There Is No Panacea!

We continue our exploration of the inherent conflicts of interest in the business of financial advice in this next 90 Second Finance video depicting the Economic Bias of Fee-Only Financial Advisors.

YES, in doing so, I’m turning the sword on myself—I am, indeed, a fee-only financial advisor.  Having spent time as a commission-only, fee-based and now fee-only advisor, I don’t shrink from my belief that the fee-only model is the best…but that doesn’t mean it’s perfect.  And as I mentioned in the introduction to this series, EVERYONE is biased; it’s a fact of money and life!  The goal should be to acknowledge biases where they exist and reduce them to the greatest degree possible.

Enjoy!

It’s About You, Not Me

I announced a few weeks ago that my second book, a co-authored project with best-selling author, Jim Stovall, would be coming out shortly.  Upon release of that news and the book’s title—The Ultimate Financial Plan—a few of my closest friends gave me some good-natured ribbing for a title that could be presumed a dubious self-proclamation of preeminence.  So although I know they were only kidding, I’d like to use this as an opportunity to explain the origin and meaning of the title and make an exciting announcement about TimMaurer.com blog posts in the month of September.

Jim Stovall and I believe with every fiber of our beings that contained in this book is, indeed, the ultimate financial plan.  However, it’s not about us.  We don’t claim to be the brightest financial minds in the universe.  We don’t purport this book to be the number one source of all facts and numbers pertaining to the discipline of personal finance (thank goodness, because it would be too long and boring).  Nor do we allege it to contain the most cutting edge thinking that will revolutionize the business or practice of financial planning — with an advisor or on your own.

Personal finance is more personal than it is finance.

The reason we believe this to be the ultimate offering in its genre is quite the opposite.  It’s not so much about us, but more about YOU.  This book is strenuously focused on you, your values and your plans for the present and future.  We may appear to represent a financial industry, which, even after a timeless humbling through the financial crisis, still seems to muster a condescending tone.  Even some of my favorite personal finance gurus are famous for calling out the stupidity of their followers.  But we’re not.  We’re not talking down to you from the pulpit, but instead across the table.  We’re not sharing insight about concepts we’ve ginned up to sell a book.  We’re sharing personal narratives and experiences we’ve gained from employing these concepts—both in our own lives and in the lives of those we advise and influence.

Let’s also not forget this book is another in a series of books Jim has written that began with The Ultimate Gift.  Selling more than four million copies and seeing it turned into a movie starring James Garner, Brian Dennehy and Abigail Breslin was affirmation enough that the heart of Jim’s novel, a story about a wayward young man learning to earn his inheritance, impacted people deeply.   It was followed by The Ultimate Life (also soon to be released as a movie).  Frankly, when I approached Jim about co-authoring a book that would allow the timeless wisdom of The Ultimate Gift to be translated through a personal finance guidebook, he hesitated, having maintained a personal policy of not co-authoring.  But then Jim realized this could be his contribution to a world ever increasingly in need of applicable wisdom facing the big climb out of the financial crisis crater.

Simply put, we believe personal finance is more personal than it is finance, so our stories and advice and practical applications are skewed heavily in that direction.

A very special September

We’re going to commit a cardinal marketing sin and take the focus further off of us just as this week marks our official promotional kick-off of the book’s release.  Over the next four weeks, I’ll be featuring guest posts from four world-class authors and bloggers that have been an inspiration to me and millions of others through their work.  I’m honored and humbled that they’ve each shown a willingness to engage you, personally, on this blog.  You’ll surely not want to miss them:

