Face-Off: Comparing The Impact Of The Shutdown vs. The Debt Ceiling Crisis

1_photoThe government shutdown is to the debt ceiling threat as political squabbling is to political suicide.  I mean no disrespect to the many individuals who are negatively impacted by the shutdown—you are being unjustly abused like the single shovel in a sandbox argument—but I can only muster so much sympathy for the campers holed-up outside of the Grand Canyon waiting to begin their rafting trip.  All of us, however, and the full faith and credit of the world’s currency reserve nation, are being held hostage in a high stakes game of political chicken regarding the newly dubbed Debt Ceiling Debacle of 2013.

Okay, now I’ll drop the SAT logic, metaphors and hyperbole to explain the fundamental differences between the government shutdown and the debt ceiling threat, the two dominant news headlines of the day:

Government Shutdown

The government shutdown occurred because of disagreements in Congress over the proposed budget for the coming (now current) fiscal year, beginning on October 1, 2013.  It’s as if you and your spouse can’t agree on how your household income should be spent.  We haven’t actually had a budget passed by Congress for years, but continuing resolutions were passed each time the moment of truth arrived [read can kicking] to maintain the levels of preceding budgets.  This time, they didn’t agree on a continuing resolution.

The resulting government shutdown has a very meaningful and noticeable impact for those working directly for the government, doing contract work for the government or availing themselves of government resources.  Non-essential government employees are furloughed, but have been promised back pay.  Many government contractors are also idle and are not expected to receive pay for time off.  As for the many government services—from federally subsidized mortgages to national parks—USA Today did a good job answering 66 questions about the shutdown on October 1, and followed up with another 27 a day later.  If you’d prefer a more visual and humorous description of what precipitated the shutdown, check out The Atlantic’s explanation—in Legos.

In short, the government shutdown may not show DC’s best side and is an annoyance to those of us not receiving the government services that come out of our paychecks, but it’s likely to be forgotten a couple days after it’s over.  The same can’t be said regarding the debt ceiling issue.

Debt Ceiling

The debt ceiling issue is not a direct consequence of the government shutdown, although it certainly is tangentially related to our inability to pass balanced budgets that actually take in the amount of income required to pay all of the government’s bills.  Since we spend more than we make as a country, we must go further into debt to meet our expenses.  The debt ceiling, then, is our credit limit set by Congress, which currently stands at $17.3 trillion (with a “t”).  It’s the equivalent of you maxing out your credit cards and going back to the credit card company asking for an increase of your limit.

We’ve had a debt ceiling in place since 1917, but Congress has continually raised it.  “Since 1960,” writes Mark Koba at CNBC, “Congress has acted 78 times to permanently raise, temporarily extend or revise the definition of the debt limit—49 times under Republican presidents and 29 times under Democrats.”

The biggest threat if we sail through October 17th without an agreement, when it is estimated that the U.S. Treasury will run out of necessary funding and lack the power to borrow anything more, is that our worldwide creditworthiness would come seriously into question, which could precipitate a demotion from our long-standing as the world’s currency reserve.

What does that mean?  Currently, international business is conducted in U.S. dollars.  When foreign countries buy oil, soy beans or steel, their currencies are exchanged into dollars to complete the transaction.  This has given the U.S. dollar more strength than it likely deserves, as foreign countries stockpile our cash to spend as needed.

Not raising the debt ceiling at this time could even mean not paying interest to those who hold our U.S. debt obligations the world over—for the first time.  Ever.  The corresponding lack of confidence in our political process and uncertainty of our financial capabilities could very well pull us back into the recession that many feel like we haven’t left yet, and the longer-term implications are even worse.

Worst of all?  We—you and I—can’t do anything about it.  Unless, that is, any of our elected representatives are checking their Twitter accounts as they sit with arms folded, legs crossed and brows furrowed.  In that case, consider tweeting this post—they might just receive an education.

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Don’t Forget To Update Your Financial Operating System (OS)

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Android die-hards can tell you everything that is wrong with iOS7, Apple’s recently released operating system for iPhones, iPads and iPods.  Those who gripe every time something changes are also among the early detractors.  Everyone else—that is, those of us who’ve gone back for a second or third helping of tasty iKool-Aid—loves it.  The exclamation that I hear most often regarding the new iOS is, “It’s the same phone, but it seems like it’s brand new!”  What struck me even harder than iWorship last week, however, was recounting the number of individuals who, with unchanged exteriors, have undergone noticeable overhauls in their Personal Operating System (POS)—for the better.

“I’m bad with money.”

Don’t you love the way we label ourselves as predestined for failure?  “I have a bad temper.”  “I have no willpower.”  “Exercise and I don’t mix.”  “Oh, I have ADD.”  “I’m not a good listener.”  “I have a sweet tooth.”  Or the one I hear often as a financial planner and educator, “I’m just bad with money.”

It sounds like self-deprecation—even humility—but it’s actually self-justification.  We’re giving ourselves permission to behave badly in the future.  Before you get angry with me for hurling accusations, let me confess that I am one of those people who have used this tactic, unknowingly and sadly, knowingly, at times.

