Tag Archives: money

Mo’ Money, Mo’ Problems: ESPN Goes “Broke”

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This week, in their “30 For 30” special, “Broke,” ESPN expounded on the Sports Illustrated article alerting the nation to the systemic financial problems within the community of elite professional athletes.  Among other frightening observations, Sports Illustrated found (and ESPN corroborated) that “By the time they have been retired for two years, 78% of former NFL players have gone bankrupt or are under financial stress” and “60% of former NBA players have gone broke within five years of retirement.”

The hypothesized causes of these frightening statistics are compelling:

  • Stratospheric salaries create the mistaken impression that the money could never be outlived.  When most pro sports originated, the players didn’t even make enough money to quit their day jobs.  And while pro football, basketball, baseball and hockey players have been making a fine living for a few decades now, the economic boom of the 90s and the corresponding leap in team valuations for owners has led to unimaginable salaries for the top players.
  • But keeping up with the Joneses is an even more gripping problem in the uber-competitive world of pro sports than it is at the country club.  Not everybody is making A-rod’s $32 mil in 2011, but everyone wants to look, eat and drive like they are.  As Jamal Mashburn observed, “The show wasn’t as much on the court as it was in the parking lot.”  Yes, the disease of more is alive and well in pro sports.
  • And unfortunately, even though many of these guys are becoming instant millionaires upon getting signed, they don’t know any more about the complexities of personal finance than any other kid in their late teens or upper 20s.  They may even carry less financial wisdom into their careers, as many young pro athletes hail from broken homes in disadvantaged communities.
  • Because so many athletes have risen out of poverty to their new fame and fortune, this also makes them a target within their communities.  Bart Scott of the New York Jets (but who spent his better years in black and purple) calls it winning the “Ghetto Lottery.”  At its peak, Andre Rison had an entourage of over 40 and Bernie Kosar had over 50 families relying on him financially.  50!
  • But it’s not just known friends and family that hound these instant millionaires—it’s also young ladies with an eye for upward mobility.  One restaurant owner in the nation’s capital confessed that she had 7,000 women who would receive an automatic text message every time Michael Jordan walked into the joint during his stretch as a Wizard.  Typically, over 2,000 women would heed the call.  Of course, these rich, young “ballers” aren’t exactly turning the ladies away either.  Travis Henry boasts nine kids, with nine different moms and $17,000 per month in child support.
  • And for those players who do settle into marriage, striking numbers of them have their assets cut in half shortly after retirement; fully 60% of NFL players find themselves divorced within three years after leaving the game.  This often doubles their expenses and halves their assets without diminishing their lifestyle.
  • Those athletes who do seek financial advice often find it through unscrupulous and opportunistic advisors, accountants, lawyers and agents who insist on taking a cut of everything.  They are often over-exposed in private equity, real estate and alternative investments—including hair-brained business “opportunities” with a 90% failure rate.  These competitive ball field warriors are especially prone to sales pitches with more allure than a bank CD or balanced portfolio.
  • All this happens typically before these men reach the age of 30.  Five years of income needs to last 50 years.

The temptation is to watch “Broke” or read about this and come to one of two conclusions:

  1. These poor athletes!  They’re used and abused to line the pockets of wealthy owners, only to be left with broken bodies and bank accounts.
  2. These stupid athletes!  They’re handed the world on a silver platter and all they do is wreak a path of destruction with their lives and let down the fans and families who support them.

Yes, it was stupid of Evander Holyfield to build a 52,000 square foot house with not one, but two, bowling alleys, not knowing whether he’d ever win another fight.  It is nearly unfathomable how John Daly gambled away $50 million and how Mike Tyson blew through $400 million.  And yes, it is heartbreaking to hear of Keith McCants’s story of being arrested penniless with two prostitutes, high on drugs that were first recommended by doctors to keep him in the game.  Leagues and owners are complicit, but so are universities cashing in on prime-time athletes and sending them away without any personal financial education whatsoever.

The temptation is to think that we’re bystanders or third-party participants, that we’re inherently different.  But we’re not.  What we see in the financial mismanagement of athletes is merely a magnification of the worst that lies in all of us regarding money.  I, for one, can certify that if I had that kind of money in my late-teens and early-twenties, I’d likely have done the same damn thing.  And I didn’t grow up without the benefit of loving parents and wise instruction.  Go ahead, think about the dumbest thing you’ve ever done; and then think about having a seemingly unlimited amount of money with which to do it AND the paparazzi drooling, waiting for you to screw up.

