Fight or Flight

by Jim Stovall

Recently, I spent quite a bit of time with a dear friend of mine who could best be described as the quintessential Southern gentlemen.  He is well into his eighth decade of life but, in many ways, his attitudes and demeanor harken back even farther to a much-earlier time.

He was born and spent his formative years in rural Mississippi and remains very steeped in the southern culture.  While my friend seems to have love in his heart for everyone, he still refers to the Civil War as the War of Northern Aggression.

One of my favorite quotes from my dear friend is that “a good run is better than a poor stand.”  This old saying may have originated in the aftermath of a long-forgotten Civil War battle, but it can serve you and me today.

There are few human endeavors that require more time, effort, energy, and resource than an argument or disagreement.  In many cases, the disagreement or argument, itself, becomes more costly than the issue it sprang from.  Very few people have the ability to disagree without becoming disagreeable.  We are all so vested in our personal beliefs that we take opposition to our position as a personal affront.

I would be the first to say there are many beliefs, standards, and positions that are worth arguing for and even fighting about, but it’s important to pick your battles.  Oftentimes, with a friend, colleague, or loved one, you can win a brief argument and lose good will and trust that have been built up over many years.  Before you engage in a conflict with another person, group, or organization, be sure to count the cost.

In the ancient and classic book The Art of War, Sun Tzu describes the best way to win any battle and be victorious in any war is to avoid the conflict entirely.  Before you engage in a debate, an argument, or a conflict, ask yourself the following questions:

1.      Do I really care about this issue at hand?

2.      Does the matter under consideration involve a core principle that I hold?

3.      What could I lose by escalating this conflict?

4.      Does the outcome of this debate affect one of my personal or professional goals?

5.      Is it possible for me to simply state my position and agree to disagree?

As a professional speaker, I have had the privilege of sharing the stage with General Colin Powell.  We should all be grateful and thankful for leaders such as General Powell who have dedicated themselves to our defense.  During a recent debate about an ongoing conflict in the Middle East, General Powell cautioned that it is important that we avoid a situation where we win the war but lose the peace.

As you go through your day today, never back down on your core principles and beliefs, but never fight or argue over things that truly don’t matter.

Today’s the day!

Your Path To Financial Freedom: Debt Elimination App

This is the fourth 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 find the backdrop for the exercise HERE or just jump right in with the instructions given below:

If you refer back to the Personal Balance Sheet you created, you will have already compiled your debt information in the liabilities section.  Next to each liability, put an “X” next to bad debt and a check mark next to better debt.[i]  Then, transfer the bad debt to the Debt Elimination App available on our web site and customize your Debt Elimination Plan.  List the debts in the order in which you will pay them off.  If you want to get that ball rolling faster emotionally, take Dave Ramsey’s advice and pay your cards off in order of smallest to largest balances.  If you want to save the most in interest payments, list the debts from the largest interest rate to the smallest.

When you make that last payment, celebrate!  Take your next month’s payment—a significant chunk of cash flow that you’ll now be able to plough into more generous budget categories and investment for the future—and throw yourself a party.  Invite family and close friends who’ve supported you throughout, and enjoy the peace of mind that comes with being debt free.

If you don’t have any Xs on your Debt Audit because you only have better debt, you need not put yourself through a financial boot camp, but deliberate over the debt you do have and consider whether or not a debt repayment acceleration plan may be right for you.  If so, use the Debt Elimination App to plan your course of action.

Click HERE to access the app!


[i] There is no “Good Debt”—just “Bad Debt” and “Better Debt.”  Bad debt is debt on ANY depreciating assets, including automobiles, but especially things like furniture, appliances and unsecured credit card debt.  Better debt is debt on appreciating assets, like homes, education and businesses…within reason.  If you’re curious how to differentiate between the two in your specific situation, email me at tim[at]timmaurer[dot]com.

The Bias Trap

by Jim Stovall

Like many people of my generation, I grew up on a steady diet of 60 Minutes broadcasts every Sunday night.  Whether you liked or didn’t like 60 Minutes, and regardless of whether you believed in their slant on a story, it was—and still is—hard not to watch.

For many years, 60 Minutes did three news magazine-type features followed by a brief commentary by Andy Rooney.  Andy Rooney could be best described as an off-beat, out-of-date curmudgeon.  This is exactly what made his commentary so poignant.  No matter what the topic of his commentary, and regardless of your own personal experience, Andy Rooney could look at any issue from a totally unique perspective.

We lost Andy Rooney not too long ago, just a short time after he retired, having worked into his 90s.  He had an amazing career that spanned from being a war correspondent during World War II through the formative stage and golden years of network TV, up to a point long past where most of his colleagues had retired.

Andy Rooney was fond of saying, “People will generally accept facts as truth only if the facts agree with what they already believe.”

It’s easy for me to believe that everyone else, including Andy Rooney, would come to an issue with a bias.  What is hard for me to admit and grasp is the fact that I, also, have a bias in every situation.

My late, great mentor and friend Paul Harvey told me that the most honest he could be as a reporter was to admit his personal bias up front.  We succeed in our personal and professional lives by making good decisions.  We make good decisions by honestly evaluating the situation and our various alternatives.  This honest evaluation is dependent upon our ability to set aside any bias we may have.  In order to set aside our bias, we must admit we have one and clearly define it.

