Money

Market Movements Make Money – Position Accordingly

Let’s face it – the Stock Market is really not for the faint of heart, especially in times like these!

Recent news and the ongoing economic uncertainty have been causing some pretty wild rides and sometimes it feels like you’re just hanging on for dear life. It can be a pretty scary place, even for the most seasoned and experienced day traders.

But without the downs, you can’t have the ups. Without the ups, you can’t have the downs. It doesn’t matter which side you’re betting on; without movement there is little potential for profit. For those players who can keep their cool during this time of fear and panic, there is money to be made.

The same essentially holds true for Real Estate. Investors want to see the real estate markets cycle because that is when real opportunities happen. Remember the old adage, ‘Buy Low – Sell High’?  It’s hard to buy low if the market is always up!

In most situations, movement means change, and change creates motivation. Sometimes perfectly good assets and real estate must be sold because of a death, divorce, partnership dissolution, retirement, downsize, loan maturity, interest rate adjustment, etc.  Sometimes the owner has simply accomplished his goal and is exercising his exit strategy to realize a profit. Sometimes the owner has just not managed the asset well. Whatever the motivation, if you aren’t expecting the change or if you aren’t properly prepared, your hand could be forced sooner than you’d like or under less-than-ideal circumstances.

Fortunately, the Real Estate markets tend to move at a much slower pace than the breakneck, minute-to-minute rollercoaster of the stock market. For those who are looking (and who actually want to see!) it’s usually a lot easier to anticipate market movement or upcoming changes and then have time to plan and prepare accordingly.  For example, information and statistics are available that show another wave of mortgages with interest rates re-setting coming up over the next few years. That could spell disaster for those owners who don’t start working on a plan to resolve the issue but it can also spell opportunity for investors who start positioning now to be ready to purchase if and when some people are forced to sell.

Ideally, owners and investors will plan and prepare to be in a position to minimize losses or to take advantage of upcoming opportunities when movements happen. Understanding your investment and the things that can affect its value are the keys to making smart investment decisions.

Smart investors are proactive, not reactive. They constantly monitor their holdings and make strategic moves to protect overall value – hedging their bets, so to speak. That way, if something changes or it the market moves in the opposite direction than what they think, the portfolio’s principal value is still largely protected. Whether it’s a stock, real estate or other asset class, every investment asset needs to be actively monitored and managed, even the passive ones. (Note: Property Management is not the same as Asset Management!)

In Real Estate, hedging or protecting your principal is often as simple as having ample cash reserves to weather through a rough spell of unexpected vacancy or repairs. The only time you really need to worry about the value of real estate is when you go to sell. Adequate liquidity can usually help you smoothly ride out a down cycle so you aren’t forced to sell at an inopportune time.

As many investors have recently discovered, a Home Equity Line of Credit (HELOC) is a poor and unreliable substitute for an actual cash reserve account. A HELOC can and will be revoked or capped by the lender at any given moment, regardless of spotless credit or payment history.

Many real estate owners make the mistake of cannibalizing their investment by draining every drop of the operating cash flow or overleveraging the asset. Then, when something unexpected comes up or something changes, they blame the market or the real estate itself for a problem that they created by not carrying sufficient reserves. You WILL have tenant changes, you WILL have some repairs – these are eventualities that can and should be planned for by all real estate owners.

Bottom line:  Know your assets, know your investments, keep your eyes open and plan ahead. These market movements are creating a lot of opportunity and it doesn’t look like it’s ending any time soon. Batten down the hatches of your solid performers to ride out the turbulence, cut loose the dead-weights and position yourself to take advantage of the opportunities created by these market movements.

Money & Kids: Kids DO Listen When Parents Talk about Money But What Are They Hearing?

If you’re a parent, at some point you’ve probably wondered if your kids ever listen when you speak.  Then you hear some of the same words and phrases being parroted back (often some we don’t necessarily want repeated!) and you know that those ears are wide open and taking it ALL in!

Parenting groups encourage us to talk about not doing drugs, not smoking, staying safe, etc. because the mantras we hear over and over again as kids tend to stick with us throughout our lives.  The same is true when it comes to money and finances.

But what are your kids hearing from you as a parent about money?  Quite possibly, you’re repeating some of the same things you may have heard growing up without really thinking about the messages you’re sending or the way your kids will interpret them:

• We can’t afford it / It’s too expensive
• Money doesn’t grow on trees
• Debt is bad
• Money is the root of all evil
• Rich people are snobs

Kids are capable of internalizing and processing some pretty complex ideas.  They may not engage in direct discussion or they might take time to mull things over but kids see, hear and listen, and they make sense of their world by processing all the information and cues around them based on their own limited experiences.

As parents, we are in a unique position of influence that shapes the way our kids think about and treat money.  Kids listen to what we say and look at what we do.  If we don’t dialogue with them, though, those verbal and non-verbal cues are open to interpretation and the conclusions that your kids draw may not be the ones you intended.

