The Victory In Failure

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

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 (How To Spend $1 Million At Starbucks) and (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

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

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 Check it out HERE!

Personal Finance is More PERSONAL than it is FINANCE

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:  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

“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?

Real Financial Planning

This is the last in a September series[i] that has featured guest posts from some of the most prolific bloggers and authors in the realm of money and life today.  If you missed any of them, I encourage you to revisit the wisdom Derek Sivers, Chris Guillebeau and J.D. Roth shared with us on  And we complete this series of superstars with the person who I believe has taken the most unique approach to enhancing our understanding of personal finance—certainly the most artistic!

Carl Richards is a financial planner, blogger and the founder of the elusive Secret Society of Real Financial Planners.  Armed with a Sharpie and cardstock, Carl used his limited artistic skills to communicate some of the more complex and profound truths of financial planning and investing to clients with simple sketches.  His building body of work at received more notice than he expected, and he was invited to become a regular contributor to the New York Times.  In January 2012, Portfolio/Penguin will publish Carl’s first book, Behavior Gap: Simple Ways to Stop Doing Dumb Things With Money.

Thankfully, I’ve also had the privilege of getting to know Carl personally, and through that relationship, I can certify beyond any doubt that Carl’s means, methods and message are not merely a smokescreen for attracting followers or selling books, but based on the foundational values upon which he grounds his life at work and home.  He’s been kind enough to share a sketch and a few words with us:

 It seems like making important financial decisions should be easy. After all, it’s just simple math, right? We’ve all been taught that one plus one equals two. Consequently, we often think that the process of making good financial decisions is as simple as plugging a few numbers into a spreadsheet or an online calculator. After hitting enter, we’ll have the answer.

The problem, of course, is that it doesn’t seem to be that simple. Making good financial decisions requires that we consider the implications of those decisions within the context of our lives. My life and your life do not look the same; therefore, they don’t fit into a spreadsheet.

What may be a good financial decision for me may be a disaster for you and vice versa. In my day job as a financial planner, I’m often asked by friends or people in the media, “What are you telling your clients to do now?” Recently I found myself becoming increasingly agitated by that question. Because of course the answer is, “It depends on the client you’re referring to,” because the answer will be as unique as their situation.

Real financial planning happens at the intersection of your life and your money. The problem of course is that this intersection is an emotional place. I think this is a challenge because most of us were raised with the idea that money, sex, and politics are not things that we discuss openly or in polite company.

Most of our parents felt like it was their job to protect us from the financial side of our families. We didn’t talk about money at the dinner table and chances are we didn’t talk about money at all. Our parents’ well-intentioned desire to protect their kids has left most of us ill-equipped to deal with the emotional issues that surround financial decisions and with the distinct belief that financial decisions can and should fit into a nice clean spreadsheet.

But they don’t. Dreams, fears, and our most cherished goals for our children don’t fit into a spreadsheet. Often those things are what financial decisions are really about. It’s not about finding the best investment; it’s about asking ourselves why we’re investing in the first place.

So in light of this fact, how do we go about making good financial decisions? It starts with taking the time to get really clear about where we’re trying to go and, maybe even more importantly, about why. So my suggestion is to stop watching Jim Cramer scream about nothing important and to put down the latest research report you received from the brokerage firm. Instead, take that time to have meaningful conversations with the people you love about money, your values as a family, and the kind of life you want to live together.

The subtitle of my first book was “The Intersection of Money and Life,” but I’m not sure I’ve seen anyone encapsulate it better.  Many thanks, Carl!

[i] If you missed the last couple weeks, you might not know that to celebrate the release of my new book, The Ultimate Financial Plan, co-authored with Jim Stovall, I’m featuring guest posts from some of the bloggers and writers who’ve most inspired me of late.    

The $30 Hotel and the Battleship Slumber Party

Continuing in this special September series[i], this week I have the pleasure of introducing you to Chris Guillebeau.  Chris is the most unassuming revolutionary I’ve ever met.  He’s soft-spoken and appears not to have a self-interested bone in his body, yet a couple-hundred-thousand people follow his every move online each week through his blog, “The Art of Non-Conformity.”  He lives the title—he quit high school and then finished his college degree in two years.  Still in his early-thirties, he’s traveled to over 150 countries in support of his goal to visit every country on the planet, educating his audience on travel and life every step of the way. 

Chris is the author of the book, The Art of Non-Conformity, and I love the way he describes the central message: 

You don’t have to live your life the way other people expect you to. You can do good things for yourself and make the world a better place at the same time. Here’s how to do it.

If  you don’t want to pay a dime for some of his wisdom, read the manifesto that kicked off his writing career—A Brief Guide to World Domination—or the sequel, 279 Days to Overnight Success.  And of course, read this post from Chris, written just for you!  


When I went to Vietnam several years ago, I was excited to find a local hotel that offered nice rooms for $25. An upgrade was available for $5 more. Sight unseen, I took the upgrade—and was glad I did.

