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Procrastination Nation – Declare Your Independence

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Yes, it is election season, as if anyone needed to remind you of that. I’m not going to waste valuable space commenting on the election. Instead I will use this time to comment on another season that is upon us. I’m referring to procrastination season. You see, I have been in the financial services industry for many years, helping people like you achieve theirr financial goals. I have also helped financial advisors overcome the effects of procrastination season. When it comes to procrastinating about our financial goals, we have truly become a “procrastination nation”.

What goals did you have for this year as it relates to your financial wellbeing? Perhaps you are viewing retirement out on the horizon in some fashion; perhaps you will stop working altogether or maybe work part time. Maybe you had plans to become better at budgeting your money this year. Those are certainly worthy ideals and I would hate to have you fall prey to procrastination.

Because the reality is this, “time waits for no one and it won’t wait for me”, as the Rolling Stones song of the same name reminds us. In other words, your retirement will still be here whether you procrastinate or not. The problem is you will be closer to the deadline and no better off. You still need to get better at budgeting, whether you start now or wait until “next year” or until “after the election” or “until the economy gets better” or whatever procrastination reason you have. Procrastination only serves to increase the stress and urgency. It’s effects are short-lived soon to be outdone by reality.

So let’s get real. Your financial goals are important and waiting doesn’t make sense. As a CERTIFIED FINANIAL PLANNER™ I can tell you that there are few reasons to put off your financial goals. The ones I mentioned above are not in that category. Here are 4 ways to break out of “Procrastination Nation” and declare your financial independence:

  1. Admit that you are in fact procrastinating and ask yourself, why? If it’s because the task seems unpleasant then look for help. For example, if you are struggling with the idea of budgeting, check out my Budgeting That Makes Sense course. If you heard that it’s a bad time to be in the market or that the market will crash after the election, speak with a trusted adviser and get informed. Regardless of what the market does before or after the election you still need to do something about your retirement.
  2. Work with a financial advisor or coach. When you have a medical issue you see a specialist. When you have a financial challenge, you should do the same thing, see an expert. Check out my blog post on how to find a financial advisor. You will save yourself a lot of time and heartburn. You can also get more information on my coaching service here.
  3. Break down your goal into manageable chunks. Retirement may seem overwhelming. Break it down into questions that you need answers to such as how am I doing with my 401(k) or other tax deferred plan? How can I find out what to do with Social Security? What about healthcare expenses in retirement? How much do I need to save for retirement? Get get a copy of my Guide to Getting Started When You Are Starting Late. Click on the link on the right side of my blog. Just remember, you don’t want to do all of this planning on your own.
  4. Get started today. That’s right, do something today, take a step, even if it’s making a phone call or searching for a financial advisor to work with. As the saying goes, a journey of a thousand miles begins with a single step. Leave a comment if you need ideas on how to get started.

Don’t feel that you have to remain a citizen of Procrastination Nation. Get started on your financial goals today. There are too many Americans sitting on the sideline in what Dr, Seuss called ‘The Waiting Place”. Ask yourself, what am I waiting for? Do I need to wait or is it stress relieving versus goal achieving to wait? I look forward to celebrating your financial independence day!

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Can Bitcoin Make Up for Retirement Savings Procrastination?

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If you read my blog post from last week, then you know I discussed why getting retirement investing advice from social media is a bad idea. Most of the people who offer such information have good intentions; it’s just that they are usually in a different place in their financial planning lives than you and me.

So, this week, I offer part two of last week’s post. I recently read a post from another retirement Facebook group that I follow. The person posting the question asked if she should consider looking at a more “aggressive” type of investing strategy since her 401k was not doing the job for her, whatever that means. She is in her 20’s and ready to give up. Ah, youth.

As you can imagine, several responding posts were offering a variety of suggestions. One that caught my eye was from another 20-something. He said he planned to retire in his 30’s because his strategy is to put all of his savings into Bitcoin, and he advised the young lady with the question to do the same. This week, we explore Bitcoin and things to consider if you are thinking of high-risk investing as part of your retirement savings plan.

Bitcoin is a cryptocurrency created in 2009. It trades in marketplaces called “bitcoin exchanges” where people can buy and sell bitcoins using different currencies. The attraction of Bitcoin and other cryptocurrencies is rooted in the fact that there are no middlemen, like banks. More merchants are accepting Bitcoin to pay for goods and services.

For example, you can book a hotel through Expedia using it and Overstock also accepts Bitcoin for purchases. There is a fixed number of Bitcoin, 21 million. Currently, there are 17 million in the market. The rest will be “mined,” which is a process of creating new bitcoin. For a deeper dive into the specifics of Bitcoin, you can read more here.

What I want to discuss is the risk of investing in bitcoin, which is a high-risk investment. Warren Buffet, the famous investor, stated that he would never own Bitcoin due to the extreme volatility that characterizes its trading. Cryptocurrency is not as liquid as stocks, so it is more difficult to get out if you see the value heading south.