Money is a tool that can be used to great effect to magnify the impact of our foolishness, and also our wisdom and discernment.  But when money becomes an adornment, when richness becomes a personality trait, and when wealth becomes an advertisement or proposition, we very well may end up agreeing with McCants’s final conclusion: “’The love of money is the root of all evil.’ It destroyed everything around me.”

Your Personal Money Story

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This is the first exercise in a series designed to walk you through an entire financial plan.  The spreadsheet is embedded in an Excel spreadsheet you can download and save for personal use.  You can get the background for this exercise in my Forbes post HERE or just jump right in with the instructions given below:

Write your own Personal Money Story.  What is the earliest memory you have about money, and how old were you?  For many, it will involve some combination of a piggy bank and an allowance or birthday gift somewhere between ages 3 and 6.  Then, rate this experience numerically between +10 for a great experience and –10 for a scarring memory.  Continue this pattern, marking all of the notable experiences you had with money—good and bad—throughout the course of your life.  As you fill in the columns in chronological order, you’ll see the graph begin to populate.

As you reflect on the completed exercise, what story does it tell?  Is it notably fortunate, happy, tragic or sad?  Is it relatively level or particularly volatile?  The answers to these questions might just explain the health of your 401k or your burdensome credit card balance.

As you develop your own realizations about your money beliefs, consider sharing your story with a select family member or friend, especially a spouse or loved one upon whom your Personal Money Story might have a meaningful impact…and suggest they do the same.

The Real Point Of Financial Planning

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Whether you’re a do-it-yourself-er or working with a professional financial planner, the real point of financial planning is often obscured in a process so deep and wide that it’s easy to get lost.  The most prominent mistake in financial planning is to allow the process to be reduced to an exercise in which success is solely derived from a single number—your net worth, today and projected into the future.  In truth, the real point of good financial planning isn’t to have more money, but a better life.

One may argue this point suggesting that more money is simply more…better, that few financial plans have suffered from a surplus of financial resources.  This is true at a moment in time, but the problem with making “the number” the ultimate goal of a financial plan is that it steers behavior to get there.  But that is the point, many of my esteemed colleagues may insist, that we subordinate our todays to our tomorrows in hopes of securing comfort and prosperity in both.  Then I ask you this:

Is comfort and prosperity the chief end of life?

I’m privileged to teach the Fundamentals of Financial Planning at my alma mater, Towson University, and every semester I pepper the class on the first day with a barrage of questions, among them, “How many of you are HERE because you WANT to be here?”  The average positive response is 10% of the class.  Most of them are accounting majors, so I engage them in discussion to determine WHY they chose that course of study.  The primary reason given is to secure comfort and financial prosperity in life.

“So you’ve chosen,” I ask, “to dedicate four-to-six years of your life becoming educated sufficiently to spend the bulk of your waking adult hours thereafter in a job you don’t particularly love to hopefully secure financial prosperity?”

Unfortunately, too many financial planning processes look just like this.  They begin with numbers and back into the actions—and life—necessary to achieve those numbers.  Planners may justify this by disclaiming that the client dictated the data (in the questionnaire designed to force the client into a box that can be managed by the planning software du jour).  The recommendation is simply the output.  But that’s because the process is backward.

It should start, instead, with three simple questions:

  1. WHO are you?
  2. WHAT do you want to be about?
  3. And, WHY?

Then and only then should the numbers come into play.  And the numbers shouldn’t exist to extinguish the who, what and why, but to support them.  If I’m really a good teacher, I may have to recommend you consider an alternative educational or vocational path.  If I’m really a good planner, I may have to recommend a course of action that could have a negative impact on your bottom line—today and in the future—but which leads to a better, more fulfilling life.

At best, the benefit of financial planning is minimized when reduced solely to a process intended to give you more money, today and in the future.  At the very worst, such a process could temporarily or permanently derail your entire plan for life.

Your financial plan must submit to your plan for life.

In the coming weeks, I’m going to take you on a blog journey through an entire financial plan, including an examination of topics you’d expect—like how to judge your investments and determine how much life insurance you should have—as well as many you might not anticipate—like how to create your own Personal Money Story and articulate your Personal Principles.  We’ll discuss everything from homeowner’s and disability income insurance to navigating death and taxes.

Each week’s blog post will be on a different topic, building on the last, and will include online exercises you can download (at no cost) for your own personal use in developing your financial plan.  It’s not designed to supplant the intangible benefits of a personal financial planner, but to be a starting point, a supplement and/or a second opinion.  And throughout, we’ll work to maintain the real point of financial planning—a better life.

