What Mark Twain Might Say

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You might think that a vast majority of my job as a financial planner would involve number-crunching, graph-making, and technical reading. My job does encompass some of those activities, but I have found that the majority of my time is actually spent counseling people. Sure, many of my conversations with clients involve talking people through the financial pros and cons of things such as moving, starting a family, or retiring, but a lot of my counsel and advice sometimes borders on being more personal. With that in mind, I’d like to share some thoughts based on tough conversations I’ve had recently with some people about their jobs.

I read recently that the average workweek in America has crept close to 50 hours a week, or 2,400 hours per year. Many of my clients seem to affirm that statistic, and sadly, make me wonder if that statistic might be a little understated. Either way, 50+ hours a week means that outside of sleeping, eating, commuting, and football, there’s not a lot of time left for anything else. I imagine I could write a couple of books on how your job can interfere with your family, friends, health, and faith if you’re not careful, but I’m just a humble blogger. So to summarize, let me just say that legendary adventurer and intellectual, Mark Twain, provided one of my favorite quotes as I went through school: “Don’t let schooling interfere with your education.” I bet he’d offer something similar in regards to work and life. I might even speculate that he would have said something along the lines of: “Don’t let work interfere with your life.”

“There is a limit to how much I’m willing to work no matter how much they pay.”

“If I quit working, I’ll have to spend time with my wife.”

 “Since I’ve retired, I thought I would have heard from my former co-workers more.”

“The way I’ve worked, there’s no way I’ll make it past 80.”

“I have to sleep on Sundays, or else I’ll never make it.”

Unfortunately, those are all quotes I’ve heard from various acquaintances, clients, and friends over the past few weeks, and frankly, it makes me very sad. My parents raised me to give 100% towards everything I do, and I’ve made that mantra part of my core personality, but as I’ve gotten older, I’ve also learned there is an important caveat to always giving all that you possibly can. I believe there is only so much one person can give, and I know you only live for so long, so if you’re giving too much to your career, chances are you’re not giving enough to another area of your life, whether that be your own happiness, your own health, your family, your friends, or your faith.

Just as I would never have the audacity to pressure someone about what they should do with their money, I would never tell someone how they should live their life. One of the differences between being a trusted financial advisor and a broker is that a trusted financial advisor is supposed to be more interested in your overall well-being than just your money. In short, I believe it is my duty to do what is best for clients, and as you might expect, what is best for someone personally and what is best for someone financially isn’t always the same thing. I don’t take lightly the opportunity to help people talk through what’s going on in their personal lives and to help them consider the current and future financial impact of any decisions they’re thinking about making. Seeing people go to less financially lucrative jobs that give them weekends, seeing people take that family vacation they kept putting off, and seeing people change careers to something they actually find enjoyable and meaningful makes me happy. In my opinion, you need to put food on your table and a roof over your head, but life is too short to let work ruin your life. 

As I’ve said before, I love math, numbers, history, and trying to keep up with all that’s going on in our crazy little world, but I do what I do so that I can help people. If today’s post speaks to you, I hope you’ll give it some serious thought. If you need a neutral party to listen or to help you think things through financially, or even personally, please know I’m here for you.

-Tom

Why I Don’t Fix My Own Car

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A question I’m sometimes asked that I don’t particularly look forward to is why someone should pay for financial planning and investment management services that they could do themselves. It’s certainly a valid question, but it’s also an awkward question for me to answer because it forces me to offer what feels like an arrogant response as nice as I possibly can. The gist of my response to, "Should someone be willing to pay a reasonable amount for financial planning and investment management services?" is usually something to the effect of “Yes.”

I’ve found that most potential clients who ask this sort of question are either very fee-conscious, they are do-it-yourself investors, or both. They may like me as a person, and they may even be impressed with my initial presentation or dialogue, but they are hung up on the irrefutable fact that if they devised the same financial and investment strategy that I’m going to work with them to develop, they’d be better off because they wouldn’t have to pay my firm’s fees. They are quite right if they devised the same (or even a better) financial and investment strategy, but what I really want to tell some of them is that I don’t fix my own car!

I don’t fix my own car not because I can’t or am not smart enough to learn how to, but because I work and have family and friends. Like many of you, I’m a busy man, and I simply cannot dedicate the amount of time it would take for me to be comfortable driving a car that I worked on. Not to mention, I don’t personally enjoy working on cars, nor am I a trained mechanic. I might pop the hood in an emergency or try to fix a blown brake light from time to time, but when it comes to something like a knocking sound in the engine or noticeably out-of-balance tires, I’m out. When it comes to something as important as my daily mode of transportation that happens to be worth several thousand dollars and could impact my family’s well-being, I want an expert mechanic whose sole focus is my car.

