Saturday, January 28, 2012

Building a Strong Foundation - Part 2

In part one, I covered the 5 initial steps you MUST take to ensure success in the creation of your plan. They are simple steps, but very crucial. In this post I will cover the "meat" of how to build a "Strong Financial Foundation." When most people think of Financial Planning, the first thing that comes to mind are their investments or retirement plan. A true financial plan not only maps a strategy to achieve financial independence or other major life goals, BUT also addresses ALL the risks that are LIKELY to prevent you from achieving your goals. This is sometimes called "Risk Management." You can have the most perfect plan to be RICH by age 50, but if you lose your income, get sick, or die, your plan will never come to fruition. Below I cover all the risks you must address if you want a "true" financial plan.

Risk Management Basics:

-Cash Reserve- Lack of liquidity is your most likely risk. Don't use a "rule of thumb" like 3-6 months of your expenses. We all have different situations. A small business owner will need way more than a tenured professor with almost ZERO chance of job loss. I hope you get the point. Really think about your situation and make some assumptions about possible worse case scenarios. Is your job really stable? How much will my A/C unit cost if it goes out tomorrow? If the engine in my Accord blows up, what will I do?

-Health Insurance: You are more likely to get sick than almost anything else. How bad would it suck to end up with a $5,000 emergency room bill that could have been avoided if you had just looked at your health insurance plan. If that happens, where do you think the money will come from? If you guessed your cash reserve or your retirement plan, you are probably right! Also, health insurance is extremely complicated. You need a specialist that deals primarily with health insurance. Don't try to do this on your own.

-Auto/Home Insurance: Most people have no idea if they are properly covered in these areas. And the agents who sell this stuff I have also found to be a bit clueless. Get with an independent insurance agent that will help you get the correct coverage limits for YOU, and also save you the most money by shopping rates. To see who I recommend in my area go to and click Jason Recommends. Proper coverage is more important than price. You don’t want to get into a wreck, get sued, lose your investment accounts because you didn't have enough coverage. Or you don’t want your home to burn down and not have enough money to build at least the same size house back.

-Disability Insurance: What drives everything in your financial plan? YOUR INCOME! If it goes away, so does your any chance of retirement or sending your kids to college. You MUST protect your income from the risk of you not being able to work. You are more likely to become disabled than to die prematurely. Important note: NOT all policies are created equal! Also, if you have a policy through your work, chances are it isn't enough to replace most of your income loss. So, you will probably need to purchase coverage outside of your work plan.

Long Term Care: If you’re done with your working years or about to be, buy Long Term Care Insurance! We have great medical care in this country which keeps us all living forever. What that means is that we will likely end up needing some help when we get old. And if you go into a nursing home or need care in your home, you will die broke! Its expensive! And all your hard work is wasted. I suggest looking at buying this coverage by at least age 55.

-Life Insurance: No rule of thumb! DO NOT use 10 times your income! That is likely not enough! Imagine the life of the ones you will leave behind if you died. What do you want to happen? Pay off the house, pay for college, donate to charity, replace your income? Then use those desires to back into the amount of life insurance you really need. Term insurance is the best option for 95% of the public. Go out as long as you can. You don’t want to buy 20 year term at age 30, hit age 50, and be uninsurable. I know, I know... You'll be as healthy as a horse in your 50's. Wise up! NOT LIKELY! Prepare for the worse case.

-Debt Reduction: Its no secret, you can’t rich sending all your money to high interest credit cards. Pay off all consumer debt ASAP. But also educate yourself. Know the difference between good debt and bad debt! Math doesn’t lie! Understand the numbers and do what’s right for you. But don’t use the numbers to justify stupidity!

Lastly, there is NO way I can cover all the details of each risk here. I have painted some broad strokes. You must work with an advisor that is unbiased and objective. You need someone to guide you, hold you accountable, and yell at you when you screw up. No one can handle their own finances objectively. The Miami Heat doesn’t think it’s a good idea to send Lebron James, Dwayne Wade out to play without a coach. Hire a Fee Only Financial Life Coach! For more go to

Friday, January 27, 2012

Building a Strong Foundation - Part 1

There are 5 initial steps you must take before embarking on your financial planning process. These steps are so simple; you will be tempted to skip them. But DON’T! They are crucial to developing a true financial plan.

1)      Organization

One of the main reasons why people find financial planning so overwhelming is because they are not organized. You have all this “stuff” but it’s everywhere, making things complicated, and sometimes frustrating. If you organize your documents it will reduce a lot of the confusion, and make things easier to follow. So before you get started, find all your bank statements, investment statements, insurance policies, legal documents, and anything else that you think might be important. Have a folder for each type of document. This will take some time, but it will save a lot of headaches later on.

2)      Spending Patterns

Too often I see people with decent income and low expenses living pay check to pay check. The majority of them do not know where their money goes. I recommend keeping track of your spending habits for at least a two week period. I know, I know this is boring and tedious, but this will benefit you in couple of ways: First you will realize how much money you waste! And second it will help you later on in the budgeting stage. Often I have worked with individuals and families complaining about not knowing where all their money goes. Every time I have asked anyone to do the exercise they come back so astonished with how much they were wasting on stupid things. If you know where your money is going, you will be able to see where you need to reduce spending to reach certain financial goals. 