What all of these expressions of inability or ignorance have in common is that they’re simply inexcusable.  Not only are they not rocket science, they are not even changing the oil in your car.  They are more like brushing your teeth or putting gas in the tank.  Even if you’re predisposed to flying off the handle, it’s no excuse for being mean.  Even if you’re prone to indulgent spontaneity, you must own your decisions.  Even if you’re not a gym rat or naturally fit, as a human you weren’t designed to be sedentary.  Even if your attention migrates easily, you can’t use it as an excuse for intellectual laziness.  Just because you like chocolate, it doesn’t excuse gluttony.  Lastly, you don’t have to understand the Alternative Minimum Tax or be able to articulate Modern Portfolio Theory to spend less than you earn and plan for the unknown, the two categories into which the vast majority of financial planning recommendations fall.

“Completely new and instantly familiar”

The great news about overcoming self-deception is that we can turn on a dime once we recognize it.  While some of us may need to do a deep dive with a counselor to target more systemic self-denial, many are free to simply choose the alternative path of wisdom and act accordingly, almost immediately.  Especially regarding our dealings with money, we can upgrade our financial operating systems right now.  Like our phone updates, it may take a little time to install the new mindset, but in dealing with behavior that is not tied to a compulsive diagnosis, we can look the same on the outside with a completely new perspective internally in a very short period of time.  Two of the life-changing tools that I’ve seen dramatically reboot people’s financial programming are Dave Ramsey’s book, The Total Money Makeover, and You Need A Budget, cash flow software created by former accountant, Jesse Mecham.

Jony Ive, Apple’s SVP of Design describes the new iOS as “completely new and instantly familiar.”  The best part about acquiescing to our own personal evolution is that it too will feel oddly familiar, because it’s how it ought to be.  Adults aren’t supposed to throw temper tantrums.  We’re designed to overrule our basest instincts with self-control.  It feels great when we expend the calories we take in through physical activity.  We’re capable of being present in a world full of distractions and applying our attention to those who most deserve and need it.  Sweets taste better as treats than as main courses.  And with a little guidance—but primarily common sense and intellectual honesty—we can choose to be good managers of money, and then do so.

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5 Ways To Prepare Your Portfolio For A Government Shutdown

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Tim discussed this issue on CNBC this week.

We all stare agape, shocked that the U.S. government has allowed splintered self-interest to rise above its collective duty.  No, we’re actually not surprised.  Sadly, we’ve come to expect this.  The question we have to answer is: Are we going to alter our lives, our financial plans and our portfolio strategies to accommodate D.C. drama?

Unfortunately, there isn’t a specific portfolio prescription for political gamesmanship or government gridlock.  Heavy handed federal influence in the aughts, especially since 2008, has taught all of us that the government may impose its fractured will at any time, effectively changing the rules of the game.  But the strategy to deal with this is little different from dealing with one of the market’s constants: UNCERTAINTY.  Consider utilizing the following five strategies in response to today’s brand of uncertainty:

1. IF you have created a portfolio that is designed to accomplish your objectives over the long-term through deliberate diversification, you may be wise to respond to the news of a government shutdown by simply IGNORING it.  (This is my favorite response.)

2. Crises of every variety can serve as a good reminder to do what we should be doing anyway in our management of investments—like reallocating. This may be a particularly good time to siphon some U.S. exposure, which has been on a seemingly undeserved tear this year, shifting it to the international exposure in your portfolio which has likely lagged.

3. Regardless of the market’s direction, increased uncertainty tends to create more volatility in the markets.  If your sanity will only be maintained by “doing something” at this time, you may respond to this aggressively by purchasing the VIX through a volatility index that rises when the spread between market peaks and valleys rises.  Or, respond conservatively by increasing cash allocations.

4. If this government standoff extends, the economy’s recent trend toward optimism may also revert, causing the Fed to balk at its expressed intent to taper its bond-buying.  If so, you might get another chance to re-finance your mortgage and slow any strategies you’ve employed that are designed to hedge against rising interest rates.

5. Recession (or depression) in Europe, protracted Middle-East conflicts, war in Syria, slowed growth in China, student debt bubble, government debt bubble… Take your pick of the crisis du jour that could send our high-flying S&P 500 into the correction (or worse) many feel it deserves.  Could a government shut-down be the back-breaking straw for this weary camel?  If you rode the market all the way down and then all the way up, it might be a good time to conduct a portfolio analysis with the goal of making capital preservation a higher priority.  To stay on the ride isn’t investing—it’s gambling.

Inaction is likely the best action to take in the face of this month’s government drama as long as you have a well-conceived, well-implemented investment strategy.  But this flavor of uncertainty could also be a great reminder to do what you should be doing anyway—ensuring that your portfolio is not a collection of hunches but a well-oiled machine constructed of wisdom, knowledge and foresight.

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Boomer Esiason: NFL Great Turned Life Insurance Advocate

Things are super at the Super Bowl“Today is your day to go out into the world.  You’re going to be great!”  This affirmation is one of a precious few memories that National Football League great, Boomer Esiason, can vividly recall about his mother, who died when he was only seven.