Why We Do Dumb Things With Money

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“How could I be so stupid?”  Maybe you’re looking at a bulging credit card bill after over-spending during the holidays, just hoping your tax refund is enough to pay it off.  Or maybe you’re looking at a budget that simply won’t balance—for the 77th consecutive month—wondering how you made it this far in life without being able to master the simple math of addition and subtraction. 

Why is it that informed, educated and even brilliant people can be so dense when it comes to basic matters of personal finance?

I’m reading a book called The Checklist Manifesto by Atul Gawande, based on his fascinating article, “The Checklist,” in the December 2007 edition of The New Yorker.  On his way to making a compelling case for the use of checklists to ensure accuracy in even the most multifaceted procedures—like emergency room surgery or skyscraper construction—he gives us some insight into why we’re capable of doing dumb things in seemingly simpler processes.  In his words:

Two professors who study the science of complexity—Brenda Zimmerman of York University and Sholom Glouberman of the University of Toronto—have proposed a distinction among three different kinds of problems in the world: the simple, the complicated, and the complex.

Zimmerman and Glouberman give us a tangible example of each type of problem.  Simple is to baking a cake from a mix as complicated is to sending a rocket to the moon.  The latter requires “…multiple people, often multiple teams, and specialized expertise.”  But once you’ve marshaled the necessary manpower and know-how to send a rocket to the moon, the exercise can be successfully repeated.

This is not the case in complex problems, however.  The example they give for a complex problem is raising a child.  “Expertise is valuable but most certainly not sufficient.  Indeed, the next child may require an entirely different approach from the previous one.”  As a parent of two, this news was both heartening and frightening.  But it also helped me realize something groundbreaking, at least to me:

While many matters of personal finance seem so simple on their face, they’re actually quite complex…because WE’RE complex.

Even as a single person with no dependents or pets, our innate proclivity for self-deception is remarkable.  But within the context of a couple or family, it’s easy to see how the “simple” discipline of cash flow management, for example, can become quite complex.

Further complicating the problem is that most areas of personal finance require perpetual decision making, in which each individual decision to save, spend, buy, sell, re-allocate, contribute, distribute, insure, reduce coverage, file, expense, deduct, bequeath, endow, receive or disinherit is its own fertile ground for success or failure that could compound positively or negatively to impact the whole!

So let’s all enjoy a collective “WHEW!” as we momentarily enjoy the fact that making mistakes with money doesn’t mean we’re a complete nincompoop.  Of course, this is an explanation, not an excuse.  We’re still responsible.  Here are three ways we can all keep our financial decision making as smart as we are:

1)     Be cognizant of things financial.  Be present and deliberate when dealing with your money.  Keep these topics at front of mind by reading a good financial blog or two (ha, ha).  And consider reading my friend and colleague, Carl Richards’, new book, The Behavior Gap: Simple Ways to Stop Doing Dumb Things with Money.  (It’s the only financial book I know of that is strewn with pictures!)

2)     Develop good habits.  We often need to force ourselves to be cognizant because personal finance either bores us or is loaded with self-deception.  The development of good habits, beginning first-and-foremost with a functional cash flow system, will help us develop the behavior we’d prefer.

3)     Be accountable to someone or something.  Some are willing and able to develop their own system to maintain accountability, but for many, a healthy relationship with a professional financial planner is the key.  In my Forbes post this week, “Hey Financial Planners, Do Your Job!” I gave advisors a gentle nudge, encouraging them (us) to make financial planning a simpler, more client friendly process that eliminates complexity instead of creating it.

What are some other ways you’ve been able to keep from making dumb financial decisions in your life?

The Victory In Failure

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This past weekend, my seven-year-old son, Kieran, got beat up.  Worse yet, I was forced to stand by powerless, watching the whole thing, unable to intercede on his behalf.  Thankfully, everything’s fine.  He sustained no lasting physical injuries although it may take a while for him to recover emotionally…from his very first official wrestling tournament. 

Believe it or not, at seven he’s two-to-three years behind most of the other kids his age, so he spent the majority of his three matches getting his 60 pound frame slammed and twisted into the mat.  After spending weeks building his skills and confidence, he realized within 10 seconds into the first bout that he was outmatched.  At the end of the second (of three) 60 second periods his disappointment crescendoed and erupted into tears, doubling his embarrassment.  He spent the third period struggling to keep from getting pinned with tears streaming down his face.

Personal Failure

The worst part was that he still had two matches to go, and having seen the other two kids wrestle already, we knew it wasn’t going to get any easier.  He wanted to quit and go home.  What was I to do?  Parents in the movies always have the right thing to say, but I was searching and finding nothing; that is, until I remembered Tim Tebow.