My own balcony! Free soup for breakfast! And truth be told, for someone who usually lives in the Pacific Northwest, the air conditioning while visiting Southeast Asia was nice too.

When I came home, I told the story of my $30 room. Some people said, “That’s awesome!”

But others had a different take. “I wouldn’t feel comfortable staying in a place like that,” a friend of the family said. “Wasn’t there a Western hotel nearby?”

Well, yes, there was a Marriott—and it cost $270 a night.

Others were unhappy for a different reason: “Dude, you got ripped off!” a fellow student in my graduate program told me. “I paid $5 a night for a bed when I was there.”

Truth be told, I didn’t need the $270 Marriott, and I didn’t feel bad about the “overpriced” $30 room. I was happy to exchange the money I did for the experience I received; I walked away satisfied with the exchange.

On countless other trips around the world since then, sometimes I’ve paid next-to-nothing, and other times I’ve paid a small fortune. It all comes down to a question of mindfulness, something I believe is the most important skill of personal finance. You can learn about exchange-traded-funds or DRIP investing whenever you’re ready (and if you never learn, you’ll probably be OK). But if you get clear about what you value and how your relationship with money is intertwined, you’ll go far—no matter which tax bracket you find yourself in.

Discussions about frugality and values tend to get weighed down by competing values: “save money at all costs” versus “live a little.” Tim’s work on this blog, his radio program, and in The Ultimate Financial Plan is smarter than that. It’s all about deciding what you value—and making sure your spending relates to those decisions.

I enjoyed reading about Tim’s choice to spend the night on a battleship with his son. He probably could have had a better meal elsewhere, or he could also have saved the money for a distant future. Speaking for myself, I’m not so sure I would have enjoyed the battleship slumber party—but I think it’s clear from the post that Tim made the right choice for his family adventure. Don’t you?


Some things are worth the money and some aren’t, and these decisions will always be relative. I don’t need to pay $5 a night in Vietnam… $30 was just fine with me. Sleeping on battleships isn’t my style, but I can see why it would make a fun memory for a parent and child.

I’m not in the business of telling people what they should value—and thankfully Tim isn’t either—but I’d encourage you to think long and hard about what you value and how your money will be used in support of those values. The poet Mary Oliver might have put it best: “Tell me, what is it you plan to do with your one wild and precious life?”

Well? It’s your turn now, and your life.

[i] If you missed the last couple weeks, you might not know that to celebrate the release of my new book, The Ultimate Financial Plan, co-authored with Jim Stovall, I’m featuring guest posts from some of the bloggers and writers who’ve most inspired me of late.  If you didn’t see last week’s post by Derek Sivers on why he decided to give his $22 million company away to charity, it’s a read both humbling and inspiring. 

Gas Prices and Margin Management

Gas Obscured by deadly tsunamis, nuclear meltdowns and revolutionary trends in the Middle East, the price of gas is rising and now threatens to impact all of us.  “According to the U.S. Department of Transportation and EIA, the average U.S. household purchases a little over 1,100 gallons of gasoline per year.” (Click here for reference.)

Only one year ago, gas prices nationwide were at manageable levels.  At $2.85, the average U.S. household was spending $3,135 annually.  A year’s worth of gas at today’s prices could easily cost $4,400—an additional $1,265 per year or $105 per month.  Not exactly pocket change.  And with some analysts predicting a near certain $5.00 per gallon, we must consider those costs—an estimated $2,365 more than last year or $197 more per month.

This is an increase that won’t be easily absorbed by the vast majority of households.  In addition to the pain felt directly at the pump, we also have a host of existing economic problems indirectly, but materially, impacted by the spike in fuel costs:

higher fuel costs = inflated cost of goods and services = reduced consumer spending

+ already wobbly economic recovery = possible double-dip recession (and all its friends)

What can you do?  That’s the wrong question to ask.  What will you do?  The short answer is to control what you CAN control.  Your argument with your brother-in-law, your Twitter gripe or Facebook rant may provide an opportunity to vent, but it isn’t likely to change U.S. energy policy or impact the actions of the Federal Reserve or start a revolution in the Middle East (wait a second).  I’m not suggesting we stifle a healthy, open debate, but we must not fool ourselves into thinking our responsibility ends with our voice being heard.  You have little control over U.S. energy policy and some control over your income, but complete control over your spending.

The number one indicator of a healthy financial household is its cash flow mechanism.  This is a two-fold process managing the present by analyzing your actions in the recent past and predicting them in the near future.  Some call it budgeting, but since that term has a tendency to draw as many readers as a detailed report of a colonoscopy, we’ll call it margin management.  Businesses without profit margin fail.  Why would we expect any different of our household finances?

