Written by: Judi Snyder, Executive Contributor
Executive Contributors at Brainz Magazine are handpicked and invited to contribute because of their knowledge and valuable insight within their area of expertise.
February is usually considered the “Love” month because on Valentine’s day, we take the time to acknowledge those we love. Few of us think about our relationship with money. As we approach retirement, our relationship with money becomes almost the most important aspect of a secure and joyful retirement. Money isn’t everything but it sure gives you more choices!
In many ways, searching for the perfect vehicle to make your money work for you is like searching for the perfect relationship. Many of us begin with the “Blind Date” investment vehicle. You know, the one that your friends are so anxious to hook you up with because it’s perfect and just your type! Then some of us have the “On Again/Off Again” investment vehicle, where one day we are up, but the very next day, we are losing. Often, we stay in this relationship because we don’t know that there is anything better suited to our circumstances. And then there’s the “Steady Eddie/Edie,” the nice guy/gal who you can count on, who is always there, waiting in the wings, in times of trouble or volatility.
The nice guys of investment vehicles may be Annuities, Bonds, Dividend Paying Stocks, Gold, Silver, and Precious Metals. If we are really honest with ourselves, at some time or other in our lives we may have been drawn to the “Bad Boy” or “Dangerous Diva” fling, the investment equivalent of Penny Stocks and other risky securities, Oil & Gas, Diamond Mines, or High-risk Auto Loans. The promise of high returns seduced us away from the safety and security of boring old Steady Eddie or Edie. We knew they were not long-term relationship material, but we couldn’t resist their charisma. Our experience with the Bad Boy or Dangerous Diva can sometimes push us to settle with a “Couch Potato.” The Couch Potato investment vehicle sits around on its lazy assets all day long doing very little for you and your future. Low-interest rate risk is real. Sure, you know it will be there when you come home, but it will never help you accomplish what you need in your financial house! Examples of Couch Potato investments include money market accounts or CDs (otherwise known as “Certificates of Deposits,” or as I’ve heard them called “Certificates of Disappointment)!”
What we are really trying to find is our soul mate investment vehicle. The one that we can have a win/win relationship with that allow us to glide through the go-go, slow-go and no-go years. The truth is, that like our real-life soul mates, they have a bit of all these characteristics in them. What makes them perfect is how they balance and match what we want depending on our values, goals and objectives!
Let’s take a trip back to our dating life and review some things we know about relationships:
You can date many nice people, but if the “chemistry” isn’t there, then it’s still not right.
Your friends might have the best intentions when trying to “set you up,” but they’re looking for the qualities they like in that person—and not necessarily what you are looking for in a person.
Relationships take two, and there is an ebb and flow; sometimes you’re putting forth more effort and sometimes your mate is.
Sometimes you need to take a “break” from each other and have some alone time to appreciate each other.
When relationships work, it’s BLISS! When they don’t, it’s HELL!
They work best when your values and goals match!
Take eHarmony, for example. They claim to have the highest number of marriages resulting from their eHarmony program. We are inclined to believe this since my husband Jeff and I are one of their success stories. That’s right, we’re a husband-wife team that’s been in business together for over 17 years, and we met because eHarmony matched our values, goals, and objectives. We know the time and reflection that went into carefully completing eHarmony’s questionnaire has contributed to our success as a couple.
Some years ago, we had a client who was very specific about her goals and objectives for her money, and yet she was in a portfolio that was not congruent with her values, nor her objectives. Upon discussing the case, we had an a-ha moment and realized that a person’s “compatibility” with his or her investment vehicles is not that different from what it takes to foster a personal relationship. As financial professionals, we set out to systematize the process, much like eHarmony does with their match-making profile. One of the most common mistakes on professional advice is using the same experts and metrics when you are entering a different phase in your financial life.