  • Thursday, September 8th, you’ll enjoy a post from entrepreneur and the best-selling author of Anything You Want, Derek Sivers, explaining why he, after building a company that revolutionized the music sales industry (CD Baby), gave the $22 million proceeds from its sale to charity.  (Yes, you read that correctly.)
  • Thursday, September 15th, I’ll share a post from Chris Guillebeau, a travel and career author and blogger whose every move is followed by over 150,000 online readers.  Chris took the time to entertain and educate us on “The $30 Hotel and the Battleship Slumber Party.”
  • Thursday, September 22nd, our guest post will come from J.D. Roth.  J.D. is a blogging pioneer in the realm of personal finance who started the uber-successful blog, “Get Rich Slowly,” voted as one of Time magazine’s “Best Blogs of 2011.”  J.D. will be sharing his take on the intensely personal elements of personal finance.
  • Finally, on Thursday, September 29, I’m excited to see what Carl Richards has drawn up for us.  Carl is the cutting edge financial planner who has worked his way into the hearts of so many through his Behavior Gap blog featured in the New York Times, employing little more than a sharp wit and a Sharpie pen in his exploration of the relationship between money and values.

I look forward to bringing you these world class writers through TimMaurer.com.

Oh, and by the way…

The Ultimate Financial Plan IS now available for purchase on Amazon.com and Barnesandnoble.com.  You can also purchase it on your Kindle  and you should see it available on your Nook and in bookstores everywhere within a week.  Thanks for passing the word if you’re so inclined!

90 Second Finance…The Bucket Plan

The "technical" term I use most in educating about personal finance is… BUCKET.  It’s useful in so many areas of financial planning.  You put your money into checking account buckets and set-up various budget buckets.  You contribute money to a 401(k) bucket during your working years and then take money out of that bucket in retirement.

This video is 90 seconds of instruction on the primary decisions you face in creating the optimal Will…the document you should have properly written before you KICK the bucket!

Holiday Blues: A Remedy

Beat-the-holiday-blues-2It’s gone.  Just like that.  What’s left, but a large, dead plant to dispose of, lights and decorations to put away and a budget that enjoyed more merriment than it could handle?  The holiday blues are setting in…

How do we counter the holiday blues?  Well, last year, one of my neighbors kept his Christmas tree up… until March!  I suppose that’s one way to process the emotional downward spiral, but it seems that denial will only get us so far.  I offer, then, a recommendation that can 1) improve your life, 2) give you a lasting infusion of holiday spirit AND 3) potentially put some of those dollars you spent throughout the holidays back in your pocket. 

The recommendation: Purge & Give.  How?  Meander throughout your house and analyze what you haven’t used in the past year and then… give it away to someone who’d likely find it a treasure.

There certainly are exceptions to the one-year-rule.  Camping gear or tools, for instance, are things that you may not use for a year but fully intend to use in the future and should keep on hand.  The most effective place to start vetting is often your closet.  If you haven’t worn an article of clothing or pair of shoes in over a year, the chances are very good that you don’t need to hold on to it (or them).  Then inventory your basement, garage, shed, desk, wallet, purse and car.

If you’re the parent of younger children, as I am, the purge-and-give process is a great one to eliminate surplus former holiday and birthday presents AND to teach your kids the benefits of these worthy pursuits at a young age.  Don’t do it when they’re asleep, hoping they’ll never miss anything, but instead involve them in the process.

How, then, might this process deliver on the aforementioned benefits?

  • Simply put, a simpler life is a better life.  Margin—personally, spatially and financially—is our friend.
  • ‘Tis better to give than receive?  You may not feel that way about your brother-in-law, but try giving to someone really in need or an organization devoted to helping those who may not have received ANY presents this time of year.  Doctors tell us we get a wave of endorphins from giving—the more direct, the better—and an endorphin rush is just what the doctor ordered for the holiday blues.
  • Assuming you itemize when doing your taxes, you should be able to deduct your charitable contributions—even for in-kind items.  You may be surprised, but if you haven't purged for several years, your contributions to charity could add hundreds, or even thousands, of dollars to your personal balance sheet.  (Talk to your CPA about your specific situation.) 

You still have time in 2010 to receive these benefits.  Take a walk around the house and head to your local Salvation Army or  Goodwill donation center or homeless shelter.  They’ll be better for it… and so will you.

And, as long as you promise not to use this only to provide solace for a lack of action on your part, this short video of “The Collector’s Collector” on the show, “Hoarders,” will help you put your situation at home in perspective:  http://www.youtube.com/watch?v=KvBGNXi1gXs&feature=fvst.

