Can Change Change Your Life?

change, denver financial planner

No, the title isn’t a typo!  Recently two concepts have been in the news that make me ponder how much small change can change your future.  The first is a poll conducted by YouGov Omnibus in January of 2018 which found that 89% of Americans would stop to pick up a coin off the ground.

 

Of course, everyone has their price. 56% would pick up a penny, 11% a nickel, 6% a dime, and 14% need at least a quarter to bother bending down. 6% wouldn’t pick up a coin at all – germaphobes!  5% don’t know.  How hard is it to answer that question?

 

Next, I keep reading articles featuring apps that round up your purchases to the nearest dollar and deposit to your savings accounts.  I admit, I find this a little ridiculous.  I’ve always been a saver, even as a kid, and sometimes get frustrated that every 23-year-old doesn’t sign up for the maximum percentage allowed in their 401(k) like I did. Now is the time!  It’s not like you have kids bleeding your bank account dry yet.

 

But, hey, those were different days.  I didn’t have student debt (thanks, Mom and Dad!) and housing was much less expensive when I was starting out.  So, maybe I shouldn’t be so self-righteous at the thought of building a nest egg with small change, either on the street or through your phone.

 

The question is, does it work?

Any chance to break out my financial calculator gets me all giddy, so let’s run some numbers, shall we?

 

Let’s say Esther, 23-years old, earns $40,000/year.   She has two options to save:  One is to pick up loose change from the ground and round up all of her purchases to the next dollar and have it deposited to a savings account.  The other is to sign up for automatic deductions from her checking account to her Roth IRA.

 

Option 1:

Esther makes on average 5 purchases per day and rounds up her purchases to the nearest dollar.  Say the round-up averages 50 cents per purchase.  She also is very observant and picks up an average of 5 cents per day from the street.  This adds up to $2.55 per day that is deposited in Esther’s savings account earning 1% per year.  Through the magic of the HP 12-C calculator I can tell you that age 65, Esther would have $35,100.

 

Option 2:

Esther arranges for $229 per paycheck to be deposited in her Roth IRA, reaching the maximum of $5,500/year for contributions.  The Roth IRA is held in an investment account.  With a diversified mix of mutual funds (that she doesn’t mess around with and trade at the wrong times), Esther averages 6.5%/year on her Roth IRA investments until age 65.  Esther’s nest egg would be $550,000.

 

Yep, my way is $514,900 better, but it requires more sacrifice from Esther up front.  Fewer dinners out, more years with a roommate, driving an older car.  All those pesky grown up decisions.  I promise this $229 per paycheck habit will get easier over time as Esther’s earning power grows.

 

Esther’s older self will be so grateful for this early habit of being serious about saving and not just treating it like a rounding error.

 

WTF (What the Finance) is…Asset Allocation?

A term we financial planners throw at our clients a lot is Asset Allocation.  What does that even mean?  Well, it’s only the most important decision you make with your investments!

 

Asset Allocation

Asset Allocation is simply the percentage of your money you decide to put into different areas of the investment markets.  A diversified portfolio will have representatives from the following:  US Big Company Stocks, US Middle and Small Company Stocks, International Stocks, Bonds, and International investments.

 

Asset Allocation usually is represented in a pie chart.  Because everyone loves pie, even if they don’t love talking about investments!  Like this:

asset allocation denver financial planner

 

Notice I used actual PIE instead of investments, so you couldn’t mistake this for investment advice!

 

Asset Allocation is said by many studies to represent 90% of the reasons your investments return what they return.  Others dispute that, but let’s just agree that it’s super-important.  If nothing else, starting your investment decisions with an asset allocation model can help you avoid some bonehead mistakes such as:

 

  • Buying a bunch of investments that are all in the same asset class. Putting you at risk for huge losses when that area of the market doesn’t do well.
  • Selling investments low and buying them high. Staying true to your asset allocation plan allows you to rebalance in a thoughtful way – not panic.

 

What’s the right asset mix (or allocation, if you must be fancy) for you?  It depends largely on the time horizon you have for your investments and somewhat on your risk tolerance.  Working with a financial advisor should help you find a good mix for your situation.

 

The SFP Channel: Resolving Credit Card Debt

If you’re like most Americans, you might be carrying a certain amount of credit card debt. But how can you get out from underneath that stress? Click on the video below to get manageable tips that will help you achieve your financial goals!

 

Check out this video!

