Money Relationships

I recently gave a talk on money and relationships. Specifically, it was about minimizing marital/relationship money squabbles. What is important about this? Well, a lot of us and our relationships suffer not because of lack of money or a financial disaster (though that can certainly be a factor), but because of the symbols money represents. Money certainly represents underlying values. How you relate to and use money is typically very similar to how you relate to yourself and others. Think of your money personality, for instance. Are you a spendthrift, a risk taker, or a hoarder? Everything we do with money sends a message to ourselves, our loved ones, and the world at large. If you are a penny pincher, for instance, it may be fear of not having enough or fear of an impending emergency. You may also be telling yourself this is the best way to provide for yourself and your family and the payoffs warrant the sacrifice. While these may be the messages you are transmitting to yourself, you may erroneously be transmitting to your loved ones and the world that you are rigid, cheap, or even selfish. These are quite different messages and one needs to be careful how money behaviors may send the incorrect messages to those we care about. I encourage people to gain greater insight into the way they handle their finances. Look at the way you have spent, saved, invested, and gifted money in the past. Track your behavior for a month or more as a conscious observer to experience how your behavior may send messages to yourself and others. Have you not purchased new shoes in a while because of money or because deep down there is a self-worth issue? Money and personal finance has so much more to do with psychology than technical mechanics. Only by blending behavioral psychology and financial knowledge can we improve our relationships with money, ourselves, and our loved ones.

Sleigh Bells Ring

I saw the emergence of the first Christmas trees of the season today and am reminded of the traditional joy, family reunions, and feasting most Christian (and non-Christian) American families will enjoy in the coming months. It makes me think of my youth when I wole up at 4:00 or 5:00 a.m. with my older sisters so we could go see all the presents glowing and calling to us under the Christmas tree. I guess, in retrospect, there were many holidays with few gifts, but my parents seemed to do the best they could. It is interesting that they still try to compensate for it now with more presents even though we are all adults. Isn't his true of many families? It is amazing how important presents are to holidays and how often many of us use money and purchased gifts to express love and other emotions. I can't help feel that there must be another way to express these emotions. Year after year families go into debt to give presents to loved ones. Is is because they do not adequately show their love the rest of the year? Is it because they have not fostered deeper relationships with people to simply enjoy their presence and unconditional love? Is it because we need to keep up with everyone else and show that we too have the newest fashions or the neatest gargdets on the market? Whatever the reason, all this spending and the marketing that corporate america uses seems to perpetuate our dangerous spending habits, causes us to frquently miss the point of the holidays, and invokes the misconception that holiday spending is a symbol of love and other emotions. Isn't a heartfealt meal, a family heirloom, or a self-crafted gift from the heart more meaningful and worth while. Do we really need more stuff and more debt?
There is much to be said of the "softer" side of finance. I would encourage that everyone develop and understand their money personality and the psychology of money in a way to foster a better relationship with money. Having this insight helps us discover why or why we have not manifested our financial success. However, if you have decided that purchasing lots gifts is still important to you and your loved ones, please keep these ideas in mind: stick to a budget by limiting how much you are willing to spend on the holidays, shop earlier rather than later to avoid paying more on things because it is last minute, avoid using dredit cards - if you can't pay it with cash you shouldn't buy it, start saving extra money now so you can purchase gifts within your budget, and look to shop online as this can save time and money. These are just a few of the several ideas to enjoy the holidays and maintian your financial health.

Stop the insanity

We all have seen it. You are driving down the road and someone is weaving in and out of traffic trying to find the fastest lane. Temporarily, he or she may find it, but remarkedly that person is next to you at the next stop light. Even if this person were to arrive at his or her destination faster than you, I am sure it would not be by much time and they incurred more risky driving conditions. We also see this in investing time and time again. Instead of constantly changing lanes to find a better one, many investors chase returns. The actual research has escaped me, but I recall reading that the average stock investor has made about 2% a year while the stock market in general has returned on average about 10.5% a year. Why? Because, they tend to buy and sell their investments far too frequently. In fact, the average investor tends to sell off investments that are underperforming (sell low) and accumulate investments that are already performing (buying high). Haven't we all heard the adage of buy low and sell high? A lot of this certainly has to do with the emotional responses of greed and fear, but also is a huge indication of how fickle and cyclical the markets are. What is today's winner is tomorrow's loser and vise versa. If anything, we should be adding money to those investments that are underperfoming and shaving off a bit from those that are outperforming. As I say time and time again, set up a properly diversified asset allocation for your personal needs and leave it alone. Please don't buy all the investments that performed the best this year. Please don't chase the high flying stocks and/or mutual funds. Please stop the insanity! Didn't we learn this in the late 90's?

