Finding a Financial Mentor

Finding a Financial Mentor

I was challenged this morning by a pastor and friend who spoke to a group of fathers. The question initially posed was this: “What do I most need today in regards to decisions?” Answer: “Someone ahead of me, and someone behind me.” In other words, we were challenged to have a mentor and mentee in our lives. We briefly journeyed through the life of Luke in the Bible. Luke traveled with Paul. Paul was ahead of Luke. Luke also had Theophilus in his life who he mentored.

When we need counsel, we so often go to our peers who are most likely facing the same struggles (and making the same mistakes). Don’t get me wrong – I do think it’s helpful to share our struggles and burdens with peers; but are our peers best for counsel? Or could it be wiser to receive counsel from someone ahead of us in life and who has already faced the struggles? My pastor friend would argue the latter. How would this look for financial decisions?

Why can taking this step be hard for us? I’d say that simply asking for help doesn’t come naturally to us. We might be ashamed of our circumstances or situation. We might think that no one else gets it. We might think there’s just no better way than what we’ve come up with ourselves. As a person who struggles with trying to think myself through situations, I have come to learn that sharing and processing what I’m going through with others is extremely helpful; and that sharing with someone who is ahead of me is even better.

Think about financial decisions that you have made during your lifetime – the good, the bad, the ugly. How about buying your first house? First car? First timeshare (uh oh…). What did you learn? Now rewind: If you would have received counsel from someone at least ten years ahead of you, do you think the bad/ugly decisions could have been avoided? Probably so.

What about your peers? Most likely they are signing up for the same college credit card only to get a free t-shirt. Then yes, that “free” t-shirt ends up costing you hundreds to thousands of dollars in interest for the tv or vacation you really couldn’t afford. What if you had sought counsel from someone at least 10 years ahead of you who showed financial responsibility? Do you think that they would have advised you differently than your peers? Most likely so.

What about us – financial planners? We are experts in this field, but does that mean we don’t need to seek financial counsel from someone ahead of us? I have been challenged to seek out a financial mentor. Just as you, we’ve found that it’s 100% impossible to check all emotions at the door when it comes to our own financial decisions. We need sound guidance – the same guidance we give to our clients.

As we seek out a mentor, we’re also challenged to seek out someone behind us that we can help. How do we find these people? Pray that the Lord would bring these people into your life. Open your eyes to those already around you. They may not be far away.

In closing, I’ll share wise counsel that the speaker received from someone ahead of him during a critical time in his life: “Make decisions today that you will least regret in ten years.” That’s good. What’s this all about? Priorities.

So now what? Make that call. Send that text or email. Take the risk. I just did.

Diets and Money – Quite the Pair

Diets and Money – Quite the Pair

You may have noticed (or not) that we took a two-month sabbatical from the Rivertree blog. We take advantage of the holiday season to plan, regroup and recharge for the new year. We are excited about 2019 and hope you are as well.

On a personal note, I am doing something I have never done before – a restricted diet. What exactly is a “restricted” diet? Well, prior to January 1st of this year I couldn’t have told you. But as of this writing, I’m now on day 29 of 30 and have learned quite a few things about food I never knew.

In the simplest terms, a restrictive diet is saying “no” to food groups that could potentially be harmful to your body. After the 30 days, you slowly re-introduce excluded food groups and see how it makes you feel. Sound like the Whole30 elimination diet? Well, it is.

My motivation for this diet was not to lose weight but to see how food was impacting my overall health. To say this diet has been enlightening would be an understatement. All my aches and ailments haven’t been cured, but I have certainly seen the benefits in eating healthier, wholesome foods.

So, what does dieting have to do with money? Well, quite a bit, I’d argue.

When I ran into Books-a-Million on January 1st, guess which books greeted me immediately at the door? You got it – money and dieting. Dave Ramsey, Suze Orman, Tony Robbins, Keto, Paleo, Plant Paradox, and Whole30 all shared a nice, wooden table that you couldn’t miss upon entry. I had settled on Whole30 prior to arriving, but I couldn’t help but thumb through each book on the table.

Then it hit me: What do we often say to our clients and seminar attendees as we discuss budgeting/cash flow planning? Give the system we teach a try. If it doesn’t work, you can always go back to your old system!

I was dreading saying “no” for the first time to many foods I love. But knowing that I could go back to my “old system” in just 30 days gave me what I needed, expecting that I wouldn’t want to go back completely.

Consider this quote about change:

““We change our behavior when the pain of staying the same becomes greater than the pain of changing. Consequences give us the pain that motivates us to change.

― Dr. Henry Cloud & Dr. John Townsend

Does this quote resonate with you? What are consequences of poor money habits or diets that might motivate you to change? Often, it’s a serious health diagnosis, high-balance credit card statement, overspending in retirement, or even bankruptcy.

Don’t let it come to these consequences. Start the process of change now. Dr. Cloud also says that change comes this way: Grace + Truth + Time = Change.

We hope 2019 is a great year of healthy change for you. If you need help or counsel to begin this journey, please don’t hesitate to contact us. We’d love to help.

