Thursday, December 29, 2016

We Create Tomorrow

We Create Tomorrow by What We Dream Today



Do you believe “we create tomorrow by what we dream today”? Maybe too many people rained on your parade, dampening your give-it-all-you-got spirit and squashing your hope.  Maybe someone said “Why do you want to do that?” You second-guessed your dream, doubted your ability to accomplish your goal, and gave up entirely on dreaming. “What’s the use?” you mutter.

Perhaps these wise words from Oscar Wilde may offer encouragement.

“If a thing is worth doing, it is worth doing well. If it is worth having, it is worth waiting for.  If it is worth attaining, it is worth fighting for.  If it is worth experiencing, it is worth putting aside time for.”

We can apply Oscar Wilde’s wisdom to today’s key message, “We create tomorrow by what we dream today.” The word “create” means “make a thing that has not existed before”.   Before we can create “a thing”, we need to know what we want to create. This analogy of needing a dream before creation relates to the crazy idiom of “putting the cart before the horse”.  It’s just doesn’t work. That’s why “dreams” are important.   You need to know, “What’s your thing?”

http://renewablewealth.com/articles/dont-put-the-cart-before-the-horse/


I also hate to disappoint you but there’s no Fairy-God Mother who can magically wave her wand to create your dream.  Effort and work are the magic.  As I look at my blog website and see the number of blog posts, I realize that they didn’t simply appear.  I know some would ask, “Why do you want to do that?” but there’s a method to my madness.  It’s my desire to help people understand that money matters and so do dreams.  Finding the right combination of strategies, financial products, and desire is the magic that makes dreams come true. I want you to believe and understand this “magic” yourself.

Seeing the possibilities, acting on instinct, and plugging away at the tedious tasks move you closer to your dream.  The tasks may not be glamorous but they are definitely necessary in order to purposely live life each day.  Early in January, John Maxwell wrote 2016:Your Year of Living Intentionally. He explained the difference between good intentions versus being intentional. Words associated with living a life of intentionality are “action”, “purpose”, “definitely”, “today”. These active words are an expression of commitment.  Making an effort to work towards your dreams requires commitment.  If your dream is worth experiencing, it is worth putting aside time for.   

Here is your assignment “to create tomorrow”.  Determine your dreams.  Then use a Daily Planner to schedule appointments with yourself to work on those dreams.  A new year with a new process opens the door to a world of new possibilities.  I am excited for you to start. 

Thursday, December 15, 2016

Having A Clear Vision


Success begins with spreading your wings, believing in your worth, trusting your insight, nurturing yourself, having a goal, and devising a personal strategy.  And then, even impossible dreams become real. ~~ Sue Augustine.


 

Dreams are clarified with a clear concise vision statement. Having a vision of where you want to be is so important. When you spread your wings, you need to know where you’re flying.  A clear vision also expresses your purpose and adds flavor to both your personal and business life.

I learned the importance of developing a vision and mission statement from an on-line college course, Creating a Successful Business Plan.   This vital step wasn’t left until the financial costs and marketing strategies were discussed. Right at the beginning, I needed to be clear about these two: the vision statement tells you where you want to be (and what you represent) and the mission statement tells you how you’ll get there.

Here’s mine:

My vision is to be the most sought-after financial planner who designs “dream” financial plans to help hundreds of people get to where they want to go now and in the future. 

I know what you’re thinking.  Doesn’t that appear self-centered, “most sought-after”?  When I asked my instructor, Kris Solie-Johnson, she assured me that the words sound confident.  When you create your vision statement, whether it’s for your business or personal life, use specific wording which reflects the things you value.  Make a bold proclamation outlining your purpose and goal.

I also learned that a mission statement could easily be confused with a vision statement.  In the course, Coach Kris instructed us to treat these “as two separate entities – one providing a concept and the other a pathway.”  I appreciated this logic.  The mission statement tends to focus on the “how” you are going to accomplish the “what” (the vision).