We live in Baltimore, and that means we root for two teams—the Ravens, and whatever team the Steelers are playing—but over the course of this season, our household also admittedly got wrapped up in Tebow fever.  We’re suckers for underdogs and comebacks.  But what impresses me the most about Mr. Tebow is not his ability to win, but his grace in failure and his impervious defense against capitulation.  Whether deified in victory or discarded in defeat, he seems to maintain the same sincere posture of positivity, even after Denver’s 45-10 loss to the Patriots.

Kieran indeed lost his final two matches, but got successively stronger in each.  In the third, his dedication even earned him a couple points against a far superior opponent and a small cheering section of coaches, parents and teammates anxious to affirm his courage in the face of sure defeat.  He carried himself with respect and a sincere smile on his face to the fourth place (out of four) podium.

Financial Failure

Kieran’s story has little to teach us about money, but much about failure.  In no period since the Great Depression has financial failure been so widespread and felt with such impact.  There are those, like my son, who did everything they could to improve their chances of success, but lacking a certain level of experience or knowledge found themselves pinned down by the weight of decisions that turned on them.  Even many of those eminently qualified and gifted—like my friend and financial planning colleague who bared his soul sharing the story of his real estate blunders during the crisis—were humbled in defeat.

Losing your home, losing your job, or losing your ability to retire due to market losses is harder to handle than losing a football game or a wrestling match.  Failure of this magnitude can be absolutely crippling.  But it is, indeed, possible to gain something from losing.

The Depression Baby generation became the best savers in U.S. history (see Beyond Our Means, Princeton University Press, 2011).  Foreclosure and bankruptcy have spawned inspired financial counsel that has changed the lives of millions for the better (see Dave Ramsey).  Many job losses have imbued the aggrieved with enough frustration towards corporate hierarchy that they’re becoming our next wave of innovative entrepreneurs (see report by the Kauffman Foundation).  And market losses have encouraged the first generation of early retirees to pursue meaningful vocations they’re happy to perpetuate over occupations they were racing to end.

I’d love to know what you have gained through loss or failure, so please share in the comments section if you’re willing.

(This wasn’t the only emotional experience I had with Kieran this past weekend relating to sports and somehow, in my mind, things financial.  I wrote about the other in my Forbes blog this week—you can read “What Do NFL Playoffs And Money Have In Common?” by clicking HERE.)

10 Ways Budgeting Saved My Marriage

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Eleven years ago, my wife and I sat across the table from an experienced married couple squirming in their seats uncomfortably as though they feared we were about to deliver some terrible news.  But the source of their discomfort was the bomb they were about to drop on us.

You see, we were not yet married, but engaged, and the couple across the table was our mentor couple in our pre-marital class.  Upon review of our personality profiles and piles of personal baggage, they felt it their duty to discourage us from further pursuing the sacred vows of matrimony.  They’d never seen a hopeful couple more innately disparate, more inevitably destined for failure. 

We are indeed vastly different, but one thing my wife, Andrea, and I share in common is a penchant for resisting authority.  So with the blessing and support of family and friends, I’m thrilled to report we’ll be celebrating our eleventh anniversary this April with our two wonderful boys, Kieran and Connor, ages six and eight.

We have never forgotten, however, the well-intended admonishment of our mentor couple; indeed, we see much of life from vastly different perspectives, foremost among them our view of things financial.  And apparently, we’re not alone. Over 50% of marriages end in divorce.  Over 50% of those splits cite financial disputes as the primary reason for the break-up.

100% of marriages deal with money as a daily necessity.


This thought occurred several times when preparing my recent posts on budgeting on Forbes.com (How To Spend $1 Million At Starbucks) and TimMaurer.com (A Burdensome Yoke…Or A Path To Peace?).  It struck me that budgeting ranked right up there with prayer and counseling as a precious few factors that have helped keep us together.  Here are the top 10 ways budgeting has saved, and continues to save, our marriage:

10)  Budgeting forces us to collaborate.  It seems that as parents of young children, the level of commitments between work, school, church, sports and the arts leaves us functioning more as independent business partners than spouses.  We’re almost always in short supply of adult conversation and genuine collaboration, and (strange as it may seem) budgeting gives us the context for both.

9)     It offers healthy accountability.  Ronald Reagan famously said, “Trust, but verify,” and while 100% verification of trust in our marriage would be stifling, we’ve found periodic accountability to be a healthy way to build faith and trust in each other.  Our joint budgeting effort means all of our expenditures are accessible to the other.  Scrutinizing every penny spent would be unfair (a-hem, note to self), but knowing everything is visible is likely to encourage us each to spend more responsibly.