Start Early

I was at a business development meeting at Shared Vision Network http://www.sharedvisionnetwork.com this morning and was discussing my business with someone I just met. After talking, he and I agreed that financial literacy is simply not appropriately taught. Though the typical working adult is usually my audience the same things can be said about our youth: schools and parents consistently fall short of teaching and passing along the virtues of proper financial management and money stewardship. Many students, for example, continue to graduate college in more credit card debt than ever before. Of course, I blame the credit card companies for their aggressive marketing efforts to this segment of society (it is far too easy for a college student with little to no job history to qualify for credit), but that is for another segment. I encourage all parents to start talking with your children about money and proper money management. Get them involved in handling the day to day payment of bills, share your household budget with them (you do have a budget, right?), let them see how your investment accounts look and experience the stock market first hand. Most of all, help them develop money beliefs and values that foster financial responsibility and empowerment. Teach them how money works as an instrument to further their souls evolution rather than something to be mismanaged and squandered early and they will be more adequately prepared for adulthood. Part of the problem, however, is that most parents have not been taught, or have failed to take the time to learn, the intricacies of proper financial budgeting, planning, saving, and investing. And so, the cycle continues.

Listen up! But, to whom?

Try doing a google search for personal finance and you will soon be overwhelmed by the myriad of options out there. Everyone seems to have their own strategy, ideology, and even agenda. The important thing is really to try to avoid those who are selling products and stick with those that are offering information and educational resources. Some of your best bets are your local newspaper columnists that aim to inform and educate their readership. I have been following Russ Wiles in the Arizona Republic for some time. Russ has teamed up with Yvette Armendarez in a relative new "MoneyWise" Blog that you can find at (http://www.azcentral.com/blogs/)
They cover a variety of topics including credit, investing, and their take on current financial news. It is a great place to start and get some unobjective financial information. That's where I got the information on Money Market Yields and information from Crane Data (www.cranedata.us). I also like The Motley Fool (http://www.fool.com/), for their general core philosophies. Some like Bob Brinker (http://www.bobbrinker.com/), but I would tend to shy from the short-term perspective and timing he seems to foster. I do like his favorite fund family that he frequently recommends. Others love Warren Buffett (http://www.buffettsecrets.com/). I also like the tenets discussed in Burton Malkiel's book "A Random Walk Down Wall Street" (http://www.princeton.edu/~bmalkiel/). These are time-tested, core philosophies to which every investor should adhere. He also has several other books that build upon these concepts. In thinking about this, though, it is important to figure out what your core money beliefs may be and find people that seem to reflect them in their writing and approach. Either way there is much to learn from these seasoned veterans.

Tis the Season

...for corporate profit reports. But, what does that really mean? To most analysts and avid Wall Street watchers, corporate profit reports generally indicate the productivity and growth of the overall economy. They are also frequently used to try and determine why the markets acted the way they did (i.e the market was up or down). Just take a look at popular news media like MSN Money http://www.msn.comwhere they give in-depth coverage of daily and weekly market reports. While earning reports may be one part of the plethora of economic data available to surmise economic health, it really has little to do with us, the individual investors. Those who have seasoned the ups and downs of the market for many years, know that trying to guess when the market is going to be up or down in any given day, week, or year even is futile. The best recipe for success, experience and data both clearly show, is to stay the course and to not worry about short-term events and media-driven hype of where the market may or may not be going. Avoid worrying about the short-term prospects of the markets, whether they are stocks, bonds, real estate, and maintain you properly diversified portfolio. What is in favor today is likely going to be out of favor tomorrow and vise versa.

Where should I invest?

In talking with people from all walks of life, I am frequently asked where I would recommend they invest. With the plethora of articles and books available today, it comes as no surprise it is confusing when trying to figure out where to invest. Of course, before embarking on any investment strategy you must ensure they are adequately insured, have adequate emergency reserves, and clearly identified goals. If those things are all in order, you are probably ready. Investing is not, however, about picking THE best investment at this point in time (as that changes rapidly), but really finding the best mix of investments that may fit your needs.

Keep it simple: mutual funds are probably hands down the best investments for most people. They offer professional management, liquidity, and diversification (for a relatively small initial investment) that you are unlikely to achieve on your own by buying individual securities. They also have mutual funds for almost every asset class out there. The key is to use mutual funds to to gain access to the major and minor asset classes. Major asset classes include stocks, bonds, and real estate. The minor asset classes include large, medium, small, domestic, and international stocks and short-term, intermediate-term, long-term, high--yield, corporate and government bonds. Remember it is important to gain access to all of these asset classes and to not try to figure out which on is the best at any given time. Diversification is key.