For example, you might think your kids will see you working long hours every day and, by that example, develop a great work ethic and commitment.  However, they might interpret it as work/money is more important than family and resent that field/job/industry/you/etc.  Discussion is a vital part of communication to ensure that the message intended is indeed the message received.

People need to talk more about money.  Not the ‘How-much-do-you-make?’ kind of talk, but conscious conversation, real talk about money, like how you think and feel about it, what it can and can’t do, how to get and how to make more of it.

Although not the main idea of the blog, I read this great post on New Methods that to me, really underscores the importance of talking to your kids about money on an everyday, spontaneous basis.  The kid asks his dad how he’s able to go fishing in the middle of the day when most of the other people he knows are at work and dad explains that by owning a business, it can keep working even when he isn’t there. Just a 30 second exchange can have a significant impact on an 8 year-old kid, how he thinks about money and how it can help to shape his life (be sure to read about the author at the end of the post!)

The post also made me think about Robert Kiyosaki’s Rich Dad, Poor Dad, which distinguishes between the mindset of an employee vs that of an owner.  The parent in the blog is sending an owner-mentality message about money.  Instead of the typical ‘work hard, get a good job’ message, the advantages of being the boss or owner are communicated.

Does that mean that we all have to be business owners to talk about money to our kids?  Of course not.  Talking about financial alternatives and options just lets our kids know that there are many different ways out there to make a living.  It also doesn’t give a free pass from talking about money to those who are well-off.  In fact, financially successful people who don’t talk to their kids about money and fiscal responsibility often end up with a very short legacy indeed!

The first step is to be aware of your own thinking and what you’re saying about money.  After reading this article, I’m willing to bet you’ll start hearing yourself all the time!  Once you realize how you communicate about money, you can decide if those really are the messages that you want to share.  If not, you can alter the phrases to convey a different kind of message:

• We’re choosing NOT to spend our funds on X because it isn’t a family priority or goal right now
• Money can grow on ‘trees’ – referral trees and networking that brings more customers/business/revenue
• Some debt (like credit cards) can be dangerous but some debt (like a mortgage) can be a helpful tool to build wealth
• Money is just a tool; the person using it decides how it will be used
• People of character do good things regardless of the amount of money they have

Older Son:  One day I’d like to manage a nice restaurant like this.  I could do a great job.

Younger Son:  Great!  You can work for me because one day I’m going to own a nice restaurant like this!

Related articles

• Straight Talk with Kids About Money (psychologytoday.com)

Why Women Make Great Investors

Women really do make great investors.  Why?  Because investing is about more than just math and numbers.

Women are becoming more and more deeply invested in their own financial success for many reasons:  Careers are being pursued and marriage is being delayed, divorce rates are higher than ever, single-moms and women who are the sole or main breadwinner in the family are increasing, cost of living is rising steadily, job security is virtually non-existent…the list goes on.  There are no guarantees in life and situations can change drastically in the blink of an eye.  Independence and self-sufficiency are more than just words; they are a gateway to freedom.  Women are no longer content or willing to be dependent on others for their quality of life.  

A lot of the Myths about Money & Women floating around out there are simply false.  Statistics show that women are blowing the stereotypes out of the water when it comes to money and investing:  Women are MORE likely to join a retirement plan, women save on average 10% MORE than men, women actually spend LESS than men, and women are MORE likely to diversify their investment portfolio.

True power and independence happen not when you HAVE money, but when you know how to MAKE money.

Just ask any lottery winner or divorcee who has blown through a divorce settlement trying to sustain a champagne lifestyle on a beer budget!  A lump-sum goes away pretty fast when there is nothing in place to replenish it.  The first step is learning about Assets & Liabilities; the next step is doing something with that knowledge.

As Rich Woman Coach Nichole explains in a video Coaching Tip about Women and Investing on Robert Kiyosaki’s Rich Dad website, there’s a lot more to successful investing than just numbers and calculations.  The Rich Woman coaches identified their top 5 characteristics that make women great investors:

• Asking for help
• Planning
• Multitasking
• Diligent research
• Value shopping

Let’s take a closer look at these strengths, how they each contribute and add up to a Great Investor Profile:

Asking for Help.  Women typically know how to ask for help when they know they need it.  And in my experience, more often than not, they prefer to ask other women.  Have you noticed all the networks and clubs and resources that are geared towards supporting women in financial and business endeavors?  The Daily Worth, WomenOwned.com, Ladies Who Launch, National Association of Women Business Owners (NAWBO), My Wealth Spa to name a few.  Many of these were created or developed just in this past decade.

Women seek and value mentors that can support and assist them in a non-intimidating, non-judgmental forum.  Although men often view women’s lunchtime or evening gatherings as a sewing circle gossip session, women frequently use friends and colleagues as sounding boards for new ideas, thoughts and perspectives.  Brainstorming and round-table sessions are becoming more and more mainstream, even in the ‘Old Boys Club’ organizations because there is strength and power in teams and in seeking outside opinions and help.

