Self-Awareness and Money

Self-Awareness and Money

I hope your fall season is going well and that you’re enjoying the cooler weather. Our newsletter topic this month might seem peculiar. What does money have to do with self-awareness, and self-awareness have to do with money? Quite a bit I’d say.

A Case Made

“Without knowledge of self there is no knowledge of God…without knowledge of God there is no knowledge of self.” Who said this? John Calvin, the great reformer! Now, we can take this quote out of context and too far by saying that introspection or self-awareness is more important than a knowledge of God. Calvin makes the case that these go together. We must see ourselves for who we truly are before a holy, righteous God. After true introspection should come humility.

But what I would also argue is that Calvin saw a place for knowledge of self. We often hear of self-forgetfulness – ignore our needs and only focus on others. But as I reflect on the life of Jesus, I can’t help but notice how many times he left the crowd to be alone. He recognized the times he needed to be alone with the Father, even though there were sick people to heal and lessons to be taught. Jesus had greater self knowledge and awareness than any other man who has walked this earth. He knew his calling, his mission, and his identity. And these impacted every decision he made.

And Money?

We all relate to money in different ways. Some of us never (or seldom) worry about it. Others think about it more often. And others are consumed by it. Where do you fall?

I would argue that first knowing how you personally relate to money is critical to making progress financially. If we know we’re prone to blow cash the minute it comes out of the ATM, then maybe that method is not best. Or perhaps it’s the opposite for you: cash gives you needed boundaries of when it’s gone, the spending stops. If it’s plastic, then spending continues.

We’re often asked by clients: Which budgeting system is best? We respond: “The one that you’ll actually do.” If a yellow pad and pencil keep you on track, then that’s best. If an excel spreadsheet, great. If an app, so be it! Ultimately, which system best helps you accomplish your goals?

What about investment account balances? TV financial pundits? Research online? Are these helpful for you, or do they create more stress? Perhaps you check your blood pressure next time you partake. Or maybe you already know the answer…you just don’t want to change. That’s okay for now. At least you know. But maybe change will come when “the pain of staying the same becomes greater than the pain of changing.” -Dr. Henry Cloud

Having self-awareness about your tendencies with money is critical.

A Helpful Tool

The Rivertree Team recently started the book The Road Back to You: An Enneagram Journey to Self-Discovery by Ian Cron and Suzanne Stabile. Whew! We have already had some good laughs as we’ve discussed our types and tendencies (and some occasional grunts as we read about the not so good parts of ourselves). The goal is that we know one another and ourselves better to create an even healthier work environment.

And at the spiritual level, considering what Brother Dave said to Ian, the author of this book: “Just remember, it’s only one tool to help you deepen your love for God and others….There are plenty of others. What’s important is the more you and Anne grow in self-knowledge, the more you’ll become aware of your need for God’s grace. Not to mention, you’ll have more compassion for yourselves and other people.”

What used to frustrate us about ourselves and one another can hopefully be replaced with compassion…and some friendly chuckles. 

Now What

Have you taken this journey before? If so, has it been helpful? If you haven’t taken this journey, I’d encourage you to do so. I am confident you’ll find it worthwhile.

*For financial planning clients of Rivertree Financial Planning: Please contact us as soon as possible if you have had any changes in circumstances, objectives, goals or risk tolerance.

Milestone: Rivertree Celebrates 10 Years!

Milestone: Rivertree Celebrates 10 Years!

We often hear of celebrating milestones: victories, championships, new beginnings, births, etc. But I generally don’t associate milestones with defeats, losses, deaths, and other unfortunate events. Listen to what Tim Fortner says:

“A ‘milestone’ comes from the use in olden times of having stones which told the traveler how many miles it was to the next city. They were a reference point which reassured the traveler they were on the right path.  Milestones have also been used to describe significant events in one’s lives.  In the Bible, especially, the Old Testament, we see a heap of stones to commemorate a significant event in the life of an individual or of the nation or people.

Joshua and the nation of Israel were experiencing some milestone events. Milestone events can be wonderful or they can appear as trouble, a loss, a setback. Certainly the defeat at Ai was especially troubling for Joshua and the nation of Israel.

With the Lord, a setback is a set up for a comeback. Now in order for this to be true, we must learn from our mistakes. We must learn the lesson the Lord would have us to learn, don’t we? Or else we are doomed to repeat them.  And when we learn something, we can begin again, more intelligently.   After what had happened at Ai, Joshua and the Israelites were discouraged.  Let’s face it- discouragement over the past failure and fear of the future are two common reactions which accompany failure.”