 

 

If your finances look like a pile of puzzle pieces without any cohesive picture, I can help! With my experience and education as a Certified Financial Planner ™ designee, I will work with you to piece together your unique financial puzzle. All this without an accompanying sales pitch for investments or insurance. My services are fee-only, meaning my clients pay me directly for advice. I receive no commissions for selling investment or insurance products. The recommendations I make are what I feel are best for you without any conflict of interest from possible commission payouts. 

 

Funny quotes about Mother’s Day

mother's day, denver financial advisor

Well, these are more like quotes about motherhood, but what better time of year to share them?  Happy Mother’s Day!

 

“Mothers of teenagers know why animals eat their young.”
~ Author Unknown

 

“It would seem that something which means poverty, disorder and violence every single day should be avoided entirely, but the desire to beget children is a natural urge.”
~ Phyllis Diller

 

“A suburban mother’s role is to deliver children obstetrically once, and by car for ever after”
~ Peter De Vries

 

“There are three ways to get something done: hire someone to do it, do it yourself, or forbid your kids to do it! “

~Author Unknown

 

“I do not like broccoli. And I haven’t liked it since I was a little kid and my mother made me eat it. And I’m President of the United States and I’m not going to eat any more broccoli.”
~ George Bush

 

“Parents often talk about the younger generation as if they didn’t have anything to do with it.”
~Haim Ginott

 

Source:  you-can-be-funny.com  http://www.you-can-be-funny.com/FunnyMothersDayQuotes.html

Streamlining for Health and Wealth: An Interview with Tam John

I’m happy to welcome back Certified Nutritionist and author of A Fresh Wellness Mindset, Tam John.  Our theme this month, in honor of Spring Cleaning, is Streamlining, both physical and financial wellness.  Let’s start with Tam’s 3 tips to get more of what you want, with financial comments from Kristi thrown in:

 

  1. Let go of what isn’t serving you. Whether it is an unproductive habit like getting cheap chemically laden pizza on Friday night or wolfing down your food standing up, or something else, stop hurting yourself.  As with these examples, you don’t need to cook dinner Friday night but there are many more healthful and satisfying choices.  Inner dialogue that you don’t have time to sit down and chew your food is nonsense.

 

Financial – If you have old investments that you don’t remember why you bought them or what purpose they serve in your portfolio, it may be time to let go.  Ask yourself, would I buy this again today if I had the chance?  If the answer is no, it may be time to sell.

 

  1. Let food fuel you. You won’t need so many extras when you choose food, drink and lifestyle that nourishes you.  Lose coffee drinks, supplements that you really don’t know they benefit you or their quality isn’t assured.  Choosing simple real lively food can be very satisfying and nourishing.  Simple choices allow you to taste the true nature of the food.

 

Financial – Get excited about your savings milestones!  If you set up automatic savings to your emergency fund or kids’ 529 college accounts, pat yourself on the back!  Let your good financial process fuel your excitement for the goals you will reach.

 

  1. Lose perfect. Everybody is perfect as they truly are.  Find your beautiful truth by slowing to your own breath for 10 minutes each day.  Pay attention to how your body feels with your choices of food and drink.  Heed the messages your body is giving you.  Its intelligence will guide you to your beautiful truth.

 

Financial – We’ve all made investments we wish we didn’t or spent money foolishly.  Let those past mistakes go and just focus on what you need to do to get on track for your future financial stability.

 

Tam JohnAre you interested in learning to make restorative choices aligned with your body’s natural design for wellness is transformational for life?  Tam offers a complimentary conversation to find out if her approach is a fit for you.  www.TamJohn.com  Also, check out Tam’s book, A Fresh Wellness Mindset, at Barnesandnoble.com, Amazon, Tattered Cover Bookstores, or Douglas County Libraries.

 

This article is for informational purposes only. It is not intended to treat, diagnose, cure, or prevent disease. This article has not been reviewed by the FDA. Always consult with your primary care Physician or Naturopathic Doctor before making any significant changes to your health and wellness routine.

ALL RIGHTS RESERVED © 2018 EatRight-LiveWell ™ & Tam John  

 

Mother’s Day & The Mother of All Gifts

mother's day, denver financial planner

Mother’s Day is just around the corner.  If you haven’t started shopping or made brunch reservations yet, take a page out of the rich and famous for ideas to let Mom know how much you appreciate her.

 

  • Pop star Rhianna in 2012 gave her mom a 5-bedroom house in Barbados.
  • NFL quarterback Terry Bridges’ mom rolls in her pink Cadillac Escalade thanks to his 2014 Mother’s Day gift.
  • Dwayne Wade gifted his preacher mother a church from which she could spread the good word.
  • Leonardo DiCaprio planted a grove of trees in his mother’s honor in 2006.  Well, I’m sure he had it done for him.  I can’t see Leo out there with his 21-year-old supermodel of the week girlfriend actually digging holes for trees.

