A New Movement FIRE

Maybe you are aware of a lifestyle called FIRE - financial independence retire early. Their goal is to retire at 40.
I recently learned about this movement and have spent some time reading what it espouses. You might find FIRE worthy to explore as it will help you review your spending and ultimately give you more money to invest.

From the blog of Mr. Money Moustache:
FIRE is simply about making smart decisions with your spending so that you waste less money. This means that you have way more money available to work with.

Living with less may test your definition of happiness.

Happiness is your goal in life, and it comes from meeting certain core Human needs. The thing is, that there are many ways to meet each of these needs – some of them free and some of them shockingly expensive.

For example, improving your physical health is one proven way to be happier. But you can accomplish this with a $2500 per month personal trainer or a $100 set of barbells from Craigslist. Same happiness, vastly different cost.

And as it turns out, there is a similar hack for every single one of life’s major expenses. You can meet all your needs at little or zero cost – it just takes a bit of skill. At this level, you would be able to save almost all of your income.

Or, you can substitute a bit more money and a bit less skill to meet those needs in an (only slightly) more efficient lifestyle, like the one I try to lead. This might allow you to save half or two thirds of your income.

Or, you can spray money in every direction randomly, trying to meet an unfiltered list of wants and needs, and end up with a random but very expensive life, while remaining almost broke throughout the entire thing. This is what most people do, and it leads to saving almost none of your income.

Reading the blog could bring you insight and reinforce some of your financial goals. Leading a meaningful life, caring about yourself and others tends to bring satisfaction. I believe in balance in all things.

When a client asks "do I have enough money to retire?" I respond: "please tell me when you plan to die." Not knowing when you will die, how long your good health will last, puts us all on notice to live every moment; to be present.

Be $ Smart - Learn new skills as what FIRE offers. Toss old habits that haven't worked. Find fulfilling work through your job or as a volunteer. Follow the three S's - spend, share, save. Retirement will come, eventually.

Promoting Financial Literacy

It is sad to say that in our amazing country where we have so many opportunities and access to so much that we are sorely lacking in financial education. Personal finance is not taught in schools. Decades ago I learned budgeting and money while working on a Girl Scout badge. At 10 years old, not much stayed with me. Unfortunately, that was my only exposure.

On the whole, we are all working/living with a handicap. Some folks have a knack for handling money, some have a mentor but most fly by the seat of their pants. Too many people are embarrassed to admit what they don't know. This struggle breeds fear, stress, anxiety and illness.

Good money skills have far reaching effects. They allow me to:

- control my day to day spending,
- effectively allot my month to month finances and live within my means,
- create, track and meet my financial goals,
- be prepared for emergencies with a $ cushion,
- understand complicated transactions like loans, insurance and mortgages,
- have a feeling of success and self-sufficiency, and
- make sound choices to live life to the fullest.

Those are the personal benefits. On a wider basis, for the general public, good financial skills:

- increase every one's ability to meet basic needs,
- improve their purchasing power,
- allow folks to work, spend and play putting their earnings into circulation,
- increase overall productivity, profits and economic growth,
- reduce general stress and illness, and
- keep personal wealth and the economy growing.

After the "big financial meltdown" in 2008 we became acutely aware of our financial savvy deficiency. Many programs were proposed for schools. Was anything ever done? For ourselves and the future of our country it is important that we pursue and encourage financial literacy.

Some ways we can help:

1. Take a class - at a local high school or library.
2. Read a financial book - increasing vocabulary recognition.
3. Ask your HR director to provide a class at work.
4. Teach your children or your grandchildren shopping skills and how to make change.
5. Approach the principal at school to request money ed be added to the syllabus.
6. Encourage students to take a financial basics course in college.

Be $ Smart - talk about money with your kids, grand kids and family. Bring money out into the open. Make financial literacy important, we all will benefit.

Easing Money Anxiety

The word "money" carries many connotations:
power, freedom, evil, fear, uncertainty, anxiety, depending on one's relationship with it.

It would be a great advantage for money to bring more positive reactions like freedom, opportunity, excitement, brotherly love, kindness.

How can you make that happen? How can you change your relationship with money? Find a really good financial adviser.

Yes, I know you can read and attempt to do it yourself. I've learned the hard way that even using YouTube videos, I still need a plumber, electrician and car mechanic. My reading and learning helps me understand the situation better but I have no intention of making that my profession. Research and comprehension keep me from being ripped-off or led astray.