The single most important factor contributing to eHarmony’s success is that they match couples on their values and goals. When you sign up with eHarmony, you are required to take a version of the Myers-Briggs Type Indicator, which assesses how you perceive the world and how you make decisions—your values. In addition, eHarmony asks other questions pertaining to lifestyle, religious preference, children, and other beliefs and goals. Once completed, your data is used to “match” you to another person with similar values and goals.
By now, you are probably saying to yourself, I’m reading an article about my money and I’m getting a dating commentary and commercial for eHarmony! How does this pertain to me and my money? Fair question, and here is the answer: A relationship exists between you and your money. The success of that relationship is dependent on how close of a match your values, goals, and objectives are to your investment vehicle choices. Most people never stop to think about their investment vehicles as an extension of their values, goals, and objectives. We’ve come to understand this is why there is so much anxiety around investing. In our experience, most people are unaware of how their investment vehicles “work”, if it’s working for them, and what fees and tax implications exist.
If this is true for you, don’t be too hard on yourself. After all, where would you have learned this information? Certainly, it’s not taught in our school systems and the companies we worked for never gave us education on our financial options. And most financial professionals, while well-intentioned, do not have the time to give a crash course on the details of every strategy they recommend. That is why it is important to develop a system to assess each of your investment vehicles and evaluate them as it relates to your individual values, goals, and objectives. We call this systematic process “Money Rules” which require you to consciously validate and confirm that your investment vehicles are in fact good long-term matches for you. Think of eHarmony using the Myers-Briggs personality profile to match you to the perfect mate!
Most successful people have money rules, whether they call them money rules or not. You may have strict criteria on what you will and will not invest in, whether you want to actively manage your money or passively invest, the liquidity of your money, what kind of returns you are expecting, tax implications, and most importantly, an exit strategy. The reason most people lose money in the stock market is because there is no exit strategy. Fear and losing money are bad exit strategies! When your money rules are in alignment with your values, goals, and objectives, money flows. When they don’t match your values, goals, and objectives, they cause anxiety and insecurity.
So, you’re thinking, I get that I need to have clearly defined money rules, but where do I start?
You start by determining your cash flow needs, your required and desired income. You will want to consider your living expenses and any expenses you anticipate in the future, such as a new roof, replacing a car etc.… You will also want to project your sources of income and which ones are guaranteed, like a pension, social security or annuity payment. Please pay close attention to the ratio of total guaranteed income to total required income. This will serve as your foundation.
Other considerations include:
How easily do you need to be able to access your money at any given time?
Are you looking for cash flow or growth/appreciation or both? If both, what percentage to each?
How active do you want to be in your investments?
What kind of returns are you looking for, and what risk are you willing to take to get them?
What are the tax implications of your investment vehicles?
What asset class(es) are you most comfortable with that meets your objectives? Are they congruent with your values? For example: A Christian may not want to invest in a company that owns strip clubs and an animal rights activist may not want to invest in companies that test their products on animals.
Each of these points are very important considerations when designing YOUR retirement paycheck. You must take the lead. Once you have established your money rules and identified potential vehicles for your money, it’s time to begin the validation and confirmation process, better known as due diligence.
What is due diligence? Basically, it means doing your homework! We don’t mean asking your neighbor’s cousin’s father about what investments have worked for him in the past few years! We mean researching historical returns and how they are calculated, strength of the company you are thinking about investing your money, as well as determining who has oversight and if “big money” invests in this strategy. Oversight organizations might include the Department of Insurance or FINRA, where you can research both companies and advisors. Big money refers to professional investors like Warren Buffet, along with Banking and Financial conglomerates. If big money is investing in the strategy, it is fair to conclude that their teams of advisors, tax attorneys, and CPAs evaluating those investments have already determined the strategy is solid.