 

What can the rest of us do for Mom that’s creative and within a reasonable budget?

 

mother's day, denver financial plannerBamboo Bath Caddy.  Who wouldn’t want this? $40 at Papersource.com

 

Basket of pampering lotions and potions – be creative.  Get her something she might not have tried like sheet masks, bath oil, or other newfangled beauty products.

 

Plan a picnic!  So much more fun than sitting in a crowded restaurant.

 

Schedule a spa treatment.  My mom and sister and I have had fun at the 5-Star Salt Caves in Denver.  Mom and I did a 50-minute treatment in the Himalayan salt cave and felt like we’d been breathing sea air afterwards.  We also did the ionic foot baths that pull impurities from your body out through the soles of your feet.  It was truly bizarre and disturbing, but so much fun!

 

Visit a winery together.  Just about every state has a wine industry these days.  Whether the wine is delicious or you’re happy to use the spit bucket, the tour will be different and educational.

 

Sources: https://www.aarp.org/entertainment/style-trends/info-2015/celebrity-mothers-day-gifts-photo.html#slide5

 

https://www.countryliving.com/life/g4228/mothers-day-activities/?slide=3

Mind over Money with Dr. Alec Baker – Part Three

Alec Baker, Denver Financial Planner

Welcome to Part 3 of my interview with Dr. Alec Baker of Peak Living Psychology.   To finish off Dr. Baker’s interview, I wanted to end on a positive note.

 

KS:  What are some shared characteristics you see of individuals who are good with their money?

 

AB:  People who are good with their money are self-aware – they know their core beliefs around money and manage their emotional responses to make good choices. They are practiced at saying “no” to both themselves and to others.

 

These individuals have core beliefs that are firm, but flexible.  They also have a solid grasp on their risk tolerance and manage anxiety rather than either being governed by it or ignoring it completely.  If these individuals are part of a couple they have good communication with their partner that helps them make money a functional part of their relationship.

 

Imagine a 28-year-old single man who makes about $80k per year.  He goes out on the weekends and especially likes to go to sporting events. He’s at an age where people are getting married, which means 3-4 invites to bachelor parties and weddings each year.  This young man hates to say no, but he has a spending plan that he consults regularly.

 

It helps him know when skipping a night out or passing on tickets to the Broncos game will help him say “yes” to bigger events without creating credit card debt.  When the 4th invite to a bachelor party for the year rolls around and he sees that it will cost him $1500 for the weekend, he consults his spending plan and declines the invitation because he only has $500 left in savings.  He focuses on seeing everyone at the wedding and knows that good friends won’t hold it against him.

 

In a different demographic, imagine a family of 4 with two working parents.  The parents have a detailed spending plan that includes individual spending for each person and money for the children’s sports and music lessons. They sit down once each month to go over the plan, evaluate where they stand, and make small adjustments as needed.

 

They are open and honest about their spending patterns and their incomes while having a mutually agreed upon arrangement for how each of them contributes to the family finances.  They have spent time learning about each other’s core beliefs around money how it impacts their choices so that they can be compassionate with one another about mistakes and supportive around making necessary changes when they become obvious.  Lastly, they work with a financial planner who can provide them with support and advice around long term planning and their financial legacy.

 

KS:  This concludes our series with Dr. Alec Baker.  What I have taken away is that problems and success with money is often not about money at all, but believes, values, and communication.  Thanks to Dr. Baker for participating!

 

Dr. Alec BakerDr. Alec Baker owns and operates Peak Living Psychology – a full service psychological services practice located in South Denver.  Peak Living Psychology offers financial therapy, traditional psychotherapy, and psychological assessment services to the Denver metro area with a focus on helping individuals and families cultivate the best things in life.  More information can be found at alecbakerpsyd.com

WTF (What the Finance) is Blockchain?

blockchain, denver financial planner

Continuing with my new WTF series that started last month with Bitcoin, today’s explanation (attempt!) is about Blockchain.  A lot of people have been using Bitcoin/cryptocurrency/blockchain as interchangeable words, but they are not the same thing.

 

Cryptocurrency

 

Cryptocurrency is a way for paying for goods and services with money that somebody made up and that is not backed by any country or central bank.  Its value is the perception that it has value, not backed by any actual thing or taxing authority.