Planning.  Most women become good planners by necessity.  Often in addition to full-time employment or business ownership, women take on, or inherit by default, the monumental task of running the household, juggling kids activities, making and keeping family appointments, planning and organizing family vacations, meals, etc.  It takes a lot of planning and organization to make sure everything runs smoothly from day to day and week to week.

Investing demands a similar kind of planning and organization to be efficient and get the most out of your capital.  The ability to make and stick to short and long-term goals is important but having a system to monitor and track it all is priceless, especially when it comes to finance and investing.

Multitasking.  Women are also known to be exceptional multitaskers.  Handling several issues or tasks at once is all in a day’s work for most women.  This translates well into the world of investing because there are always many different things going on in many different markets and across many different asset classes.

Women who are able to see various market factors and how they can affect an investment will be much more able to predict possible outcomes and proactively make adjustments as needed.  Diversification is also easily appreciated and accepted by women who are more likely to hedge their bets as opposed to going for the glory in a single ‘Hail Mary’ home-run move.

Diligent Research.  Women know how to do their homework.  They are used to budgeting, comparing prices, finding the right pediatrician, school, camp, mechanic, gardener, insurance, etc.  In finance and investing, this means that women know how to investigate and identify investments that will work best for them.

Investing involves a LOT of research.  ‘Due Diligence’ is an investment term that refers to the process of verifying data presented, investigating the investment parameters and terms so that the investor can make an educated decision to purchase or decline.  As a real estate investor, I screen and analyze literally hundreds of properties before finally deciding to offer in on one or two.  Diligently investigating the investment and the people involved is a crucial step in protecting your investment funds up front and finding a good fit for your specific purposes.

Value Shopping.  Warren Buffet once said, “Price is what you pay; value is what you get.”  Women seem to intrinsically know how to stretch a budget and shop for bargains.  They are aware of what’s available, what the going rates are and will go clear across town to get something at a discount.  Women know that it makes sense to get a designer gown at half price if they are willing to find and sew on a couple of missing buttons.

Investing for value or value-add opportunity follows the same principles as shopping for any kind of bargain.  You need to have a good idea of the general market value so that you have a benchmark to evaluate the investment you are looking to purchase and know when it’s priced below its true value, or when a few simple steps are all it takes to realize its potential (add value, like sewing on a button).  Once you know what to look for, it gets easier to spot the gems.

Finance and investing may seem like a spider’s web of intricacy and detail but understanding the rules and knowing how to filter out the junk makes it a lot easier.  Women have the skills and qualities to excel in the investment arena on their own terms.  Women really do make great investors!

~ Eleanor Roosevelt ~

Related articles

• Billeater: Retirement Planning for Women – Saving Your Savings (savings.com)
• Are Women Stronger Investors? (brighthub.com)
• Where Are All The Women Angel Investors? (businessinsider.com)
• More Proof That Women Make Better Investors Than Men (dailyfinance.com)
• Women in Investment News: Hot global investment book “Why Warren Buffett invest like a girl? & Why you should too” (thaiintelligentnews.wordpress.com)

Investing Takes Effort: Would You Let the Dealer Pick Out Your Car?

When purchasing a big-ticket item like a car or a house, don’t most people usually do a little research, shop around, compare prices and look for specific features that suit their needs?  Of course they do.  So why do many people not bother doing the same when it comes to their investments, especially their retirement, arguably one of the most important big-ticket items a person will ever own?

It always surprises me when people talk about their portfolio but have no clue as to what they are invested in.  They’ll often joke about it and make a comment about leaving it up to the professionals or that’s why they pay their stock broker/adviser the big bucks.

Let me ask you this:  Would you let the dealer pick out the car you’re going to purchase?  Or how about letting your real estate agent pick out your home?  Highly unlikely.  So why would you let anyone else have the last say on your retirement or investments?

Think about some of the reasons why you probably wouldn’t leave the decision-making up to a dealer or agent:

Perspective.  The fact that there are six – count’em, six! – cup holders may be a fabulous feature but not as high on your list of ‘Auto Must-Haves’ as it might be for the car-pool commuter.  An agent might find the school next door to be most convenient but your spouse working the night shift might disagree when trying to sleep during the day.  Different people are always going to have different opinions based on their unique personal perspective, especially when it comes down to the details.

Priorities.  The dealer may also not realize that you’d rather give up side air-bags for an extended warranty, even though you indicated that ‘safety’ was a priority.  An agent  might consider a view to be more valuable than a yard.  Many of us don’t even realize our own priorities until we start looking at options and are faced with making some decisions.

Cost.  It’s way easier to spend someone else’s money.  It’s also easier to take risks and overlook ‘minor’ issues when it’s not your buck.  The agent or dealer won’t have to live with the stiff clutch or the less-than-functional kitchen layout.  And if compensation is based on a percentage of price, they might not be as aggressive in negotiating the sale.  Always track the money chain.  Fee structure can often make a big difference in how much you end up actually paying for something.

