Viewing entries tagged
expenses

Pain v. Gain

Clearly the most arduous part of the Wealth Management proces is having to construct a list of household expenditures. But the question remains, why is it so arduous?  In a world of online tools such as Quicken or Mint, why is budgeting so damn aggravating? 

First off, as you can read here, there are some pretty fundamental reasons, three of them actually, the first of which is clear, "it's not fun." We get it, and we can appreciate it. Few things that are necessary in life are fun in the true sense of the word, eating salad isn't fun, exercising everyday isn't fun and surely, picking that salad over your favorite steak or cheeseburger and fries isn't fun either. 

The second falls into that realm of the "doing v. knowing" gap. You already know where your money is going (out of your bank doesn't qualify as an answer).  But truly, you don't know where its going, you just think you do. And, in the world of the "doing v. knowing" gap, thinking you do virtually makes it so.  

iStock_000017327425XSmall.jpg

Clearly the most arduous part of the Wealth Management proces is having to construct a list of household expenditures. But the question remains, why is it so arduous?  In a world of online tools such as Quicken or Mint, why is budgeting so damn aggravating? 

First off, as you can read here, there are some pretty fundamental reasons, three of them actually, the first of which is clear, "it's not fun." We get it, and we can appreciate it. Few things that are necessary in life are fun in the true sense of the word, eating salad isn't fun, exercising everyday isn't fun and surely, picking that salad over your favorite steak or cheeseburger and fries isn't fun either. 

The second falls into that realm of the "doing v. knowing" gap. You already know where your money is going (out of your bank doesn't qualify as an answer).  But truly, you don't know where its going, you just think you do. And, in the world of the "doing v. knowing" gap, thinking you do virtually makes it so.  

For all we may want to ignore it; the reality remains that whatever you earn in your lifetime, whatever you save, whatever you invest is largely meant to do one primary thing....pay for what you spend today and what you'll spend over the remainder of your lifetime.  

Meaningful financial plans are built on accurately judging expenses, today and tomorrow. Not perfectly predicting it, but accurately predicting it would be key. If you're building a house, your "budget" is your foundation, everything else gets built on top of that. The more accurate (level) the budget the more reliable everything from there up is going to be.  

And, as the Carl Richards notes in his article, awareness is seldom ever a bad thing to have.  

 

 

It's Public, It's Policy and It's Damn Important.

Back in the late 70's and into the 80's, the norm was that an American worker was covered by a defined benefit pension plan, more or less a guarantee that they would retire with some measure of their current income assured.

It's time for a public dialogue on the quality of retirement in America

It's time for a public dialogue on the quality of retirement in America

But as with personal financial matters, the exact nature of how that was suppose to work got away from the higher-ups. Few noticed that life expectancies started to increase and the workforce started to age. What had began as a promise to a veritable cadre of people at it's inception, morphed into a promise to a massive group of Americans. And as the promise meant more and was made to more; the cost of the promise escalated, till it was in effect, uncontrollable and out of control at the same time.

The shift was made to 401k and other plans that put the onus on the employee to figure it out. As noted in last weeks blog that didn't go well and it continues to not go well today.

When I hope for things, I tend to not hope in colors. I don't hope "Republican" or "Democrat" I just hope. I'm agnostic when it comes to solutions. 

But before we get to solutions we have to have a national dialogue about retirement and saving for it. Oh, I'm sure that the public programs, Medicaid, Medicare and Social Security will be the lynch-pin to formulate the starting point, but our problem is really so much more than those things. While there aren't many retirees that at this point that could afford even a modest reduction in their "supplemental" retirement systems as noted, that's because their underlying retirement systems is either wholly inadequate or non-existant. A recent MIT study showed that nearly half, 46% of Americans have less than $10,000 in financial assets when they die.  For way too many American's what was meant to be supplemental is in fact primary, and for them today and probably many more in the future, the chameleon like shift will be complete. What had once been "additional" has become "it." 

My hope (again, agnostic hope) is that our leaders can focus on these national problems in the hope of a national solution. For all the effort, it seems we spend way too much time worrying about what Greece has in the bank and not worrying about what our citizens do. And that just seems wrong.

Throwing A Hail-Mary With Your Money

If Wall Street cared about your future before it's own....well, that's not going to happen now is it?

If Wall Street cared about your future before it's own....well, that's not going to happen now is it?

"Fund managers like these guys who are underperforming are going to want to make themselves look good for the rest of the year and make up for lost ground. There's going to be an effort to pull out the year in the last month."

"Fund managers like these guys who are underperforming are going to want to make themselves look good for the rest of the year and make up for lost ground. There's going to be an effort to pull out the year in the last month."

So says a recent CNBC.com article

It seems to me that you should be the key person in your investment relationship. 

It would seem fair and appropriate I think, that your goals, and your interests should be the ones first served. 

The statement from CNBC.com seems to portend that active investment managers now know what had escaped them for the first eleven months of the year, namely how to make money in this market. 

That would of course, beg the question, "what changed?" Since the only real change is the focus of your investment manager, you might ask, how many boundaries will get crossed, how much additional and unwarranted risk will get taken, and how many "policies" will get overlooked in the interest of "pulling out the year?" Are those actions that are being taken something that you signed on for? Are they policies that you approved? Are they risks that you agree with? Doesn't seem to matter does it? No, because this isn't about you, its about them. 

If you're investing (not gambling) then contrary to their belief it's ALL about you. It should be about your willingness to take that risk, your willingness to minimize unnecessary transaction costs and taxes. But in the world of active management, it's much more likely to be about what they want, not what you want. 

We control very little in our lives anymore. We don't get to set economic policy and we don't get to decide on the direction or velocity of the stock market. That being the case, we should control what we can control, namely how our investment professionals respond to the fact that we exist at all. This fact, that it's your money, is something that should never be overlooked or trivialized. 

When the focus becomes "pulling out the year" understand that the effort, while likely doomed to fail before it even starts based on any reasoned objective measure, is being played out with your retirement/college fund/kids wedding money.

So if December becomes the month that a strategy worked, you might want to ask yourself how that happened and what changed? Why wasn't that the strategy employed throughout the year?

If it fails, you might want to consider who'll be harmed when it doesn't work?