After careful consideration and thought, my mission statement reads:  

I diligently adhere to the eight-point FPSC® Code of Ethics established by the Financial Planning Standards Council (FPSC).  I conduct myself in a matter whereby my clients’ interests take priority. I act diligently, professionally, and with integrity. I am objective, fair, and open. The client’s information remains confidential.  I am a life-long learner and, as such, am competent through my on-going commitment to education.   

 



In Stephen R. Covey’s book, The 7 Habits of Highly Effective People, he specifically dedicated a section to the development of “A Personal Mission Statement”.  His notorious statement was “to always begin with the end in mind.”  Here he writes:

The most effective way I know to begin with the end in mind is to develop a personal mission statement or philosophy or creed.  It focuses on what you want to be (character) and to do (contributions and achievements) and on the values or principles upon which being and doing are based.




Therefore, whether you are an entrepreneur in your farm business, a stay-at-home parent, or an employee, vision and mission statements serve specific purposes.  These creative statements clearly help you see life’s road map in concise and clear ways, acting like motivators that propel you forward onto success.  When you experience life’s turbulences, like Arlene Dickinson mentions in her book, All In, these bulletproof reasons “restart your engines when they threaten to stall.” This is your commitment to daily live your life on purpose.




We can’t drift through life as though it doesn’t matter.  Life matters.  We have only one chance to live on earth to prove to others that we are here for a purpose.  So take time today to write your vision and mission statements instead of New Year’s Resolutions.  These statements will serve you well in the New Year and in the years which follow. 

For an additional resource to help create your vision and mission statements, click here.  In the comment section, you are invited to share yours. 

Thursday, December 1, 2016

Financial Lessons from “Humpty Dumpty”




As I prepared to write, a strange thought popped into my head. Write about Humpty Dumpty, the cute round egg.  Sounds insane, doesn’t it?  BUT I have done crazier things than this to get attention. If you are unfamiliar with the legends of Humpty Dumpty, you are welcome to read about them here … The rhyme goes like this (in case, you’ve forgotten!)

                    Humpty Dumpty sat on the wall,

                    Humpty Dumpty had a great fall.

                    All the king’s horses

                    And all the king’s men

                    Couldn’t put Humpty Dumpty

                    Together again.

The way I interpret this nursery rhyme is anyone could be “Humpty Dumpty”. We may think we are invincible.  We have a steady income; we can afford anything we want as long as we have access to credit. We’re on a roll.  In other words, like Humpty Dumpty, we are sitting on the wall, with a great view on life. 

Then something happens.  A disaster occurs.  The disaster could be a vehicle accident, leaving us permanently disabled (or dead).  We may have lost our high-paying job because of the drop in oil prices; or possibly we borrowed too much and now we can’t pay back the loans and credit cards.  That’s our great fall, an unfortunate event.  Nothing we can do on our own or with the help of others can put us back together again unless we were adequately prepared financially to cushion the fall.

You see, in hindsight, if we knew disaster was approaching, we would do everything in our power to avoid the collision. The truth is “When it’s too late, it’s too late”.    

The media hype in November, Financial Literacy Month, was geared to create awareness about the importance of financial planning and to have Canadians take control of their financial destiny.  I’m not convinced everyone was listening.  Now my curiosity is piqued about effective marketing campaigns to motivate people to take action.  

How would you react if you were told, “There’s no way you can save $2,400 by next Christmas. (That means saving $200 each month.)”  Would you be more motivated to prove them wrong or discouraged and believe they’re probably right?

Recently, I came across Donna Freedman’s article, “The 10 Best Ways to Blow Your Money” on Money Talks News. Not only did Donna come up with her list of “ten”, her readers responded with their “10 Best Ways to Blow Money”.  Before rattling off her list, Donna made a facetious comment.

“What is money for, anyway, except to enjoy? You work hard for a living and deserve all the perks that salary will buy.  Be daring, not dull.”

Then she persuasively adds:

“Thinking like that is a great way to put yourself perpetually into debt, or at least living paycheck to paycheck.” 

Do you believe this thinking-in-reverse article is more effective than one which read, “The 10 Best Ways to Save Your Money”?  Perhaps we are more apt to recognize our blunders than our successes.  We may be more likely to stop existing behaviors if we knew they were bad rather than start new behaviors even though we know they are good. Hmmmm!