If you’re looking at a choice, a decision, a debate, or controversy, the easiest way to clarify and get rid of your own bias is to argue the other side and present the other position.  This keeps your logic strong and gives you the benefit of an opposite perspective.

During the formative years of my company, the Narrative Television Network, I had the privilege of interviewing many classic film stars.  Among these were Jack Lemmon and Walter Matthau.  These two superstars were the best of friends who seemed to have virtually nothing in common.  For years, they starred on Broadway playing the lead characters in Neil Simon’s production of The Odd Couple.  Jack Lemmon played the persnickety, neurotic neat freak Felix Unger while Walter Matthau played the irascible slob Oscar Madison.  Both of them told me, on separate occasions, that they brought strength, originality, and freshness to their roles because, once a week, they would switch parts, allowing Lemmon to play Oscar while Matthau played Felix.

The late, great favorite son of my home state, Oklahoma, Will Rogers, who was a Native American, was fond of saying, “Never judge a man unless you have walked a mile in his moccasins.”  Mr. Rogers understood that a different perspective would change your focus and eliminate your bias.

As you go through your day today, try to gain knowledge and apply it in the form of wisdom by eliminating your own preconceived bias.

Today’s the day!

Financial Fact and Fiction

by Jim Stovall

It is difficult to make good financial decisions even under the best of circumstances.  There are a myriad of tools and an endless supply of information available to us, but it’s difficult to sift through the debris and get to the true treasures that lie underneath.

In listening to one of the recent political debates, one candidate who felt his opponent was bending the truth was heard to say, “My opponent is certainly entitled to his own opinion, but he is not entitled to his own facts.”

As we try to boil down financial news into information we can utilize, we must separate the fact from the fiction.  Here are a few examples.

If you follow the news reports and talk shows, you might think that rich people don’t pay enough taxes or don’t pay their fair share.  This fiction would paint a picture of idle rich people frivolously spending hoards of money without contributing to the tax burden.  The facts are that the wealthiest few percent of people in America pay the majority of taxes while over half of working adults pay virtually no tax at all.

The fiction one might derive from the media would tell us that most U.S. consumers buy and consume goods that were made in China.  While China has a robust, thriving economy and will certainly play a significant part in global financial matters for the foreseeable future, the financial facts are that only 2.7% of goods purchased by Americans were made in China.  Over 88% of American money is spent on goods and services provided in America by American companies.

Another Chinese fiction would have us believe that China owns virtually all of our government debt which they might refuse to refinance at any point in time, putting the American economy into a tailspin.  The financial facts are that China owns 7.6% of our U.S. Treasury debt.  Our own government owns three or four times more than China, and state governments, municipal governments, and private investors like you and me own more than anyone else.  Our growing national debt is a concern, and once again, China is a factor, but when we’re evaluating the situation we must deal with fact, not fiction.

An alarming fiction tells us that the majority of the energy that the United States uses to keep our economy and defense going is imported from unstable or unfriendly governments in the Middle East.  While the amount of oil imports is certainly a concern and we can all agree that energy independence would put the United States in a more stable position, the fact is that currently the United States imports 9.8% of its oil from the Middle East.  This is down nearly a third over the last decade.  Almost half of our energy is produced right here in the United States with twice as much coming from Canada and Mexico as comes from the Middle East.  This means that approximately three-quarters of the oil consumed each day by the United States comes from right here in North America.

There are plenty of facts to be worried about without creating anxiety over fiction.

As you go through your day today, make good financial decisions based on facts, and eliminate the fiction from your thinking.

Today’s the day!

Personal Principles and Goals

This is the second 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 find the backdrop for the exercise HERE or just jump right in with the instructions given below:

Deliberate over that which you want to mark your life.  Write down a word or phrase that will be your Personal Principle—your value—and then give a sentence or two of explanation.  These are yours, but I encourage you to share them with a good friend and your spouse, if applicable.  (One of the nuanced difficulties and benefits of marriage is the necessity of allowing your Personal Principles to be folded into those of your spouse.  If your spouse is a willing participant, encourage him or her to complete this exercise as well to develop a set of Unifying Principles for your family.)

You might benefit from reviewing Ben Franklin’s list of personal principles—his “Thirteen Virtues.”  The goal is not to make Franklin’s your own, but to be informed by his intellect, entertained by his wit and inspired by his wisdom:

Your GOALS—especially your financial goals—may be better informed when you complete this entire process, but practice now writing down a few goals that meet the specific, measurable, attainable, and meaningful criteria, then come back to them after completing the full plan series.  Financial goals will then be broken down into specific steps to meet those goals in your Action Plan in the final step.

Mice and Men

by Jim Stovall

Recently, there was a university study done using white mice as the subjects for a psychological experiment.  The mice were put into a cage with a red light and a green light on opposite sides of the space.  The experiment was designed in such a way that when a bell rang, a mouse could rush to the red light or the green light to receive a treat.  The treat was only presented for a few seconds, so that if the mouse guessed wrong and went to the green light when the treat was being presented at the red light, the mouse didn’t have enough time to rush across the cage and get the treat.