A true financial adviser plays a sacred role and exercises a societal obligation to help people cope with money anxiety as stated in a recent article of Investment News.

Your adviser should be able to extract fact from fiction:

- are your fears or concerns about money well founded?
- are your goals realistic?
- are your values reflected in your investments?
- are you clear about where you are today and where you want to be in 5 years, 10 years, retirement?

A Robo adviser cannot feel your emotions or understand the cycles of life to help you make good decisions over your lifetime.
A true adviser honors your values, respects your worries and concerns and helps you accomplish your goals. And, they bring expertise to the table; the expertise that many years of study, client interaction, fluctuating markets built their experience and wisdom.

Good financial advisers are out there; you just have to search for them.

Be $ Smart - take the time to find the financial adviser who's right for you to relieve your money anxiety!

Creating an Investment Strategy - Part 2

Last week we took the initial steps in developing an investment strategy. Did you write them down? Putting things in writing (goals, promises, commitments) adds a dimension, a connection to the universe that helps propel you forward.

As you build your strategy here are some steps to follow:

1. State your investment goals and objectives clearly.
(some goals might be retirement, new home, kids education, second home, world travel, build wealth.)

2. Determine your time horizon.
(next year, in five years, 10 years? Time helps gauge the amount of risk.)
For multiple goals you may have multiple time frames.

3. Describe your return expectations.
(low risk = low return, high risk brings higher potential for both gain/loss.)

4. Detail the level of risk you are willing to take.
(I call this the "sleep factor" - how much money must I keep absolutely safe in order to sleep at night. Set that money aside in safe investments: CD's, U.S. Treasuries, stable value funds, and invest the rest accordingly.)

5. Assess your liquidity needs.
(how much cash must you be able to get at any given time.)
This keeps you from selling investments at the wrong time.

6. Decide who will monitor your portfolio?
(you, a broker, a money manager?)

7. Include a schedule for rebalancing your asset allocation ( mixture of stocks, bonds, cash, alternatives) - quarterly, annually?
Each component will grow at a different rate; rebalancing brings them back to your original proportions.

Be $ Smart - follow the steps, write them down, create your strategy, build your wealth.

Next time we will view a sample investment strategy.

Becoming a Better Investor - Whom to trust?

The financial services industry can be very confusing and intimidating. Many people either stay away or jump in blindly and get fleeced.

So how do you find someone to help and guide you?

Let's start with some titles and designations:
Financial Advisor - a very broad term which translates to someone who can help you with finance and investments.
WMA - Wealth Management Advisor - same as financial advisor but has more snob appeal.
CFP - Certified Financial Planner - a person who has taken many courses and passed a rigorous exam covering all the aspects of personal finance. They have a good grasp of money management and investing.
Stock broker - aka Financial Advisor - this person has passed the Series 7 exam, is register with the SEC (Securities and Exchange Commission) and has a good knowledge of investing.

Let's review how they get paid:
Financial advisor, WMA and stock broker rely essentially on sales. The more they sell you, the more commissions they make. (Both buy and sell orders generate commissions for the broker.) If you are being advised to buy and/or sell often, the only person making money is your broker.

A Fee Only Financial Planner prepares a comprehensive plan for you and your family. It may include buying a home, additional education for you or your spouse, education for your children, taxes and other financial goals leading to retirement. Since this plan takes many hours of gathering information and analysis the planner will charge a substantial fee - somewhere between $1000 to $2500 or more, depending how complicated your situation may be. The planner then sends you to a financial advisor or broker to implement the plan.

Another type of Financial Planner will prepare a less comprehensive plan and implement it for you. The fee for the plan will be covered by the charges for investing. (You don't get the plan for nothing.)

Remember to ask:
"What's this going to cost me? How do you get paid?"

There are ways for you to determine if a broker or investment advisor is a bad apple. Go to BrokerCheck at finra.org website or call the BrokerCheck hotline 800-289-9999. Here you will learn a broker's current license status and history, employment history and any reported regulatory proceedings, disputes and settlements.
(FINRA - the Financial Industry Regulatory Authority is the self-regulator for the securities industry.)