Let’s return to Humpty Dumpty.  If Humpty Dumpty knew he was an egg and that he was very fragile, do you think he would have taken the chance of sitting on the wall?  After all, it was a huge risk on his part which ended badly. I don’t want the same thing to happen to us. What financial risks are you facing today which are not being addressed?

Thursday, November 17, 2016

What Would You Do?




Occasionally, I’m asked, “What would you do if you were me?” The probability that you have faced the same question is very likely.  It’s a tough spot in which to find yourself!  Undoubtedly, if you know the person’s circumstances and have had a similar experience, you’re comfortable giving advice.  If you feel some hesitation, though, you would probably reconsider the facts and weigh several options in order to decide on the best advice.

The unknown piece is you can’t predict the person’s response to your advice because you are not the person asking the question.  Everyone reacts differently to advice from others so I am cautious as to whether they are sincerely looking for advice from me or seeking validation for a plan they have already thought through.

Different situations require different considerations.  Simple situations can be satisfied with easy-to-give advice.  Extreme questions require extreme considerations and planning.  If my friend was asking for the best apple pie recipe, that’s easy.  However, if my friend was asking how much to save for his retirement, that requires more thought and planning. 

Here’s the dilemma when extreme questions are about money.  Extreme questions require you to expose yourself.  One client said, “I feel like I am standing here naked,” as she handed me their investment portfolio, credit card statements, bank statements, and tax returns.  No doubt it’s a daunting experience to reveal what you’ve done with your life’s earnings.  Definitely you saved as well as squandered a share of your income.  You may even feel like you could have done a better job if you’d tried harder.  A financial planner can be compared to a doctor.  We diagnose potential problems when you are willing to expose yourself.  We examine any symptoms and treat any ailments with plausible remedies to make the “boo-boo” go away.  Many people are reluctant to go for their annual health check-up.  They also experience the same reluctance to make an appointment with a financial planner.  Much like an x-ray reveals broken bones, a financial plan can help diagnose broken parts in need of repair and ensure you are on the right track. 

 


The decision you must make is whether to work with CERTIFIED FINANCIAL PLANNER® professional or fly solo.  Equipping yourself with financial information is the secret to a successful outcome.  Financial Literacy Month and Financial Planning Week were launched for the same reason I publish my blog posts, to create awareness concerning “your financial health”.  We can’t do everything perfectly right.  I can honestly say I squander my share of money on things that are not always beneficial.  However, I believe we can all be coaxed into striking a balance between our spending and saving habits.  Maintaining great financial health is an impressive habit to develop, something which was discussed in my last blog.

With masses of information available on the Internet, here are three specific websites to gain access to various topics, such as dealing with life’s challenges, starting your first job, and how to open a bank account.  Pick a topic of special interest to your particular circumstances and get smarter about money.





To end on a different note, I’d like to share this story that I use in my “Money Matters” presentation.



A magician was working on a cruise ship in the Caribbean.  The audience would be different each week, so the magician allowed himself to do the same tricks over and over again.

There was only one problem. The captain’s parrot saw the shows every week and began to understand what the magician did in every trick.  Once he understood, he started shouting in the middle of the show.

“Look, it’s not the same hat!”

“Look, he’s hiding the flowers under the table!”

“Hey, why are all the cards the Ace of Spades?”

The magician was furious but couldn’t do anything; it was the captain’s parrot after all.

One day the ship had an accident and sank.  The magician found himself on a piece of wood, in the middle of the ocean, and of course, the parrot was by his side.

They stared at each other with hate, but did not utter a word.  This went on for several days.

After a week the parrot finally said, “Okay, I give up.  What’d you do with the boat?”

    

Like the parrot who wondered what the magician did with the boat, we, too, may be wondering at the end of our working careers, “What did we do with the money?”

I’m asking, “What would you do”

…with an inheritance

…to prepare for retirement

…when you face a critical illness

…if you lost your job

…to ensure you are on the right track financially

…to save for your children’s education

Extreme questions may require you to “get naked”?  So, what will you do?

