MoneyMinding Monitor

by Catherine Novak, based on MoneyMinding’s 12 Simple Steps by Tracy Piercy

Train wrecks.  Derailments.  From where I write this in British Columbia, occasionally our newscasts feature images of a chain of heavy train cars lying on their sides, spilling their contents into a river canyon or a ditch, looking both ungainly and fragile as their small wheels spin helplessly in the air.  It’s never pretty, and clean-up is often difficult.  Is it any wonder that when crises happen in our life, we sometimes talk about being “derailed”?

For long periods of time we chug along the track that’s been set out before us, delivering our goods, sheltering our passengers.  Then, WHAM!  A rockslide on the track, or a cow, or even the “wrong kind of snow” causes us to lose our grip, or get jerked off the rails.  Whether your metaphorical derailment is a physical injury, a relationship breakup, a sudden financial loss, loss of a job, or death of a family member… these are the circumstances that life throws at us, and putting ourselves back on track often takes time and a series of small steps.

Ironically, often the “life crises” are compounded by money crises.  When you can’t work because you are sick or injured, or you are caring for someone else, that can hit you right in the wallet.  So what are the steps you need to take get moving forward again?

The first step, and it’s not an easy one when you are knocked over, is to be grateful for where you are.  Unlike trains, you are a human being, capable of love, appreciation and gratitude even in the most unlikely circumstances.  It might just be “Thank heaven I’m not dead!”  or “I’m so glad I have family members who love me,” or “Well, I’m grateful that this lousy thing is done.  Let’s see what I have left to work with.”  When you know what you are grateful for, take the time to record your thanks – in a notebook, on index cards, or on sticky notes by your bedroom mirror.  Don’t let those items of gratitude slip out of your life.  Recreate your moment of thanks daily.

This is the perfect time to reflect, reassess, and to make new goals that take into account the life event that you have just been through.  When you have your goals, write them down and carry them with you. 

Obviously, these first two steps are much broader in scope than you will find in most financial repair “how-tos”.  But the truth is, financial health is built on a foundation of overall well-being. When you have these first two priorities in place, then you can ask yourself, “What is the next baby step I can take to reach my goal?”  That next step may be to record your daily expenses, so you know where your money is going as well as where it is coming from.  It may be to start putting aside your change, so you can use it later for “guilt-free” purchases.  Do that one next step consistently for 30 days, so it becomes a part of who you are.  If you try to change too much at once, especially when you are already dealing with the larger change of your “derailment”, your new habit may not stick. 

Expect success, at least in this one manageable area of your life.  Taking charge of your money does not have to be a struggle, provided you approach it in a step-by-step fashion.  You may even find it to be one area of calm and control in an otherwise turbulent situation.

by Catherine Novak, based on the MoneyMinding 12 Simple Steps by Tracy Piercy, CFP

A career magician named Tony Eng lived in my town of Victoria BC all his life, until he passed away earlier this year. When he died, it was major local news, because so many local families had been entertained and bedazzled by magic tricks, especially his sleight of hand. Tony could perform standing right in front of you and play tricks with handkerchiefs and cards with such dexterity that even though you were right there, you had no idea how he “put one over” on you. And you loved that he tricked you, because he did it with such warmth and love of his craft

Of course, not all trickery is so warm and fuzzy, especially when it involves your money. Now, this isn’t an article about con artists and other charlatans who are deliberately out to separate you from your money against your will. Plenty of articles have been written about those criminals; many consumer organizations, securities commissions and other regulatory organizations have information on how to protect yourself against theft, fraud and shady deals.

The fact is, we can be tricked by people and circumstances that bear no ill will at all towards us. We can be tricked by the nightly news, by a hot tip from our brother-in-law, or even by our own financial statements… if we’re not maintaining the right focus. Trickery happens when your attention is shifted away from the real focus and onto something else that’s eye-catching and flashy. You may think you have your eye on what’s important – in fact, you’re just looking at the carefully-shuffled deck, or the shiny object. And when your attention is diverted in this fashion, you miss what’s important. You’re duped, and the joke is on you.

The biggest “tricks” when it comes to money are the ones we play on ourselves, when we let ourselves get pulled off-track by undue focus on individual factors that don’t take into account our personal “big picture”. Two of these factors are rates of return and advisor fees. These can form a piece of the picture when we are making financial decisions, but to focus only on these “numbers” is to ignore vital information like your investment philosophy, the quality of your investment and when you need to turn that money into income.

What does it matter if your advisor fees are 2.5 percent when they pay for expertise that would have cost you more time and money to learn on your own? Why should you lose sleep at night in an investment more volatile than you can stomach just to chase a higher rate of return? Perhaps you can reach your goal with a lower rate of return delivered more consistently.

When it comes to money, your focus should always be on your personal, specific goals. Do you know how much money you will need to live life the way you want to? Do you have a plan to make that money come in each month, now or in the future? If so, make that plan come to life. Getting distracted by scary news about the financial markets won’t help. Spending too much time fussing over management expense ratios is counterproductive. Exhausting yourself searching through newspapers and driving across town to save two bucks with a coupon probably won’t help either.