3.) Understand Your Financial Personality

This takes some self-awareness and honesty. To build wealth you have to come to terms with who you really are, and accept it! Everyone does not fit nicely into a box like some financial guru’s will have you to believe. We all look at money differently based on our financial personality.

The 7 General Personality Types:

Entrepreneur: risk takers, mission about their business, all they focus on, they concentrate all investments in their expertise, biggest risks are liquidity and no diversification, this strategy doesn’t work in tough times.

Nester: favorite investment is their home, they don’t buy new carpet, they invest in it, will buy a new roof vs. vacation, impulse to pay of home ASAP, and believe that will make them feel more safe, love to buy time shares and vacation homes, biggest risks are no ROI on remodels, don’t understand benefits of positive leverage of real estate.

Workaholic: buy anything that saves them time, desire status and prestige, very ad hoc with money, act on stock tips from a party, open a CD because bank offers free gift card, likely to succumb to salespeople and buy high risk investments, they insist things like boats and cars are good investments, usually can thrive with coaching, need hand holding before major purchases.

Vacationer: spend money on experiences rather than things, not a lot of value placed on money, just one seminar away from happiness, value education, likely to be professional students, these folks usually become nesters.

Gambler: want to get rich quick and spend it quick, addictive personalities, get depressed and repeat the process, huge risk takers, biggest risk is no self-awareness.

Scaredy Cat: hoard their money in constant fear, scared of running out of money, avoid any long term investments, need a strong dose of education.

Shopaholic: fear but big spenders and givers, very outgoing, in denial about spending, unlikely to hire a financial planner because they don’t want someone to know the truth.

Each has pro’s and con’s. Each personality may be situational and will change as we go thru life. Some types can make a disastrous marriage. Before you can become financially fit you need to understand who you are and your natural tendencies towards money.

4.) Current Financial Position

Next, I want you to take a snapshot of your current financial position. Write down all your debts and all of your assets. This will become your balance sheet and will determine your net worth. A balance sheet is a two column page, on the left side you have all the things you own and on the right side you have all the people you owe. Once you have all your assets and liabilities organized, you simply subtract assets from liabilities and that is your net worth (Asset-Liabilities=Net Worth). You should take a look at your balance sheet at least every quarter, and I recommend updating it on a monthly basis. You also want to have a clear picture of your income and expenses. This will become your cash flow statement. The cash flow statement is an overview of your “cash in-flow” and “cash-outflow”. Your inflow is ALL of your income and your outflow is all your expenses and savings. The cash flow statement will help you determine if your income is sufficient to cover your expenses. Together the balance sheet and cash flow Statement will give you a good picture of your current situation and help you set realistic financial goals. Send me an email at and I would be happy to give a FREE financial statement worksheet in Excel.

5.) Create a Realistic Budget

Budgeting is a very basic and important part of personal finance. It is a MUST for financial planning. There is no need for a complicated budgeting process. There are many great software packages out there you can use to create your budget. The two most popular ones are Quicken and Microsoft Money. You can also use a simple spreadsheet for budgeting. Google Documents also has a straight forward budgeting spreadsheet. Your budget won’t be perfect in the beginning, but you gotta start somewhere. You can always make needed adjustments in the future. Note! Not all budgets are the same. Do what works for you. I’m a spender by nature, so budgeting used to be very difficult for me. I would make the perfect budget on paper, but never follow it. Why? It’s hard for me to envision everything I may want to do in a month. Will I want to go to dinner once? Three times? Will I buy a want a bag of chips and Yoo-Hoo at the store this month? So, I have a budget based on years of spending history in Quickbooks, but I also don’t worry if I follow it to a T. What I do is pay myself first. Every dollar and make I automatically save 15% no matter what. The rest is available to pay bills, go to dinner etc. I pay me, then my bills, and then I can basically blow whatever is left if I want. Sometimes I do, sometimes I don’t. But I no longer feel bad about myself when I overspend by $20 at the grocery store. This strategy works for me, but it may not work for you. Do what’s best for you and your family. The point here is for you to be in control of your money, not have a plan and wonder where it all goes.

One more important note! The above are all things you must do to if you want to achieve financial success. But remember, most of us can’t do it alone. We need someone to guide us and hold us accountable. That’s where I come in. I am a Financial Life Coach. I help clients every day do exactly what’s outlined above and more. Go to for more.

Monday, January 9, 2012

5 Investments to Avoid In 2012!

1.) Lottery Tickets. Lotteries were designed by politicians as a “patriotic” way to entice the poor into voluntarily returning their welfare checks back to the state. A 2006 Financial Planning Association survey found 21% of surveyed Americans think that winning the lottery represents the most practical way for them to accumulate several hundred thousand dollars. The odds of winning the Powerball Jackpot are 1 in 195 million and 1 and 5 million to win 200k. Even if the lottery returned 50 cents for every dollar bet, you’re better off at the Vegas Roulette tables that pay 95 cents for each dollar bet. Plus you get free drinks!