Another reason Bitcoin is not for the faint of heart is that it trades 24 hours a day. Bitcoin fanatics are typically glued to their cell phones throughout the day, watching the value go up and down. Some investment pros say that it is a buy and hold investment and that one should approach it that way due to the large swings and the inability to time the market in any way.

The lesson with Bitcoin and any high-risk investment is to ask yourself how you would feel if you invested the amount you are thinking of investing and saw your value go to zero? Then, what if it swings back up in value in a couple of days only to go back to near zero in the next few days, and so on? It’s a classic risk tolerance test.

How much can you afford to lose within your retirement investing time frame, and will you be able to sleep at night knowing the volatility? When one is in their 20’s and 30’s, they have time on their side to make up for a high-risk loss. Not so much when you are in your 50’s and 60’s.

Instead of chasing risk to make up for years of not investing in your retirement plan, start where you are, work with a professional, and develop a plan that will allow you to retire on your terms.

For information on my financial coaching, go here.

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Why It’s a Bad Idea to Get Financial Advice Through Social Media

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I belong to a few Facebook Groups devoted to the topic of “retirement planning.” As a professional, I find the questions interesting, and some of the responses even more intriguing. You get the occasional planner or broker selling their wares. For the most part, there are people like you and me concerned about having enough money to live on throughout retirement. When I see a question from one of the members asking for advice, I typically encourage them to get a professional to help them. There is a danger in relying on social media for your financial planning.

A Northwestern Mutual study exploring the state of financial planning found that 63% of Americans say their financial planning needs improvement, and the number one obstacle is time. No wonder people flock to social media to look for a quick fix! 69% say the pace of society makes it harder for them to stick to long-term goals. Yet, the danger is still there. I always recommend that you work with a planner. Although the consequences are not as dire, it is like asking your cousin for medical advice because you don’t have time to see a doctor. There are no shortcuts in life!

Here are five things a Certified Financial Planner can do for you:

  • Bring a process to help you overcome your financial challenges – a CFP®  uses the procedure shown below in the graphic. It starts with identifying your goals and then proceeds with an analysis of your financial life. Then a plan is developed to accomplish your financial goals, including how to implement the plan.
  • Be objective – a CFP® is not tied to a specific investment product solution. He/she is a fiduciary, which means they have your best interest at the forefront of the relationship. You don’t have to feel like you are being “sold” something. Ethics is part of the CFP certification process.
  • Bring expertise – a CFP® has to pass a rigorous certification exam after completing an equally rigorous curriculum of various financial planning topics, including investments, taxes, estate planning, and financial planning, to name a few.
  • Make sense of life changes – life happens, as they say, divorce, marriage, death, and they carry financial implications. A CFP® can help you sort out the complexities often at an uncertain time, emotionally, in your life.
  • Business ownership issues – whether you are starting a business or exiting a business, it can be complicated to unwind a business partnership or put a business plan together at startup. A CFP® can be an objective and qualified resource. A CFP often works in concert with other professionals such as attorneys and business valuation experts to bring comprehensive and qualified experience to their clients.

So, while social media may seem like a good idea to cast a wide net and get a bunch of opinions on your financial situation, it can often cause more harm than good. I recommend that you take the time to interview a CFP® who is a good fit for you. Ask for recommendations and testimonials if necessary. You can find more information about the CFP designation at www.cfp.net .

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Budgeting Smudgeting, Why Do I Need a Budget?

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I know, I know. Just the thought of having to put a budget together reminds a lot of people of going to the dentist when they haven’t been for a few years. It’s that fear of, “What am I going to find out? And, “Whatever it is, it’s going to be painful.” Before you run off to another blog site let’s try to come to terms with both the fear of budgeting and the reasons why you absolutely have to go through this process. And…it might actually be fun! Yes, I really did use the word fun in the same paragraph as “dentist” and “budgeting”. Hear me out on this.

Why is budgeting so painful?

I believe it’s because many of us know we have “leaky” behavior so it’s a matter of “the truth hurts”. Leaky behavior is what I call those expenses that may not seem like a big deal but over time they add up to thousands of dollars. Money that could help you reach your retirement savings goal; things like daily Starbuck’s coffee runs, eating out every weekend, weekly shoe shines, having a yard guy (or gal). You get the idea. At the risk of being called the “fun police” let me state that you don’t have to automatically cut out all of those enjoyable expenses but when it comes to finding extra dollars to invest for your retirement those are areas we want to look at first. That’s why it’s important to know what they are in the first place. And that is where the pain comes into play. Many people upon learning of the amount they spend on these various behaviors often bring their hand to their forehead and cringe. There’s the pain. We are often resolved to our income and know it well but we “hope” there is enough money at the end of the month instead of vice versa.

How Can a Budget Help?

First, you start form a position of strength. You take control of the monthly expenses instead of the expenses taking control of you. In other words you have a game plan. Imagine if your favorite sports team started the game with no real plan, just a vague idea of how they hoped the game would go. They know they want to score more point than the other team and they have a pretty good feel for how they have done it in the past so off they go. What do you think the chances of victory would be? Well, that’s how many people treat their personal finances. They hope their income will cover their expenses. Your budget is the foundation of your game plan.

