Why Hire a Financial Planner?

Although I’ve never hired a financial planner, I have had to hire an expert to help me do something I could potentially have done myself. Earlier this year I switched gyms and the new one had less exercise classes. After two years of either going to a class or doing cardio I had still not started weight lifting. I always had a reason to skip it. The truth was I didn’t know how. After some half-hearted attempts to learn I realized I was not disciplined enough to learn this skill on my own. The routines online confused me and my motivation barely lasted past five minutes.

Shortly after joining the new gym they offered me an introductory personal trainer session. At first I was an adamant no. At the time my main objections were that it’s expensive and it’s something I should be able to figure out on my on. But then I saw that I could afford it and realized that I was probably not going to learn it on my own. So I took the plunge and signed on for a one year contract. I can now happily say I am comfortable with my weight lifting routine. And a positive side effect is that my butt has never looked better!

So what does my personal trainer have to do with a financial planner? Both professions have experts who motivate you through behavioral changes. They have been trained to quickly spot possible problems. Plus the best coaches, either for fitness or finances, are just as excited about your success as you are. If it’s fear that’s holding you back, take a look at this great article by Michael F Kay from Financial Life Focus. Continue reading “Why Hire a Financial Planner?”

Women’s Symposium of Southern California

Next International Women’s Day we will have the second annual Women’s Symposium of Southern California, which will bring together financial experts to answer questions from women in the community. The first symposium was in March of 2016 and it was a great success. It was all put on by Marah Fineberg, CFP and she decided there is a need for an annual event like this in our community.

I am proud to say that I am part of the Partnership Committee. My main job is to let others know about the upcoming Symposium and request involvement from other organizations that share our mission.

I’d love to hear if you have any thoughts on who I should contact. Also, please spread the word to anyone you think may benefit from this event. Our next event will be on March 8, 2017 in Marina Del Rey.

Sufficiency and your True North – Celebrating Enough

The Soul of Money by Lynne Twist is not your typical personal finance book. It does not go into how to get out of debt or where to put your retirement investments. Instead, it is a thoughtful book that reminds us that we already have enough. We have probably all heard that the endless pursuit of more does not lead to an enjoyed life. It only leads to a need for more. The issue for many of us is that we forget this simple idea, especially when we listen too closely to the consumerism in society. Twist shares her transformation away from the mindless pursuit of more towards a more aligned lifestyle for herself and her family. Continue reading “Sufficiency and your True North – Celebrating Enough”

Career Exploration Before Signing on for College Debt

One of my nieces is starting her senior year of high school and is stressed about college. She knows she wants to go to college, but is unsure of what she will study and how she will pay for it. This is very natural, especially for children who are the first ones faced with the luxury/burden of deciding what they will do for money as adults. A few generations ago most people grew up to do what their family did. The children of blacksmiths were blacksmiths. The children of farmers were farmers.

My niece is certain that she wants to attend college because she likes academics. However, college is not the only option. High school graduates can join the military, go to a trade school, start a business or get a job. Most high-paying jobs do require a college degree, especially if you want to move up in a company. But if you go to college just because it’s expected of you, rather than because of your own internal motivation, you may have trouble completing the degree requirements. If academics is not your thing consider trade school; the school requirements are shorter, the cost is lower, and the jobs are unlikely to be outsourced to other countries.
Continue reading “Career Exploration Before Signing on for College Debt”

Helping Kids Become Financially Capable

Most of the responsibility of teaching kids about money falls on their parents and family. This can be rather stressful, especially if you are uncomfortable talking about money and don’t want to be actively questioned by a kid. In order for kids to learn about money they’ll have to be allowed to interact with it and yes, even make mistakes with it. It’s better to make money mistakes as a kid when the amounts are much lower than to learn about money after you open up a credit card at 18.

As a parent, or even just as a person who interacts with children, we need to pay attention to our money talk around kids. Do you put money down and call it the root of all evil? Do you glorify it and act as if you’ll never have enough? How do you say no to buying something for your child or any kid you know? Do you ever say no?

There are many ways to teach children about money; you’ll get to decide what way works for you and the kids you interact with. The main thing is to keep in mind that kids clearly see your beliefs around money; make sure that you are as aware of them as they are.