When you work with a financial professional it is important to know the extent of his/her expertise in the various areas of finance. Although they may exhibit a certain level of knowledge, there is no test or regulation for integrity and trust. You must seek a professional who is worthy of your trust and the care of your money.

Be $ Smart - take the time to research and interview financial advisers before you give them your hard earned money.

Becoming a Better Investor

Achieving financial freedom or financial independence is a worthwhile goal to pursue at any age. Life can be more enjoyable and less stressful when you have enough money to live the life you want.
I have learned I can only work so many hours each day, each week. Realizing that, I must put my money to work by investing.

Over the next few weeks I will give tips on investing. Actually, last week's $ Tip discussed the services offered by a Full Service Broker vs a Discount Broker, was a good start.

Education is the key. I offer four suggestions. Pick one or two to raise your understanding and commitment to investing:
1. Take a class. Most adult education programs at your local high school or college offer a class on personal investing. Take a friend. Learn together. Go out after the class and discuss what you learned and what you can implement.

2. Read. Join AAII, the American Association of Individual Investors.
The cost is $29 per year. They are dedicated to people like you who are learning about investing. They offer a monthly publication filled with good, basic information. Also, they offer chapter meetings where you can meet others interested in investing. Go to www.aaii.com.

3. Read more. Buy one, yes one, money/investing magazine. Read it cover to cover, even the ads. Here you are familiarizing yourself with a new vocabulary. The more you see and read the words, the sooner you will understand their meaning. You don't really need a year's subscription until you find one magazine you enjoy and understand. Or, regularly read the Business Section of your newspaper.

4. Find a "money buddy". Doing things with another person is always more fun. Just as Weight Watchers encourages buddies and exercise routines suggest partners, you know you are more likely to stick to your financial goals and learn more if you have a buddy.

Be $ smart - learn investing to build wealth and financial independence.

Personal stories...

We never know how our lives may be impacted.  Right now I am awaiting the arrival of Sandy and wondering what havoc the storm will wreak.   I also feel powerless with my daughter, 8 1/2 months pregnant, over 200 miles away wondering how she will fare with the storm's low pressure and a full moon!
Life sometimes throws us lemons; it's up to us to make lemonade.

Please read the personal stories of a few people whose lives I have been privileged to guide:
One wintry, snow filled night Louise R. and her husband, Stan were returning from a friend's home in the next town.  The roads were icy and Stan could not control the car.  Stan did not survive the accident and Louise was hospitalized for two months.  No sooner was she home than the insurance agent arrived with the check for the life insurance policy on her late husband.  Before he left, he had sold Louise an annuity using the insurance  proceeds.  Fortunately, Louise had a good friend who called me for assistance.  I was able to review the annuity, determine it was not appropriate for Louise and had her money returned to her.  Louise understood she was grieving the loss of her husband and was not able to make important decisions at this time.  She hired me to assist her with all financial decisions for one year.

Margaret L. came to me devastated on learning that her doctor husband of 28 years had been diagnosed with terminal cancer and had less than a year to live.  Margaret was an artist and never bothered with money leaving all the decisions and bill-paying to Hal.  Over the next six months Margaret met with me for one hour a week learning financial terms and taking  money-tasks home to perform.   She arrived for her appointment one day very excited about a visit to their estate attorney the previous day; she actually understood what the attorney had presented!

Cathy C.  had  a trust fund left to her by her grandparents.  She gave me a call to learn if she should refinance her mortgage.  After reviewing Cathy's substantial portfolio we were able to determine she had more than enough assets to pay off the loan  and live mortgage-free.   We also reviewed the charities to which she contributed 10% annually based on her family tradition.   We found new organizations that spoke to those things about which Cathy felt strongly.

Larry T. had suffered an injury while working as a carpenter apprentice for which he received a  reasonable  settlement.  We reviewed Larry's job prospects and financial goals.   Larry opened a savings account and paid off his credit cards and medical bills.  Once those items were satisfied Larry had enough money to put a downpayment on a small wood-working shop of his own.

Sally P. had been a nurse for almost 30 years.  She was single and frugal.  Toying with the idea of retiring in a few years, Sally wanted to start enjoying the fruits of her labors while she was still physically able.  Her dream was to take one BIG trip a year until she retired.  On reviewing Sally's savings, pension and social security we determined Sally would certainly have sufficient money to satisfy her wanderlust without jeopardizing her future.