8)     It humbles us.  I’ve not found a more helpful tool in the pursuit of a successful marriage than humility, and since the use of money is so pervasive in our lives, small mistakes are the norm, not the exception.  Rarely a weekly cycle goes by in which we don’t each humbly acknowledge that we erred in some capacity, humbly submitting our mistake to the other.  And of course, a good budget is designed to withstand these small mistakes.

7)     It provides an opportunity for reconciliation.  The prevalence of small errors in our budgeting, however, provides fertile ground for a destructive tendency: that we’d develop a scorecard, real or implied, and shame the more regular offender (because there normally is one in most households).  So for us it’s very important that a humility ground-rule is established: Any time an offending spouse submits in humility to an irreversible mistake, forgiveness and reconciliation is the only way forward.

6)     It gives us reason to celebrate.  For each mistake, there are several successes in each budget cycle.  The long-term success of our marriage is often built on a series of small victories, and we should never withhold an affirmation for completing a project under budget or enjoying the security of a buffer when an emergency arises.

5)     It cuts down on surprises.  So many aspects of our life are subject to variability and volatility.  We can’t necessarily reduce the number of those surprises, but we can certainly reduce their negative impact by being financial prepared for them.  Financial strain, and especially shock, pushes many marriages to (and over) the brink.

4)     It makes us better parents.  All of us parents could probably agree that it’s possible to spend too little OR too much on our children, right?  We’re responsible to determine what the right levels of spending are for our children, and budgeting allows us to deliberately set aside appropriate levels of funding for education, clothing, sports, music and fun.

3)     It shows our dependence on each other.  Andrea and I do think very differently, and this inevitably leads to divisive thoughts like these: “You know, I think I could do this better on my own!”  But this decries the very essence of marriage as an institution in which each partner’s primary objective is to serve the other.  The process of budgeting puts our (literal and emotional) dependence on each other on full display.  That makes us vulnerable, but it’s good.

2)     It preserves a healthy level of independence.  The income production in most households is almost never perfectly equitable.  Andrea sacrificed a successful career in the financial industry when she chose to stay home with our young children.  This has been an incredible blessing in our family, but it’s also a breeding ground for insecurity and manipulation as I might have a tendency to overestimate my contribution to the family’s finances and underestimate Andrea’s.  It is imperative, then, that part of our budget is the preservation of a certain amount of financial independence for each spouse.  To offset this income inequity, we’ve established “His and Hers” accounts with unilateral privileges.  Many shun budgeting as too restrictive, but properly implemented, it actually gives us room to breathe financially, and we all need room to breathe.

1)     It preserves date night!  One of the interactions I’ve enjoyed most throughout my career was with a client who is a generation or two my senior.  He and his wife have five kids(!) and appear to be more in love today than they’ve ever been.  So at the close of one meeting, I got up the nerve to ask this gentleman what his secret to marriage and parenting was.  His answer?  They never fail to set aside time—and money—for each other as a couple.  He made a convincing case that we are better parents when we deliberately setting aside time to be together, away from the kids, and not just for date nights, but also long-weekends and even week-long vacations to remind ourselves that before we were parents we were lovers.  This proved especially difficult for Andrea and me because by the time we got to the end of most months, we’d already spent our discretionary cash on the rest of life and felt like we were taking funding away from other things to line-up a babysitter and enjoy a night or weekend out.  So now, much as we have preserved His and Hers accounts, we also have an Ours account.

Budgeting is not the slightest bit romantic, but it has the ability to promote and preserve the romance in our marriages and keep us on the right side of that daunting 50% divorce statistic.  There are as many good ways to manage this process as there are couples, and I’d love to hear some of the ways budgeting has helped preserve YOUR marriage also, so please share your story in the comments section!

The Money Maze

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by Jim Stovall

The current turmoil in the financial markets has created more confusion and controversy surrounding money, wealth, and personal finance than ever before.  Surprisingly, money is not the key to wealth.  Knowledge is the key to wealth.

People who are wealthy have a high degree of knowledge and understanding as it relates to money.  They did not obtain this knowledge because they have money.  They have money because they obtained this knowledge.

If you divided all the money in the world up equally among those of us in a capitalistic, free enterprise economy, within a few short years, those dollars would find their way home again, and the rich would continue to get richer while the poor got poorer.

Whether you’re dealing with medicine, mechanics, or your money, knowledge is power.  When you visit your doctor or auto mechanic, the more you know, the better off you are and the more likely you become to have a positive outcome from the encounter.

I have written 16 books, and as they are released into the retail marketplace, they all take on a life of their own.  Recently, I have written a book with my co-author Tim Maurer entitled The Ultimate Financial Plan.  When it hit the marketplace, it began getting a lot of attention from high places.  Here are the reviews from USA Today and the New York Times.