Value.  No one will care as much about getting the best bang for your buck as you will.  These are your hard-earned dollars so it makes sense that you’ll want them to work as hard as you do (or harder!)  That’s why we usually take the time to shop around, to get the most value for the best price.  We each have a different cut-off point when we feel we have a good idea of the ‘going rate’ and are comfortable with the intrinsic value of the purchase.  The dealer or agent might only look at 2 or 3 options before making a decision.

Reliability.  Choices can be tough, either having too few or having too many.  It’s hard to know all the in’s and out’s of every product in every field and it can be even harder to slog through all the information out there and filter it down to manageable, suitable options.  That’s one of the reasons why we look to loan brokers, agents, lawyers and other professionals.  Hiring a specialist in the field and leveraging their knowledge and experience is usually well worth it.  But…

How reliable would you consider the data or opinion if the dealer/agent providing the information was also the owner of the car or property you are about to buy?

Don’t get me wrong.  I think it’s VERY important to seek professional assistance and advice, especially for infrequent, large and/or complex transactions.  But just like an auto dealer or real estate agent, their role is to give information, guidance, advice and support through the transaction.  You might decide to outsource some of the legwork but ultimately you need to make the final decisions.

All of these concepts apply when making any major decision, including investment and retirement planning.  If you leave all the decision-making up to someone else, you are basically at the mercy of their choices.  You don’t have to be an expert but you owe it to yourself to do a little research and have a basic understanding of the core concepts, even when you use a professional, so that you can effectively evaluate the information you are given and make informed decisions.

NOTE:  Many employer-sponsored retirement and 401k plans are limited to a few select investment funds but they usually include dollar-for-dollar matching contributions.  It’s hard to go wrong with free money!  Just be sure to monitor statements and fund performance, and discuss options or concerns with the fund manager.  Don’t forget ~ 401k accounts can normally be rolled over into an IRA when employment has ended.  Know where your funds are and what they’re doing!

Pennies & Pounds ~ Making a Big Difference in a Small Way

My Grandad always used to say, “Take care of the pennies and the pounds will take care of themselves.”

He was obviously English and referring to the British monetary system but the concept is clear no matter which currency it’s applied to:   Little amounts saved can add up to a lot.  And that can make a big difference when it comes to meeting not just your financial goals but personal goals as well.

The inspiration for this post actually came in the form of a credit card statement ~ when I realized my interest rate had just TRIPLED for no apparent reason.

I never used to really understand or pay much attention to how the credit industry worked.  I never really felt I needed to because I almost always paid the entire balance during the grace period so I didn’t have to pay interest or late fees or over-limit penalties.  I also never used to ask questions.  I just assumed there was a good reason for the changes, that it was my fault, and that I, a lowly borrower, was powerless to do anything about it.  Remember The Golden Rule?

Well, not anymore.  I’ve taken a keen interest in everything credit-related over the last few years, especially with the Great Recession and as the new federal regulations started coming out.  I began tracking cards and rates, watching every statement like a hawk.  I now review and verify new charges, avoid pre-authorized bank or card charges wherever possible or set email alerts to follow up free trial periods so that I cancel on time if needed.  And I always, always, ALWAYS check the interest rates.  

Twice in the last two months I have noticed rate hikes and successfully called the credit card companies in an effort to get them to lower the interest rate.  Through this process I have learned that most credit accounts are set up on various automated systems.  One involves a periodic, random check that is based on an inquiry into your credit report.  Any kind of change to your credit (new card, job, even an error) can trigger a hike to a predetermined default interest rate, regardless of your past history with that card or company.  The new rate is applied immediately and without notice.

Another automated system involves the payment due date.  In the past, many companies would forgive a payment that posted a day or two after the due date.  Not so anymore.  Additional fees are typically set to apply immediately and are often accompanied by an automatic interest rate hike.  I realized this after making a payment through my bank website instead of the company website.  Because of the weekend, it delayed my payment beyond the due date and triggered an automatic rate hike.

As expected, the first response to both of my calls to request a rate reduction were negative.  It pays to be calm and persistent, though.  Fortunately, I have excellent payment history and was able to use that to my advantage.  After asking for manager review and assistance, I was able to successfully get both rates adjusted back down to their original levels (along with my blood pressure!)

The interest rate reduction was extremely important because I was carrying a balance on both of the cards at the time.  The tripling of the rate meant that my minimum monthly payment would more than DOUBLE from the original amount  and would have resulted in TRIPLE the amount of total interest paid for the year.

Remember, this is happening immediately and without notice.  More importantly, it is happening regardless of actual payment history.  It might have gone unnoticed and unchallenged had I not been in the habit of reviewing and tracking the charges and rates.

Obviously, these hikes would have affected my own overall cash flow.  But, in this global, interconnected world, that isn’t the end of the story.  It could also impact the financial situation and daily lives of several women in developing countries who have benefited from the micro-loans that I’ve been able to contribute to since I was introduced to Kiva, an incredible micro-finance organization.  The few extra dollars that I am able to save in interest can literally mean the difference between a child somewhere being able to attend school or not, or a family’s ability to put food on the table each week.

