Slade asked me about Financial Planning
I’m not a professional personal finance guy, but the same toolkit we have in the gym and field really carries over into our issues with (and without) money. Don’t take any of this as anything but some suggestions to a friend. These are all things that worked well for me. Oddly, the principles make a great coaching template, too.
Slade Jones is a good friend, lifting enthusiast and a visitor to my gym. He emailed me a few days ago and told me he liked my blog on time management. He asked if I would consider writing something on finances…financial management.
Like most people, my family was not wealthy. Trust me, I’m not a trust fund baby complaining about how lazy others are in the world. I’ve struggled financially but I did a lot of smart things.
I don’t give investment advice because there are really two key investments: You and your spouse. You might scoff or laugh at “spouse,” but marriage or any other committed relationship can be a bust or a boon to your financial health.
Investing in YOU
If you had a great elementary education, studied hard in secondary school, burned the midnight oil in college prepping for exams, entered your post-college academics with vigor and graduating with honors at every step, you are probably doing okay today. If you had a few missteps along the way, you certainly can continue along the path towards success in a million ways, but it is always better to have the big educational sheep skins in your pocket then to still have to take “just a few more classes.”
College is much easier to attend as a teenager and early twenty-something. Each year after 23 or so gets harder and harder as life begins to pile up things. Mixing full-time employment with college (as many of my students do) is a real act of juggling.
Continuing education is something that I think not only fills in the gaps of traditional education, but it opens you to new possibilities. At least once a year, I attend a workshop. I try to go to more, but life gets in the way. I go to success workshops, those ten dollar ones that are mostly advertising, movement workshops, and traditional, “in the chair” fitness and health conferences. Some, like the RKC, really changed my life. As I type this, I am heading out to Los Angeles for the two day FitRanx workshop.
Certifications are fine. Degrees are fine. Having both shows that you have some background and continue to learn and explore. Your biggest investment is you.
Next, choose wisely when it comes to the love of your life. I never realized it at the time, but when I met Tiffini, she gave me some advice that shaped my life. She worked at a bank (I was about to say “a great place to meet beautiful, smart women,” but I will hold it in) and she told me: “Your credit is king.” One’s credit can open doors (literally) and do wonders for interest rates.
Dating is fun when you also get professional financial advice.
Debt, not paying bills, bankruptcy (unless you are running for President), credit cards and bad loans (interest too high or value to debt problems) can keep you bogged down for a long time. Having a wife wise in the ways of money kept us from ever really getting behind. Of course, things came up, they always did and always will, but simple adherence to some level of fiscal discipline can do wonders.
The single greatest gift we gave our daughters, in a sense, was debt free college educations (Columbia and the University of Utah). There certainly is good debt and bad debt, one could argue a student loan being “better, “ but no debt is the best.
Tiff had no debt when we met. She has had a very successful career with the Department of Treasury after leaving the bank. When I started my business, I didn’t have to worry about a number of things, like health care, as we had it covered as a family. These were all parachutes that allowed me to step out into the world of running my own business. My wife travels a lot and understands the nature of flying and living out of a suitcase. She understands the value of upgrades to First Class, Sky Clubs and TSA pre-approval. I follow her advice on travel prep and planning. These discussions both save us money and make us money.
So, concept one: your greatest investments are you and your spouse.
Learning about Finance
I graduated from college debt free and worked in a cheese factory as I saved money for my Masters. Soon, I had that degree and began teaching and coaching. For a year or two, it seems, I had what I needed but I wasn’t getting ahead. And, life happened.
I wasn’t ready for all of it.
In 1985. I had just returned from the Middle East and I was forty pounds lighter from my “little friend,” a liver parasite. I had a lot of education, I had traveled a lot, and I had a great occupation.
Yet, I lived in a basement, drove a VW with the rear bumper being held on with a weight belt, and I owed $800 in credit card debt. When I looked around I knew I needed to improve some things. My answer to questions has always been books.
I went to the local library and found Earl Nightingale. His books led me to his audio series “Lead the Field” and I began to think more like Earl. In other words, I would spend a little time “thinking” every day.
From there, I began reading magazines and books on personal finance. (A great process is highlighted HERE)
I was lucky at this time to be asked to teach Economics. I liked it all, but soon realized that we were missing a huge concept: Personal Economics. Over time, this would become one-third of the course. High school kids are lucky: they tend to be debt free and the world is wide open to them. In ten years, this will all change.
Most personal finance books focus on a big task right away: “where are you?” It’s good advice and correct, BUT it can also be stifling. It can also make you a bit hopeless.
Now, as I was doing this, I was sleeping on a fold-out couch, so I wasn’t too worried about reality. My “where are you” wasn’t very exciting.