Continue reading “Helping Kids Become Financially Capable”

Financial Flourishing and Kids: Saving for College

As a society we want to see children flourish and part of flourishing is being financially capable. Financial capability is a term coined by the Center for Financial Inclusion that goes beyond financial literacy. It describes someone who knows how to solve money questions and feels confident in their ability to take care of themselves financially. Whether someone has a high income or not is not an indicator of whether they are financially capable of caring for themselves. Becoming a financially capable person takes work because you are actively evaluating situations to see if they will work out to your benefit. It often feels easier to simply do what others do.

In addition to teaching a child to be financially capable, parents are also instructed to save for their child’s future. The common reasoning states that for your child to succeed he or she will need to go to college. It follows that if you want your child to be able to attend college it makes sense to put funds away for them. This leaves you with some big questions: How do you manage the expense of having a child today with the desire to provide for their future? How can you raise your child to be financially capable and make good use of any funds you may be able to provide for them?

Continue reading “Financial Flourishing and Kids: Saving for College”

Neal Gabler Publicly Exposes Himself – Taking Shame out of the Money Conversation

Last month The Atlantic published a very moving article on financial insecurity. Author Neal Gabler shared his private battle with financial illiteracy and shortsightedness in an article entitled The Secret Shame of Middle-Class Americans. If you are struggling with your finances, or know someone that is, I strongly recommend you read the whole article. 

Gabler begins by stating that he is one of the 47% of American who would need to borrow in case of a $400 emergency. He goes on to detail the decisions and assumptions that got him to this place. He assumed he’d make more money next year; that his children needed to go to a private school; that he didn’t really need to tell his wife what was going on with their finances. He did not do anything wrong or irresponsible, he simply went for the American Dream using reasonable amounts of debt and risk. He ignored any signs of financial distress until it was too late. Pair this with the fact that his income after adjusting for inflation is the same as it was twenty years ago and you get a perfect storm.

The article ends with Gabler sharing how he now manages his finances; it is not what he had imagined twenty years ago. Although he has a good income, a long career, and a graduate degree he has not taken a vacation in ten years. He no longer uses credit cards. He and his wife only eat out a few times a year. He is now doing the things that we all know we should do to do well financially. But why is it so hard for us to start here and to do these things by choice rather than necessity? And why are we so ashamed to talk about finances?

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Buying a New Car

I just bought a car and I am very happy with my decision. Here are the steps I took:

  1. Get upset because I needed to replace my old car.
  2. Get overwhelmed thinking about what car I could buy
  3. Follow Fool Proof Guide to buying a car
    • Determine budget
    • Research Car
    • Find best price
  4. Purchase Car
  5. Update insurance and budget

The most difficult part for me was feeling overwhelmed with having to make such a big decision. The thought of stepping into a car lot left me feeling incompetent. I put off replacing my car as long as I could. A few months ago I learned I could not register my 2007, 177K+ mile car in California because the catalytic converter was broken.

I had known it was functioning at less than 100% for a while, but I figured it could still hold out for a bit longer. Then I learned the car couldn’t pass a smog test with a check engine light on. My mechanic was nice enough to turn off the light, but by the time the car was ready to get a smog check the light was already on again. It was decided: I needed to replace my car.

I live in Los Angeles where it often feels like we have more cars than people. Our freeways are called “The 405”, “The 174”, and “The 5”. We let each other know where we live by describing the major freeways around us. We have ten car museums in the greater Los Angeles area. As the song says Nobody walks in LA, the Smithsonian has a great article on how things got this way. A lot of the time it feels like what you drive is a statement on what you value.

When it comes to finances my motto is less is more. As I mentioned in a previous post financial well-being is best served by spending thoughtfully. Rather than focusing on what you want in a car, focus on what you want in your life. Buying more car than you can afford is a recipe for stress. Thanks to hedonic adaptation after only three short months the thrill of having a new car will wear out, while the payments will continue. Do yourself a favor and value your sanity by setting a budget before you even start looking at cars.