Have a blessed—and simpler—New Year!

The Cure For Greed

Interesting, isn’t it, how all that seems to be good about the holiday season recently incepted also seems to be accompanied by something… less than good?  Along with the bountiful feast on Thanksgiving comes the gluttony of eating like animals preparing for hibernation.  Along with the tradition of competitive college and professional football comes the sloth of watching three games… back-to-back… in the same spot… on the same couch.  And along with the season of giving comes the season of frenzied consumption, driven by marketing that at times seems downright manipulative.

Please don’t perceive my tone as judgmental; I only used the examples mentioned because they are those temptations to which I am most susceptible.  I am not a member of the naturally frugal minority condemning the profligate materialistic majority.  It is, after all, my tendency to prefer more over less, better over worse, cool over dorky and hip over unfashionable.

So it is with humility, then, that I posit this “Cure for Greed,” learned quite unintentionally through an experience many years ago that helps me avoid succumbing to the tug of materialism, an enticement we all face daily:

 

What It’s NOT and What It IS

Humblepie_medium I’m convinced that men posses a tendency that occasionally, but predictably, propels a misnomer out of our mouths to demonstrate our obtuseness and invite a hefty slice of Thanksgiving-sized humble pie, lest our egos inflate beyond a manageable size.  Recently I was invited, in the presence of my wife and a few other couples, to join a group of men on an outing designed to reset our testosterone levels—something having to do with cards and viewing a football game on an over-sized television.

My eyes lit up, until I received a loving nudge from my bride reminding me that she was already committed that night and had asked me to manage the home front.  Not begrudgingly—because, indeed, I love the opportunity to get some quality time with my two adventurous boys, ages 5 and 6—I innocently responded that I was not able to join the guys because, “I’m babysitting that night.”  As it turns out, fathers are apparently not supposed to refer to watching their own children as “babysitting.”  Ahhhhh.  Lesson learned!

Words are important.  Words are powerful.  They can stop tears from running down the face of a little one and bind two people together for life, but they can also deflate a person’s will and manipulate.  Two of the terms in my vocational realm that are so often misused are “Financial Planning” and “Financial Advising.”  What is the first thing that comes to your mind when I ask, “What is financial planning/advising?”  My guess is that 65% of people assume the term is synonymous with the sale or management of investments by a stockbroker.  The other 30% probably think that it is the pursuit of finding the right insurance coverage.

It may be generous to assume that 5% of people have been painted an accurate picture of what true financial planning or advising really is.  One thing that makes accurate discernment so difficult regarding this terminology is that financial planning does, indeed, include investment planning and insurance planning.  But if the advice stops there, it’s not genuine financial planning.  The primary reason that financial planning has been viewed in such a modular fashion is that the behemoth financial industry realized, before financial planning even became a thing, that couching product sales in the appearance of sound planning and advice was good business.  But, at the end of the day, financial planning with a brokerage firm inevitably leads almost solely to the sale of brokerage products; with banks, banking products; and with insurance companies, insurance products.  Below you’ll find a glossary with more complete definitions of the fundamental tenets of true financial planning and advice; what it’s NOT and what it IS:

  • Investment planning—Is NOT merely the sale of stocks, bonds and mutual funds; it IS determining how all of the assets in your life—including stocks, bonds and mutual funds, but also real estate, commodities and entrepreneurial ventures—intersect with life and move you closer to your goals and objectives.
  • Insurance planning—Is NOT just about buying prescribed insurance products; it IS learning how to manage risk first through risk avoidance, risk reduction and risk assumption before transferring risk through insurance products.
  • Cash flow/budget planning—Is NOT just for the under-resourced living paycheck-to-paycheck; it IS the engine of every household’s sound financial plan, just as it is for every successful business.
  • Tax planning—Is NOT having your tax return prepared or jamming your numbers through Turbo Tax; it IS planning for the present, but also the mid-term and the long-term regarding payroll taxes, income tax, capital gains tax, tax deferral, gift tax, inheritance tax and estate tax.
  • Education planning—Is NOT sloughing a random chunk of money every month into an education savings plan to assuage your guilt that you’re too busy keeping your own financial house in order to apply much thought to the cost of your children’s education; it IS first developing a Family Education Policy (here’s how much mom and dad are willing to pay and the terms you need to meet to receive that help) and then establishing a deliberate plan to meet those goals, some of which should be saved in a 529 education savings plan.
  • Retirement planning—Is NOT slaving away at a job you don’t love so that you can shelve as much of your income as humanly possible in a 401k and IRAs to which you’ll look for financial salvation in a retirement that can’t come soon enough; it IS, first and foremost, finding a career that you can enjoy indefinitely so that you are always employable (the BEST insurance against running out of income in retirement), saving effectively for financial independence while also allocating dollars to enjoying life today and in the mid-term.
  • Estate planning—Is NOT sleeping through an expensive meeting with an attorney to have documents drafted that you don’t understand; it IS examining the impact that you’d like to leave on this earth and implementing tangible plans—yes, through wills, powers of attorney, advance directives and occasionally other trusts, but also—designed to create a legacy, no matter your age.

Speak well.  Plan well.  Live well!

YOU NEED TO KNOW…That It’s So Much Easier To Live The Truth

6a0120a8cdef2c970b0133ed471626970b No doubt, you’ve at some point been given the admonishment that it’s easier to tell the truth because you don’t have to remember your lies.  It really is solid logic, especially for those of us with selective memories.  Doesn’t it also seem that people tend to get in more trouble for lying about something they’ve done wrong—attempting to be covering it up—than they do for actually doing the wrong thing in the first place?

 Sure, it’s particularly obvious in cases like former President Clinton’s hazy recollection regarding his interpersonal relations, but how about the emails between fund managers laughing about sales of financial products they knew were destined for failure?  It’s quite possible that examples like those of corporate falsehood and the accompanying aloofness played a substantial role in the populist uprising that led to major changes in Washington recently.

That leaves me wondering… if it’s easier to TELL the truth because we don’t have to remember our lies, and we recognize the severity of the consequences when we’re caught in a lie, what are the implications if we LIVE a lie?  How about in our occupations, the pursuits in which most of us will spend the majority of our waking hours?  Do you ever feel as though you’ve been pigeon-holed into a particular job because it works well for someone else, but not necessarily for you?  Maybe you’re even encouraged to perform your duties in such a way that are in conflict with your values—or at least your instincts.  Maybe it seems like it would just be too hard, financially or personally, to be true to yourself and do something for which you’re better suited.  

Then follow the example of Keith McCullough, author of the book Diary of a Hedge Fund Manager. He found himself educated and skilled enough to excel at the highest levels in the hedge fund world.  He was “making it big” financially and had all the opportunities to continue to ride that wave.  But he knew it wasn’t who he was or what he was meant to be doing and took a 100% pay cut to walk away. He may not be making more money than he did as a hedge fund manager, but now Keith is enjoying the harmony of both telling AND living the truth… and that is something YOU NEED TO KNOW.

Selfish Generosity

The-art-of-non-conformity-set-your-own-rules-live-the-life-you-want-and-change-the-world Chris Guillebeau is an interesting dude.  I had the chance to hang out with him recently when he was stopping in Baltimore on his book tour in support of his new book, The Art of Non-Conformity, and I interviewed Chris on the radio show, Money, Riches & Wealth.  In case you’ve never heard of Chris and require a little more buy-in to believe he’s worthy of the “interesting” label, my summary following should do the trick:

Chris quit high-school after his freshman year, got his GED, snuck into community college, finished hisundergrad degree in 2 years (your math is correct—at that point, he wouldn’t have even finished high school ordinarily), served with an aid organization in Africa for several years, came back to the states to complete grad school, began to blog, became a professional writer and then wrote a book including a chapter in which he calculates to the penny how he could’ve gotten more education for far less outside of grad school rather than in.