Your Milestones

In light of Fortner’s words, how would you describe and document your milestones? Could you do it in the form of a story? I was challenged some thirteen years ago to document the “fence posts” in my life – the significant people, places and events that have most shaped me. If you had to list your ten most significant “fence posts”, who or what has shaped your life, for better or for worse, what do you think that would look like?

For me, this exercise was fascinating, eye-opening and sobering all together. Then came the harder challenge: sharing these fence posts (i.e. “milestones”) with others. But not just any others – safe, loving people whose undivided attention was listening to my story. Whew! I’m having to take a deep breath even now as I remember!

Financial Milestones

What are your financial milestones? First job, first house, first credit card, last credit card (better!), debt payoff, mortgage payoff (party!), retirement account balance, extravagant giving, etc.? The list could go on, but again, what are yours? We’ve discussed many times the importance of setting goals. You are far more likely to celebrate some financial milestones if you have a plan in place. Behavioral finance research (which we believe in and practice with clients) continues to show that having a plan in place alongside your goals gives you far more probability of achieving them.

Our Milestones

In August, Rivertree set a milestone of its own. We were thrilled to celebrate the 10-year anniversary of the Company! Wow, how the time flies! As often said (particularly about parenting), the days are long but the years are short.

We have many milestones here at Rivertree:

-Opening an independent shop in 2009 on the tail-end of the Great Recession

-Amy joining the team (and taking a leap of faith in a young Company) in 2010

-Jonathan joining the team in 2013

-Brent joining the team in 2015

-Phillip joining the team in 2016 and continuing in a consulting role after leaving in 2017

-Valerie joining the team in 2017

Fast forwarding to today, we oversee approximately $140 Million in client assets and service over 500 households. We’re amazed and humbled at these milestones. And, they would never have been possible without the trust and confidence of our clients. We are committed to continually earning our client’s business as we walk alongside them and celebrate their milestones. From the bottom of our hearts, Thank you!

Now What?

Do you have the courage to document your milestones – the good, the bad, the ugly – that shaped you? Or better said – your personal story? If you do, I challenge you to share your story with a good friend. The outcome of this process may surprise you!

*For financial planning clients of Rivertree Financial Planning: Please contact us as soon as possible if you have had any changes in circumstances, objectives, goals or risk tolerance.

The Perils of Do-It-Yourself IRA Transactions

The Perils of Do-It-Yourself IRA Transactions

I hope your summer months wrapped up well. For many of you, kids are now back in school and a routine is gladly welcomed. For others, this time of year may be business as usual. But may I share with you an observation I’ve had throughout my career? August and September tend to be restart months…perhaps a second New Year. Goals for the year may be revisited. Commitments slacked on become a priority again. A renewed energy might be felt to conquer certain tasks. If you haven’t already, I encourage you to revisit your goals and see what you’d like to accomplish before year-end. Once Thanksgiving comes, you’ll find it harder and harder to find that energy.

Shifting to this month’s topic, I’d like to share an article I recently read by Ed Slott, the “IRA Guru” as I call him. In this article from Ed Slott in Investments news, he shares real life stories about IRA transactions gone wrong. I think there is much to learn from these stories. Here are some thoughts.

The “Do over” option is gone

Prior to 2017, investors had the option of recharacterizing Roth IRA conversions in the event a mistake was made (or often times a better conversion opportunity occurred). The Tax Cuts and Jobs Act eliminated this strategy. When implementing a Roth IRA conversion, an investor is converting pre-tax dollars to tax-free growth dollars. How do you get there? By paying taxes on the amount converted.

In the story Mr. Slott references, an investor made a mistake by converting $2,000,000 rather than $20,000. Whew! How a simple decimal point caused significant taxes due! You might desire to be in the highest income tax bracket, but this is not the way to get there.

Working with an advisor could have helped correct this problem. Unfortunately, this investor is most likely going to tax court pleading for a private letter ruling from the IRS (which is a costly endeavor I might add).

Checking the correct box

Few realize the incredible importance of completing retirement plan rollover paperwork accurately. You could have it 95% accurate, but the 5% mistake could cost you thousands, if not tens of thousands, in taxes.