She was the “Belle of the Ball,” according to Esiason’s grandparents and older sisters—a beautiful singer, dancer and piano player who “would light up a room” with her blond hair and blue eyes, inherited by her only son.  But Boomer was not old enough to own these recollections himself.  Those memories endear him to the woman he can barely recall, but his enduring memories are limited to only two.  The first was sitting on his mother’s lap while she tied his shoes on the first day of kindergarten, whispering prophecies that would indeed come true.  The second and last memory was being denied access to her hospital room as she died of ovarian cancer.  Young Boomer was relegated to sitting in a courtyard, the scene emblazoned in his memory, as his mother would occasionally come to an overlooking window to catch a glimpse of her boy.

Living With A Broken Heart

Almost 30 years later, in 1996, Esiason found himself at that same hospital visiting his maternal grandmother shortly before her passing.  But that time, as an adult with children of his own, he recalls looking from his grandmother’s room, fixating on the very courtyard where he once sat contemplating the loss of his mother.  There was so much that he didn’t—couldn’t—understand as a child that he was able to comprehend as a husband and a father.

Boomer’s father, Norman, was a member of the Greatest Generation, a World War II veteran who took advantage of the G.I. Bill.  He worked his way into a solid job, but his wealth was in his family, not his balance sheet.  The loss of his wife—her income, of course, but especially her presence—had a significant negative impact on their household.  But quiet, reserved and proud, he never once considered complaining or outwardly lamenting the financial difficulties he endured after the passing of his wife, even shielding his children from the reality.  Boomer recalls at the age of 16, lingering as his dad finished the weekly examination of household finances so that he could ask for five dollars to take his girlfriend out, a favor he was rarely denied.

“I know that he lived with a broken heart,” the younger Esiason confessed.  “He died in 1999 on Thanksgiving, of all days, at the age of 77.  But from the time that my mother passed away in 1968 to 1999, I never saw my father with another woman in all those years.  He raised me with a broken heart and I think I was his escape.”  Indeed, Boomer gave his dad something to cheer about.  After setting 17 school records at the University of Maryland, he was drafted into the NFL by the Cincinnati Bengals in 1984.  In 1988, he led the Bengals to the Super Bowl and was voted Most Valuable Player of the league.  His dad was also able to see his son retire from football and begin a successful broadcasting career that continues to this day.

Today, however, Boomer’s passion for football seems eclipsed only by his desire to pass on the life and financial lessons that he has learned through experience.  So when Boomer was asked to be the spokesperson for Life Insurance Awareness Month by the LIFE Foundation, it was an easy decision.  “This absolutely fits what has happened to me in my life for a number of reasons,” Esiason told me as he opened the window into his life beyond the gridiron.  “When I became an NFL football player and decided to have kids in the early 90’s, I recognized that I didn’t want to have happen to my kids what happened to us, as [we were] struggling when I grew up.”

Further compounding the importance of life insurance for Boomer and his wife, Cheryl, is the fact that their son, Gunnar, has cystic fibrosis, a genetic disease that primarily attacks the lungs and often compounds the impact of other illnesses.  Day-to-day medical expenses are high, and the cost of finding a cure, higher still.  So in addition to the $100 million raised by the Boomer Esiason Foundation to benefit all CF patients, Esiason sees life insurance as vital to ensuring that his son has the financial resources necessary to continue his push toward a cure.  “If I don’t protect [Gunnar’s] future and I don’t protect my family’s future, then if we ever found ourselves in the situation that I found myself in when I was seven, it would be an unmitigated disaster and my kids and my wife would not be able to sustain the life that we’re fortunate to live now.”

Boomer and his best-friend, Tim O’Brien, made the decision to acquire adequate life insurance for their respective families together in the early 1990’s.  Later that decade, O’Brien helped move the Boomer Esiason Foundation headquarters “closer-to-heaven,” to the 101st floor of the World Trade Center’s North Tower.  While thankfully all of the Foundation’s full-time employees were absent the morning of September 11, 2001, Esiason lost over 200 friends, among them, Timothy O’Brien, husband and father of three children, ages seven, six and four when he died.

There is no financial strategy or product that can return a life when it’s been taken, but the life insurance conceived in Tim O’Brien’s foresight allowed his family to grieve properly and to move forward deliberately, without fear that their livelihood was also at risk.  There is no athletic accolade that will reprogram Boomer Esiason’s brain with memories of tender moments with his mother at his high school or college graduations, his wedding or the birth of his children, but the financial and life lessons learned from her loss and the endurance demonstrated by his father are already being passed on to future generations.

“My business is me.”

“I don’t have stock options and I don’t own companies,” Esiason told me.  “My business is me.”

Although I’ve never been asked to provide color commentary for the Super Bowl, and most of the people I know have never been voted the MVP of the most valuable sports league in the world, the same can be said for most of us: My business is me.  Your business is you.  Have you really done adequate financial and life insurance planning to ensure that those you love would be cared for even beyond the demise of your business—you?

Most people avoid conversations about life insurance because we generally don’t like to brood over the topic of our own demise, and many attach a hard-sale stigma to the life insurance business, using that as a rallying cry for inaction.  Death’s inevitability considered, a fear of it is certainly understandable, but meaningful discussions on the topic can be surprisingly life-giving.  And while the entire financial industry has more work to do in its evolution from sales to advice, the stereotype of pushy life insurance salesmen coercing you to sign your life away is grossly overstated.  Besides, neither of these concerns reduces the importance—the responsibility—of planning for the unexpected.