Three things seemed to really help me at first. Not every author or book agreed on this, but these were all momentum builders. Also, over time, these three made the biggest impact.
- “Fortune Fund.” It seems funny to think about it now, but each and every day, I would toss coins or dollars into an envelope that had “Fortune Fund” written on it. Every so often, I would go to the bank, which no longer exists, and deposit this into my savings. This was not used for anything other than building my “fortune.”
I began seeing coins here and there and it was fun adding to the envelope every day. The idea is that one needs to see both the hazy future and some progress towards it. I can be a penny or a million dollars, but each day the fund is growing a little. This costs almost nothing save the envelope.
- Emergency Fund. In our home, we always used US Savings Bonds. Today, it might not be the same, but buying and having a Savings Bond…in your hand!…was a nice way to bridge the Fortune Fund and problems. One year, the hot water heater went out on Christmas Eve, soaking all of Santa’s gifts, so we used the Bonds to cover this unexpected event.
Things come up. The Emergency Fund is a bridge between an affordable problem and a disaster. This is a broken car, a leaking hot water heater, or a major furnace repair. These are things that must be fixed. Once the family hits a certain income level, the need for this will change, but it is nice to have about $1500 in easily assessable funds to deal with issues.
If you use credit cards to fix emergencies, the debt spiral is going to get worse. Using a credit card for a thousand dollar fix might cost lots more with interest tacked on (and it will). Things come up. I believe, and more on this later, that with some wise proactive thinking we can stay ahead of much of this, but stuff breaks. Until you have the Emergency Fund built up, don’t worry about trying to beat the Stock Market.
- Pay off your lowest debt. Grab your bills. Pull out your accounts and find the lowest one that you owe money. If you owe thirty bucks on a small card, pay that off. It might be wise to destroy that card, too. Next month, try again to pay off your lowest debt. Becoming debt free is one of the most “freeing” things that one can do.
Debt is a noose. It cuts down your ability to have options. For example, I warn college kids not to get pets. If you have dog, you can’t live in the dorms and you might not be able to find cheap housing. So, you have to get a job to keep the dog. As much as you love Fido, Fido is a burden.
Debt might be worse. Hate your job, but love your expensive leased SUV? You have to keep going to work. No SUV? That gives you the chance to say “goodbye” and walk away. Debt forces you to do things you don’t want to do.
Eliminate debt by attacking each one from smallest to the largest. You will literally free yourself from debt’s yoke.
Deal with these first. The Fortune Fund is just like quality training, “Little and Often over the Long Haul.” The Emergency Fund is recommended by most experts and it gives you some personal insurance against the basic crap that life throws at you. Paying your debts off from smallest to largest is sound and, like weightlifting, progressive. It also insures that you took a moment to actually acknowledge your debt and understand the need to eliminate it.
“Where are you?”
Once you get started on the first three simple steps, most books and financial advisors tell us to get a total grasp on our financial situation. The “Your Money or Your Life” program really goes into depth here asking for details like EVERY dollar one has ever earned. That might be easier at thirty than seventy, but the idea has merit.
Years ago, I did a full sweep including estimating the value of the books, videos, furniture, cars and everything in my possession. Anyone who has ever put up a Garage Sale sign knows that what you think things are worth has little to do with how much people will pay for them. I have some signed books and a very interesting signed screenplay (let’s just say the autograph comes from a notorious person) and I am sure that these will sell for a few bucks…at best.
This brings us back to the good versus bad debt argument. If the interest on the home is at two percent; that is pretty good. If your six figure student loan included graduating from Medical School; that is pretty good. Owing five figures on the credit card for a two-week bender in Cozumel might not be good debt.
Filling out the long list of personal assets might open the same discussion: a motorcycle might not have as much value in areas like Utah or Colorado as it sits all winter in the garage. The asset side will highlight good and bad assets. Your treasures are junk to me. I have cases of throwing and lifting materials and they have little financial value in the real world.
That’s why I put this one off a bit: it hurts to do this exercise. Discovering that you have earned a quarter of a million dollars and have 100,000 in debt and nothing to show for it can ruin the whole day.
Barbell Theory and Finance
Nassim Taleb made a good point about money in The Black Swan. We should have a “Barbell Strategy” when in comes to investing and careers. In investing, keep the bulk in the safest, dullest thing one can find. The rest should be invested in the most insane, speculative stock there is available. He argues that no other strategy will work.
In life, mimic the same principle: work your “safe” job that has insurance, retirement and appropriate wages. I realize this is not as easy as it used to be and it is hard to believe we tossed aside a lot of those principles in the decades after World War II.