Thursday, November 3, 2016

Habits and Tools; Everything to Achieve Financial Freedom



 HABITS

How often do you hear people casually dismiss an inappropriate action as a “bad habit”?  We want to change…but it’s so hard!  We find ourselves always getting the same results from our repeated behaviors, vowing to do better the next time. Perhaps a first step might be to learn about habits and how to change them.  With the appropriate tools, we can stop beating ourselves up about our habits and proceed to make everlasting changes.




The Power of Habit
The book, The Power of Habit, Why We Do What We Do In Life and Business, was an eye-opener for deepening my understanding that there is an ingrained method to our routines.  Unconsciously, we go through the motions without detecting our hidden patterns.  Whether our habits are quirky or normal, we have them. Whether you floss your teeth at a certain time, tie your shoelaces in a certain way, or drive to work using a certain route, you have habits.  Unfortunately, when you want to change a routine or habit, you may face challenges.
People who attempt to change money habits related to saving and spending generally feel discouraged and defeated.  Understand that everything we do is cyclical. The loop begins with a cue which triggers a routine leading to a reward.
 


A simple neurological loop at the core of every habit


A fairly common occurrence happens on paydays.  The cue is having money in the bank account to trigger an event, a scheduled lunch date with friends or coworkers. The reward is a great meal with great people.  You may recognize this regular outing is becoming an expensive venture over the long term.  Your desires are to save more and spend less.  You know changes need to happen but you’re unsure how to break the cycle.  You may crave time with your friends but the question is whether you can find other less expensive ways.   

In the short excerpt, How Habits Work, Charles Duhigg shares his four step framework for replacing “bad habits” with “good habits.”   The four steps are:

1.     Identify the routine

2.     Experiment with rewards

3.     Isolate the cue

4.     Have a plan.  

In analyzing the cue, routine, and reward, you need to identify the unfavorable habit before you can forge ahead with a plan to change.

One of my favorite quotes in a long list of many is:

What you hear, you forget.

What you see, you remember.

What you do, you understand!

Often, I share this quote to highlight the importance in “doing” the action step to implement a positive change.  Whether the “doing” is to lose weight, exercise, or manage your money effectively, it’s about uncovering a new routine to lead to the reward.


TOOLS

Since you now have a better grasp on habits, let’s put this knowledge into action.  November is Financial Literacy Month.   Just like Christmas occurs every year, Financial Literacy Month has become a major event to aspire Canadians to take action.  This year’s Financial Literacy Theme is “Managing money and debt wisely; It pays to know.”   By committing to learn one new thing, over time you will develop money habits which inspire you to become a better money manager.  Cravings are the driving force behind habits.  When you crave “financial freedom”, the longing to be debt free or the desire to have a retirement fund, you are motivated to stick with your plan.

In order to measure your success, you need tools.  Financial tools are no different than other tools.  If you were fixing a leaky drain pipe or sewing a button on a coat, you need them to get the job done. These valuable financial tools, Net Worth Statement and Cash Flow Statement, were discussed in in the previous blog, Important Tools to Have in Your Toolbox.


Net Worth Statement lists your assets (everything you own) and liabilities (everything you owe) to determine your net worth.  It isn’t surprising to learn that the majority of people only create their Net Worth Statement when they apply for credit (loan, mortgage, or credit card).  This statement is a picture of your financial situation.  Creating this snapshot every year provides a clear indication of how well you manage your money.  Please don’t underestimate the value of this tool.   It’s a true measure of your financial success.






A Cash Flow Statement shows precisely the income coming into your hands and the expenses being paid over the course of a month or year. Tracking your income and expenses determines whether you have a surplus or a shortfall at the end of the period.  At a quick glance you also know whether you are “living within your means”.  The habit of tracking your expenses instills more control over spending because you categorize where your money is being spent.     




