Archive for the ‘Philosophy’ Category

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Time and Choice

February 2, 2011

I wrote the following on my Facebook business page last night (http://on.fb.me/e6ke8E):

Due to the magic of compound interest: if you have two 22-year-olds earning 12% on their money, the first contributes $2,000 annually for the first 7 years and the second contributes the same amount for the next 37 years – they both end up with $1,200,000 at age of 65.

I don’t know what else needs to be said here other than time cannot be made up by extra deposits. $2000 a year is only $167 dollars a month. How much is your cable? What would you rather have at the end of the day: nothing (maybe some good shows which you can download or stream for a fraction of the cost) or 1.2 million. Its unfortunate that most people will say cable. I don’t have cable. With all the free access to stuff online why the hell would I pay 166 dollars a month so I can sit 5hrs a day in front of Jerry Springer. I would rather have 12% (or even 5% or 8%) growth than 100% loss.

It’s doubly unfortunate, and I’m not mocking, that most people don’t think they can ever achieve that kind (or proportionately similar amount) of income. It’s just a matter of putting money into a well diversified, protected, and properly managed financial plan and waiting “x” amount of time.  We accept limits much too easily I believe. Our limits are defined by our belief and nothing else; and our habits become dictated by that belief. It’s a human failing to accept the comfort of resignation over the assumed anxiety of effort. We should be putting the same sensibility to our financial health. The ‘wait-and-see’ attitude frankly takes way too much time. Act now and talk about a plan with your advisor. It is exciting and fun to see the possibilities that arise when you simply tweak a few lifestyle decisions. You actually have more money through a plan; you are not sacrificing your weekly coffee (unless its three a day). Discipline reveals your dreams; and, in this case, does not need to exist for long. Time and choice are not scary, they are opportunity.

 

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My challenge to you

January 24, 2011

I know from time to time I express my concerns over your financial security in harsh realities. Perhaps it stems from my visceral need to shake you into coherence. Is there not a better way to get my point across? I am sure you are aware that simply existing without engaging yourself in an exiting, fun, and goal-setting, attitude means that you are existing in reaction to things that are readily manageable. Although you would agree that you have a responsibility to deal with the manageable (which I call predictable) financial scenarios of life, you often don’t consider it. And if you won’t consider that, how can you realistically consider the damaging effects of the unmanageable and unpredictable scenarios of life that are even more detrimental to our financial security.

It is inconceivable (to quote from “The Princess Bride”) that many of us willingly ignore the responsibility that exists through a heartfelt examination of  the realities of managing our financial health. In fact, we barely ever even indulge in the examination itself. If we did, we would exist in dissonance with our existing apathy and would be forced to deal with it. This is my role: to advise you that it will not necessarily “work out in the end” if you don’t plan it accordingly. To challenge your own apathy is not negative; and I believe this is what holds people back. Dissonance (or the emotional realization that things that “are” do not coincide with the way you want them to be) creates new excitement and opportunities.  We control our own lives through feelings and emotional concentration. Doing so effectively rids you of the hopelessness that derives from the fallacy that life controls you.

A client said said to me recently that men in their 20’s and 30’s don’t handle their business like men of the previous generation (“like her father,” she said). She said we are too busy playing video games and going out for wings and beer and watching UFC that we don’t take out the garbage, work in the yard, fix the car, save for our kids education, shovel the driveway, make breakfast for our family, clean the house, fix the roof, have good ‘date’ nights with our partners, and so on. We are failing at handling the responsibilities sought after by our partners (forgive me for speaking in “traditional” family terms only, it’s for brevity only) because we are self-absorbed, selfish, lazy, and ignorant of what I can only term “family man pride.” We wrongfully assume that “she” will handle it…it’s no wonder she gets bored with us.

With the existence of another contemporary fallacy that believes working 70hrs a week will make you successful, we are struggling with handling our, more important, family business. Not that I’m saying you shouldn’t work hard or love what you do (most of us do one without the other), but if you do so without plan and passion you are misguided and possibly wallowing through life in a routine. The same holds true for your financial health.