 

Bitcoin

 

Bitcoin is a brand of cryptocurrency.  There are many others.  They include Litecoin, Ethereum, Zcash, Ripple, and Monero.  Is cryptocurrency the money of the future?  Maybe.  Is Bitcoin the one that will last?  Hard to say.  Think of the early players of the internet age (AOL, Pets.com) that seemed like such giants at the time, but are no longer as relevant.

 

Blockchain

 

This brings us to the title of the blog – Blockchain.  Blockchain is the method by which cryptocurrency transactions are tracked.  But, blockchain can be used for many other things besides cryptocurrency transactions.  In other words, Bitcoin needs Blockchain to function, but blockchain does not need Bitcoin.

 

Blockchain is Distributed Ledger Technology.  It’s a way to track transactions that’s different from the currently used Centralized Ledger.  With a centralized ledger, a trusted third-party controls data and sends that data out to the interested parties.  What could possibly go wrong?  Ask Target, Equifax, or any other large firm whose centralized data has been breached and sold on the black market to identity thieves.

 

With Distributed Ledger Technology, the transaction (purchase, contract, transportation, etc.) each party to the transaction has a copy of the data.  The shared infrastructure is more transparent and the processing more automated.  Each transaction has its own special code and cannot be deleted from storage.  Data can be added to the Distributed Ledger, but not deleted.

Who is using this?

 

Companies as diverse as Walmart, L.L. Bean, Bank of America, Nasdaq, and, yes, Bitcoin are using blockchain technology to speed up transactions and safeguard data.

 

Here is an example.  Say a large grocery chain has a report in the Denver area of tainted eggs that made some customers sick.  With centralized ledger technology tracking transportation of the eggs, the origin of the tainted egg can’t be specifically pinpointed beyond the most local distribution center.  Every egg from that supplier in the Denver area stores must be pulled from the shelves.

 

Using blockchain technology, each egg carton is tagged with a sensor that has a unique code.  The sensor tracks the transportation of that carton to its final destination.  The egg bought by the sick person can be traced back to the specific batch and supplier it came from.  Only those eggs can be destroyed, saving time, money, and waste.

 

While Bitcoin futures would not be an investment recommendation from most long-term financial planners, watching the future of blockchain technology may be a more worthwhile use of research.

Mind over Money with Dr. Alec Baker – Part Deux

Welcome to Part 2 of my interview with Dr. Alec Baker of Peak Living Psychology.  Today we tackle one of my favorite topics of mind and money – the act of consistently outspending income.

 

Let’s begin

 

KS:  When people spend outside of their means, what is at the root of that?

 

AB:  People’s spending behavior is generally related to their core beliefs.  People who spend more than they make are often either in denial of their financial reality or have some plausible reason why overspending doesn’t matter.

 

For instance, you might have a single income family where the primary earner insists paying for the top tier TV package with all of the bells and whistles because that is their reward for working hard and if they can’t afford that their all of their hard work is for nothing.  To admit that they can’t afford it would be deflating and lead to a sense of failure for that person.

 

As a result, they refuse to make a different choice and run a deficit on the family credit card each month that leads to truly problematic debt in the long run.  This sort of denial and AVOIDANCE is a common emotional response to an impossible or undesirable situation.

 

In another example, we can see that a sort of magical thinking about spending can give someone that plausible deniability that what they are doing will be ok in the long run.  Imagine a 30-something couple with two incomes and no children.  They love to travel the world and are both very optimistic about their future earning prospects.  One owns a business that is still growing and has a future earning potential of around $250k per year.  The other has just finished professional training school and expects to be making more year over year for the next five years or so.

 

These two have lots of optimism, so they take a trip to “Yacht Week” in Croatia that costs $7k per person and they add a stop in Paris for five days that adds an additional $2k per person because, c’est la vie!  They believe they won’t be able to enjoy it in five years because they might have kids and all sorts of other obligations and since the future is bright they don’t think much of the expense.

 

Even though their future earnings could support spending $18k in two weeks, their current earnings are closer to $125k combined and they have to do the whole thing on credit.  In the meantime, their balances are stubborn and their paying hundreds of dollars in interest payments.

 

KS:  There you have it.  Overspending your income has lots of reasons and doesn’t make you a bad person.  But, not recognizing the habit and digging yourself into lots of credit card debt or not having emergency savings will have long term negative consequences.

 

Stay tuned for next month’s installation about characteristics of people with great money habits.

 

Dr. Alec Baker

Dr. Alec Baker owns and operates Peak Living Psychology – a full service psychological services practice located in South Denver.  Peak Living Psychology offers financial therapy, traditional psychotherapy, and psychological assessment services to the Denver metro area with a focus on helping individuals and families cultivate the best things in life.  More information can be found at alecbakerpsyd.com

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