Continue reading “Buying a New Car”

Giving Back – Being Charitable is one of the Best Uses of Money

Personal finances encompass your entire relationship with money, that includes giving to charity. We all routinely receive requests to be charitable. Most of us probably contribute to causes we believe in, even if it’s only sporadically. According to Charity Navigator in 2014 total giving was $300 billion, or about 2% of US GDP. This is the equivalent of the GDP of all of South Africa in 2009. That’s impressive. We give so much each year that we could fund an entire country with a population of 49 million people. You can find a detailed report of what charities we give to here.

Why do we give?

Simply put, we give because it feels good to spend money on other people. Eric Baker’s article What’s one way where money definitely brings happiness? shares the psychological benefits of giving. The article describes a survey conducted by the Harvard Business Review on people’s happiness after receiving a profit sharing bonus from their company. They found that those who spent the bonus on charities or gifts for others showed increased happiness for longer than those who only spent it on themselves or bills.

Continue reading “Giving Back – Being Charitable is one of the Best Uses of Money”

Is it time to align your life? – Does your Spending Reflect your Values

Have you ever thought that it was time to consider downgrading your lifestyle to cut expenses? Downgrading your lifestyles sounds painful. It sounds like something is being taken away from you. Instead we can call it aligning your lifestyle. You can ask yourself: Does your lifestyle enable you to become the best version of yourself? If it doesn’t then there’s the option of aligning it.

In my life I’m considering a re-alignment because of several reasons. I am going to deplete my savings to replace my car within the next couple of months. In four months I will be purchasing a certificate program to become a Certified Financial Planner, further depleting my savings. Within the next year I plan to re-start my career at an entry level position in the financial planning industry. In other words, I will most likely experience a drop in my income. And finally, in the next few years I would love to launch my own practice and become self-employed. This will require a nest-egg to get me through the initial three years.

I am very vigilant about avoiding lifestyle inflation, however, I rarely look at cutting things out. The last time I seriously looked at cutting expenses was five years ago when I began my debt payoff journey. Given all the upcoming changes in my income and the major upcoming expenditures I have begun to consider what else I can cut out. And let me tell you a little secret: it is painful to consider cutting anything out.

What’s the why?

I’ve shared what has led me down this path, but what would get you to consider re-aligning your lifestyle? It could be one of the following:

An unexpected expense that is beyond your current savings

Examples of this abound. Say your car needs to be replaced, you’re having a baby, your house requires major improvements, a recurring medical issues comes up, etc., etc. You get the idea. Regardless of the reason for the expense, it is more than you can afford without going into substantial debt

You expect a decrease in your income (or are currently experiencing it…)

Maybe you’re going back to school. Maybe you’re retiring. Maybe you’re taking time off work or will be working part-time in order to care for family. Or maybe your boss gave you a pink slip. Whatever it is, your income is no longer what it used to be.

You want to build up your savings or pay down your debt faster than you can with your current lifestyle

What if you dream of traveling across the world? Or of stating your own business? Maybe you want to give a substantial amount of money to a cause. Or maybe, you just want to be free of the ball and chain called consumer debt. These are just some examples of the many dreams that require a drop in expenses before they can be achieved.

You are unhappy with your current lifestyle

It may be that you are tired of having so much stuff to maintain and insure. Last year I visited Cuba and I came back feeling my lifestyle was too extravagant with all of the eating out and an entire 750 square foot apartment all to myself. Or it could be that you have realized that you cannot actually afford your current lifestyle and are paying for it with debt and loads of excess financial stress.

There are many other reasons for wanting to align your lifestyle. The list above is a sample of broad categories. Regardless of your reason I’d suggest you proceed deliberately.

Aligning your lifestyle can have a painful adjustment period. Robert Cialdini, an expert on the science of influence and Professor Emeritus of Psychology and Marketing at Arizona State University, states that this is due to the scarcity principle. This principle states that when something becomes less available we value it more and thus want it more. For example, I currently live alone and I am completely free to to use whatever part of the house I want and listen to music as loudly as I want with or without pants. Where I to get a roommate to lower my housing expenses I would need to adjust. My first instinct is to imagine the changes I’ll need to make will be overwhelming. In reality however, I spend most of my time at home at my desk in silence wearing a skirt. I am certain I can find a roommate who would be okay with this.

