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How Does Your Door Fit?

Is by "design" or by "default?"

As I was reading Simon Sinek's recent offering, "Start With Why," a story he told early on in the book resonated with me, not only from the standpoint of entrepreneur/business owner but also from the perspective of wealth manager/advisor. 

It seems that a ways back,  some U.S. car manufacturers had visited a Japanese auto manufacturer and were watching the various tasks that were performed along the Japanese assembly line.  While much of the work was the same as "back home,"  the one thing the U.S.  delegation noticed that was missing,  was that in the U.S. there was a last person at the very end of the line who was tasked with whacking each car door with a rubber mallet to get the door to sit properly and line up with the overall body contour. 

When questioned about why step didn't exist in Japan,  the American's Japanese counterpart noted that "we design the doors to fit from the beginning, that's the difference." 

Many people treat their efforts at achieving financial success and as a result the life that they truly desire, in the same way as the American auto assembly line; they treat each and every financial transaction, be it, picking a money market account or deciding on an investment allocation for their 401k plan, about like a U.S. car door; whack it till it ultimately fits, even if it doesn't.

The "piecemeal"  approach is seldom ever going to be efficient and like the U.S. auto builders who had to pay a union worker to swing the mallet and purchase lots of rubber mallets for them to swing, generally, in the long run to be sure, it's going to be more much more expensive. 

Because we fail to choose a path to take, cobbling together financial assets and financial decisions seems the norm.  Without a well thought out plan, we have little context to balance our decisions against. Absent a well defined standard, almost everything is going to fit more-or-less, even if we have to hit it with a mallet to make it so. But the reality remains that it didn't really fit at all did it?

To be sure, it's one more thing checked off the list. But that doesn't make it either effective or right, does it?

The fact is, that on its surface, you'd have a hard time telling the folks with a well thought out plan and path from the ones without one. But, over time, as calamity and change have their influence, it wouldn't be hard to tell at all.  If you never had a plan, it'd be awful hard to stick to it. 

Set a course for your financial future and stick to it. Decide what you'll need to live the life you truly believe that you're entitled to based on a lifetime of work, then figure out how to get there.  There are steps, pragmatic and calculable ones, that put you on the right course. 

Find them. 

Why We Love Goals and You Should Too!

Everyone loves setting goals, it's one of the reasons that productivity and to-do apps are among the most downloaded by smartphone and tablet users alike. 

Problem is while we all love having goals we're not clear on how to best achieve them. Most folks think that the goal, that seemingly elusive "end state" is what we should put our focus on. I beg to differ. 

Reality is that the best way to achieve any goal remains to focus your attention on the processes that get you there. (As an example, read this Fast Company blog by Dilbert creator Scott Adams) Let's take an example, let's say you decide you want to be in awesome physical shape.  Are you better off focusing on a combination of [a] your desired weight and [b] specific body measurements or are you better off focusing on [a] getting to the gym just three days every week and [b] eliminating all the "bad food" you eat?

If we operate on the premise that your ideal weight (175 pounds in my case; I'm currently 188 but was 227 lbs. two years ago) is 200 lbs. I might be crazy, but hoping that your ultimate weight will remain a long-standing motivator seems improbable, weight loss is a slow and tedious process isn't it? I mean, is watching a drop in quarter or half pound increments really gonna do it?  And, it's so easy to "stop" and be content when the first ten come off, afterall, dieting is hard and ten pounds is probably gonna make your clothes fit better. 

But you can get energized by ending a day knowing that you got to the gym and did a workout, any workout, on your way to your goal. (P.S., "any workout" is also a better "process" than expecting yourself to be a gym maniac every time you show up there...) And, you can pat yourself on the back knowing that you got through another day without Dunkin' Donuts or fast food.  Focusing on the process allows for every day to be a win, instead of the notion that you're killing yourself and still have 25 pounds more of killing yourself to go. 

See, if you focus on the "steps" and not the "end" things look a lot different. There are lots of people who yearn to connect more with their kids and is hard and takes more time than we think.  But rather than "forcing" the matter, how about this.  [1] Get home early two nights a week and be around on Saturday, [2] turn off your smartphone and tablet when you get in and leave it off till the kids are in bed (It'd be better for you if you just left it off, but that's your call). I bet if you can do those things, you'll feel better along the way because the process is key to the goal, not the other way around, and getting the small steps right is more of a determinant of long-term progress. 