There are too many predictable cracks in our fountain of wealth that we, out of fear, refuse to acknowledge. The cracks can easily (and profitably even) be plugged. It’s even fun and exiting! Where along the way did we look at financial planning as dreadful…believe me it’s pretty exciting. Another question: How does thinking that I am going to to “sell you” assist you achieve your financial freedom? It does not. You are just being dumb and selfish and self-conscious.  You’d be amazed at the families in financial difficulty who, when I ask if I can help, simply say “no we’re good.” To this day I don’t get it. A partnership with trained and licensed individuals who have an ethical, a personal (and yes even financial) vested interest in the quality of your life is not something that is detrimental to you or something that you should willingly ignore. Do you fix the foundation of your house when it has a crack in it? No. You hire someone who specializes in foundations so you don’t do it wrong and make it worse. Why don’t you do the same with money? Your money is even more important than your house.  A ship never gets to where its going by random chance and a good engine, it takes a conscientious captain, a good team, and a good plan.

This article challenges those of you who have only superficially dealt with each paycheque as it comes in to actually look at how little you have to do to make a gigantic difference in your financial health. We’re not even talking about new money…just sensible maneuvering of existing money.

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Poor Spending and our Genetics?

January 21, 2011

A Halifax advisor colleague of mine Stephanie Holmes-Winton (see her excellent blog at www.advisordefusingdebt.wordpress.com) discusses the research done by Dr. Santos of Yale University. Dr Santos was curious to determine if the poor spending habits of humans comes from a genetic predisposition.  The following is an exerpt from http://www.advisor.ca dated Jan 14, 2011:

Dr. Santos and her team gave their small community of capuchin lab monkeys some money – not real money of course, rather unmarked coins the primates could use like money. This was to be her monkey economy and the coins were the currency. The team of researchers introduced the monkeys to a monkey market which they had created for them. They taught the monkeys how to use their coins to gain food and treats. Our primate cousins quickly got the hang of it and began using their monkey money with ease.

As it turns out, the monkeys got up to a few bad behaviors humans sometimes exhibit, like stealing the coins when no one was looking or taking them from other monkeys.

Things were humming along at the monkey market and then came the twist: the monkeys were given situations where they had to take risks. Dr. Santos wanted to see if the primitive friends would make the same mistakes we humans do when presented with financial risk. What they found is that monkeys, just like humans dislike loss more than they like gains.

In the end, Santos and her team discovered that indeed those impulses that drive our financial behavior were no different than those of our very prehistoric relative “Ida”, the lemur. Our financial behavior is indeed to some extent is in our DNA and a 35-million-year-old habit can be hard to break.

I surmise that the very same carnal impulse that causes us to zig when we should zag in the market also drive our behaviors around spending and debt. The very instincts that once upon a time kept us alive don’t always serve our financial best interest. The best part of Santos’ discovery is that we are not destined to repeat the monkey’s behavior or even our own. Our ability to see what we have done and make a different choice is remarkable.

Make no mistake behavior is a huge part of finance from the panicked investor wanting to sell at the worst possible time to the borrower purchasing a house they can’t afford. It’s coming from the same place in our brains. Offering clients’ behavior change recommendations as part of their work with you may go a long way to helping them make meaningful financial change without allowing irrational instincts to sabotage their efforts.

To add somewhat to this I ask you if you really should be upset because our neighbor bought a new SUV and you have no kids. What the hell do you need such a ridiculous new vehicle for if yours is perfectly acceptable and paid for and running well. This need to compete is undoubtedly also part of our genetics as well and is often a major part of our financial undoing. It is a self-conscious “tell” of our weakened emotional state and only leads us into unnecessary debt. Your emotional health should be based on how much cash flow you retain, not how much you display.

So, what do we do with this new found knowledge?  Again, I turn to Stephanie for a creative resolution for 2011:

As the new car smell of 2011 wears off and the excitement of promises made during a champagne induced pledge to be better this year fades, I’ve got a challenge for you.  Let’s start a resolution revolution.  Every year millions of us make a resolution to do better with our money, but generally by the third week of January we’ve abandoned the thought and gone right back to what we were doing before.

If you change nothing, you change nothing.  One thing I know is that our clients will not listen to advice that we are not willing to follow ourselves.  So for the next four weeks I dare you to be the change!  From today until midnight 28 days from now change the way you spend.

Go On A Cash-Diet

Don’t worry; there are no pesky points or weigh-ins on this diet.  All you have to do is this:

  • Gather your family  (if your are single, get a few friends together to join you in your resolution);
  • Decide how much money you are willing to spend on a weekly basis on emotionally affected expenses such as food, clothing, entertainment, gifts, coffee, eating out, liquor, etc.;
  • Elect one person to retrieve your family’s weekly cash amount;
  • Divide the funds based on who normally does what, making sure everyone has at least a small amount to spend on themselves only;
  • And repeat for four weeks.

