Posts Tagged ‘Life Balance’

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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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An Update to Christmas and A Modern Approach

December 13, 2010

-Well, things are winding down for the holidays.  Except for a packed schedule of social events, Christmas parties, concerts, performances, business will be slowing down until the week of Jan 5th (unless otherwise needed). The holidays should be a time to socialize with family and friends and recharge your batteries. It is also, believe it or not, a good time to consider (with a relaxed and clear mind) the adjustments you wish to make to your finances for the new year.

Your financial health should be exactly like your physical health- unencumbered with complications. Protecting, saving, and growing a powerful net worth is not complicated. Take the right steps and exercise your plan and you will have energy, choice, longevity, and freedom of lifestyle. Although I am making an obvious analogy, it is important to realize that your mental and physical health is directly linked to your financial health. Both are made stronger on principles of discipline, planning and fun. If you can come honestly to the realization that you will have at least one serious health related complication in your life , you will agree that you must prepare (both physically and financially) so as to limit the damage to your life; and don’t underestimate the damage this causes. A protection strategy partnered with growth of your net worth is a responsible and exciting combination.  This is the only message I wish to have you consider during this holiday break.

-On a separate note, my meeting with Scott Brison was quite successful. I am looking forward to working with him and his group to educate and support local (and non-local) programs and plans that can be implemented to assist families with the financial impact of critical and catastrophic illnesses. As you know, this is a big part (mandatory even) of all of my financial planning strategies and I am happy to support Scott on this and any other related programs.

-Finally, I am proud also to support the initiatives of Andrew Patrick Murray in his “Modern Approach” to Real Estate. He, I believe, is the first to capture the cutting edge of social media and mobile applications for the purposes of assisting the home buying/selling public with their real estate needs. Andrew and his team can provide the entire life-cycle of the home buying/selling experience from one easy to use application. For more, please review his Facebook page at:

http://www.facebook.com/home.php?#!/pages/Halifax-Real-Estate-A-Modern-Approach/136668999714884

Also, the official website is:

http://www.modernapproach.ca/modernapproach/index.lasso

Thank you for reading and thinking:

See you in (or before) the new year, Jeff H Barrett

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Government bailouts for illness? Whose responsibility is it?

December 2, 2010

I posted this before Christmas and I still feel it is important for the average Canadian to assist, (if not be mostly responsible) the Government in this responsibility. I am looking presently for opportunities to develop a workshop on this matter for Valley area families. The following is an unedited repost of my previous post:

Interestingly, I noted today that the Liberal Government is proposing a Family Care Plan. As I see it, this has arisen because Canadians have not been properly planning for the impact of traumatic health events that they pretend don’t exist; especially not to them. As I read in Scott Brison’s newsletter (www.brison.ca): “caring for an ill parent, grandparent, spouse or child can be a challenge for millions of Canadians with many having to use personal savings or miss one or more months of work to provide care.”

With the unwillingness to properly address the inevitability of financially devastating health events in our lives, we are left with a Government proposition that claims that it is the responsibility of everyone to pay for what I deem to be negligent financial planning on the part of Canadians themselves.

The article continues by saying: “Like the loved ones they are caring for, many of these care givers are in the fight of their lives, and want their government to show leadership to address this pressing priority for Canadian families.”

Now, I am as liberal as the next person, but with Canadian’s spending $1.45 for every $1.0o and with our reticence to put income protection measures in place in favor of speculative investment strategies that rely upon the health of the individual, it’s no wonder that 80% of Canadian home foreclosures are a result of a traumatic health event of the mortgagee. Government social spending and bailouts cannot be implemented for every self-imposed negligence.  People cash out their RRSP’s and throw away 50% of their earnings growth (because of the tax consequences of doing so) but are unwilling to spend 75 dollars a month to cover their income in the event of a traumatic health event.  These products have been out there for quite some time now and are mandatory in my planning. It is poor business and poor ethics to speculate with people’s money when a single event can wipe it out. Not only that, people often ignore the consequences for the entire family when a loved one gets sick. Do you want your kids to sell their home to fund the costs of treating for you? Well, this happens all the time.

The Family Care Plan would introduce the following measures: 1: “A new six-month Family Care EI Benefit. This is similar to parental leave so that Canadians can care for gravely ill family members at home without having to quite their jobs.” 2. “A new Family Care Tax Benefit. Modeled on the Child Tax Benefit, to help low to middle-income family caregivers who provide essential care to a family member at home.”

Now perhaps I can accept an additional tax benefit to low-income family caregivers, but anyone over a certain threshold should be, in my opinion, on their own. The Government is in precarious waters when it chooses to provide an EI-type benefit to family members who have had sufficient means and opportunity to plan and pay for private critical illness and/or disability coverage.  In this largely self-imposed financial climate, is that where we should be spending money? I am open to debate on the matter, but I don’t know where the money will come from.

In sum, I am perhaps not as liberal as I normally am on this topic. Social programs are necessary, yes. But should we not be sharing the risk a little bit?  Is it not more than ever the responsibility of the advisor to protect your income before telling you he/she can make you 6 figures and then put all your money in an investment account that you cannot access without significant tax liabilities? Remember these questions, when you think about your situation.

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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.