This type of publicity for a brand new book is indicative of the hunger in our society of people looking for answers for evermore perplexing questions.

In The Ultimate Financial Plan, we do not seek to give you the answers to all of the questions, but instead, we seek to equip you with the knowledge you will need to evaluate investments and investment professionals.

In today’s financial realm, it’s not enough to simply evaluate financial advice.  You have to evaluate financial advisors.  Financial decisions are among the most important you will ever make for your family and your future.  Unfortunately, if you make the wrong decisions today, you may not know it until you get way down the road toward college expenses, family emergencies, or retirement.  At that point, it’s too late to correct a poor decision and recover.  You can’t wait until you’re thirsty to start digging the well.

We humans have a tendency to avoid perplexing life questions that confuse and frustrate us.  Always remember that doing nothing is never a good financial plan, and to not decide is a decision, in and of itself, and rarely a good one.

As you go through your day today, commit to obtaining the basic knowledge you need to create your own customized money strategy, and then you will have the ultimate financial plan.

Today’s the day!

Black Thursday and the Value of Time

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This past Thursday—Thanksgiving 2011—I was fortunate enough to spend the entire day with family.  We spent the morning as our household of four and shared the afternoon and evening with my parents, brothers and extended family on my mother’s side.  After our fill of family and food, we headed home just before 8:00pm (not without purpose, mind you—the Ravens game was set to kick off at 8:20pm).  As we drove through the town of Bel Air, Maryland we passed a Target and a Best Buy, amazed to see lines wrapping around each building with prospective deal-seekers spending their Thanksgiving night huddling for warmth, embracing the side of a big box store.

This phenomenon, I assume, was driven by a desire to be one of the first in each store when they opened their respective doors at midnight.  That’s midnight—the earliest possible moment a store could open and still call it the Friday after Thanksgiving.  Not to be outdone, in an act of supposed consumer benevolence (and arguably outright employee exploitation), the world’s largest retailer decided just to break the barrier by opening at 10pm on Thanksgiving.  Should we just get it over with now and rename Thanksgiving Black Thursday?

Unlike many of my personal finance blogosphere colleagues who’ve justifiably brought their wrath down upon the consumption worship that has become Black Friday, calling for an outright boycott on moral or frugal grounds, I’d like to take a different approach.  In my financial planning class, we talk a great deal about the “time value of money”—the impact of compound interest gained and lost over time.  This concept is practically the centerpiece of all financial planning (rightly or wrongly), but a topic that receives precious little attention is the monetary value of our time.

How valuable is your time?

How valuable is your time?  Well, for starters, how much are you paid?  Take your salary, add any bonuses or commissions and divide it by the number of hours you work.  (This is only a rough approximation not applicable for many who are unemployed, underemployed, retired or working for reduced or no pay.)  Glancing at the Bureau of Labor Statistics, we learn that “Management Occupations” have an hourly mean of $50.69 (or $105,440 per year).  “Computer and Mathematical Occupations” demand an hourly mean of $37.13 (or $77,230 per year) while “Mathematical Science Teachers” derive less annually ($73,480) but more per hour, thanks to summers off, at $41.75 per hour.    While you may very well be blessed with substantially higher hourly/annual compensation than those mentioned above, there are many who make far less. If you’re among them, I don’t need to remind you that though you may receive less compensation, you don’t work any less, so for the sake of argument, let’s assume a reasonable vocational hourly rate of $40 per hour.

Now take a moment to ponder this question: Is the time you spend at work your most valuable?  You may answer yes, but many will prioritize their time engaged in service or worship or pursuit of their favorite hobby as their most prized.  How about drinking in a new book, movie or long-awaited album from your favorite artist?  Or what about that 30 minutes each morning with nothing but your hot cup of coffee or tea and your thoughts, catching up with an old friend over a glass of red wine or toasting the birth of a new addition to your best friend’s household?  Many will rank their daily exercise or sleep as highly valued and even more will rate time spent with family and friends as priceless.

What is a reasonable premium that we could place on this time?  Even though it’s impossible to know, isn’t it likely that we’d value some of this time as at least double or even triple the hourly value of the very important time we spend on the job?  We could easily assume our most valuable time—time that we’ll never get back—is worth over $100 per hour!

How about the time spent at Best Buy from 5pm until 2am on Thanksgiving night and Black Friday morning to secure a savings of $300 on a 42 inch flat screen TV?  From a financial perspective, with an eye for the value of our time, those eight prime-time hours would appear to net a guaranteed LOSS of at least $500!