How Does the Budgeting Process Work?

It begins with gathering the data that makes up your financial history. Next, you use this information to do a cash flow analysis. That’s taking a look at your income versus your outgo. You will calculate what’s called your net cash flow. That will tell you whether cash is coming in faster than it’s going out…or vice versa. Then we need to know your net worth. In simple terms, your net worth is the sum of everything you currently own minus the sum of everything you currently owe. Why is this important? It gives us a snapshot of where you are today…financially. This is the foundation of our game plan. It tells us form where we are starting. Just like a team at the beginning of the season. They need to know what they have to work with and go from there.

Once we have the snapshot of you financial situation, then we start looking at your money goals including retirement, college funding, social security, healthcare just to name a few. Of course not all of these may be on your list of goals depending where you are in life…at least not yet. We have to set priorities and timelines.

Budgeting is not a one-time deal or a once a year deal like paying taxes. Yes, we have to revisit that bad boy on a regular basis. So like anything else that can be a chore to do we have to make it as enjoyable as possible. Thanks to technology even budgeting can be fun. Yes, I used that “fun” word again. Well, even if it isn’t fun it can become bearable.

Check out my Budgeting That Makes $ense course. Click here to Learn More and check it out!

Check out our Budget Tracker tool here. I know that you will find it helpful. You can also get a FREE copy of our Net Worth Calculator here.

Question: How do you feel about the idea of building a personal budget? You can leave a comment by clicking here

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It’s Time to Leave “Someday Isle” and Start Planning Your Retirement Journey

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The Employee Benefit Research Institute conducted a telephone survey recently and asked people age 25 and older how they felt about their retirement finances. The responses were interesting and confusing. As the Wall Street Journal reported, it conveyed a sense of false hopes for many Americans. Consider:

  • Two-thirds of those surveyed said they felt confident about their retirement income preparations but…
    • 64% said they or their spouse had saved for retirement
    • 57% said they or their spouse are currently saving for retirement
    • 44% said they or their spouse had tried to calculate how much money they will need in retirement
    • 32% are confident Social Security will provide sufficient benefits
    • 22% said they had saved $100,000 or more for retirement
    • 19% stated they had received advice from a financial advisor

So the survey results above don’t match up with the expressed optimism and confidence. What gives? Are we fooling ourselves into a retirement death spiral or are we afraid to face the reality that the boomer generation just hasn’t done a good job of preparing for retirement?

In either case, it’s time to get over the “woulda, coulda, shoulda” thinking and start looking at what we can do right now, today. I am sharing my “Ready List” to quote my old college football coach, Bill Walsh. Just as a football team develops their Ready List to prepare for an opponent you too need a “Ready List” – the retirement income planning “plays” you can “run” right now depending on what opponents you are facing right now which could be one or more of these:

  1. I haven’t saved enough
  2. I’m not contributing to my company 401k or other retirement plan
  3. I don’t understand how Social Security works
  4. I spend too much money on “stuff” instead of saving for retirement

And there may be more. But let’s start where we are and go from there. Get off the “Someday Isle” and let’s look at these possible solutions – my “Ready List”

  1. Start with the end in mind – Sit down with a CFP (Certified Financial Planner) and figure out how much you have saved right now. Together you can uncover the retirement income “gap” and discuss solutions to help bridge the gap with one or more of the Red Line Solutions discussed below.
  2. Look at your expenses – We need to look at what you spend now and what lifestyle you want when you retire. Most people want the same or as close to the same lifestyle that they have pre-retirement. So we typically use 70-80% of your pre-retirement expenses in retirement as a starting point.
  3. Don’t forget Social Security – This can make a huge difference in your retirement income projections. It’s a guaranteed annuity with inflation protection. We need to figure out when the best time to start taking benefits will be. Don’t assume it’s at age 65. More on Social Security here.
  4. Find the gap – I use a terrific program called Retirement Analyzer. Once we account for your assets, expenses, Social Security and other potential sources of income we can determine when you will or won’t run out of money. We call this the Red Line analysis. The Red Line is when you will run out of money. We want to push it beyond age 100 just to be safe – make it disappear!
  5. Bridge the Gap – Depending on where/if your Red Line shows up, for example, at say age 75, then we need to come up with Plan B. We call these the Red Line Solutions. What are those? Here are some examples:
  • Modify when you start taking Social Security
  • Work longer
  • Work part-time in retirement
  • Reduce expenses in retirement
  • Increase contributions to retirement accounts
  • Sell an asset

I explain these Red Line Solutions in more detail here. Beating yourself up over what you haven’t done won’t get you any closer to an enjoyable retirement. Taking action now will. You don’t have to do it alone. Work with a professional advisor and get started on your retirement income plan. That’s the only one that matters.

Time Out! What is the number one roadblock to your retirement income goal? You can leave a comment here.