Rules

  • NO ADVANCES.  Take the cash on the same day every week.
  • TELL EVERYONE.  The more people you tell about your little resolution the more revolutionary it will become.  Tell clients too; they might just start to open up about their cash flow knowing you are working on yours.

You can do just about anything for four weeks.  I myself live like this most of the time, and I’ll be on it with you because I wouldn’t ask you to do anything I wouldn’t do.  The limit isn’t as important as the fact that there is a limit.  So, in the words of a very famous active wear company … just do it!

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What’s Wrong With Failure? (via Magiawen’s Hideout II)

January 8, 2011

Below is posted an excellent commentary on the positive aspects of failure. It can be best described by the following fallacy: “this thing we (often) call ‘failure’ is not the falling down, but the staying down.”

There is no failure except in no longer trying. -Elbert Hubbard A life spent making mistakes is not only more honorable but more useful than a life spent in doing nothing. -George Bernard Shaw If you have made mistakes, there is always another chance for you. You may have a fresh start any moment you choose, for this thing we call "failure" is not the falling down, but the staying down. -Mary Pickford So anyway. We have all these quotes and adage … Read More

via Magiawen's Hideout II

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Are you succesful.

January 7, 2011

*below is an amendment to a previous post with corrected (downward) stats.

Successful people, among other things, gain an edge because they are willing to take on tasks that unsuccessful people hate doing. The interesting point is that the successful people don’t like doing them either. They are simply motivated to tackle them because they know it is necessary to achieve their ultimate goal. Having the ultimate goal without doing the unpleasant things leaves you as a dreamer.  Don’t get me wrong, there are many pleasant tasks associated with becoming successful, but real success involves pushing effectively through the unappealing or even scary tasks associated with achieving your goal.

Research has shown that out of 100 people 54 will end up broke, 1 will be wealthy, and 4 will have financial freedom. The rest will be existing. Why in one of the wealthiest countries in the world have so many people figured out how to be either broke or nearly broke.  A large survey was also conducted with working me who were asked why they get up and go to work in the morning. 29 of them said that they didn’t know.   Each one of these people grew up with aspirations, dreams, and desires. Along the way the dreams became smothered in altered justifications brought upon by fear and conformity. You are a victim only from your lack of belief in a world that you can control through enthusiasm and thought. It sounds harsh but we are not lemmings.

If you are truly successful it is because you decided not to conform; and conformity equals a lack of success in your life.  Conformity tends to push you into the middle; and I’m not talking about the socio-economic ‘middle.” That has nothing to do with success.  Ask yourself if your career inspires you into feeling successful. If the answer is ‘no’ than you (I’m afraid) have simply been conforming. Courage is success and success comes before money, not after.

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Financial Truth and Zen

January 5, 2011

How much time do you spend talking (or arguing) with your partner about money? We have the tendency to view our finances as an external variable and we react to situations  as if they are uncontrollable stresses forced upon us. This is a great fallacy. I have said this many times, that your financial health is simply the result of the effectiveness of your reality, decision making, and planning. We all have dreams and desires, but you cannot go into the casino with 10 dollars and expect to win 10,000. Maybe you’ll win 15 or 20 or maybe you’ll lose it all but don’t expect more than that.  I believe this is the same faulty thinking that affects a lot of Canadians. They outspend themselves out of a desire for a life that they wish they had, but probably (because of their circumstances) cannot afford. There was a time when I was no different. Many years in fact. If your lifestyle dreams do not align with your financial situation you have two choices: adapt your lifestyle dreams (which I consider to be a terrible sacrifice); or adapt your situation.  I agree that somewhere in there is a perfect balance, but the point is that we must learn to be harsh with our realities. It is true that we could all learn a lesson in delaying our satisfaction. I forget who said it but: “if you forgo going to the beach today you will  own the beach later.” Believe me, it doesn’t take much for the financial stresses of our lives to be whisked away. It’s all discipline and goal setting.

From one of my favourite sites, “Financial Zen,” is an article called “How to Get Financial Peace of Mind.” This paycheque-to-paycheque living is a ‘cancer’ to our lives. He starts the article by saying:

“Our finances are one of the things in our lives that stress us out the most. If we’re trying for a stress-free life — with stress-free productivity, working and living environments, waking early, morning routines and the like — then we need to address our finances and find routines that will keep the stress of money to a minimum.”