Now is the time to sit down with a trusted advisor, with your spouse, even just with your list of priorities and ask “What am I doing to secure my income on a monthly basis?” You may decide to reshuffle some priorities. You may find that your portfolio needs rebalancing. You might not take your brother-in-law up on that tip -but then again, you might if it contributes toward your monthly income goals! At least this way, your eyes are open and you are looking at something solid and unchanging.

A picture may be worth a thousand words, but a video that tells a story is worth a thousand pictures! 

We’ve just reformatted some of the best stories from MoneyMinding members, and made them available on our website.  To find out what people have experienced as they use the MoneyMinding Makeover system, go to http://www.moneyminding.com/mm/success_stories.php

It only takes a couple of minutes, and we think you’ll be inspired!

The best way to cope with unexpected expenses is to be prepared for them in advance! Financial planning is where you put controls in place that help you cope with both the expected and unexpected events in life. Here are my top four tips:

1.  Put systems into place that prepare you for unexpected expenses.  It could be a sum of money set aside as “savings” that you add to each month. Many advisors recommend having 3 months’ earnings set aside for just such a purpose.

2. Understand your risks and to take precautions to minimize them. If you aren’t aware of where your risks are, or haven’t evaluated them recently, sit down with a qualified financial advisor at a reputable firm. Consider all the potential areas of exposure: death, sickness, loss of income, loss of money, old age, unexpected accidents or repairs, and so on.

3.  Where those risks could result in a devastating change to your life, secure your peace of mind with appropriate insurance.  Many people have the basics covered, but what about critical illness, disability, business overhead or long-term care?  There is pet “insurance” too, which can spread the inevitable costs of caring for you pet’s health over time, like a forced savings program.

4.  Look at your sources of income.  Do you have more than one?  How much are you in control of its continuity? Many excellent business ideas have come about because the owner faced a critical expense, and faced it with an idea that brought in more money.  But if you are proactive and think of that money-making idea before an expense takes you “over-budget”, you will be in better shape.  Your secondary sources of income do not have to take a lot of time, either.  Income-producing investments, rental properties, or an idea that can be licensed or that produces royalties all count as alternative sources of income.

You know we are saying something different when a corporate press release gets picked up by one of the most prestigious publications in the country!

 Investment Executive magazine took our story “Get Rid of the Cliche Financial Advice For Real Results”, edited it just a bit, and ran it in their online edition.

 Their title is “Educator urges investors, advisors to take active role during financial crisis”.  Actually, we urge investors and advisors to take a more active role at all times!

 And of course, the best way to start taking control is by educating yourself, and becoming both familiar and comfortable with discussing your finances and your life goals.  That’s why we developed The MoneyMinding Makeover and membership in The MoneyMinding Network.

Victoria BC - Certified Financial Planner and founder of MoneyMinding Inc., Tracy Piercy, volleyed criticism at financial commentators who say only “don’t panic” in the current financial crisis. This financial educator is offering alternative advice, recommending a much more active role for investors and their advisors.

“People are looking for practical, timely answers that will put them back in the driver’s seat, even if the road is rocky in today’s markets,” says Piercy. “But the content of most personal finance articles offers nothing concrete. They might as well tell the investors reading it that they just need to give all their trust to the professionals who have crystal balls and will make sure they live happily ever after.”

Piercy continues, “If you rely on someone else’s professional help to guide your financial affairs, you still need to have an active role in the outcome.  In medicine, you see a doctor, but you have to take the medicine and live a healthy lifestyle; same thing with money.  The problem with the cliché prescriptions being offered today is that they don’t provide anything original, timely, useful or practical. Real people need personal answers that will actually help.  Even the language is generic and not well-defined.  How about explaining what risk is, for example, rather than telling people to ‘avoid excessive risk’?  Rather than saying ‘don’t panic’ and ‘stay the course,’ proactive advisors give investors a strategy on when and how to take action to stay in control.”

Piercy recommends that financial professionals make client lifestyle goals and monthly income the focus of any conversation involving whether or not to stay invested.

Piercy’s company, MoneyMinding, works with financial professionals and their clients to help demystify personal finance concepts and the financial markets, so individuals can gain control of their money “without sacrifice or cutting back”. It accomplishes this with two flagship products, the MoneyMinding Makeover Course and the MoneyMinding Network, as well as through books, seminars, special reports and CDs. Visitors to the moneyminding.com website can download the “Mending Your Money Mistakes” report free of charge when they subscribe to the newsletter, The MoneyMinding Messenger.