The only constant in our financial lives is change.  Change requires flexibility.  Surprises require margin.  And failure requires grace.  So, if you’ve failed at margin management to date, give yourself grace.  Recognize the inevitability of change and submit to the most fundamental fiscal discipline of cognizant cash flow management.  And yes, deprive yourself of some level of comfort today to build margin into your financial realm so that when surprises occur, you’re prepared.

How does margin management work?  Margin is deliberately setting aside funds for the unexpected.  It’s simple, but it’s not easy.  (Check out this hysterical Saturday Night Live skit entitled “Don’t Buy Stuff You Cannot Afford.”)  It’s basic math, but behavioral management (especially our own) is horribly challenging.  We must set aside money today (which we’d like to spend) for future expenses (for which we’d prefer not to pay).  Each virtual envelope in our cash flow system should be filled with an amount slightly beyond our typical expenditures.  Then, we should have a distinct category labeled “margin” or “buffer” or “slush.”

My two favorite tools for margin management are and  Mint is the best free online personal finance tool I have seen.  It aggregates all of your accounts and does half the work of margin management for you.  YNAB stands for You Need A Budget (You Need A Margin Manager just didn’t have the right ring to it) and is a software-based tool with a $59.95 price tag.  It’s nothing short of a life-changer for those who dedicate themselves to its precepts and process.

Last night, for the first time since college (the ‘90s), I put less than a full tank of gas in my car.  I’m not going to lie; my pride took a hit as I arrived after and left before my fellow citizens who chose to fill ‘er up all the way.  But I completed the last leg of my journey home satisfied knowing I kept within the confines of my car expense budget for the month.

freedom from discipline = no margin = bondage

strategic discipline = margin = freedom


NOTE: This post first ran on Tuesday of this week in a new column I’m writing for

The Stuff Dreams Are Made On

Bogart We’ve all heard the phrase, “the stuff dreams are made of,” likely without questioning its origin.  Black-and-white movie buffs may remember Humphrey Bogart’s character, Sam Spade, used this phrase in the 1941 film, The Maltese Falcon.  His is really a mistaken reiteration of Shakespeare, when in The Tempest Prospero declares, “We are such stuff as dreams are made on.”  I could make a case that the prepositional switcheroo is really quite meaningful here, but I’d prefer to make a different proposal altogether:

The stuff dreams are made of (or on) isn’t actually stuff at all. 

Most financial planning focuses on the material realm—the acquisition of cash, stocks, bonds, mutual funds, real estate, business interests and other stuff.  Please don’t misconstrue my statement as imposing an inherently negative connotation on the word stuff or the things mentioned in that list.  I just think it’s ironic that these things appearing quite tangible are actually the most reliably temporal.

Cash, for one, is forever devalued.  In 1914, you would’ve been a “millionaire” in today’s relative terms with $45,500.  2007 taught us real estate is subject to losses and 2008, that the market is not necessarily a benevolent power pledged to making our dreams come true.  If you’re still holding onto the false belief that bonds can’t lose money, a broadening global sovereign debt crisis (that is, incidentally, deepening in many U.S. states) is likely to cure you of that logical illness.  And, with the exception of some very nice red wines, even those assets which appreciate in value over time don’t actually get… better.  My home, for example, was in better shape when it was built in 1969 than it is today.

Kieran1 Speaking of appreciation (and depreciation), my oldest son, Kieran, and I traveled with his Cub Scout troop this past weekend to the aging Battleship New Jersey, docked in Camden, NJ.  We got an exhaustive inside-and-out tour, ate two military-style meals and even spent the night on this magically floating metal monstrosity.  Many things about this experience were notable, not least among them the willingness of hundreds of men and boys to don bright neckerchiefs as they go about their days (just kidding, guys, I’m sure there’s a meaningful reason for that tradition I just don’t understand).  

The New Jersey is, according to our salty tour guide, Popeye (seriously), the most decorated battleship in U.S. history.  Launched exactly one year after “…the day that will live in infamy,” the New Jersey served in World War II, Korea and Vietnam before being decommissioned for the last time in 1991.  It was a day and night of “Wow!”s, but by far the most impressive thing for me was the entirely satisfied, albeit weary, smile on my boy’s face as we pulled away from the ship, knowing this was a memory we’ll likely have forever.

What tangible did we have to show for it?  Popeye’s business card and a $3.99 keychain trinket with a mini telescope.

Kieran2 My Shakespeare’s a little rusty, but I’m pretty sure when Prospero said “WE are such stuff as dreams are made on” (emphasis added), he wasn’t talking to (or about) his 401k, Roth IRA or even his FDIC insured bank account.  There’s no question, however, that larger balances in those can aid one in the acquisition of those non-material blessings in this life.  

I like the way my friend, Jim Stovall, puts it:  “There are only four things you can do with your money: Acquire stuff, buy security, create memories and make the world a better place.”  Neither Jim nor I would suggest the pursuit of any of these is wrong, but in a culture seemingly bent on the acquisition of the tangible, I encourage you to be deliberate in your pursuit of that which you can’t see or touch, but also never loses value.