Category : investing behavior

Hamburger Helper Really Helped Me

For the past 30 years – pretty much all of my adult life – I have been a planner and a worrier.  I am the type of person that starts packing two weeks before a big vacation.  I am the type of person that starts putting a Thanksgiving grocery list together in OCTOBER.  It isn’t that I plan to worry, I just worry if I don’t plan.  These traits are deeply embedded in the genetic code of my family going back multiple generations.  At times it can be a good thing to keep me on track, but often it can be overwhelming and take up too much of my day.  If I get this worked up prior to a beach vacation or family holiday, you can only imagine how I feel when it comes to retirement planning.

One of my biggest fears in life is running out of money in retirement.  The idea of working in my 70s and becoming a burden on my kids has caused me to lie awake at 3AM more than a few times.  I know how hard retirement planning is going to be for today’s youth so I do not want to add taking care of mom and dad to their plate.  Now I am not just worrying about my own retirement, but the retirement of my children 50+ years away.

How have I learned to deal with this and prevent what is left of my hair from falling out?  By identifying which factors I have control over versus the factors I do not.  I have no control what the market is doing, at what age I die (outside of eating less Kansas City BBQ…not happening), or what the federal tax code is going to look like in 20 years.  What I can control is my savings rate, which funds to invest in, and doing my best to eliminate debt.

I was lucky growing up that my dad was also a planner/worrier, and he taught me at a young age to save and then save some more.  He worked for the same large company for 33 years, working long hours, often travelling more than he was home, and missing valuable family time for the good of the company.  At the age of 53 the company decided he was too old and “retired” him.  It was a scary time and had he not saved for a rainy day, our family would have been in the middle of a monsoon.  Thankfully he was a third generation planner and was prepared by saving, living below his means, and reducing debt.  I’ve always admired him for taking control of his financial situation and not leaving his later years to chance.  He has been retired now for 23 years and is still going strong.

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Something about Mary…

When the 60-something woman walked into the office I could see her fighting back the tears.

From time to time this happened to me as a financial advisor. After all, once you’ve counseled 500+ families about retirement, you’re bound to see some tough situations.

But on that day in April of 2009, it turned into a situation I’d never forget. The kind of situation that would make me sick to my stomach.

As I came out to introduce myself to her (let’s call her Mary), she thanked me for my time. I’d never met Mary before. She’d been referred to us by her husband’s co-worker.

We made our way to the conference room and as I always started off meetings, I asked her, “What can we do to help you today?”

Mary replied, “I’m in trouble. And I don’t know what to do.”

“Okay, what’s the situation?”

“Up until last Friday, I worked at a small regional bank for 32 years. On Friday, the Federal Government came in and seized the bank. They locked the doors. We are officially out of business. Which means I lost my job.”

“I’m really sorry to hear about that. That’s definitely not an easy thing to digest…”

“Yeah, well my job is my last concern. The problem is that I had my entire retirement account invested in the private stock of the bank. The valuation last year said it was worth $750,000. Is there anything I can do?”

I already knew the answer and I suppose deep down she did too…the simple answer was there’s nothing she could do. And the stock was virtually worthless. 

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Don’t Call Me Lazy

I am always intrigued by the comments we get on blooom’s Facebook page. Some are wonderful and uplifting, some are hilarious, and others. . . well let’s just call them “interesting.” But the ones that really catch my attention are those that are critical. And it’s why they are critical that concerns me. These comments criticize our clients for using blooom’s service. They are critical because these people believe that personal finance should remain personal—handled solely by that individual.

More specifically, the comments call out the blooom clients for being lazy or dumb. I came across one this past week and for some reason the following comment hit me hard and prompted me to write this blog:

Why pay someone to look over your money when you should be the one doing it[?] And you wonder why so many Americans are in debt, cause they are lazy with their finances. Sorry not paying someone to make money off of me cause I’m [too] lazy to watch over my own 401k.

When I read this, I didn’t get upset because I am an employee of blooom. I got upset because I am a client of blooom. According to this person, that makes me lazy and to some others who have commented, it also makes me dumb. So not on behalf of blooom, but rather on behalf of blooom clients, I feel compelled to provide a more expansive response to these types of Facebook comments.

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There are a Thousand Ways to Save: Pick One and Start Today

We are mid-way through National Save for Retirement Week so it makes sense that it’s also “Brown Bag” your lunch day. There is no shortage of “how to save money” blogs on the internet and maybe I am just feeding the beast by offering my five tips. But the good news is, there ARE thousands of articles out there about saving. So whether you are focused on saving for your “Life After Work” or have other goals like saving to pay extra on your student debt or saving for the down payment on your first home, there is never a shortage of tips to help you along the way. Just pick a few that you like and start saving!

  1. Remove yourself from alerts: It’s hard to resist the temptation of shopping when every day you are receiving emails and text messages about the next “can’t miss” sale. Shut down the impulse noise to keep your budget on track.
  2. Make it a competition: My husband and I follow the Dave Ramsey Cash Envelope System. We take out a certain amount of cash each week that we allocate for our own personal use. We call it our “fun money.” But we still found ourselves putting some incidental purchases on our cards that caused a lot of budget leakage. So we now have a bet. We can only make purchases with our “fun money” cash. Whoever puts any “extras” on the debit or credit card has to treat the other person to dinner and pay for it with their “fun money.” The thought of losing a bet to my husband is a great motivator to keep the plastic in my purse.
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Should I flip out market correction

401ks aren’t life or death. BUT they can feel like it. So go with me here for a second…

Imagine…the day has come to an end, you’re exhausted and ready to flop on to the couch for what is left of the evening. You flip on the TV and are instantly bombarded with reporters talking about how the stock market plummeted that day with images of stereotypical floor traders hysterically yelling “sell, sell, SELL out of the market”. Market corrections are happening. Naturally, you frantically grab your computer and log into your 401(k) account to see for yourself and you notice your account balance is down 5% for the day. How are you feeling about that?

Odds are you feel panicked and worried that your retirement is in jeopardy. You aren’t alone in having this feeling. Seeing a big loss on your statements can be nerve-racking. The thing to remember, however, is that a loss on paper is just as arbitrary as thinking you can never drive your car again once your gas tank reaches empty. It’s not the end of the world and if you don’t sell everything in a panic your investments will be back to normal in a matter of time, it just may take some patience.

There are a few important facts about market corrections that you should always keep in mind:

  1. Market corrections are inevitable. No matter how much of a market-timing wizard you believe that you are they can’t be avoided. What goes up must come down, and vice-versa with stock markets.
  2. Since 1928 there have been 26 market corrections, where the market dropped between 10-20%. The average length of each correction is 136 days. While that sounds like a long time it is actually quite brief compared to bull markets where markets grow for 464 days on average with gains of 55.86%. While some market corrections may be far worse than others and may take longer to recover the markets always recover and then some.
  3. Market corrections are beneficial to investors in the long term. If you continue to invest through a market correction you will bring down your average price-per-share getting you a higher number of shares for the same price. (See: What investing and ice cream have in common). This could lead to greater upside potential once markets begin to recover.
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