Let’s also not forget that whatever goods we capture in the hunt, whether at a full or discounted price, are depreciating in nature.  Their value begins to fade the moment we take them out of the box and we’ll likely be tossing them aside as worthless in under a decade, while our premium time is very often a legitimate investment in ourselves and those we love accompanied by compounding memories over the years.

Let me not oversimplify this to suggest that all things consumption-oriented are bad and the activities I tend to prefer are universally good.  After all, I do tend to spend “several” minutes each Thanksgiving Day engaged in the ritual of football spectatorship.  I’ve also heard from friends who enjoyed a rich time of fellowship joining a family member or friend on an early-morning shopping excursion.

But let us not forget that every minute of every day is spent—it’s up to us to spend it well.

______________________________________________

*This article also appeared on Tim’s new blog on Forbes.com. Check it out HERE!

Personal Finance is More PERSONAL than it is FINANCE

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I need to share a secret with you: financial advisors aren’t perfect.

What?  You already knew that?

OK, so you already knew that financial advisors aren’t perfect, but they (we) may still need to come to grips with that.  It’s not as easy as it sounds.  You see, anyone trained to be an advisor in the financial services industry proper—represented by The Big Three: banks, brokerage firms and insurance companies—is likely given more instruction on molding your perception than on actually advising you. I speak of this from first-hand experience.  Let me give you a few examples:

I was told by one of my sales managers when I was a financial advisor for a very large insurance company, still in my twenties and struggling to make ends meet, that I should buy an expensive sports car.  This would supposedly accomplish two purposes: first, I would exude the desired air of success necessary to attract big clients and second, it would create a greater sense of urgency to sell more of the company’s products to keep up with my big car payment.  This same Glengarry Glen Ross-style[i] sales manager also instructed me to arrive at a lunch destination with a hot prospect early enough that I could ask the maitre d’ to call me by name, as if I was a regular at the fine dining establishment.  And if that wasn’t convincing enough, I was also to tell the waiter in advance what my favorite drink was so that when he or she approached our table I could just say, “I’ll have the usual.”  I was told to never have a beard, keep my hair off my ears and shoulders, never wear flashy ties, shave twice per day and never wear jeans or sweatpants, even for a Saturday morning trip to the grocery store.  After all, you never knew who you might sell—I mean, see. 

It was all about perception, and of course, when it came to all things financial, I was to have all of the answers, regardless of the subject matter.  If I didn’t know the answer I was to exercise my skills of creativity and persuasion to make one up.

Last week, one of my colleagues took a big, bold step in changing this culture of perception.  Carl Richards wrote a must-read article that was published in the New York Times, telling his story of an instance of personal financial mismanagement in the midst of the financial crisis that ultimately led to a short-sale on his home.  In doing so, not only did he break this barrier of perfection perception—that you never really believed anyway—but he also introduced an interesting new possibility, that we could not only learn from our financial advisor’s successes, but also from his or her mistakes.

Yes, I said “we” can learn from “our” financial advisor, because even though I’m a financial advisor (maybe even especially because), I need to have my own financial advisor.  Another colleague, Rick Kahler, author and co-author of several books including one of my all-time personal finance favorites, The Financial Wisdom of Ebenezer Scrooge, insists every financial advisor needs his or her own financial advisor.  Why?  Because money is simply too personal.  Kahler told me, “Money touches everything in our lives. How we think about it, how we use it and what we believe about it speaks volumes about how we view politics, religion, relationships, and even sex.”  He went on to say there are few topics that evoke shame quite the way money does, and I believe this may be especially true for someone who is looked to as a source of financial wisdom, like a financial advisor.

Personal finance is more personal than it is finance.

You may have heard me say this before, but it’s not a slogan I devised because it sounds clever; I genuinely believe it to be true that within the realm of financial planning and all of its numbers, charts, projections, amortizations and allocations, the most challenging and important aspects of the discipline of personal finance are not the financial, but the personal.  This is because financial planning blends both economics and emotions, and self-analysis is strewn with self-interest, self-deception, self-condemnation for some and self-aggrandizement for others.

This is why a majority of lottery winners and professional athletes find themselves in bankruptcy only a short time after their big pay day.  This is why many people who make over $250,000 per year are still living paycheck-to-paycheck.  This is why even the best financial planners need to submit themselves to the scrutiny of another advisor.  This is also why people who’ve worked to develop a healthy view of money become the “millionaire next door” with only a modest income, build successful companies from scratch, use their financial failures as a catalyst for success and in some cases find the greatest level of contentment has nothing to do with financial wealth at all.  And this is why this entire blog is dedicated to this fascinating intersection of money and life!