A few dollars saved here and there may not always seem like much or worth the trouble.  To some, it might even be looked at as penny-pinching or cheap or just plain anal-retentive.  To me, it’s about meeting financial and personal goals, without having to compromise one for the other.  Who knows?  Maybe Grandad was right about the pennies and pounds after all.  In the grand scheme of things, that little bit just might make all the difference in someone’s world.

Related articles

• The Golden Rule (investstratcre.wordpress.com)
• How many credit cards do you need? (confused.com)
• What Makes a Bad Credit Card Terrible? (applyforacreditcard.com)
• How to Really Manage Your Credit (online.wsj.com)
• A Little More Than the Minimum (thesimpledollar.com)

‘Make Money’ is not a SMART Goal

‎”It is more important to know where you are going than to get there quickly.” ~ Mabel Newcomer

If you don’t have a clear, defined financial goal how are you going to know if you ever reach it?

‘Make Money’ is not a SMART goal (Specific Measurable Attainable Realistic Timely).  How much money?  In what time frame?  With what amount initially invested?  You need to clearly state exactly what it is you want to accomplish.  Then, you can measure and evaluate, and make adjustments as needed to stay on course.

When you want to go somewhere you’ve never been before do you just get in the car, start driving and hope you get there?  Of course not.  You get out a map, look at where you are and where you want to go, and then plan a route that suits you best based on your personal preferences and needs – like taking or avoiding toll roads or highways, visiting certain cities or sites along the way, taking 3 hours to get there versus 6 hours, etc.  If you run into a roadblock or detour or something unexpected comes up then you pull the map back out, make the necessary adjustments and get back on the road.  A plan to meet your financial goals can and should be crafted and maintained in much the same manner.

So what is it that you want your investments to accomplish?  Think both short and long-term.  Do you want to generate income to pay for college tuition?  A wedding?  To replace a spouse’s income so they can stay home with kids or retire early?  To help you retire to a warmer climate or closer to children and grandchildren?

It’s okay to think big; you just have to be prepared to plan and break it down into manageable chunks to make it happen.  You also need to be patient and give the plan time to work.  You can’t make a great chili without letting the spices simmer!  It’s also okay to change your mind and make changes along the way.  You never know what life’s going to throw at you.

One of my biggest pet peeves is that most so-called ‘financial advisors’ don’t seem to actually advise people at all.  They just babble on about risk and safety and then suggest putting money into a company-managed fund (for which they get compensated) and eventually you should ‘make money’, because it’s a ‘balanced’ fund where losers are off-set by winners.

Really?!  I should spend the next 30 years investing my life savings in something I don’t fully understand that might eventually make me some amount of money?  How is that a good plan?  Please don’t tell me that it’s to protect my principal.  If that were the case, it’d be easier and safer to just stick to FDIC-insured CD’s.

Every asset should have a POSITIVE effect:  Generating income, off-setting paper gains/losses, creating tax benefits, preserving or enhancing net worth or otherwise helping me reach my overall personal and financial goals in some way, shape or form.  Personally, I want my assets working as hard as possible!  Every investment should have a specific purpose for being in your portfolio and role to play in working towards your overall goals.  

If you don’t understand why you are invested in a particular product or vehicle, you need to ask questions and do some research.  At the very least you should be able to read and understand your investment account statements.  If your advisor can’t or won’t help, it might be time to find a new advisor.  Remember, no one will care as much about your money as you.

Bottom line, if I’m paying for advice, I want an opinion.  I’m not asking for a guarantee, just an opinion from a knowledgeable professional in that particular field.  I want a summary of information and data used to form that opinion.  I want to know exactly what this particular investment is designed to do for my portfolio and how and when it will help achieve my overall investment goals.

Then I can make an informed decision and make sure I stay on track to accomplish my goal.

Related articles

• How to Turn Teen Girls Into Financial Prodigies (dailyfinance.com)
• How to Successfully Plan for Retirement (money.usnews.com)
• Financial Tips to Grow Your Wealth and Fulfill Your Goals (shawketali.wordpress.com)
• Financial Goal Setting for Better Future (knowledge2finance.wordpress.com)

To Dare Mighty Things means to Take Risks

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‎”Far better it is to dare mighty things, to win glorious triumphs even though checkered by failure, than to rank with those poor spirits who neither enjoy nor suffer much because they live in the gray twilight that knows neither victory nor defeat.” ~ Theodore Roosevelt

When it comes to investing, there are no guarantees and nothing is ever completely risk-free.  Really.  There are investments with projected lower volatility and there are ways to help mitigate risk but there is no way to completely eliminate risk all together.

If you choose to invest, you will have to expose yourself to some kind of risk at some point.  The good news is that you get to choose.  And it is your choice.  Own it.  Own it when you prosper and own it when you don’t.  When you authorize funds to be sent, you make the choice to invest.  It might be good, it might be great, it might be not-so-good, and on occasion it just might be a spectacular disaster!