Bottom line is this; if your goal is to eat an elephant, one bite at a time really is the correct answer and not because it's too big to get down in one gulp. 

What's your first bite gonna be and what of.....?



Well, it's been over a month now since the plethora of New Years Resolutions were made, and I was wondering how you're doing on accomplishing those "goals" you set for yourself?

Setting goals, whether it's to start a new habit or finally get something done that's been on your to-do list for way too long, plays out many times in an all too typical fashion. 

At the outset, our energy for getting things done is at it's zenith. We can envision all the good that will come from our efforts, and early on, it all seems well worth the sacrifice that we'll have to make. 

But all to often what plays out in real life, is that we make "some" progress towards the goal and then there's an energy shift.  What use to be the energy to accomplish our goal and nothing less, becomes a division of energy.  Part of that energy gets consumed in rationalizing in our mind why being only part way to the goal is good enough. After all, we've lost half of the weight we'd originally planned but we feel better and our clothes fit a bit nicer so that's a plus. The remainder of our energy gets used doing everything within our power not to slip back to where we were before we ever started.  Odd, that our desire to actually meet our goal is all but lost, but only because we never purposely direct our energy back to "accomplishment" not progress. 

In personal finance, I refer to this often as the "knowing v. doing" gap. I can't tell you the number of people that I've worked with who now had teenage children and yet, they hadn't ever gotten their estate documents in order.  Their Wills don't even reference the kids, because the document that they have was drafted before they were borne. In conversation, these folks can recite, title and verse, why they need to update the document, who would have done it were it ever to have been finished, the importance of having it done, the reasons behind having it done, etc. 

You can tell that the tone of confidence in their voice about the issue comes from a place of "doing" not of knowing. For them, knowing that it should be done, knowing how it should be done, knowing that it can be done is the same thing as having actually done it.

Except that it actually isn't.

No matter where you're stuck, getting back on track isn't all that hard. You just need to redirect your energy and focus it back on attaining your goal, not merely moving towards it.  Accept nothing less than "getting it done." Expect nothing less of yourself than you will do it. 

Life in the abyss of compromise and rationalization is a dead-end. 

Now get back out there and start getting it done. 

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"Bottle of red, bottle of white......"

Billy Joel suggested a choice of your favorite wine for that special date. That still "might" be a good idea, but read on. 

Daylight savings time has been tagged as a great opportunity to "check the batteries in your smoke alarm." I like it, it works, if you do it enough, one becomes the other, it's an automatic way to remember something important to do that might otherwise slip through a crack.  

So, here's another suggestion.....

This is Russell during one of our recent conversations where I explained we needed to cut back on buying cat treats.....note he's not happy. 

This is Russell during one of our recent conversations where I explained we needed to cut back on buying cat treats.....note he's not happy. 

How about setting a date each year to sit with your spouse, partner, family, or your pet if you were not to have any of the former to sit with, and talk about your "financial goals?" I mean really talk about your financial goals. (Yes, for the record, I do talk to my cat, Russell. (And, he pretends to listen but almost never agrees with me.)

If you can't or won't layout a well defined and professionally crafted plan, at least have an informal one. Even talking about specific goals can set you on the path to making strides at improving those things you've chosen to do better, such as;  

  • eliminating or cutting down credit card debt
  • living within a reasonable budget for Holiday shopping
  • saving more next year
  • getting your estate plan in order (has it really been that long since you last checked what your Will says will happen to the totality of your worldly possessions? Do you even have a Will done?) 
  • increasing your 401k contributions? 
  • figuring out what college is likely to cost

There's a long list of things that we could add, but that's not the point.  

The point is that "planning" starts with the realization that [a] there's stuff to get done and [b] there's usually some logical steps that can be taken to assure at least some progress towards getting those things done, right?  

So, be it Merlot, Chard' or Pinot, get comfortable, pour a glass for you and your significant other and get it going. Don't try to solve all the woes at once, pick one thing, state your intentions and then figure out how to make it happen.  

Where it goes from there is entirely up to you.  

Getting into a fight about it probably isn't recommended. 