I hope you know me well enough to know that I’m not trying to be self-serving in anyway, but I have to say that when it comes to something as important as people’s financial well-being and their ability to fulfill their financial and life goals, I really wish they’d go with a “financial mechanic.” Whether you don’t understand finances, don’t want to understand finances, don’t have time to understand finances, are incredibly fee-conscious, or are a do-it-yourself investor, I really wish you’d let someone help you or at least occasionally offer a second opinion. Maybe from time to time you’ll want to fix a blown “financial brake light,” but when it comes to a knocking in your financial engine or an out-of-balance investment portfolio, wouldn’t you like some professional help?

Prudent, long-term investment advice can absolutely be a huge deal, but don’t underestimate the potential financial and emotional value of financial planning and wealth counsel. Figuring out a way for new parents to know they will be able to send their child to college is worth something. Figuring out how to implement a little-known tax strategy that saves real dollars is worth something. Having someone to convince you the sky is not falling some years and not to go all-in at the top of the market cycle other years is worth something.

As I said earlier, I’m not trying to be braggadocios in any way, and I’m not trying to pressure you into seeking financial advice from me or any other quality advisor out there, I’m simply trying to make a point. When I don’t feel well, there are some things I’ll try, but at the end of the day, if I’m still not well, I’ll go see a doctor. When it’s somebody’s birthday and I need a cookie cake big enough to feed a small army, I'll go see a baker. When something isn’t working with my car, I’ll go see a mechanic.

Do what you do, but please be careful if you fix your own car.

-Tom

Savings is a Bill!

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I’ll be the first to tell you that I have some quirks. For example, I have to write out a to-do list every week, my office desk has to be clean before I can go home (I throw stuff in drawers), and seeing a lot of unread emails causes me a lot more angst than it probably should. Another one of my quirks is that I cannot stand unpaid bills. Paper or electronic, if a bill comes in, it gets paid that very day (unless I’m on vacation or seriously ill). Maybe you’re not quite as crazy as me, but if you’re reading this post, I trust you pay your bills pretty promptly, too.

My wife and I are also pretty good savers, but even I must admit that my love for saving money pales in comparison to my hatred of unpaid bills. That’s why when I heard about a new approach, or more accurately, a new twist on how to think about saving, I got excited. The twist is this: What if we viewed savings as a bill?

When the power bill comes in, I pay it. When the mortgage statement comes in, I swear, and then I pay it. When my wife’s credit card bill comes in, she pays it. At the end of the pay cycle, or month, or year, we usually have a little bit more income left over than we have expenses, so we try to save it, but that doesn’t always work out. Luckily, my wife and I have been blessed to have enough coming in to be able to save a little, but we also have to constantly work at being disciplined and diligent enough to save. Even though we’re pleased with our savings efforts, at times, we could do better, and I bet viewing our savings as a bill would help.

The “savings is a bill approach” is not earth-shaking, and it’s certainly not complicated, but if you or your family are struggling to save enough to meet your financial goals, or to save at all, I’d recommend you try this tweak. If savings is a bill, it comes out at the front of the pay period, not at the end. If savings is a bill, it’s a regular expense and must be viewed as a recipient of part of your income pie, not just the residual crumbs. If savings is a bill, I bet you and I will both save more, and more regularly.

Sorry, but I’ve got to run. The water bill calleth!

-Tom

Freedom from Student Loans

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While reading an article recently published in InvestmentNews, I was surprised to learn that 71% of college graduates coming out of school with a bachelor’s degree have student loan debt. I was also surprised to learn that student loan debt has passed credit card debt and is now the largest form of consumer debt after home mortgages. When considering the 71% of college graduates with student loan debt, the average debt is close to $30,000!

I knew student loan debt was a burden for many people, but I’ll be honest, I didn’t have any idea that it impacted nearly three out of four college graduates. I was also a little shocked by the magnitude of the average debt. So, what if you’re like the majority of college graduates out there, and you’ve got some significant student loan debt relative to your current salary weighing you down? What should you do? I’d like to share some thoughts.

If it were me, I’d get a job after college graduation as quickly as I possibly could. Even if it was not my ideal job and was just a short-term opportunity, I’d want some income so that I could hopefully avoid taking on any additional debt and maybe even begin to think about attacking my student loan debt principal. 

If it were me, I’d look into consolidating my student loans (if I had more than one) so that they would be easier to manage. One check per month would feel less overwhelming, and the interest rate on the consolidated loan could even be beneficial.