No one has a crystal ball.  The best any of us can do is to research and learn and grow.  The only way to grow is to learn from our mistakes and missteps.  Sometimes we want something so badly (like a guarantee) that we ignore many of the warning signs that, on hindsight, were right there staring us in the face from the start.  Sometimes unforeseen variables come into play.  Sometimes things just don’t pan out as projected.

Don’t beat yourself up for a bad call (and certainly don’t beat up your broker!)  It’s impossible to completely eliminate your mistakes just like it’s impossible to completely eliminate risk.  But there are a few things you can do to help you mitigate and manage the fallout:

• READ, READ, READ…and then read some more!  Read every word on every page of every document about every investment or project or private placement.  Make sure you understand all of it (including the risks) before opting in.

• Beware the Guarantee.  Immediately red flag anything ‘guaranteed’ for intense scrutiny and further research.  Seriously.

• Check out the people involved.  People can make or break a project no matter how great the idea.  Follow the leadership and follow the money (salary, distribution and profit structures).  Good people put their investors first.

• Document everything.  Keep copies of all signed paperwork, documents, information and communications.  Following up phone calls with a summary email is a great way to help keep track of conversation details.  Dated docs make it easier to reference back to details (especially at tax time).

• Learn.  Review the investment or project to pinpoint what went right and/or what went wrong.  Being able to objectively identify the elements or activities of a success or failure will help you to apply that knowledge to future projects.  If you let yourself get emotional, too busy pointing fingers and blaming everyone (including yourself) then you’re not going to be able to learn and grow from the experience.

Next time you get the chance, read or listen to a biography of someone you admire.  Chances are they’ve experienced just as many failures as successes.  Everyone gets it wrong some of the time, even the professionals, especially the professionals if you consider the number and volume of transactions handled.  You can travel once a year and never run into any problems but if you fly once or twice a month, chances are you might get delayed or lose your bags every now and then.  

If you want to keep going places, you have to put it all into perspective and then get back on the plane!

Related articles

• 5 Excuses Sidetracking Your Retirement Savings (money.usnews.com)
• Why Do We Dislike Taking Risks and What To Do About It? (becomeabetteryouin365days.com)

The Golden Rule

Maybe you’ve heard of it.  Maybe you’ve experienced it.  Maybe you’re one of the ones teaching the lesson.  Any which way you look at it, the concept is pretty clear:

The Golden Rule of the world of finance ~ Whoever has the Gold makes the Rules.

Money is a pretty complicated thing.   When you don’t have it, your life can be complicated.  When you do have it your life can be complicated.  The big difference in those complications seems to be whether you are following someone else’s rules or making your own.

Right now there are a lot of people at the mercy of rules dictated by institutions and government and others all over the financial industry.  Real estate owners and investors are not the only ones feeling the credit crunch, although they are arguably shouldering the brunt of the on-going mess in both residential and commercial markets.  Barriers such as tightening regulations and newly imposed standards are hurting new purchases.  Lower property values are making it tough to refinance even solid performing properties.  Existing Home Equity Lines of Credit (HELOC’s) are being capped and closed despite perfect payment histories and spotless borrower credit.  They may not tell you this, but even lenders who actually want to renew your investment loans may not be able to because they already have too many of that particular type of loan on their books.

Take a look at the banking and credit card sectors, too.  If you haven’t been monitoring your statements on a regular basis, you really need to pull them out and read carefully.  Your savings rate may have been cut and credit card interest rates could have tripled for no apparent reason.  New monthly and annual fees may now be applied to your accounts and many in-place fees may have jumped up.  Worse, that credit card you haven’t used in a while may have actually been canceled and your account closed at the company’s sole discretion.  Every single one of these situations has happened to me over the past two years.

It’s frustrating.  But unfortunately, when you have structured your life around debt and credit provided by others, you often end up paying the price, literally.  Remember the Golden Rule?  They have the gold so they make the rules.

Sure, you can rant and rave about the injustice of it all but basically if you want or need the cash/credit that they offer, you must accept their terms or go elsewhere.  Credit card companies send you those lovely little notices stating that if you don’t want to accept the new rate you are welcome to cancel the account and simply pay off the balance.  They are banking on the fact that most people won’t be in a position to do so.   Why do you think they send applications to college students as soon as they turn 18?  Because spending habits are formed early and hard to break.  Once you dig that hole, it’s hard to get back out.  And the cycle begins…

So what can we do?  Well, we can start by weaning ourselves off of this dependency on credit as a means to support unsustainable and, in most cases, unnecessary lifestyles.  It’s hard and will take some time and changes but has to be done if you don’t want to be a slave to your debt.

• Take your financial temperature.  The first step is to really look at your financial situation.  Figure out what income you have coming in and what expenses you have going out each month.  Look at everything – credit card purchases, ATM withdrawals and cash purchases, bank statements.  Click here to request a template to help you get organized.  As ugly or upside down as it may be, that’s your current budget.  Make a list of all your loans, balances, rates, etc.  Don’t panic at the totals.  You have to know where you are before you can look at where you’re going.