You might expect this rebel with a cause to be a loud, type-A, bull-in-a-china-shop sort, but I was somewhat surprised to learn he’s actually a soft-spoken introvert.  That hasn’t stopped him from communicating a truck-load of wisdom, certainly through his book, The Art of Non-Conformity, but even more so through his online presence (which you can enjoy at www.chrisguillebeau.com).

And here’s the most interesting thing about Chris and his vision that separates him from the vast majority of vocational self-help voices:

He doesn’t think it’s all about YOU (or him or me).

Way too many books—most glaringly, The Secret—have attempted to make us followers by courting us with self-centric pronouncements that WE are each the center of a universe that is waiting to dutifully serve us all the success and money we could dream of if we simply dedicate our every thought and action to that “reality.”   Mr. Guillebeau, on the other hand, sends a strikingly non-hedonistic message.  Sure, he believes that we should be enjoying nearly every minute of our education and job, but instead of attracting us with visions of living endless hours with our toes in the sand and a fruity umbrella drink in hand, he encourages us to live a life filled with purpose and work that may be enriching, but definitely fulfilling.

He believes that in order for us to be entirely fulfilled with our life’s work, we need to be serving someone other than ourselves; that we—regardless of our age—must be building a legacy, not just an estate.  He calls it “selfish generosity.”  Doing something good for others that is also good for you.  If you struggle to believe that one can find financial stability, or even affluence, by pursuing a vocational course that doesn’t seek first and always to serve oneself, take a look at, well, Chris.  Or, have some fun learning about Blake Mycoskie, the young entrepreneur who started a phenomenally successful, for-profit shoe company—TOMS Shoes—on the premise that they would give away one pair of shoes for every pair sold. One-for-one.

Aw, I don’t know…the whole greed-centered focus worked out so well in the Great Recession, though! (Sorry, I’m obviously struggling with my 2010 New Year’s Resolution to avoid the use of sarcasm…)

Listen to just a few minutes of my interview with Chris Guillebeau on this topic by clicking here:

 

Chris Inteview

 

 

You Need To Know…Talent vs. Practice

Listen to Tim deliver this YNTK!  Click below:

You Need To Know - TalPract

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YOU NEED TO KNOW… some good news and bad news about your retirement—and life--plans.

You want the bad news first, don’t you?  Your retirement plan goals aren’t likely to be realized overnight.  Worse yet, most of your big plans in life also aren’t going to materialize in a flash moment of brilliance.  We know this, don’t we?  But our actions don’t always show it.  We agree that our goals aren’t likely to be met in an instant, but then we act as though the retirement or other life goal lottery is going to strike…. by over-weighting hot stocks picks or volatile mutual funds in our portfolios…  Or maybe we work day-in-and-day-out expecting someone to change our life and move us to the penthouse corner office, or hand us that big break.  So the bad news is that hope, desire – even talent – alone will not really get us anywhere in our long term planning.  As Anders Ericsson, the world renowned expert on high performance in work, sports and life puts it “I have yet to find a talented person who didn’t earn their talent through hard work and thousands of hours of practice.” 

So what’s the good news?  Ericsson dubbed the term “deliberate practice” in describing the one key factor that virtually all successful plans have in common.  That’s the reason that your buddy, who doesn’t have a lick of athletic ability, has a golf handicap in the single digits.  That’s the reason that monthly investment plans virtually always end up positively surprising folks years down the road.  But, when it comes to engaging in “deliberate practice” to better your retirement or financial independence plan, it requires that you HAVE a plan… then you have something to practice.

Talent, hope, passion and vision are all great things, but without employing them in habitual pursuits, they will accomplish very little.  Conversely, you will surprise yourself in your retirement and other life plans if you simply dedicate yourself to a deliberate practice of your objectives… and that is something that YOU NEED TO KNOW.

The Financial Planning Timeline…in 90 Seconds (sort of!)

Unfortunately, the "financial planning process" has the unintended consequence of rushing YOU (and the financial planner) through the most important steps of the process in an effort to get the planner paid the quickest.  See how in "The Financial Planning Timeline in 90 Seconds."