What do you do to align your lifestyle?

Once you decide that you need to align your lifestyle in order to reach your dream, you then get to decide what needs to be changed. Start by writing down your expenses and placing them into buckets of what can be changed from easiest to impossible. The easier things are anything that would have little effect on your quality of life. The harder things would require major life changes. Then there’s the sacred expenses that cannot be altered. Put it all on the table and recognize that whatever you decide is okay. Below is my list with some of my expenses.

  • Easiest: Starbucks, video games, new clothing
  • Hard: gym, wine membership, eating out
  • Sacred: housing, internet, health insurance, car insurance, retirement savings

Given my dream of changing into a new career I need to look at the big expenses. I do not drink enough coffee or buy enough clothing for changes in those expenses to meaningfully affect my budget. To make lasting impact on your budget target you really need to target recurring expenses. It’s much easier to cancel your wine membership once than to rely on your will-power to pass up every opportunity of Starbucks.

The real impact comes when you look at those sacred expenses. Can you lower them somehow? More specifically in my case, can I actually give up living alone? That leads us to the next question…

How do you get through the pain?

Let’s say you’ve decided to align your lifestyle and know what you will be targeting. It’s now time to take action. Here are the steps I suggest:

1) Determine your bare minimum. What do you absolutely need?

As I contemplate getting a roommate I know that at the very least I need my own bedroom and full access to the kitchen. Maybe you’ve decided to get rid of your leased car and are thinking of buying a used economy car with no frills. It could be that instead of getting Starbucks three times a week you will now limit it to those days when you only get six hours of sleep. Or you will set a limit on how often you go out with a friend who only wants to go to five star restaurants. You can set up guidelines on what an aligned lifestyle looks like for you.

2) Easy does it

Slow and steady will get you to your dream with less scrapes and bruises than forcing your way there. Take the time to think things through. Allow yourself time to make sure your decision is really aligned with your best interest. Don’t confuse a decision with a reaction to some outside stress, like getting a pink slip or reading about another person who launched their own business and is living in the Bahamas.

When we make changes before we are ready we are likely to slide back into old habits. Will-power is not an effective way to reach your dreams because it doesn’t last long. Moreover, big lifestyle changes take time. Even if I were to decide today that I do want to get a roommate it will take time to find the right-person. As Frank Sinatra said, only fools rush in.

Of course there is always initial discomfort whenever there are big changes. However, we can become accustomed to anything. Harvard Professor Daniel Gilbert states in his book “Stumbling on Happiness” that it only takes three months to become used to anything. You can see his 2004 Ted Talk here. In other words, give yourself plenty of time and grace as you become used to life without cable, steak, or a car of your own.

One last suggestion: remember that nothing is permanent. Say I do decide to get a roommate to save money. I may later on decide that the money is not worth the headache. At that point I can change again. And I can have the satisfaction of knowing that I truly tried to make it work.

Are you ready to align?

If you have a dream that requires you align your lifestyle with its pursuit then you’ll have to consider the following questions:

  1. Why are you changing?
  2. What will you be changing?
  3. How will you do it?

Above all remember why you are doing this. It also helps if you tap into a network of friends who believe in your dream. If you’re trying to cut down on how much you spend eating out, it’s okay to tell a friend you’d rather hang out with them at home and eat ramen. When those closest to you are supportive of your lifestyle changes it becomes much easier to adjust to the changes. When they are not supportive of your dream, it’s best to avoid the subject with them rather than sabotaging it. I had a friend who once said “Don’t tell your goals to trolls” because their doubt can seep into you.

For most of what I do my “Why” is that I want to make the most of my short time on earth. I began to seriously dream of becoming a personal financial planner after reading George Kinder’s book “The Seven Stages of Money Maturity”. There is one thought in particular that stood out to me:

Our first obligation in this world is to discover the circumstances in which our souls flourish. This is the truest and deepest meaning of freedom – living under the conditions that makes us most truly ourselves.

– George Kinder

I think this resonates with everyone. For some of us, our finances may not be aligned with our new direction. Thankfully with some effort you can change your lifestyle to reach your dreams.

Do you have a dream you’d like to save up for? Is there a “sacred” expense that you may consider addressing?