Yields are back

Money Market Mutual Funds are yielding about 5% for the first time in many years (www.cranedata.us). Not too long ago Money Markets were yielding only around 1% or less and forced many investors to look elsewhere to stash their cash. While the higher yield is good, remember that Money Market Funds are not really intended to be vehicles to maximize return. Money Market Funds and their equivalents (very short-term bonds, CD's, and savings accounts) are really designed for money with shorter-term goals. Even while a safe investment offering 5% sounds good, it is hardly enough to out pace inflation and help meet your long-term goals. In the investment world, its all about risk versus reward. Money Markets offer liquidity and stability. With little risk, you tend to have little potential for return. These vehicles are really best suited for your short term emergency reserves (ideally at least 3-6 months of living expenses) and other short-term expenses, while your other assets should be invested elsewhere to maximize your long-term returns. Vanguard, Fidelity, Dreyfus, and others all offer competitive yields. Just remember, that cost counts and that is why Vanguard typically offers the highest yield of the bunch.

What are Your Money Messages?

As a way to introduce some of my thoughts to my fellow bloggers, I am including an article I recently had published in a local newspaper.

Modern society constantly inundates us with conflicting messages — especially when it comes to money. On the one hand, advertising touts the allure of bigger and better homes, the fastest cars, and the coolest new high-tech gadgetry. On the other hand, we repeatedly hear financial gurus attempting, seemingly in vain, to spread the wisdom of zero debt, sound budgeting and saving, and intricate retirement planning.

So, which message is right?

Most of us think to ourselves that the financial goals we so often hear about make logical sense; however, we seem to reach this conclusion begrudgingly, or put that awareness on the incessant back burner. Even as we know what we should do, we continue to find ourselves mired in the financial trappings of modern-day consumerism. Why?

For the most part, our schizophrenic financial behavior occurs because both of these messages miss the mark when explaining proper money use, and the conflict feeds on sometimes hazardous emotional responses. The first belief feeds on our immediate desires. It plays into the culture that tells us we need things to feel successful, accomplished or normal, or that we work hard so we deserve “nice” things, regardless of their cost. The latter belief draws its power from our fears — fear of lack, fear of being unable to support ourselves and eventually retire, or fear of being unable to properly care for our loved ones. It is no wonder that most of our relationships with money are bipolar, at best.

Our typical money messages fail to remind us that money is simply a tool to help our souls evolve. Money, as a form of energy, is an instrument used to pursue fuller, richer and more purposeful lives. In his book, Women, Men, and Money, William Francis Devine puts it eloquently when he states, “[M]oney is an instrument of personal evolution and the power in it lies not in taking possession of [our funds] but in how we behave with them.”

This is not to say that we should ignore the money messages that encircle us; rather, we should question where those messages fit into our human evolution. Saving for retirement can be a wonderful thing for some people; however, it becomes a Pandora’s box for others. We can become so fixated, addicted even, to the misconception that life will blossom if we simply follow a program. Such a fixation encourages us to deny the frustrations of not living on purpose or settling for work that fails to fulfill our passion in the present. In order to find fulfillment, we must do something satisfying with the funds our work and savings afford us.
Even if our investments yield in excess of 20 percent for years to come, the act of sending money to our favorite investment firm — and waiting for it to yield a profit — does nothing to further our connection with yourselves, build rapport with our partners or cultivate our inherent talents. The traditional investment vehicles in which we constantly are told we should participate do nothing to cultivate our souls.

Using money as an instrument through which we enrich our souls involves avoiding the three-pronged dilemma promulgated by the so-called American dream, one which threatens our souls’ very vision: buying a grander home than we either need or can afford, doing work we are not fitted to, and saving, saving, saving with that retirement carrot as our incentive. While they are seemingly important cornerstones of the dream to which most Americans aspire, perhaps we should also become just a little bit skeptical about these pervasive financial messages, realizing that these goals can trap us and severely limit our human evolution. In describing the energy of life’s intentions, Albert Einstein said, "All means prove but a blunt instrument, if they have not behind them a living spirit." And so it is true of the instrument of money.

Welcome to my Blog

My intention is to comment on current issues and financial events that help individuals take more control over their personal finances and their lives. I mix psychology, spirituality, and socology with my technical financial training to educate and empower. I will be linking with other bloggers and financial resources as appropriate. Together we can Build Knowledge, Create Confidence, and Gain Control.