2.) Life Insurance, usually called whole life, variable life, universal life, permanent life, etc. I have a unique perspective on these products because I began my career with a large life insurance company. I know all the sales “tricks”, I know how much commissions these products pay, and I understand their inner workings (most financial folks don’t). While a “FEW” products are pretty good, MOST are terrible! These products are not “commodities”! There are only about 5 companies that sell respectable products, and the rest are JUNK! For some very high income earners and high net worth individuals, these products can be a great asset to own, BUT the vast majority of the public needs to stay away. If you are a high income earner, BEWARE of sales people that come to you calling it the “Rich Man’s Roth IRA! People that use this language are just “one trick ponies.” They do not analyze your entire financial situation to make sure it is truly a fit. They just want to sell you on the positives and leave out all the negatives. Get a 2nd opinion from a fee-only advisor (someone who does not sell products) that truly understands these complex products.

3.) Timeshares aren't an investment at all, since it makes ZERO sense to put money into a depreciating asset and expect a return! Most timeshare sales people don’t claim that they are quality investment these days, but they will still use subtle language during sales presentations to give the impression that purchasing a timeshare is a good financial move. If you don't listen carefully, you will think that this is a great investment when, in fact, it's far from it! If after reading this, you find yourself just “dreaming” about having a time share, buy it on the secondary market. They are really difficult to sell! So, there are many folks out there that have realized that they are terrible investments and are willing to sell at a deep discount. Check out timeshare resale websites and you can find the exact same units being sold at a discount of 50% or more.

4.) Any Investment Sold Over the Phone. Legitimate investments are never sold over the phone. Period! If their investment was as good as they say it is, and then they wouldn’t be spending their time talking to strangers like you on the telephone. Never buy anything over the phone because of the increased exposure to fraud.

5.) Too Good To Be True Investments. There is no FREE lunch especially when it comes to personal finance. There are a lot of financial sales people running around selling things like annuities, limited partnerships, and private investments. If you don’t understand the products, do NOT put your money there. Also, some investment guys will promise you the world. All I have to say it remember “Bernie Madoff!”

If you work with someone that is only paid by providing you with sound financial advice, NOT by selling you a product, more than likely you will not have to worry whether or not a recommendation is in your best interest. Call me for free initial consultation at 615-878-2134 or go to

*some data from Bert Whitehead, MBA, JD

Monday, January 2, 2012

Purpose Driven Goal Setting

Purpose Driven Goal Setting

Most people set the same goals year after year only to never gain any ground. One of the main reasons for this is because their goals have zero purpose. Your goals must be backed up by something meaningful to give you the power to stay the course long after your will power is gone. Purpose means discovering the “Why” behind what you say it is that you want. Goals without real meaning aren’t worth the paper they are written on! People who achieve success have something that gives power to their goals… And that something is Purpose!

“If the WHY is important enough to you then no HOW is too difficult.”

7 Steps to Purpose Driven Goals

Step 1: Ask the Right questions.
Let’s say one of your goals is to retire at 55 or lose twenty pounds or stop smoking. Ask yourself, what will it mean to you if you accomplish the goal? Don’t accomplish it? How will it make you feel if you succeed? Don’t succeed? Is it really a big deal to you? Do you truly want what you say you want?

Step 2: Link your intentions to a purpose.
"If the 'why' is important enough then no 'how' is too difficult."
In other words, very few of us would jump off a 100’ bridge for ten thousand dollars. But many would if it meant saving our children. The 'how' of creating wealth is simple to understand but not easy to implement. It takes commitment, dedication, time and effort. If your only reason is to become rich then you don't have a compelling enough 'why'. You need a purpose that motivates you when your will power is long gone. 

Step 3: Be honest with yourself
If you don't know where you are, how do you expect to get where you want to go? Sit down and be honest with yourself. You have nothing to be ashamed of!  So get real honest with yourself and your spouse!

Step 4: Formulate a specific game plan.
Your game plan should be specific steps in making your intentions come to life. Create a daily, weekly, monthly plan of action steps. Break it down into bit sized pieces. 

Step 5: Force yourself to take at least one small step each day.
Do something! Anything! One thing is better than nothing! If you only got 1% better each day, where would you be in a year? None of us do well when we feel like we have a million things to do. But we all can do 1 or 2 things that move us closer to our goals each day!

Step 6: Track your Results
This may be one of the best tactics I ever learned. Because what do we all say to ourselves? I can never live on a budget. I diet but never lose any weight. Get out a little note pad and at the top of each page write down each goal and your purpose for it. On that page track your behaviors. Every dollar you’re spending, every piece of food you eat etc. Give this a chance for 2 weeks! You’ll quickly realize why you are not getting results. What this does is makes you conscious of your behaviors and changes your habits! At least you will no longer be able to say that you do not know what is keeping you from success.

Step 7: Re-evaluate your progress and your purpose every 3 months
Something’s you will try will not work but you must know what they are so you can change course! Your core values may also change therefore changing the purpose. 

For more about me and to get my goal setting worksheet, go to