Search engines like google make it possible to have information we need delivered to our fingertips. One word of caution, however: When you research online, be sure you understand the source and motives of the individual or company providing an opinion. Are they a competitor? You wouldn’t expect a Mercedes dealer to sing the praises of Lexus! Are they bloggers? Many times, you have investors who deliberately put out questionable information to influence a company’s stock price. They may hold positions such as “short” or “long” that would benefit from certain movements in the stock’s price [3]. Their opinions may be biased, and they might have ulterior motives. This kind of manipulation tends to work on small to mid-size companies because it is fairly easy to have an immediate effect on their stock’s price. You are less likely to see this with large companies like GE and Proctor & Gamble.
The process of due diligence can take some time, but it should not be avoided or assumed. What I mean by “assumed” is this: Just because an advisor from a large firm recommends an investment vehicle, it does not mean it is the best or necessarily a sound one FOR YOU.
Another area of consideration in the “romance” of your money is your choice of advisor(s). Did you ever hear the saying, “When you marry someone, you marry their family”? Well, investing is no different. Choose a team that has the credentials you need for that particular asset class and ask for references so that you can hear firsthand about the team’s process and results. Hear me loud and clear: Financial professionals are biased. All of us. We are biased toward the strategies that our licenses allow us to offer you, the investor! Even “fee-only” planners have biases. This doesn’t mean they are bad, they just might not be the expert that is right for you at this time. For example, I’m guessing you aren’t still going to a pediatrician for your healthcare, but that doesn’t mean the pediatrician is a bad doctor. It just means that for this point in your age and healthcare needs, the care may not be the most advantageous. This is exactly why you may need to have several financial professionals with specialties in the asset classes YOU choose. This is why YOU must LEAD your wealth team!
Ask your Financial Professionals questions such as:
How long have you been in business?
What is the dollar amount of your average client account?
Are you invested in the strategies being recommended to me?
What are your licenses and what asset classes do they allow you to offer me?
What is your track record?
What is important to you in life? (Yes, this is a fair question. Remember, you desire a true match to your values and the advisor is a very important part of the equation.)
What is your long-term plan for your practice? Who will service me if you retire or something happens to you?
Be sure and let your advisor team know your communication style. Financial DNA body of work has found communication style traits can be characterized in three areas: Personality, Review Process, and Correspondence. The following is the kind of information I like to see from a client I’m working with:
Personality Characteristics & Review Process and Other Communication
Be an active listener
Move quickly to the bottom line. Give direct answers; get to the point and use graphics, one-page overviews and/or verbal communications
Use logic and key points vs. detailed summaries.
I need all the information; remember my need to analyze, encourage my input
Slow down the pace of communication vs. speed up the pace of communication
Do not mistake my lack of response for inattention
Offer options so I can decide and allow me time to reflect
Look for ways to minimize the risks
Newsletter or other educational material: Email, snail mail, text or all?
Appointments: Phone call, email, text or phone call followed by text or email?
I’m encouraging you to fall in love with your money, not in an unhealthy, co-dependent way, rather a partnership of respect and excitement! Your relationship with your investment vehicles and the financial professionals that offer them, are equally important as your relationship with your spouse, boyfriend/girlfriend, family, and friends. It deserves the same care and attention you would extend to those you care about. Knowing your money rules and developing them in congruence with your values, goals, and objectives will provide you with a clear path to financial success!
To get more information about how to create your money rules, visit www.HomeStretchFinancial.com and schedule a complimentary discovery appointment.
Judi Snyder, Executive Contributor Brainz Magazine
Judi is a retirement and transition coach, helping people nearing or in retirement find purpose, wellness, and financial certainty in their golden years. In 2004, she transitioned from employee to entrepreneur into financial services. Because of her own transition, she understands the unique challenges that come along with creating a new identity and purpose. Judi became a CeFT®, Certified Financial Transitionist®, to further enhance her solutions for those going through financial transition and address the financial aspects of transition. Becoming a CPRC, Certified Professional Retirement Coach, expanded her tool chest to help clients navigate through the non-financial aspects of retirement, such as finding purpose, exploring spirituality, and health and wellness, which are as important as the financial planning yet rarely addressed. Happiness and fulfillment are about more than money.