For more information:
Catherine Novak
Marketing and PR Coordinator
250-592-0457 or toll free 877-764-6444
catherine@moneyminding.com 

MoneyMinding Network Launch Timely Answer to Personal Money Questions

Victoria BC – MoneyMinding Inc. announced today the launch of its live and online networking component, The MoneyMinding Network.  Designed for both financial industry professionals, and the clients who work with them, it features both educational evenings and an on-line social networking presence.   “I see the MoneyMinding Network as a vital resource in today’s financial climate, where uncertainty and confusion seem to be overshadowing people’s ability to make good financial decisions”, says Tracy Piercy, CFP, MoneyMinding’s founder. “Networking organizations for business development, community service or simply shared interests have been around forever,” continues Piercy “We are doing something new with networking by integrating day-by-day financial education, unconnected to financial product sales.  It’s simply about helping people get better results from their personal finances by asking the right questions and making the right contacts.”   One example of the MoneyMinding Network in action is the Mix ‘n’ Mingle, started earlier this year to offer both education and local networking.  Each Mix ‘n’ Mingle has drawn close to 100 people who gather to listen to some of Victoria’s most knowledgeable financial and property experts. MoneyMinding was developed by Tracy Piercy, a Certified Financial Planner professional, to teach financial education that explores opportunities “without sacrifice or cutting back”.  Since its inception over 3 years ago, MoneyMinding has grown to serve thousands of people across Canada, the USA and around the world.  MoneyMinding also supports its sister organization, The MoneyMinding Foundation, a non-profit dedicated to promoting financial literacy to people who otherwise could not afford it.

What would you do if you won 3.6 million dollars?  Would you run out and spend a bunch of it?  Give some of it away?  Take your time and make a decision? 

If you decide to take your time, you’re on the way to a good start - still, I’m puzzled why Maple Ridge BC realtor and lottery winner Peter Dushop chose to take his 3.6 million and stuff it away in a safe deposit box for almost a full year while he pondered his options.

The thing is, excellent and safe “holding tanks” for money are available for people who want to think things through before they make a big money decision, such as investing a lottery windfall, an inheritance, or even buying a house.  There are high-yield savings accounts, or money market funds which would be perfect for holding your cash until you know better what you want to do with it.  By waiting nearly a year to claim his money, Dushop said “no thank you” to tens of thousands of dollars of interest.  A year ago, money markets were yielding 4.5% annually, and in the last couple of quarters that return has dropped to around 3 percent.  That’s not a lot when you are looking at hundreds of dollars, but when you are talking about $3.5 million, it could have made $100,000 interest or more.  And that is the interest you get for “playing it safe”. 

So?  Doesn’t he have enough already?  He might, though research shows that most lottery winners don’t hold onto their earnings, spending and losing the money until they reach their previous standard of living, usually within 5 years.  If Mr. Dushop spent the year educating himself about money management, he may defy the odds.  I get the feeling though, that he spent the year scared stiff to take any action because it could be “the wrong move”.

That’s a shame, because we need more people with access to money who are unafraid to use it and grow it, enriching their lives and more importantly, the lives of those around them.

Question: How many credit cards can you leverage for investing before it damages your credit?

Answer: If only the answer were as simple as a number!  I could say, well, 9 - and you’d be on your way!  In reality, the credit card companies and credit bureaus don’t care whether you are using your cards to buy stereo equipment, or to invest.  But they do care about how you manage your credit. 

Here are the areas to be aware of:

• The effect on your credit score when you fill out a credit application.  Each time a company or financial institution makes an inquiry, it can adversely affect your credit rating.  If you fill out a credit application, be reasonably sure that you will qualify for it.
• The relationship between your outstanding balance and your limit - you should use only 1/3 of your available credit at any time.  Leave lots of room!
• Your frequency of use - it’s better to use a card regularly, which can be as little as once a year.  Keep it somewhat active.
• Overall history of the card and the length of time you’ve had it.  A long credit history with a couple of bumps and snags is better than a short history where you are an unknown quantity.
• Your total debt-to-service ratio; in other words, your debt payments compared to your income. Again, keep this to a maximum of 30%.

If you keep within these guidelines, you can use the credit available to you to fund wonderful income-generating projects, or to take advantage of a terrific opportunity and have a terrific credit score.

The Wall Street Journal Online’s blog on wealth quoted an interesting, if small, study on splurge spending which obviously touched a chord in its readership.   

 Usually, articles in WSJ Online’s wealth blog generate around 15 comments - maybe over a hundred if you are combining the topics of wealth and politics, which tends to bring out the armchair pundits.  But the post “Splurging is Good for Your Health” generated a whopping 477 comments at last count, with most everyone weighing with their own judgements on whether “overpriced indulgences” lead to happiness and less regret.

 The “spenders” and the “savers” seem to show up in equal numbers, and with equally valid justifications for their points of view.  A few people dissed the study itself, published in the Harvard Business Review, for being too small and from too narrow a demographic. 

The wisest comment - at least in the first 100, which was about as far as I got - was this one, from one Mike in the U.K.:

“It’s easy to spend too much and have no future - It’s just as easy to spend too little and have no past - The difficult bit is to get it just right.”

That’s why it’s so important to keep your goals and your values foremost, and know what they are before you start building your “ideal budget”.