Boomer Esiason doesn’t sell life insurance.  He’s an ex-pro football player, an NFL commentator and the chairman of a foundation in support of the cystic fibrosis cause.  I don’t sell life insurance.  I’m a fee-only financial advisor, an educator and a writer.  Both of us, however, wholeheartedly support the LIFE Foundation’s initiative to bring awareness to the vital role of life insurance within financial planning in the month of September.  Consider utilizing their life insurance calculator and description of the different types of life insurance as a first step in that journey.  Feel free to ask me questions about your specific situation in the comments section or via email at tim at timmaurer dot com.  But please don’t let “Look into life insurance” be another important to-do left undone.

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Facebook Isn’t Always Your Friend: Don’t Get Burned By Social Media

gty_facebook_like_button_nt_130313_wblogWe’ve known for a while now that employers are scanning the social media presence of would-be employees before making a job offer.  More recently, we also learned that our very own credit worthiness could be impacted, not only by the content we put forth, but also by the knuckleheadedness of those to whom we are connected online.  Alternative lenders, such as Lenddo, Kreditech and Kabbage, may track social media activities of you—and your friends—in determining whether you or your business are a worthy credit risk.  So unless you decide to follow my personal path—Facebook abstinence (the only method proven scientifically effective in 100% of cases)—I hereby offer the only slightly less certain way to avoid being haunted in the future by your social media past: Don’t “say” stupid [stuff] online.

Consider this litmus test to be applied before liking, updating, tweeting, sharing, tumbling or pluss-ing:

Only share that which you would be happy to see appearing in BOLD CAPS on the front page of USA Today, the New York Times and your home town paper.

Even if we’ve been duped into believing that social media offered any level of privacy whatsoever, the reality is that it doesn’t.  Its inherent design is to compound, to magnify and to extend the reach of whatever message we communicate, for better and worse.  Privacy settings, if anything, obscure the fact that we are exposed.

It deserves mention that Facebook, contrary to some reports, is not the devil.  Nor are they, or any other social media outlet, an altruistic venture.  They all teeter on the fence between the seemingly opposed realms of Beneficial and Intrusive.  Ironically, however, it is hard to imagine their offering much of a benefit were it not for their intrusion.  It is our input that builds the algorithms in Facebook to direct us to the friends we seek and the artists, brands and personalities we follow.   In the case of these unique lenders, it is individuals and businesses lacking sufficient credit history to receive loans through conventional means who are divulging their online activity to the alternative lenders who find parallels between social media activity and credit-worthiness.  We’re not talking about major credit agencies, banks and insurance companies requiring our social media login information—yet.

Whether we are looking up old schoolmates on Facebook, scanning for trends on Twitter, building our virtual networks on LinkedIn or applying for a loan, it is up to us to determine what information in our possession is worthy of dissemination in these venues.  While it seems that every third person we meet these days is a “Social Media Consultant,” the aforementioned litmus test for online activity won’t cost you an awkward lunch meeting and is simply based on applying the 2,400 year old Hippocratic Oath to ourselves—first, do no harm.

Whether we like it or not, we may need to consider protecting our social media footprint the way we protect our credit score, for the sake of our available credit, our employment and even our reputation with family, friends and colleagues.  As Will Rogers said well before Al Gore invented the interwebs, “It takes a lifetime to build a good reputation, but you can lose it in a minute.”  The advent of social media has given us the opportunity to fast-track reputation building, but it has also shortened the journey to embarrassment and magnified every online misstep.  You can’t delete your past, but you can delete your post. So unless you’re willing to see that post, tweet, status update or email making headline news, consider hitting delete instead of send.

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How Music Can Save Your Marriage And Financial Plan

IMG_6338My brother, Jon, and I have a recurring argument with our lovely wives, Amanda and Andrea, respectively.  They believe that good music is in the ear (as it were) of the beholder.  Jon and I cringe, like Will Smith and his poor children, subject to the needless visual supplements required to make the music of Miley Cyrus and Lady Gaga interesting enough to consume.  Seemingly incapable of withholding the raft of musical elitism that will surely land us in the bad graces of our beloved, we’re drawn to the life-zapping light like flying insects.

“No, you don’t understand,” I assert, “there is good music and there is bad music.  Like too much sugar will rot your teeth, too much ‘ear candy’ will rot your…your soul!”  (After all, it’s only Andrea’s best interest with which I’m concerned.)

“Then why don’t you marry Jon, so you can listen to your favorite music all the time?”

These little spats are just for fun (usually) and give our lives together a unique texture, but too much variability in the ways we live and love is draining and too often leads to a marriage requiem.  Discord over financial issues is often cited as the leading cause of divorce, and while the statistical jury is still out on whether money issues are a leading or lagging indicator of marital health, it’s clearly an issue worthy of our attention.

Here are three ways that you can apply musical theory to maintaining financial harmony in your household:

1)     Establish a rhythm – In music, the rhythm is the foundation of a song.  Musicians establish a song’s rhythm first through the time signature, musical math composed of measures and beats per measure.  Rock songs, like Led Zeppelin’s “When the Levee Breaks” with its iconic drum beat, are typically written in 4/4 time signature.  Contrast that with the Dave Matthews Band’s “Seven,” written in 7/8 time, a rarity in rock and pop that has a notably different rhythm.  Another time signature easily spotted is 3/4, as in Johann Strauss’s “Vienna Waltz,” with its recognizable 1-2-3 repetition.