Mr. Slott references a Veterans Affairs person who attempted to do a tax-free rollover to an IRA from her Thrift Savings Plan (TSP). Rather than her retirement dollars being rolled over tax-free, she was paid directly with 20% mandatory federal tax withheld. Here’s the problem: The 20% may not be enough depending on the dollars at stake. Here’s the bigger problem: Even with this mistake, the rollover could have still occurred utilizing the “60 day rollover rule.” However, this investor was working alone and failed to get this done. And sadly, after spending considerable money on pleading her case in tax court, she lost her case.

Beneficiary Designations: Oh, How Important!

The extreme importance of proper beneficiary designations is something we have seen firsthand at Rivertree. The rules for retirement plan beneficiary designations (e.g. 401k, 403b, TSP, pension plan) and IRAs can be quite different. We often say to our clients that the “I” in IRA stands for individuals…that’s you! Qualified retirement plans set their own beneficiary and distribution rules. And their rules may not be exactly what you would desire for your beneficiaries.

Know this: Some plans will distribute 100% of the qualified beneficiary’s money paid directly to them rather than to an Inherited IRA. Whew! This is another significant tax hit that could have been avoided with proper planning.

As part of our financial review checklist, we revisit and update beneficiaries on accounts. Keep in mind that for some qualified plans, particularly pension plans, beneficiary designations are kept on file in the HR department. And these accounts could still have an ex-spouse listed as primary beneficiary. Even if you have updated your estate plan (e.g. Last Will and Testament), the beneficiary designation takes precedent over a will.

Conclusion

In closing, here’s a quote from Mr. Slott: “The tax laws are particularly complicated and unforgiving. Some mistakes, usually the biggest ones, cannot be undone. Advisers can help clients avoid these tax disasters and provide real tangible value, before the damage is done.

We would be glad to discuss with you any of the items mentioned in this article. In the meantime, finish strong for 2019!

*For financial planning clients of Rivertree Financial Planning: Please contact us as soon as possible if you have had any changes in circumstances, objectives, goals or risk tolerance.

Financial Planning – Outside the Lines

Financial Planning – Outside the Lines

Are you tired of taking sides? Tired of having to choose one over another? Simply tired of making so many decisions every day? Well, I’m not surprised given that some studies estimate the average person makes 35,000 decisions a day. I feel exhausted just thinking about this!

So, what’s a person to do? Well, a starting place is simply to acknowledge the exhaustion that comes from having to choose so many times on a daily basis (enter “decision fatigue”). And if you are symptomatic of the condition “paralysis of analysis,” it’s just that much harder.

What about financial planning? Think you have some choices to make? Well, I think we’d agree that you do. So, what does financial planning “outside the lines” look like? We have some thoughts.

Firstly, Giving Credit Where It’s Due

I read Scott Sauls’ book Jesus Outside the Lines about 2 years ago. The timing of this book was perfect for me. Scott’s writings resonated with me, particularly as it related to politics, money, and hope (or realism). He approached these quite sensitive topics with humility and grace. I greatly appreciated this. So, thank you, Scott, for your book and helping me with the title of this post.

Investments

Let’s name a few choices you have: stocks, bonds, mutual funds, ETFs, annuities, passive, active, momentum, contrarian, etc. Shall I go on? I’ll spare you.

So, what’s an investor to do? And which of these options are best? Ultimately, you have to make a choice. Or, you choose to hire someone to help you.

Insurance

Buy term and invest the rest? Buy term and spend the rest? Or buy permanent, whole life insurance? Perhaps variable universal life? Follow the duck to Aflac or rely on your traditional health insurance? Work with an 800# rep or have a local agent? Which is best? (Answer coming…)

Estate Planning

Save money and do a cookie-cutter last will and testament? Or pay a local attorney to help? Retitle all assets possible into a revocable living trust, or go through the probate process? Name specific beneficiaries on all accounts, or let your will do the work?

So many decisions here. What’s a person to do?

Financial Planning (Outside the Lines)

It’s this: Developing a financial plan specific to you and your needs, goals and desires. It’s not a robo-advisor or robo-plan. It’s not a one-stop shop online or a local company advertising that they have all the right answers and solutions. It’s not an insurance company promising (almost) to save you 15% on premiums.

I remember early in my career thinking I had the perfect plan and most all of the answers to clients’ concerns and questions. My heart’s motive was to help. However, I learned with time and experience that I needed to step out of my personal story and enter into their stories.

The client may communicate their desire to have life insurance that is guaranteed to always be there. They may communicate their desire to have retirement income that they can never outlive, regardless of market conditions. The client may share their desire to work with a more traditional “brick and mortar” bank rather than an online bank paying a higher interest.