• Live within your means.   If your expense dollars outnumber your income dollars, rest assured you aren’t alone.  But unless you are the US Government and can print more money, you’re going to have to slash those expenses and bring them in line with your income.  Be prepared to make big changes.  Maybe you can save $1000/mo by renting instead of owning your home or eliminate a $400/mo payment entirely by buying a used car.  You don’t have to cut out everything, just prioritize and make sure you are spending on what is truly important to you (read more  Live and Spend without the Guilt).  Remember, this is your financial health we’re talking about.  Would you choose to not reset a broken arm because others might think you look ‘different’ in a cast?

• Reduce credit card balances.  Start with the highest interest rate and pay as much as you can each month while making minimum payments on everything else.  It’ll take some time but you will begin to see that balance go down more and more each month.  Focus on that great feeling and it will motivate you to keep going.  Rinse and repeat for each card with a balance.

• Transfer balances.  Call every company you owe and find out if they will review your account history and lower interest rates.  Find out if they will accept a lump sum payment for a discount if you pay the balance now.  If and when you have room on a lower rate card, use it to pay off another card and proactively manage your debt to pay less total interest.  Set email alerts when rate specials end so that you can reevaluate as needed.  Saving on interest is like putting CASH back in your pocket.

• Bring the list; leave the cards.  Temptation is best dealt with by removing it altogether.  Take a list when you shop and ONLY get those items.  Leave your credit cards at home and use cash.  The less accessible your money is, the less likely you are to spend it.  And for goodness sake, go to the local park for recreation and exercise, not the mall!

We all know that money itself can’t buy happiness (on the contrary, money tends to magnify the real issues in most situations).  But, like any other tool at our disposal, having exactly what you need at hand can make a world of difference in accomplishing our goals.  

These people and institutions only have the power that we give them, though.  That WE GIVE THEM.  Our spending habits are letting these people hold us underwater.  Take back control of your life, your spending, your credit and borrowing power.  Choose to pay and play by your own rules.

Spend (or not!) without the Guilt

Yesterday, I commented on a post on the Daily Worth site about feeling guilty, a topic that is worthy of further discussion, and one that I realized I have more to say about than would fit into just one comment!

Here’s the original comment:

What a great subject to bring up!  Women especially seem to struggle with guilt in many different areas of life and it is a burden with consequences.  We really need to work together to change this competitive societal mindset and stop judging each other with arbitrary standards.  

Being frugal is NOT the same as being miserly.  The important lessons here seem to be smart money management (i.e. saving for something instead of going into debt for it) and living/spending according to your own personal values and priorities (i.e. a purchase designed to enhance quality family time).  

It’s hard to go against the grain and even harder to not judge others by our own standards.  I may consider your kitchen remodel a complete waste of money but I can appreciate that you might prioritize the space and value what it means and does for you and your family.  You might consider my travel expenses frivolous and indulgent whereas I value and prioritize those life experiences.  

Bottom line, a hearty ‘Way to go!’ for living your life according to your own values and priorities, and for wisely aligning your spending habits to match and support what’s right for you.

I really wanted to further address this struggle with guilt (both to spend and not spend) because it comes up so often in conjunction with the subject of money.  I think there are several powerful forces at the root of this very negative and counterproductive emotion.  If we want to get a handle on it, we’re going to have to look it straight in the eye and call it out.

Challenge the Competitive Societal Mindset

Huh?  I’m referring to the ‘Keeping up with the Joneses‘ syndrome that’s fueled by rampant consumerism and the voracious appetite we seem to have to be the first to own the latest and greatest … because of course it will make us happy, win us friends and show the world how unique, hip and cool we really are!

Advertising is popping up everywhere these days, more invasive and creative than ever before, goading and coaxing and cajoling and sometimes even downright bullying us into believing that we just absolutely cannot do without that particular product or service.  Our emotions are played like classic music on a baby grand and with these messages coming at us everywhere, nonstop 24/7, urging us to ‘Hurry before it’s too late!’ and ‘Don’t let the other guy beat you to it!’ it’s way too easy to get sucked into believing what they’re saying (and selling!)

Do we really need all this stuff?  That’s completely up to you.  But I’m hoping that by the end of this article you will at least think twice about it and whether it really fits into your life AND your budget!

Stop Judging by Arbitrary Standards

So who actually said that it takes X to be successful?  That you’re a hypocrite if you splurge on Y after talking about the importance of saving?  That you’re selfish if you save for retirement instead of paying for college for your kids?  Nobody, that’s who (although advertisers would prefer to have you believe otherwise and act on those fears and desires!)