Every household has a rhythm of cash flows—money comes in via income and goes out as expenses.  Regulating this rhythm to the best of our abilities allows our household to settle into a comfortable pattern.  This becomes more of a challenge when your pay comes at a different interval than your expenses, but you don’t have to be a virtuoso to accommodate for these differences.  Divide your conservative estimate of your annual income by 12 and you have your monthly budget to allocate.  Then divide any annual expenses by 12 to be sure you set aside the necessary coin to pay for them when they arrive.

2)     Create a melody – Rhythm makes a song work, but it’s the melody that makes it memorable.  You don’t have to love classical music to get Beethoven’s “Fur Elise” stuck in your head.  Great melodies are often reincarnated, like when Billy Joel reprised Beethoven’s “Sonata Pathetique, Movement 2” in his song “This Night” (listen to the chorus at: 59).

Crafting a comfortable rhythm helps keep our finances on track, but we create a melody in choosing how to spend our excess cash flow.  Maybe you’re known for generous hospitality, like one friend of mine whose parties are not to be missed.  Maybe you’re making a concerted effort to provide meaningful support to a worthy charity or broadening your children’s horizons through regular travel.  Or maybe you’re foregoing income to invest your time as a mentor or student.

3)     Manage dissonance – Dissonance is the sound produced when two or more musical notes don’t appear to mesh well.  If you hit three adjacent white keys on a piano at the same time, you’re likely producing dissonance.  Musically speaking, dissonance can be used to good effect, creating atonal suspense that is eventually resolved, but left unresolved, it’s likely a song that no one wants to hear.

Financially speaking, every couple is born in dissonance.  Our individual personalities, strengths and weaknesses, compounded by our personal history with money, make it impossible to strike a rich major chord every time.  Our goal should be to recognize the dissonance when it arises, treating it not as failure or a misplayed note in our duet, but instead as an opportunity to work toward a deep resonance when the dissonance is resolved.

Jon and I had some fun a couple years back riffing on this topic in a video we created called “Making Financial Music.”

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Men Want It All Too: Work And Family

Mr._Mom__1_“I wanted to be able to change diapers.”  That’s what Tim Donohue told me when I asked him about the life-altering choices he’d made regarding the elusive work/life balance.  We had both just read the recent New York Times article, “The Opt-Out Generation Wants Back In,” revisiting the topic of women with Ivy League pedigree and promising career prospects who’d “opted out” of corporate life to dedicate themselves wholly to the art of maternal domestication.  Judith Warner’s findings were decidedly mixed, but with all of the talk of women on the “Mommy Track,” I was left to wonder, What about the dudes?  What role do men play in weighing their obligations at home and the office?

The debate about working moms is now so ubiquitous that we must conclude it’s a real issue—that women are wrestling with this topic so consistently that the battle waging within them is genuine.  Women, as a whole, seem clearly to want both a) to play a formative role in the upbringing of their children and b) to satiate the desire within to capably accomplish tasks of seemingly greater import than changing diapers or organizing class parties or even holding office within the school PTA.  Regarding the now public discourse over this internal wrestling match, men have done largely what they should—if they know what’s good for them—remain silent (sitting behind their three-olive martinis, newspapers and crossed feet adorned with the slippers June brought to the front door).

I am not fool enough to break that silence, but I do seek to explore whether there is any similar angst, any similar wrestling over this topic regarding their own roles, in the realm of men.  As it appears, there is and they are.

The 60-Hour Work Week

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Tim, Lesley and Louise

Tim and Lesley Donohue live in Denver.  Tim is a mortgage banker, Lesley is a nurse, and they both played a meaningful role in bringing Louise, their beautiful newborn baby girl, into this world.  What makes them unique and relevant to this discussion is that they’ve been planning—for years—to also both play a meaningful role in Louise’s day-to-day care into the future.  They intend to accomplish this with Tim working (roughly) 36 hours per week and Lesley 24, co-parenting along the way.  Why 36 and 24?  They’re compelled by the logic of philosopher, author and theology professor, Gilbert Meilaender, who suggests that in order for a family to support itself financially, practically and relationally, the parents’ aggregate occupational efforts should consume no more than 60 hours.  “We simply can’t have it all,” Tim told me.  So he will don the Baby Bjorn while Lesley works two 12-hour shifts per week.  Tim will fill in the gaps with his flexible work schedule, and maybe they’ll need six-to-eight hours of childcare per week.

No, you don’t just up and decide to do this.  Tim’s been planning on it for over a decade, since well before he even met Lesley.  I can corroborate that because I recall him telling me, very specifically, at a coffee shop, about ten years ago, that he was engineering his work-life to accommodate his life-life.  He wanted a job that offered good pay, lots of flexibility and a boss who trusted his employees to get the job done without being micro-managed.  “I wanted a career that was a good expression of who I am, but that also gave me plenty of space to be who I am.”  Fifteen years ago, when he made these career decisions, Tim was a mentor to high school and college youth.  Today, he’s a husband and a father, a son and a brother, a friend to many, and an active member of his community.