 

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.

Say “No” to Instant Gratification

Say “No” to Instant Gratification

I remember it like it was yesterday. When I was in high school, I worked all summer to save up enough money to purchase a brand-new Sharp VCR from Wal-Mart. I remember how I felt when I finally walked into the store and laid down my hard-earned cash to make the purchase. I can still smell the fresh Styrofoam as I opened the box. I had zero regrets because it was worth the wait.

I also remember the times I’ve made impulsive purchases. Something would catch my eye that I wasn’t looking for (perhaps an infomercial??). After making the impulsive purchase, the product or service didn’t satisfy the same and guilt would eventually follow.

The Missing Word

There’s a word that’s missing from many of our vocabularies in America. That word is “No.” Saying “No” has become increasingly more difficult as we are now the most marketed to culture in the history of the world. That’s a fact. What’s more amazing is how much more effective (and less expensive) advertising is. The ads are more targeted now. They know what you want, or might want, based on your web and social media activity.

And what if you don’t have the money to make the purchase? No problem! It’s just 49 easy monthly payments of $1.99. Wait…what the heck did I purchase? A pair of running shoes?? And how much interest will I pay over these four years? Who cares…it’s just $1.99 a month. I can do it (although often the interest on an annual basis is anywhere from 39% – 400%). And no, that’s not a typo.

My old boss Dave Ramsey is often pleaded to by his listeners to run for public office. He responds with his classic shotgun laugh. But for fun, they came up with some slogans. One was, “Change…You’re Not Going to Like.” Another was simply, “No.” These were in reference to our government’s out of control spending habits.

Insert “No” Moving Forward

I read a time.com article just this morning regarding debt levels in America at every age group. The article opens with “Americans have fallen back in love with debt.” The statistics are staggering. We’ve exceeded debt levels prior to the Great Recession…just by a little. Below is from newyorkfed.org:

Aggregate household debt balances increased in the fourth quarter of 2017, for the 14th consecutive quarter, and are now $473 billion higher than the previous (2008: Q3) peak of $12.68 trillion. As of December 31, 2017, total household indebtedness was $13.15 trillion, a $193 billion (1.5 percent) increase from the third quarter of 2017. Overall household debt is now 17.9 percent above the 2013Q2 trough.

So how can we appropriately respond to this? Take a look at your budget and spending habits. Where do you see “No” inserted? Perhaps ridding yourself of credit cards would be a tremendous step. And what about that tax refund being applied to debt payoff or savings rather than a car down payment? Small steps like this go a long way.

Think about people from just a few generations ago. Could they finance a couch? Of course not. If they wanted a sofa, they were forced to save for it and delay pleasure. Today, we can stretch payments over five years. And no, I’m not buying the “Same as Cash” deals. It’s not the same as cash. Over 80% of these arrangements result in interest payments of up to 39% going back to day one. They win. You’re not beating the system. That’s why they keep on doing it and stretching out payments for even more years.

Saying “No” is healthy vocabulary. We need it in all areas of life. Prayerfully consider where you need to say “No.” Your freedom awaits.

What Can You Do

What Can You Do

I hope you had a nice February. If you live in Mississippi, we had our usual volatile whether. You may need snow gear one day and a swimsuit the next (slight exaggeration but you get the point).

Personally, this February is certainly one to remember as I had hip surgery. Fast forward to today, I’m doing well thankfully. I still have a journey of recovery ahead of me. But, to say it has been a joy ride would not be honest of me.

I had a close friend stop by recently to check on me. He was gracious to listen to me share how hard things have been. We all need folks to just listen sometimes, right? And sometimes, we need a friend to challenge us.

After hearing me share about the things I couldn’t do right now, he asked, “What are things you can do?” I paused. That had certainly not been my focus. I reflected on his question that night and the next morning. I started thinking about not just things I can still do, but what are new things I can do? I mentally came up with a long list and took action on some immediately. My spirits were lifted and some contentment returned.

I’m not writing a message about the “power of positive thinking,” but I am challenging myself, and you, to reflect on this question: “What are things you can do?” More specifically, “What are things you can do to make progress financially?”

With financial planning, there are many aspects that we can’t control and are forced to use some assumptions: inflation, rates of return, life longevity, etc. However, there are many aspects of financial planning that we can control.

What are steps that you can take TODAY to-

  • Begin a debt elimination plan?
  • Implement a budget?
  • Call the lawyer to get your will completed?
  • Increase your life insurance coverage?
  • Increase your charitable giving?

Don’t be overwhelmed by this list. Prioritize. Need help taking steps and prioritizing? That’s exactly what we do. Give us a call. We’d love to help.

Spring is just a few weeks away which I always welcome (well, minus the pollen). Spring is a time of new life, and it can be a time of new hope and purpose.

Take a few new steps and see what happens.