So enjoy the process and the wine.  


One Size Fits Somebody...But Perhaps Not You

Few things in life are a given. Fewer things in personal finance are.  


But, history indicates that the personal preference is to forgo analysis, avoid doing the math and just follow some simple "rules of thumb." After all if we can withdraw 4% during retirement (maybe, maybe not), purchase 10x our earnings in life insurance and subtract our age from the number 100 to find out what percentage of our portfolio we should have in stocks....why bother to run any numbers?  The answer's right there for all to see, it involves no analysis or work. The "rule of thumb" must work, I mean if it didn't work, it wouldn't be a rule of thumb would it? 

Well time tested as it might be, the question of "should you pay off your mortgage" or save more money toward retirement instead seems to have finally gotten some air outside of the rule of thumb world.  

In a recent St. Louis Post-Dispatch article  the questioned was asked of a number of financial professionals who all had basically the same depends!! Yea! A vote for "it depends!"

It depends because, well, it depends.  As you might read in the article, much more debt exists post-retirement in America than we believe.  Paying off the mortgage has in many cases become a thing of lore.  

And, if you consider that we're about as near a bottom in interest rates as we're ever going to get, paying off your mortgage now should come with one substantive word of caution....the equity you create by paying down your debt may be equity you never see again. If you were to "leverage" your mortgage debt today, we could assume I think that at rate in the 3-4% range, after allowing for a deduction for mortgage interest, you're highly likely to arrive at a net lending rate that will be less what the reasonable projection for market returns would be.  That would seem to indicate that you can make more money by investing your money than paying down your debt. 

Math would then seem to indicate that if we get back to mortgages in the 7-9% range, we might not be able to get the same result.  That could mean that the equity you create today might not be accessible (at least and have it work mathematically later on) if interest rates cycles repeat.  And, as someone once said, "the future may not repeat itself, but in certainly rhymes." Last time that happened we went nearly 14 years before the interest rate shift made getting your hands on that money a worthwhile mathematical effort. 

So before take a leap of faith by following the rules of thumb, consider that some reasonable analysis might be a better way to chose your path.  

More on "rules of thumb?" Read my earlier blog post on this same topic here.  



Leveraging The Unexpected

I can't take credit for this weeks blog topic. It actually is a quote from Jim Collins, noted author of books such as "Good To Great" and "Built To Last."  And, his use of the phrase wasn't a title to a blog, it was a question..."what's the best way to leverage the unexpected?"

And it got me to thinking.

Let's start with a simple premise.  If you don't know what you're doing or why, or; you don't know where you are or why, the question changes doesn't it. It changes from "what's the best way to leverage the unexpected" to "how can you possibly leverage the unexpected?"  Right?

To optimize change; you need to know where you are. 

To optimize change; you need to know where you are. 

I mean, to my way of thinking, there's always this inexorable linkage in life. One task relates to one action which relates to a bigger set of actions, that relate to a goal. Leverage by design I think, pre-supposes that you've got something "in hand" that you can "multiply" in some way in the effort to create something new, bigger, better, clearer or some other positive descriptor you can use. Leveraging it appears takes two "things" a known and energy of some sort, be it thought or action, which we then apply "on" the known. 

Here's the problem though. Most people don't really know where they are (financially almost for sure) or what they're doing (not in an arrogant sense, in a pragmatic sense. I'll assume most people know what they're doing, though often not why). If that's true then the reality is that you can't really leverage the unexpected because you know not what your energy should be geared towards multiplying. And, hence the problem.

Financial advisors often talk about "controlling what you can control" as central to success and it is. My suggestion would be that one of the things that you can control is learning how to figure out where you're at, where you're headed and why.  I say that for two reasons: (a) if you don't know, any road will take you there and (b) if you don't know you can't leverage the unexpected. And, call me a fool here but I'm just about dead certain that the unexpected will show up and more times than we care to admit. 

If the only constant is change and if that constant has a "will" of it's own, then we control only a small fraction of life's changes. Which, by design, means we can leverage very little change.

So, among those things that you can control, spending, life choices, how long you work, where you live, what you own, what you save...let's throw one more thing on the list.

Your ability to adapt and prosper from the unexpected.  

All you have to do is take control of it, and there's help for that. Start with defining where you are.