Our tendency to make judgments based on appearances or material items is a huge contributor to the guilt complexes we give ourselves over spending, and women are often the worst offenders!  How many times have you witnessed (or maybe even participated in?) an old-fashioned sewing circle gossip session where the chit-chat consisted of critiquing the ‘Haves’ and the ‘Have-Nots’ of your social-sphere, over so-and-so’s new car/job/ring/house or the fabulous private school where so-and-so sends their kids?  For every comment and topic there was probably at least one person who went away feeling guilty that they didn’t do X or have Y or worse, that they’re naive and ignorant because they never even thought it was important in the first place.  Holy pressure, Batman!

Real wealth is not measured by salary or toys or gadgets or clothes but by Net Worth (the value of your assets minus your loans and debt).  Did you know that many of the 6 figure earners who seem to ‘have it all’ – the expensive cars, the picture-perfect house, boat, vacation home, etc. – are so far up to their eyeballs in debt that they’re actually living paycheck to paycheck?   Yet often these are the people we idolize and think of as ‘successful’.  Now that’s a scary thought!

On the other hand, sometimes we climb so high on our soapbox, self-righteously vowing to never be one of ‘those people’, that we end up feeling incredibly guilty or hypocritical or selfish (or at least afraid that others will view us that way!) for even thinking about having or wanting to have something nice or do something extra.

Awareness is the first step towards change and it begins with us.  Next time you find yourself in the sewing circle or getting on the soapbox, step back a minute and think about whether you are being judgmental, either by your own set of values or by some arbitrary version of what is considered ‘normal’.

Living & Spending According to our own Values and Priorities

Have you ever stopped to think about what is truly important to you?  Seriously.

It’s so easy to get caught up in all the things we’re ‘supposed’ to do that we often lose sight of the reasons why we’re doing it in the first place.  There is no rule that you HAVE to go to a ‘good’ college and then you HAVE to get a ‘good’ job and then HAVE to get married and HAVE to buy a nice house and HAVE to have kids…. you get the picture.

Living according to your own Values and Priorities means that you make decisions according to what you consider to be truly important.  Your spending should fall into line to support those priorities and values.

It’s hard to step off the path and do your own thing.  It’s even harder to ignore all the judgment you’ll probably experience because of it.  Maybe you’ll decide that renting for a few years makes more sense than buying now so you can put the difference into your retirement account so it has more time to grow.    Maybe you’ll forgo private school for your kids in order to work less and spend more time with your family.  Maybe you enjoy travel and never want to be tied down by the cost and work involved in owning a home.  Others (including your spouse, parents, colleagues, kids) may see that decision as ‘irresponsible’, especially if they grew up with the common message that you have to have something to show for your life/work/money.  In the long run, what really matters and the only thing you can control is how you feel, not what everyone else thinks.

Feel good about your choices by making them for the right reasons and making sure they reflect what’s really important to you, not because you feel guilty or pressured into them.  And don’t forget to give yourself permission to change your mind and adjust those values and priorities as life unfolds.  Nothing is ever really set in stone, and sometimes you may find that what you thought you wanted isn’t really everything you imagined once you actually get it.

Smart Money Management

Do you own your possessions or do they own you?  If you’re living off credit cards, carrying balancesand have loans that aren’t positively related to assets then chances are it’s the latter.

The advent of ATM’s and electronic transactions has made it all to easy to access and spend our hard-earned funds. Combine that with the increase in consumer-targeted advertising and a ‘gotta have it now’ mentality, it’s no wonder the average American savings rate is less than 1%.

Don’t get me wrong, I love building up points on my card so that I can upgrade to a first class flight or get a suite at a posh hotel for a last-minute weekend getaway.  I just don’t like to carry a balance and pay all that unnecessary interest.  It could add up to another adventure!

Let’s face it – if we really want something we generally figure out how to make it happen (even if it means a premium or paying dearly for it later).  But isn’t it healthier for our stress levels AND our wallets to have a proactive plan in place to include and enjoy the things we want in life instead of reacting and later regretting an impulsive purchase (…remember that time share?!)

Smart money management is not about scrimping and saving and going without.  It’s about living within your means.  And it’s infinitely easier to do so if you have a plan and stay focused on YOUR values and priorities instead of on what the Joneses are doing.  Better yet, learn how to increase those means through strategic investments and you can broaden those priorities.

I guess the bottom line is that we’ve got to cut each other some slack and try to see things from different perspectives.  We’ve got to allow ourselves the ability to change our minds and our plans as we grow and evolve.  And we have to afford the same courtesy to others so that they can too.

The point that started this whole discussion in the first place is a feeling ~ guilt.  Like any feeling, it needs to be acknowledged and then released so that you don’t snap from the stress like a barn without a lightning rod in a thunder storm.  Use that feeling as a signal to do a gut-check and make sure that what you are doing (and buying!) is really in accordance with your own personal values and priorities.

Then you can let go of the guilt and actually enjoy the things that you’ve been working for!

Related articles

• Guilt is a worthless emotion and dysfunctional (in my opinion). (howtotrulylive.com)
• Guilt: sure cure way not to get what your soul calls for. (musingalong.wordpress.com)

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