Three Ways Borrowing Money Was Bad For Me

Three Ways Borrowing Money Was Bad For Me

A recent New York Times article revealed some terrifying data regarding debt in America. Consumer debt reached $12.73 trillion in the first quarter of this year. While around 70% of that is mortgages and home equity loans, about 11% is student loans, 9% is car loans, and 6% is credit cards. While these percentages might seem insignificant, history suggests that this data is cause for alarm. According to this same article, the Federal Reserve Bank of New York reported that “total household debt in the United States had reached a new peak — $12.7 trillion — in the first three months of the year, another milestone in the long, slow recovery of the nation’s economy.” The article goes on to note that debt “accounts for nearly 70 percent of all economic activity in the United States.” (more…)

You Can Thrive Financially Without Credit Cards

You Can Thrive Financially Without Credit Cards

Say what you want about millennials, but they seem to be making wise decisions when it comes to credit cards. A new survey finds that the majority of millennials are avoiding credit cards. A study commissioned by Bankrate and compiled by Princeton Survey Associates International revealed that 63 percent of adults 18 to 29 don’t have a credit card.

If millennials are indeed avoiding credit cards, many will urge them to reconsider. Today, it’s extremely common for family, friends, blogs, and banks to advise young adults to apply for credit cards.

While often accompanied with good intentions, encouragement toward credit cards may not be the best path forward for young adults. Millenials can thrive financially without ever using a credit card. Credit cards aren’t as essential as we think they are. The most popular arguments for credit cards are building your credit score, establish a credit history, reward points, and emergencies. But there are alternative ways to accomplish all of these things without credit cards.

“Credit cards are essential for building your credit score.”

Credit cards are a way to build credit, but they may not be the best way. There are alternative ways to increase your credit score and establish a credit history. One example is borrowing against an existing savings account or CD. Let’s say you have $500-$1000 of expendable cash in savings. You could go to your local bank and ask to borrow against what you have. The bank will freeze the money you have in your savings and then write you a check for that same amount.

Next, deposit the check into your savings. Ask the bank to set up an automatic withdrawal from your savings account and pay the loan back over the course of a year. You accomplish the same thing (increasing your credit score and establishing a credit history) without taking the chance of creating a credit card balance you can’t pay.

You’ll still have to pay interest and a small fee, but this is minor compared to the risk associated with revolving credit card debt. Furthermore, this is a great way for a young adult to learn the invaluable discipline of saving and establish a relationship with their bank.

“Rewards points are an excellent way to get ‘free stuff.’”

Everyone loves free stuff but using credit cards for points is risky. Credit card points are free for the self-controlled and expensive for the impulsive and undisciplined. Credit card companies know that impulsive consumers abound, which is why they rarely lose money from all of the “free stuff” they give away.

The New York Times interviewed a 25-year-old marketer who uses her credit card to rack up on airline points. Though she never carries a balance from month to month, it is evident her habits have disadvantages,

Time magazines piled up around her apartment and gathered dust after she bought a subscription simply because it came with an offer for extra points. And she has increased the amount of time she spends shopping on the Internet because merchants offer incentives online for cardholders that are not available in stores.

The same article goes on to note that “economic and social science research suggests that consumers tend to spend more using plastic than they ever would with actual cash.”

We buy what we don’t need and justify it because we are getting points. We feel less guilt when we splurge with a credit card than when we spend cash. The reward of points eases our conscious concerning our frivolous spending. As the saying goes, nothing is free in life. Everything comes with a price. At the end of the day, the “free” plane ticket isn’t free after all.

“Credit Cards are great to have for ‘emergencies.’”

Emergencies can happen to anyone at anytime. Whether it’s job loss, an unexpected trip to the hospital, car repairs, or a major home repair, there is no limit on how much an emergency will cost. Many promote using credit cards for emergencies as responsible and reasonable. But there are flaws in this logic.

If you know you have a credit card for emergencies, you lose motivation to save money and build an emergency fund. The money you should have saved becomes money blown on things you don’t need. It’s more appealing to spend extra money instead of saving it for emergencies, especially if you know you have a credit card for those emergencies.

Furthermore, you’re placing yourself at risk of paying more than you would have paid if you had used cash. A $3,000 emergency on a credit card with a 25% interest rate can quickly get out of hand. Now your revolving debt is a new emergency.

Finally, inconveniences become emergencies. When I was in college, I had an awful lot of so-called “emergencies.” Hunger pangs became emergencies. Boredom became emergencies. It’s so easy to swipe for so-called emergencies today and forget that a bill is coming tomorrow.

The Exception, Not the Rule

Using a credit card for the purposes above and paying your card off every month works for some people, but they are the exception, not the rule. How do I know this? In our office, we like to say, “Follow the money.”

Have you ever wondered how creditors make so much money? They have overhead costs and employees they have to pay — not to mention the free stuff. If the majority of people used credit cards correctly, creditors would close their businesses. The reason they aren’t losing money is that they know most people don’t use credit cards responsibly. Most Americans carry a balance forward each month, and creditors earn 22-27% on that money. Or we buy things we don’t need. Both benefit credit card companies.

The next time you give or receive advice about credit cards, consider the risk involved. There are safer alternatives for millennials and anyone else pursuing financial security besides credit cards.