The experimenters designed the study so that 80% of the time, the treat was presented at the green light.  After a short period of time, the individual mice became aware of the discrepancy between the results of guessing the red light versus the green light, and they would only go to the green light when the bell rang.  In this way, all of the mice—by only going to the green light—were successful in receiving a treat 80% of the time.

The conclusion of the experimenters was that the mice were relatively intelligent and acted in their own enlightened self-interest.

Then the plot thickened when a similar experiment was done with human beings.  Individuals were put in a room with a red light and a green light on opposite walls.  When the bell rang, they could collect chocolate candy directly beneath one of the lights, but they had to guess correctly between red and green as there wasn’t enough time to get across the room if their first guess was wrong.

Like the mice, after a short period of time, the humans observed that most of the time, the chocolate candy was presented directly beneath the green light; however, unlike the mice, the humans tried to outguess the pattern and rushed toward the red light periodically.

The mice, by recognizing a prevailing condition and only going toward the green light, were rewarded 80% of the time.  The human beings, by trying to outguess the experimenters, were only rewarded 67% of the time.

By any measurable scale of intelligence, human beings can out-think and out-reason mice; however, human beings are susceptible to the thought that they can out-guess a prevailing system.  One need go no further than a casino to see relatively intelligent human subjects participating in a system where they intellectually know they cannot succeed on a long-term basis.

As you go through your day today, think like a mouse when you have no control over the conditions, and think like a human when your effort, energy, and ingenuity can make the difference.

Today’s the day!

Your Personal Money Story

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.

Repetition Helps and Hurts

By Jim Stovall

The tasks we repeat are the tasks we master.  The thoughts we review are the thoughts we remember.  Practice doesn’t make perfect.  Practice makes consistent.  Only perfect practice will make a perfect performance.

I have spoken in many arena events with thousands of people in attendance.  It is interesting to observe when the event organizers conduct a brief experiment.  An announcer will get onstage and quote the first half of an advertising slogan that hasn’t been used in decades.  Without hesitation, thousands of people in unison will recite the second half of that obsolete and outdated slogan.

Cigarettes have not been advertised on broadcast TV or radio since the 1960s; however, when the announcer at the arena event says, “Winston tastes good…”, the entire audience recites, “…like a cigarette should.”  While I’m glad that cigarette advertising has been outlawed, and future generations won’t be exposed to that harmful habit in the same way many of us were, it is important to realize that the slogan has been deposited into our collective consciousness in a way that it can be recalled by the masses instantly.

It’s not memorable because we care about cigarettes or like the ad that ran years ago.  It’s memorable because the message was repeated countless times.

I’ve heard the same announcer simply mention the first ingredient listed in a McDonald’s commercial by saying, “Two all-beef patties….”  Without hesitation, 10,000 people recite in unison, “special sauce, lettuce, cheese, pickles, onions, on a sesame seed bun.”

You may not like Big Macs and may not have had one in years.  That particular ad hasn’t run on TV or radio in several decades, but because of the repetitive nature of the advertising campaign, we all know it immediately.

While repetition in delivering your message is important, there is a type of repetition in the digital age that is counterproductive.  If I receive one email from a person or organization, I’m likely to give it some of my attention.  If I receive two or three of them, I instantly know it is part of a bulk email blast, and I don’t have to pay attention to it.  If I get an envelope in my mailbox addressed to me with some type of offer or incentive, I may review it for a moment; but if I get two or three duplicates of the same mailing in my box at the same time, I realize it’s only a mass mailing, and I don’t have to pay attention to it.

If you’re going to use the power of repetition, use it in a way that benefits your message, not in a way your message becomes marginalized.

As you go through your day today, remember:  Repetition can make you memorable or annoying in the eyes of those you want to reach.

Today’s the day!

The Real Point Of Financial Planning

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.

The Most Important Love Letters You’ll Ever Write

Originally in ForbesYou don’t want to write estate planning documents because you don’t love meditating on the prospect of your own death.  Sure, you might think you’re mature enough to face that eventuality and plan responsibly to care for anyone or anything you might leave behind.  But even if you’re perfectly cognizant of your own mortality and confident of a secured eternity north of the border, you may not rank a discussion on splitting up your worldly assets and responsibilities with an attorney particularly high.

But your estate planning documents aren’t for you.  Think of them as the most important love letters you’ll ever write.  Find inspiration in knowing that you’re caring for the people and causes you love, even if you’re not here anymore.

The most important recommendation in every financial plan is successful completion of thoughtfully prepared estate planning documents.  So, no matter your age (unless you’re still a minor), marital status or net worth, you need to be considering how to write your WILL, DURABLE POWER OF ATTORNEY and ADVANCE DIRECTIVES.

Here is an estate planning crash course in the form of three videos addressing each primary document in under 90 seconds.  Enjoy!  (Then, act.)

 How to Create a Will in 90 Seconds or Less

 

How to Create a Durable Power of Attorney in 90 Seconds or Less

 

How to Create Advance Directives in 90 Seconds or Less