At night, on your free time, or whenever you can: follow your passion. Whatever you love to do, do it. If it is a hobby, craft or service that you would gladly do for free, do it. Slowly, mold this into a business. Build your skills. Market as you can. When you can, make the leap and turn your hobby into your career.
The Two Test Tubes
I have worked multiple jobs for a long time. Sometimes, it is just to stay on course. I taught ESL for a few years when Day Care costs went through the roof and paying tuition here and needing another care there meant I would miss three evenings a week. Other times, it was the opportunity of a lifetime and the timing was perfect.
Once I began my own business, things began to clutter. The 1099 tax forms start coming in and keeping everything straight can be an issue. Being offered to do a workshop on this coast and a clinic on the other can be hard to decide which to say “yes” to without some kind of system.
I just borrowed mine from the weight room. I give things grades:
A: This is the ideal job. Using Pareto’s Law (80/20 Rule), these are those wonderful things, like royalties, that pay year in and year out without any current work. This obviously includes books, but it also includes classes that I wrote for the online environment. In other words, these are things that have minimal stress, time or work, but reward asymmetrically.
There are conferences and workshops that get A grades, too. We are always looking for more of these opportunities.
B: This would be the 9-5 kind of job. Work and stress are rewarded with a reasonable check and benefits. My college job is this way: every morning I spend time grading papers, keeping up, and fixing issues. I get compensated fairly. This isn’t always the sexiest job, but this is what Bs are all about.
C: These are the “one off” kinds of jobs, like a one-day workshop, where I do the work, get paid and fly off. What’s nice about these is that there is always the possibility of Cs turning into As. For me, this would be my RKC experience.
F: Yeesh. This is where a LOT is demanded and little is given back in return. Often, these have the promise of future riches (“Checks in the mail!”), if…if only…we can turn things around. When you get emails that tell you “Do this” and there is no compensation, you might have an F job.
By the way, it is not just money. Great people, like I have in one of my groups, are as valuable as a big paycheck. Sometimes, it can help if an association really makes a difference in the world.
Yearly, I chart out every source of income. I don’t grade them right away. In this little chart, I put in these questions along the top:
Internet issues? (If I do something and I can’t get on the net, other things suffer)
Spider Senses? (Odd one, yes. Is something or someone trying to tell me something about this? Honestly, I am usually right.)
With that, I grade the company, association or school. I don’t act instantly on this decision, but I look at my calendar and my daily planner. I should spend my time on the Bs and Cs, keep the As in the sunlight with plenty of water, and make some decisions on the Fs.
Oddly, I try to be as upfront as I can with the issues with the Fs. The less they listen, the more I know that the sun is setting on this relationship.
Ongoing Personal Finance
There are some easy ways to insure that you stay ahead.
- Schedule eye doctor, dentist and medical doctor visits at least yearly. A dental issue caught early is not only less painful but less expensive.
- Four times a year, take the car in for lube and oil. The place I go does all these point by point inspections and I just go along with the recommendations.
- When you change your tires, get a new battery. This is good advice in the states with snow; your mileage (ha!) may vary.
- As I said with time management, fill your gas tank when it gets to half full.
- Take a picture of everything, and both sides, in your wallet. Email the pics to yourself and maybe a trusted friend. If you have a passport, do that, too. When you lose your wallet, those pictures will have all the numbers that you need to call and all the numbers that you need to know.
- Declutter. Pick a shelf, a drawer, a closet or a room monthly to clean out. Have three boxes or bags. One for the garbage, another to give away and a third to put things that belong somewhere else. Give yourself a set time, ten minutes to half an hour, and when you finish, toss it out, give it away and put it where it belongs. Done. Decluttering, for whatever reason, frees up a lot of creative space.
- Keep master lists for home chores, food shopping, menus and everything else. Be sure to have your exact furnace filter sizes and always keep around lots of extra batteries of every kind. Have one tool kit with all your tools in there.
- Come up with Holiday traditions that include set up and break down. On Thanksgiving Friday, we put up Christmas. Now, with Amazon, we also spend a few hours shopping. If you have a family member who is a Steelers fan, find that kind of thing in Dallas is going to be tough. So, for us, Christmas shopping is finished just after the tree goes up.
- Figure out ways of sharing your time, treasure and talents. I like gyms that have canned food drives and push up contests for local charities. Volunteer, if you have the time.
- Finally, health is first. Income is great, but make sure you are playing, walking, eating right, and sleeping deeply. Take care of yourself.
Frankly, that last line is also perfect to summarize personal finance:
Take care of yourself.
For further reading:
Moneyball (book and movie), Michael Lewis The book on Cost to Benefit Ratio.
The Automatic Millionaire, David Bach Good, sound advice.
Lead the Field, Earl Nightingale
The Richest Man in Babylon, George Samuel Clason