But Tim knew it was going to take a lot of effort to put himself in that position.  In a volatile business that is 100% commission, he started socking away money very early.  He knew that an overabundance of income one year could turn into a drought in another, so he worked to save one, and then two full years’ worth of living expenses as an emergency reserve.  He saved cash to buy a car with no debt.  He bought a house in a high cost-of-living area north of Baltimore, and aggressively paid his mortgage down with every shred of excess income, so that when he and Lesley moved to Denver (with a lower cost-of-housing), they were able to buy a house without a mortgage.  In their mid-thirties.  With two years of living expenses saved.

What makes Tim and Lesley so successful in finding a healthy balance between work and life is that they don’t consider it to be a balancing act.  Instead, they have successfully integrated work and life.

Is it possible that our notion of work/life balance implies that these are two opposing forces, and furthermore, that positioning them as competitors creates inertia that keeps them from being more successfully integrated?

Tim and Lesley make it look easy because of their forethought and the deliberate steps they took years ago to make a more integrated personal and financial life possible today, but most of us didn’t do that level of planning and are entrenched in seemingly irrevocable roles today.  Or are we?

Opting-IN

Women may not be the only ones giving up elite Northeastern educations for parenting purposes.  Andrew Ritter has two degrees in geological sciences (one from Colgate) and plied his trade up the stalactite ladder (or would that be stalagmite?) all the way to Project Manager, around the time he met his wife Jennifer, an attorney.  But as Jennifer’s legal career gained momentum, Andrew was burning-out of…whatever it is that geological scientists do.  He decided to punt his degrees and valuable experience, starting up a residential remodeling business, the work he did during college.  Andrew didn’t fall prey to the “Mancession” of late.  He simply decided that killing himself in 70-hour-a-week increments was not the way he was going to spend the majority of his adult waking hours.

Therefore, when baby Wilson and his little brother Ridgely came along, and as Jennifer’s career arc soared, Andrew had the occupational flexibility to opt-IN to being a part-time stay-at-home dad.  “There’s no question,” Ritter told me, “that it has been difficult financially.”  In a high cost-of-living area, they feel sometimes as though they’re just treading water.

“Was it worth it?” I asked.

“I wouldn’t trade these years for any corporate accomplishment.  I get to walk my kids to school every morning, and when Jen is in trial—leaving at 6 am and returning at 2 in the morning—I can be here to make sure everything runs smoothly at home.”

Maybe the key to “having it all” is simply a willingness to redefine our “it all.”  Or maybe the secret is to pursue our “it all” with less.  (Or both?)

Messrs. Ritter and Donohue both agree that the choices they have made are their choices—they’re not universal and worthy of widespread adoption.  But there are themes here that very few of us would dispute:

  • It’s becoming increasingly difficult for a household to live comfortably and save for the future with a sole source of income.
  • Both moms and dads struggle to know exactly how to allocate their time between the individual purposes to which they feel called and their chosen roles as partners and parents.
  • Dedicating ourselves to a work/life ratio that feels out of kilter eats at us, and can leave us dissatisfied with our efforts in the office and at home.

Our attempts to balance work and family have failed.  But resourceful, forward-thinking moms, dads and companies are getting more out of work and life by creatively integrating the two.

If you enjoyed this post, please let me know on Twitter at @TimMaurer, and if you’d like to receive my weekly post via email, click HERE.

Confessions Of A Self-Righteous Fee-Only Financial Planning Evangelist

250px-Saint_Francis_of_Assisi_by_Jusepe_de_RiberaEvangelical Christians have a PR problem, wouldn’t you agree?  If you want to evoke the scent of condescension, judgmentalism, self-righteousness or hypocrisy, all you need to do is tack on the adjective “evangelical” to the person, place or thing you’re describing, and voila—your work is complete.  The original evangelists—the Disciples, the Apostle Paul, Saint Augustine, even Christ Himself—don’t seem to engender so much animosity (today), but modern-day zealots who invoke these ancient names in pursuit of conforming others to their worldviews have become an easy target for cynicism, in many (while certainly not all) cases deservedly.  Self-righteous fee-only financial planning evangelists—of which I am one—are beginning to face a similar dilemma and may require an act of God to remake their reputation, especially within the industry.

My confession should not be seen as sins for which every fee-only advisor is guilty, but several others have shared similar thoughts with me—some making even bolder statements and passing firm-wide edicts outlawing comparisons designed to disparage the “unholy.”  While there are many individual acts to be brought to light, all of these indiscretions fall under a single umbrella transgression:

Instead of highlighting what we are FOR, we have magnified what we are AGAINST.  Instead of making our case to new and existing clients based on who we ARE, we have taken the more expedient route of peddling who we are NOT.  For example:

  • We are NOT salespeople.  We delude ourselves.  Everyone is selling, from the Pope, the priest and the pastor…to the doctor, the professor and the journalist…to the accountant, the attorney and the advisor…to the agent, the broker and the banker…all the way down to the butcher, the baker and the candlestick maker.  Whether it’s a product, a process or a personality, we all have something to sell.
  • We are NOT biased.  Yes, the bias of commissions is the most evident, but less evident biases can also be dangerous, and sometimes even more so when papered over with apparent altruism.  Hourly billing has an inherent economic bias to stretch an engagement.  Flat fees incentivize the service provider to clip their work, moving on to the next fee.  And those compensated by a percentage of assets under management have a clear conflict to prefer managing more, even if those assets would be better applied to debt repayment, real estate acquisition or investment in a small business.  All of us are biased, and to dispute otherwise is self-deception.
  • WE are NOT non-fiduciaries.  The spirit of fiduciary is vitally important, and the evolution of the industry depends on its application, but the word (fiduciary) itself is relatively meaningless and occasionally misleading.  Unfortunately, we have allowed the word fiduciary to become just another mousetrap to be sold, trampling the spirit of the word in our haste.  A true fiduciary is too busy acting like one to spend time yelling at those who they believe are not.
  • We are NOT, God forbid, Merrill Lynch or Morgan Stanley.  While the trend was already underway prior to 2008, the move away from proprietary wire houses to independent advisory firms turned into a tidal wave after the financial collapse.  It was primarily the investment banking and trading arms of behemoth brokerage firms that earned the public outrage, but while those complicit started raking in record bonuses the year after the crisis, tens of thousands of financial advisors were left with a heavy anchor on their business cards.  Needless to say, we didn’t exactly throw them a life vest.

Saint Francis wasn’t born with a halo around his head and animals flocking to his crib.  Early in life, he apparently lived it up as a wealthy merchant’s son and even tried his hand at being a warrior for his home town of Assisi prior to receiving the revelations that redirected his path.  The movements for which he became known, however, were enacted less through fiery rhetoric and more through penitence.  While the exact source is disputed, no one doubts that this quote attributed to Francis exemplified his life and work: “Preach the gospel at all times.  When necessary, use words.”  We as fee-only financial advisors would do well to seriously consider this admonishment.

Is it possible that the next phase of the financial industry’s inevitable transition (as well as the Church’s) will be led not by rigid demands for legalistic purity, but instead by a humbler, quieter, simpler, more effective practice grounded in affirmation?

If you enjoyed this post, please let me know on Twitter at @TimMaurer, and if you’d like to receive my weekly post via email, click HERE.

10 Reasons To Take A 10-Day Vacation

10 Day Vacation-01For only the second time in my adult life, I just completed a vacation of more than seven days—10, to be exact.  Corroborating my first experience, I am now convinced that there is a certain magic to the 10-day vacation and have resolved to make them an annual habit.  Here’s why:

1. Most importantly, a 10-day vacation gives you the time necessary to surrender, to capitulate, to truly vacate.  It wasn’t until fully four days into our Grizwoldian adventure that my wife was able to observe a genuine change in my demeanor.  “You just seemed to visibly loosen up in that moment,” she told me.  The moment she was referring to was when she, our two boys and I got caught in a torrential downpour in the middle of a bike ride.  I wasn’t an overbearing ogre early in the week, but I was still in work mode; a tad too productive, efficient and compliant for vacation.  It took me the first four days of vacation to transition from being a hesitant bystander to a willing participant.

2. Travel consumes a lesser percentage of your total vacation time.  If you’re going someplace worth going, you’re likely sacrificing a day getting there and another getting back.  Whether by plane, train or automobile—and even if the actual travel time is only half-a-day—the stress and logistical maneuvering consume a full two days.  That’s almost 30% of the seven-day vacation, but only 20% of a 10-day break.

3. Because travel consumes proportionately less of the 10-day vaca, it also opens the door to a traveling vacation with multiple stops.  With the family truckster fully loaded, we drove to Charleston, South Carolina from our home in Baltimore for three days prior to heading northward to Williamsburg, Virginia for another week—a highly improbable feat if you only have seven days to spare.  This change in geographic context gave our single vacation the feel of two separate trips, each with their own set of lasting memories.

photo4. You’re gone long enough that you’re forced to off-load your duties at work.  If I take a three or four-day weekend, I rarely even set my email out-of-office notification or update my voicemail message.  I’m effectively taking a vacation while still on the clock in my mind.  When I take a seven-day vacation, I’m hesitant to completely check-out of my work responsibilities and even feel guilty asking for help.  But if I’m going to be missing days in more than two different work weeks, I really have no choice but to arrange for enough back-up help at the office to truly separate myself from the duties I’m hesitant to relinquish.

5. You’re gone long enough that you’re forced to budget financially for the vacation.  Heeding Carl Richards’ advice, I don’t take a trip of any length without having budgeted for it.  It takes away from the refreshment I seek when I have to wonder how I’m going to pay for the vacation when I get home.  The additional time and cost of a 10-day vacation really demand budgeting in advance of your departure.  Additionally, I recommend seeing where you stand financially five days in so you can recalibrate if necessary for the second half of your trip.

6. A 10-day vacation leaves sufficient time for the creation of memories through experience and the catharsis of do-nothing relaxation.  One of the books I enjoyed over vacation was Laura Vanderkam’s, What the Most Successful People Do on the Weekend.  I found much of the wisdom therein applied just as well to vacations as to weekends.  Vanderkam suggests that we “set anchors”—activities to which we apply some forethought, with the aim of memory creation—and allow relaxation to fill the gaps in between.  None of us wants vacation to feel like work, filled with have-to-dos, but these anchors are, in contrast, want-do-dos.  For us, a couple anchors were to take a horse-drawn carriage tour of downtown Charleston and to ride our bikes as a family into historic Williamsburg for Colonial-era root beer and ginger cakes.