It starts with you, not us. Our personal plan might (or will) look different than yours. We are happy to share what we are personally doing in our financial plan. But again, we expect our plans to look a little different.

Our job and passion is to walk alongside you in your life story. We are morally and legally obligated to put your interests above our own. That’s how it should be.

We are deeply thankful for those who have asked us to come alongside them. It would be a privilege to have a conversation with you about how that might look in your life journey. And be assured that your financial plan will be designed outside the lines.

*For financial planning clients of Rivertree Financial Planning: Please contact us as soon as possible if you have had any changes in circumstances, objectives, goals or risk tolerance.

A Counterintuitive Freedom

A Counterintuitive Freedom

I hope you are having a good summer. I always enjoy the 4th of July holiday. I anticipate good food, good fellowship, and of course, some fireworks!

Before I continue, I’d like to pause and thank those who have served and fought for our country’s freedom. From the bottom of our hearts, thank you! Thank you to those who are serving now and have served in the past. I am certainly guilty of taking this freedom for granted many times, which is why I’m thankful for holidays and special times as these, when we honor those who have served.

The topic of freedom was discussed in our last Rivertree team meeting. Specifically, we discussed what freedom looked like in regards to finances. We could have gone many directions here: budgeting, freedom from debt, retirement nest egg, etc. But our discussion quickly went into a different direction.

Children

Many of us have children, grandchildren, or children that we may not be related to but consider our own. What a blessing children can be! And oh, what a challenge they can be…

Children need us. It feels good to be needed. And sometimes, it feels good to just be alone. Both are good and healthy.

But something happens to all children. It’s unavoidable. They grow up! Yes, I’m stating the obvious here, but humor me and keep reading.

Children grow physically. They grow emotionally. Hopefully for many of us, they grow spiritually.

But here’s my question: Are they growing into adults? I’m not talking about age of adulthood per your State’s law (FYI it’s age 21 for Mississippi, not 18).

Adults

What am I talking about in regards to adults? A responsible, contributor to society and at the core, a desire to be an adult.

But what happens? It doesn’t always go this way. Children rebel. They leave home before they’re ready. They denounce the wisdom they’ve learned through their early years. They hurt the ones who love them the most.

It’s devastating. What went wrong? Is it our fault as parents? I’d argue for most of us the answer is, “No.” It’s not your fault.

The Counterintuitive Freedom

Thankfully, we find the story of the prodigal son in Luke 15 of the Bible. The younger son requested an early inheritance (which is seldom a blessing to a child I might add). The son lived recklessly, wasted his money, and found himself feeding pigs (and even desiring the pigs’ food!).

At this point, we learn that the son “came to his senses.” He finally reached his point of true brokenness and need.

So, where’s the counterintuitive freedom I keep referencing? It’s this – Allowing our children to reach the place of brokenness rather than rescuing them. We “rescue” by giving them money. We rescue by bailing them out (including from jail). We rescue by not allowing them to truly experience the natural consequences of poor decisions and behavior.

“But what about mercy and grace, Scott?” I hear ya. I treasure mercy and grace. I’ve received it time and time again, from humans and The Lord Almighty.

When they’re children, we often do extend mercy and grace. We may discipline using other consequences so they don’t have to experience the natural consequence (and tragedy) of crossing the road before looking or playing with (or in) the fire.

But our topic today is adults, not children. For adults, it’s time that they experience natural consequences. It’s what the father did for his prodigal son. He allowed him to squander his wealth and live with pigs. Don’t you think this father had the ability to find his son and go rescue him? We don’t find this answer explicit in Scripture, but I think we can infer that the father did have this ability. But in his wisdom, he waited.

As a father, I sure wish Scripture gave us more information about what the father did and what he felt while he waited. How long did it take? Was he angry with his son, and even God? Did he grieve? Did he weep? Did he lose faith? We just don’t know.

Know this: There is counterintuitive freedom in allowing our adult children to experience the natural consequences of their decisions and behaviors, even if we have the means and abilities to “help.”

Love your adult children. Pray for them. Share the burden with God, and others. Give them the space to come to their senses.

Don’t lose hope. And when you feel like you have, God is big enough to listen and meet you where you are.

(Recommendation: I’m 70 pages into the book “Reaching Your Prodigal” by Phil Waldrep. Although I have more to read, I feel confident in saying that the author gets it. It’s answering the questions: What did I do wrong, and what can I do now?)

*For financial planning clients of Rivertree Financial Planning: Please contact us as soon as possible if you have had any changes in circumstances, objectives, goals or risk tolerance.