There are very simple (though our society has become ever incapable of implementing these) solutions. He explains:

“Let’s address these each with some simple solutions:

  • Get out of debt. This is often the first necessary step. But how do you do this? First, monitor your impulse spending urges to stop the bleeding. Use a debt snowball as a plan to get out of debt. Also see: How I save, How to stop living from paycheck-to-paycheck, and How I ended my affair with the credit card.
  • Pay your bills as soon as they come in. This is one of the easiest ways to eliminate stress over bills. When you get your power bill, write a check, put it in an envelope, and mail it the next day. Or if you bank online (and you should), go to your computer, log in, and send your electronic payment. To do this, you’ll need to develop a bit of a cushion in your bank account, so you always have enough to pay the bills as they come in.
  • Make your payments automatic. I’ve covered this before … it’s an great alternative to the above method. Instead of paying bills as they come in, you can set up automatic payments and automatic savings payments online, so that as soon as your paycheck comes in, your bills get send out and a certain amount is transferred to savings (or investments). Either method works great.
  • Develop a financial security net. This is something you should also do right away. First, if you are married or have any dependents, you should get life insurance right away. Do your research and make sure you’re getting the right policy for your needs. Don’t get whole life insurance — it’s not the smartest investment. Second, look at your other insurance to see if it meets your needs, from auto to homeowners to renters and more. Third, make sure you have a will — this might not seem necessary if you are young, but if you have any dependents, this is a must. Fourth, develop an emergency fund — right away. I know, it’s something that everyone advises, but if you don’t have at least a small emergency fund, you will never have financial peace of mind. Build it up to 3-6 months worth, or whatever you need to feel secure.
  • Review your finances at least weekly. To get a sense of control over your finances, you have to monitor them. Be sure you’re balancing your checkbook at least once a week, to ensure that you don’t have bounced checks or debit transactions. Even if your bills are automatic, you’ll still want to make sure they’re going out. Take the 10-20 minutes every week that’s necessary to look at your budget, your expenses, your income, and make sure you’ve got everything under control. If you’ve got a partner, do this together.
  • Talk about money with your partner. Money can be a huge stressor on a relationship. It’s important that you talk about money on a regular basis in a non-emotional way, as hard as that may sound. It’s crucial, in fact, to the survival of your relationship. You both have to be on the same page, or you will eventually argue and have major crises about your finances. You need to talk about your financial dreams and goals, your spending patterns, your budget, your income, your savings, debt, financial security, bills and the like. If you don’t already do this, it may take awhile in the beginning, and be difficult. But try to do it as a team, and not accuse each other of anything, don’t blame, and try to be positive and constructive. Over time, it will get easier. At the minimum, devote 10-20 minutes each week to reviewing your finances together, reviewing your goals, and making sure that you’re together and seeing eye-to-eye. It will make a major difference in your relationship and in your stress level.”

Doesn’t this sound appealing. Well it is, and it’s not difficult. You just have to make the decision. Life is only the acceptance of decisions and nothing else. The same holds true here.

Thank you to http://zenhabits.net/financial-zen-how-to-get-financial-peace-of-mind/ for the info.

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Busy-ness redefined…

October 12, 2010

You know, I read this article lately called “The End of Busy” (http://zenhabits.net/end-of-busy/). There has been a large movement against the bravado of the all-to-familiar response to the question: “how are you?”  The answer, unfortunately, lies in the quip:  “I’m great, really busy.”  Busy-ness as an ideal state of productivity is actually counter productive. The article calls it “a fool’s game.” Instead, it says that “busy is simply noise, action without meaning, lots of little unimportant things rather than a few important ones.” Can we not transfer this to the theory of investing for the future? I refer you again to my often quoted statistic that shows that: “from 1984 through 2000 the stock market surged by 16% a year. In the same time, however, the average investor in a stock fund earned only about 5%. By pursuing the crowd, investors lost two-thirds of the profits they could have.” Just as in life, this ‘busy-ness” (which if you look at it spelled “business” you will extrapolate a sort of irony), actually erodes two-thirds (in the analogy) of your life through ineffectual, half-finished, and emotional fickleness. It is illogical to believe that you’ve finished what you’ve started if you’ve continued to deviate at points in the interim. Establish the foundation of protection, and grow with the trend that has existed in perpetuity. Through a holding of that space, you will actually earn more.