I’d love to hear your thoughts on financial advisors, sleazy sales tactics and money beliefs, so please join our conversation!

[i] Glengarry Glen Ross was a 1992 movie with an all-star cast including Jack Lemmon, Al Pacino, Alec Baldwin, Ed Harris and Kevin Spacey.  Alec Baldwin plays Blake, a “motivator” from the home office who is brought in to increase sales.  You can check out his motivational speech here, but pleased be warned that the language is a bit…colorful: http://www.youtube.com/watch?v=y-AXTx4PcKI  In the interest of full disclosure, I never had a manager go quite this far, but I did get the table pounding “I made one million dollars last year!  I buy a new Cadillac every two years for cash on the barrel head—because I can!” speech (the manager’s words verbatim).

For Love, Not Money

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“I commit to nurturing a gratifying relationship with money.”

In the twittersphere, I saw this seemingly noble resolution dart by last week.  I subverted my urge to question it in under 140 characters, but with no such limit here, I’d like to engage this notion that I believe to be fundamentally flawed and potentially dangerous in our quest for personal and financial harmony.

I’m sure this blogger/tweeter, a self-described expert on women’s financial dealings, is well-intended, even when she invites you to “Love your money, love your life,” on her home page.  Reading through her prescriptions, I have no doubt we share many personal financial philosophies; indeed, it is not my intent to start a feud or initiate a personal attack, but instead to take issue with this philosophy I’ve often seen at work in many forums, even if I’m to be accused of merely mincing words.

Money is not something worthy of our love and affection, nor is it a suitable partner in relationship.

Relationship is—or at least should be—reserved for people and love is the currency of relationship.  Money when personified is given too much credit; it becomes an end instead of a means.  Of course, it often is the object of our love, admiration and respect.  Possibly we think that if we address it properly, it will find us worthy of financial favor and bless us with…more?  But not unlike other inappropriate relationships, a love of money often devolves into fantasy, obsession, lust and eventually infidelity.

Your primary relationships in life—your significant other or spouse, your children, your parents and siblings, your friends, your co-workers and co-laborers in service—can’t compete with money.  This is because genuine relationship requires give and take and money appears on its surface only to give, without argument, criticism or judgment. It’s no wonder, then, that with over 50% of marriages ending in divorce over half of those splits cite financial disputes as their origin.  It’s no wonder children manipulate their parents for money and parents cut children out of wills.  It’s no wonder siblings ostracize one another over inheritance, that business partnerships collapse and non-profit initiatives are scarred by financial scandal.  When given an opportunity to compete with people for relationship, money wins.

Therefore, we must never allow money to compete with or for relationship. 

This also appears to be in keeping with money’s design, even in its most primitive form.  The long-held presumption was that money came about as a wildcard in the realm of trade.  Let’s say we’re part of an economy based on the barter system; I’m a farmer who makes dairy products and you’re the village tailor.  You’d like some cheese, but my wife is also gifted with the needle, so I have no need for your services.  You’re out of luck.  Enter money.  You give me money for cheese, and I can use the money to pay the blacksmith for some much needed horseshoes.

This theory has been called into question, though.  Some economists argue that while this may sound logical, actual examples of the barter wildcard are nonexistent.  They claim that money was used more as an I.O.U.  You have something I need, but I have no way to compensate you, so money serves instead as a marker of what is owed—debt, effectively.  While the meaning or importance of money’s origin could be argued, one thing is clear in either of these cases: money was designed to enhance relationship, not stand as its replacement.

And that is no different today.  While money may serve very poorly as the object of our adoration, it is quite effective as a tool for its expression.  Certainly, in suggesting money is not worthy of our love, I by no means intend to imply that it is inherently bad or evil, just neutral.  As my friend and co-author, Jim Stovall, puts so nicely, “Nothing can take the place of money in the things that money does, but outside of the scope where money is useful, it has no value.”

Mincing words?  I think not.  Words are powerful.  Our words express and even inform our beliefs, and we act on what we believe.  What we believe about money will impact what we do for and with it.  But if I’m starting to sound a bit too gray, fuzzy, squishy or philosophical for you, consider these more pragmatic reasons to further entertain my plea:  Those who have put money in its rightful place—out of their hearts and in their bank accounts, investments, homes, educations, businesses and service initiatives—tend to acquire more of it, spending less paying attorneys and compensating ex-spouses, ex-children, ex-friends, ex-business partners, ex-everything.  And lastly, a philosophy grounded in falsehood is eventually destined to fail.  Reason enough to reconsider yours?