7. You have the time to actually develop rhythms of life unique to that particular vacation.  One of my favorite things to do on vacations is to find new rituals that seem to apply to that particular area and our family’s phase of life.  Personally, I try to maintain some semblance of a workout regimen so I don’t feel quite so guilty about over-exposing myself to the local cuisine, so I found a fitness center I could ride my bike to most mornings.  Our boys, Kieran and Connor, are at those ages (nine and seven) when they could swim all day if you’d let them, so most nights we went for a night swim to cap off the day.  But it takes a few days to explore and find the rhythms that will work in a particular place and time.

8. You get the joy of seeing the week and weekend vacationers leave—while you’re kicked back “working” on reading your second novel by the pool.  There is nothing fun about leaving an enjoyable vacation, but when your vacation begins or spills over into the middle of a week, you get to watch other people yell at their kids for slow-playing the departure process while you order a fruity umbrella drink.  Those days on which everyone else is travelling and checking in or out are also great days for planning an anchor event (see #6) when you’ll likely have less competition.

9. You can avoid the dreaded vacation hangover.  Long weekends can feel torturously short and seven-day vacations often leave you wishing you could go back in time, but by the time a 10-day vacation is over, you’re starting to warm to the idea of getting life and work back to normal.  The idea of sleeping in your own bed has increasing appeal, eating out has started to weigh you down, spending money like the Greek parliament has begun to feel self-indulgent and you’re almost anxious to get back to the daily rhythms of work and rest.

10. You come home a better spouse, parent, employee­—a better person.  A 10-day vacation has the highest probability of providing the rest, relaxation and lifelong memories that we all hope to get, but rarely do, from the highlight of our summers.  Conversely, taking fewer days often leaves a residue of dissatisfaction that leaves us perpetually wanting more.  So go ahead, tack a few extra days onto your next vacation.  We’ll all be better for it.

Life Is Not An All-Star Game And Investing Is Not A Home Run Derby

MLB: All Star Game-Home Run Derby162.  That’s how many games are played in the regular season of Major League Baseball.  There’s only one All-Star Game—in the middle of the season, played last night—and it’s rightly referred to as a break for the sport that requires more endurance than any other.

Life has come to look too much like an all-star game, with our greatest hits trotted out on LinkedIn, Facebook, Twitter, Instagram and more.  And while social media has made it easier to craft perception, we’re often putting the face on just the same at networking events, church (especially church) and family parties.

Façade creation is expensive.  It’s inherently limited to the external, the material, and almost always comes with a price tag.  It also tends to degrade, both in appearance and value.  How much time, effort and money do you expend on your perception engine?

No, life is not an all-star game.  It’s grinded out over long and arduous seasons, filled with many highs and lows and sleepless nights spent picking fiberglass-laden tobacco out of our teeth contemplating an oh-for-five game, imagining how we can do better next time.

The highlight for many of the All-Star break, however, is the Home Run Derby, where the game’s biggest sluggers do their worst to cream-puffs tossed by coaches.  It’s like batting practice on steroids (pun intended), complete with no fewer than 47 “Back, back, back…and it’s gone!” calls from the Swami himself, Chris Berman.  Quite the spectacle.

Too many investors, however, emulate home run derby strategies in their process, swinging for the fences on every pitch.  This is problematic for at least two reasons: First, the market’s not pitching balls at half-speed right down the middle.  There simply aren’t any no-brainers (Apple) or sure things (real estate).  The second reason concentrating your investing on the long-ball is a bad idea is that, well, you’re probably not an all-star.  I mean no offense—neither am I.  But I’ve been around the business long enough to see (brilliant) grown men brought to tears, exasperated by the apparent futility of their efforts.  I know enough to know that I don’t know enough to be a big-league stock picker, and I’m ok with that.

Unfortunately, many on Wall Street have a tendency to overestimate both the power of their swing and their knowledge of the game, and I’m not just talking about the overwhelming majority of mutual funds that underperform their benchmark.  Bill Miller, manager of the once-vaunted Legg Mason Value Trust (LMVTX) struck out at the plate so many times in 2008 (most notably in his all-in bet on Bear Sterns) that he inflicted systemic damage to the fund and the very firm he helped put on the map. As investing success persists, it seems, hubris inflates, making these minted sluggers ever more likely to end up walking back to the dugout with their heads hung low.

I’m not just talking about stocks, bonds and mutual funds as investments, either.  It’s even easier to deceive ourselves into thinking that an expensive degree or a home priced out of our reach are worthy of a home run swing.  Let’s, instead, make a practice of getting on base repeatedly, and allowing someone else’s luck or error to drive us home.

Chris Davis leads the major leagues in home runs with 37 only half-way into the season, but he admitted that it wasn’t actually Oriole Magic (or steroids for you haters).  “It was more about consistently putting the bat on the ball, not swinging at balls 14 feet out of the strike zone.”  That’s good advice, for baseball and investing.

If you enjoyed this post, please let me know on Twitter at @TimMaurer, and if you’d like to receive my weekly post via email, click HERE.