Education Savings Plan App

This is the 12th exercise in a series designed to walk you through an entire financial plan.  The exercise is embedded in an Excel spreadsheet you can download and save for personal use.  You can read the backdrop for the exercise HERE, or just jump right in with the instructions given below:

If you’re starting from scratch, the following application steps will provide a great starting point; if you’re re-evaluating, this will be a great opportunity to hone your approach.

Create your family education policy.  If you are one of two parents, put your minds together.  If you’re a single parent or one of many students without a benefactor in your educational quest, your policy is just as important.  It may be helpful to pull out your Personal Money Story exercise, which likely includes some good or bad experiences you’ve had surrounding the cost of your own education.  Then, review your Personal Principles and Goals before articulating your educational savings goals.  Utilize the Family Education Policy worksheet to concrete your family’s plan, and then, at the appropriate time, share it with your children.

From that policy should spring your Education Savings Plan.  Use the calculator we provide to help you determine what your monthly savings should be and how much of that should be going into a 529.

Click HERE to access the Education Savings Plan app!

There Is No Panacea!

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

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


The Economic Bias of Commissioned Financial Advisors

What do a used car, an old television with rabbit ears and an annuity policy have in common?  You’ll have to see in this new 90 Second Finance video in which I discuss the Economic Bias of the commission-only financial advisor.

Last week, I introduced the topic of Economic Bias in the financial advisory realm.  I discussed each of the three primary compensation models for financial advisors, and this week we take a closer look at the Economic Bias of those who earn their compensation solely from commissions.

I’d love to hear your feedback and any experience you may have had to support OR contradict my thoughts.

90 Second Finance…The Bucket Plan

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

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

State Of The…

President-Barack-Obama-State-Of-The-Union-Address-PHOTOS Did you watch President Obama’s recent State of the Union address?  What did you think?    I’m not asking whether you liked the color of his tie or enjoyed seeing Vice President Biden and newly elected Speaker of the House John Boehner try to suppress their disdain for each other on camera.  I’m curious what you thought about the speech’s content and substance.  Mine is not a political question—asking if you agreed with the President’s stances on this-or-that—but a probe to determine if you feel the topics in the speech were meaningful.    He touched on:

  • High unemployment
  • The depressed housing market
  • The sluggish economy
  • Two wars
  • The national debt
  • The sovereign debt crisis in Europe
  • North Korea’s nuclear ambitions

Few of us would argue that these are not vitally important issues, but which do you think has a bigger impact on your life—The State of THE Union or the State of YOUR Union?

Whether you acknowledge it or not, you’re an entity.  You and your spouse (if you you’re married) and your children (if you’re a parent) are certainly beholden to other entities, like cities, states and countries, but you also enjoy a great deal of sovereignty.  You decide where to live, what to eat, whom to befriend and marry, how to derive an income and how to spend it.  But interestingly, we tend to spend more time bemoaning the action and inaction of those with less of a direct influence in our lives—bosses, legislators and Presidents—than those who most directly impact our lives…US.

I seek not to minimize the importance of the State of the Union address (even though it seems more like political gymnastics these days, regardless of the party affiliation of the deliverer) and certainly not the actual state of our great country, but to elevate and affirm the most powerful leaders in our respective realms—YOU and ME.  Your entity needs you to be actively involved in the process of gauging its state, crafting its vision for the future and moving in the direction of that vision.

The first step in effectively leading the “Democratic Republic of You” is to simply be honest with yourself.  This, of course, is where we must deviate from the political analogy, because we do ourselves no good whatsoever to spin our current reality into something shapelier than it is.  Each of us is uniquely made, and we only distance ourselves further from fulfillment when we attempt to prove otherwise.

The most common way I see this play out is in the educational paths we take and the career choices we make (topics I’ll be discussing in the next couple of weeks), but I’d like to ask you to take 5 minutes to complete an exercise right now.  It’s very simple and it works wonders to help us analyze our current state.  You need only one piece of paper with a line down the middle (see the sample below).  On the left hand side, you write LIFE TAKING and on the right side you write LIFE GIVING. Those things that fill the Life Taking column are the roles (or tasks within roles) that drain you.  They’re a chore, not a labor of love.  On the Life Giving side, list the opposite—those things you can do for eight or ten hours in a day and wonder where the time has gone.  You might be tired after a long day of Life Giving activities, but you don’t feel weariness; instead, a great deal of satisfaction.

Looking over this list, you’ll be able to honestly answer whether the state of you or your family is good, or not.  The optimal end result is not to eliminate all of the things that drain you and replace them with the stuff you love, but if the majority of your roles and the duties you’ve accepted as yours are Life Taking, I encourage you to consider making some difficult decisions in an effort to improve that ratio.  That may mean saying yes to something, but it almost certainly means saying no.  Next week, I’ll share how this type of analysis can be used to give us much needed direction in our educational and vocational pursuits.

If you want to get started on listing these out for yourself, I have provided a downloadable version of exercise right here:  Download Life Taking, Life Giving – BLANK.

And if you need a little levity to warm up to this exercise, take a look at Saturday Night Live’s take on the 2010 State of the Union address.


Holiday Blues: A Remedy

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

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

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

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

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

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

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

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

And, as long as you promise not to use this only to provide solace for a lack of action on your part, this short video of “The Collector’s Collector” on the show, “Hoarders,” will help you put your situation at home in perspective:

Have a blessed—and simpler—New Year!

The Cure For Greed

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

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

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

What It’s NOT and What It IS

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

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

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

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

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

Speak well.  Plan well.  Live well!

Defense Wins Championships

The fall is, without a doubt, my favorite time of year. And a not-so-insignificant element of that is the joy that fills my heart when huddled around my parents’ television on a Sunday afternoon with my family, a belly full of “linner” (a lunch big enough to be dinner) and the smell of apple pie wafting over a group of adults and children yelling in unison at the images of modern day gladiators chasing around an odd-shaped leather ball.  Football is philosophy… and some of that philosophy translates especially well in our personal finances.

You Need To Know…Talent vs. Practice

Listen to Tim deliver this YNTK!  Click below:

You Need To Know – TalPract


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

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

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

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