If it were me, I’d obviously keep making minimum payments on my student loan debt, but I’d set aside a reasonable cash emergency fund, I’d contribute whatever it took to get my employer’s maximum company match to my 401(k) or retirement plan, and I’d pay down any credit card debt I had before attacking my student loan debt principal. My goal would certainly be to get my student loan debt paid off, but I need to make sure I can survive a “rainy day” and go ahead and begin saving for my retirement, as retirement dollars contributed now have a longer time frame to really appreciate than retirement dollars contributed years from now. After I had my rainy day fund built up, my retirement contributions in order, and my credit card debt zeroed out, it would be full-fledged war on my student loan principal until I was able to remove the giant debt stone that had been tied around my neck as I pursued a higher education and a brighter future.

While I’d do everything I could to eliminate my debt burden, I wouldn’t put my life totally on hold. I admire and respect people who are focused on extinguishing their student loan debt as soon as possible, but putting off things such as getting married, renting your own apartment, and buying a reliable car in the name of paying down student loan debt may not be the best life choice. It may be the best financial choice, but it may not be the best life choice. Do whatever you think is best, but I wouldn’t put off taking the next steps in your life and move back in with your parents solely so you can live as inexpensively as possible and pay down your student loan debt as soon as possible.

I understand that some members of my generation aren’t yet interested in my ramblings about investing, insurance, and estate planning because they are still battling their student loans, but that doesn’t mean I can’t help. Get a job, set aside some cash, start contributing to your employer’s retirement plan, and live thriftily so that you can pay off your student loans as soon as reasonably possible, but don’t “postpone” your life. Once you’re free from your student loans, you’ll have a lot more cash flow free up, and you’ll be ready to take flight towards your other financial and life goals.

-Tom

Current Documents - It Does a Family Good

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Have you ever looked in the fridge and been really glad that you had a nice gallon of milk just sitting there? Not to get too crazy, but a gallon of milk kind of proudly stands out in a refrigerator with its crisp labelling, unusual shape, and pristine coloring. There’s just something about knowing that it’s there that can put a smile on your face. If you want cereal, it’s there, if you need to bake something, it’s there, and if you need something to wash down more Oreos than you would care to admit, it’s there.

There’s another scenario, though, and it’s one of my least favorite. Have you ever opened a gallon of milk and given it that customary sniff, just to make sure everything is as it should be, and had your nostrils greeted with the deplorable, putrid, sour smell of rot? Have you ever gone to the trouble of reaching up in the cabinets to retrieve your favorite glass and gone ahead and poured a glass of milk (bypassing the customary sniff test) only to find the inside of your mouth wrenching after that first gulp of spoiled milk? I know I have damaged my nostrils and angered my taste buds doing just that on more than one occasion, and it’s no good. You need milk, and unless you’re a two-gallon kind of family, you’re usually just out of luck. All you can do is pour the expired product down the drain, put the lid back on the jug so it doesn’t stink up your garbage, and head to the trash can.

Unfortunately, I’ve seen some estate planning and health care documents that resemble spoiled milk. They were originally done oh so well. They were crisp documents done by prestigious lawyers, they were printed on the obnoxious, extra-large-sized legal paper, and they were kept in a nice little binder in the family’s safety deposit box or the bottom of a dresser drawer. The documents were like a good gallon of milk – they were there if you needed them. However, time passes. Family relationships and dynamics change. Agents, guardians, and executors pass away themselves or lose their desire or capability to assist you. Minor children become adults and have children themselves. Financial institutions and governments change the wording required for everything to work as it was so intended. Any or all of these events can take a perfectly good set of estate planning or health care documents and spoil them. This will likely go unnoticed (just like a capped gallon of expired milk in a fridge), but when someone gets hurt or passes away and the documents are needed (just like a glass of milk to wash down a peanut butter sandwich), the documents can really stink and show just how "expired" they really are.

Wills, power of attorneys, health care directives, and beneficiary designations are a lot more important than a dairy product. When someone gets sick or passes away they can’t just pour their old documents down the drain and get fresh ones. Their family could be legally required to drink the cup that is put before them based on their loved one's most recent estate planning and health care documents no matter how old they are, even if the family knows it is not what the deceased or incapacitated wanted or intended. I’m not trying to make anyone spend a bunch of money on attorney fees, but if you pull your documents and see that they have cobwebs on them, you may want to consider getting them updated. If you’ve recently had children or become a grandparent, if a family dynamic has seriously changed, if a key person in your documents such as a primary or contingent agent or beneficiary is no longer with us, or if your documents are more than about five years old, it may be about time to get your documents updated.

If you don’t have any documents at all, consider this your proverbial kick in the you-know-what. Living without proper documents in place is a lot crazier than not having milk in your refrigerator!
It wasn’t something I particularly enjoyed, but my family and I have our estate planning and health care affairs in order, and that gives my wife and me a sense of comfort and confidence. I can focus on other things, such as running to the store for a gallon of milk and maybe, just maybe, a pack of Oreos.

-Tom