FINANCIAL FREEDOM

Whether you are developing new habits or learning new techniques, the greatest virtues are commitment, patience, and perseverance.  I was led to believe that new habits can be developed within 21 days.  Recently I learned that’s not necessarily correct.  When this tidbit of information circulated, somehow the words became skewed. The correct version is a new habit may take “a minimum of 21 days.” The truth be known developing a new habit takes as long as 66 days on average.  Do everything in your power to stay the course: find an accountability partner, seek a CERTIFIED FINANCIAL PLANNER® professional to assist you, and use positive self-talk reminding yourself, “You got this!” You may soon enjoy the financial freedom you have been craving. 


Thursday, October 20, 2016

ETFs (Exchange-Traded Funds) ~ What’s That?



Are you the type of person who likes to learn new things?  The type who finds pleasure in understanding something that is totally foreign?  The type who would try anything once?  Bungee jumping, sky diving, or shark cage diving!  If these activities sound a bit extreme, then you might be open to something more passive than any of these.

Deepening your understanding of investing might be the difference between life and death.  Now this sounds like a harsh statement but maybe not if it means you can afford to put food on your table to prevent you from starving.

At the latest CIFPs Professional Development Day, the discussion was about people who do not want to take risks with their money so they choose the perfectly safe route and put their money into GICs (Guaranteed Investment Certificates). This type of strategy raises a perplexing question, “Are they not putting themselves at risk if they run out of money?”   

Advisors are always taught to understand their clients’ objectives and risk tolerances.  If safety is what clients want, then safety is what they are given.  However, financial advisors and financial planners also have an obligation to educate their clients.  Their clients need to fully understand that holding only safe investments could be dangerous.  Settling for 1% GIC investments returns may not be in their best interests if this means running out of money in their retirement years.  Living destitute would not be “pleasant”.  Dreams of retirement life could be destroyed when the “well” runs dry.

Knowing your options in advance of your retirement date is a plausible solution. During the days when you are accumulating your wealth, you need to decide where to invest your money for it to grow. Having some knowledge is better than having no knowledge about savings and investing.

Previously, we discussed mutual funds in the blog, Investing in the Rise and the Fall of the Markets.  With all the hype in the investment world about transparency in regards to fees, people are beginning to take notice exactly how much they are paying in management fees. I don’t believe the true cost of management fees could ever be determined because the task would be too onerous for mutual funds companies.  Yet here’s the dilemma we, as investors, face.  We are trying to reduce fees and increase returns while we minimize risk.  That sounds like quite an accomplishment to undertake.  

What's the answer? You’ve heard the adage, “Don’t put all your eggs in one basket” known as diversifying your money into bond and equity investments spread over different sectors of the economy and world markets.   Another investment option, which does this and is gaining popularity, is ETFs, exchange-traded funds. These investment funds trade like stocks and derive their value from the markets by riding the coattails of indexes, for example, the S&P/TSX 60 Index. Because ETF returns are mirrored from the performance of an index, technically, the management of the funds is minimal which in turn reduces the fees and expenses.  This strategy is known as “passive investing” as opposed to “active investing” where portfolio managers actively buy and sell securities.

The following excerpts explains ETFs growing popularity. 

The article, The Rise of ETFs, reported that “At the end of 2007, there were only two ETF providers in Canada.  Today, there are 13, including Vanguard, which entered the market in December 2011.  Between 2008 and March, 2016, the number of Canadian ETFs rose to 424 from 77 while AUM (Asset Under Management) increased to $95.0 billion from $19.4 billion.”  

Another article, (Canadian EFT Industry: Why Exchange Traded Funds isn’t the question any longer) points out, “…while the ETF industry here nears the $100 billion milestone, it remains a fraction of the Assets residing in the Mutual Fund space ($1.3 Trillion).”   

The last point about ETFs comes from US analyst Dave Nadig, from Factset. He commented, “I can’t believe how strong fund flows into Mutual Funds still are in Canada…In the US, that ship sailed about a decade ago, with ETFs the beneficiaries of the shift.”  

Here’s your challenge.

If you are unfamiliar with ETFs, make an effort to learn about this popular investment option.  A great amount of education is available from various sources.  My role as your financial planner is to point you in the direction where you gain the knowledge necessary to make an informed decision about ETF investing. Choosing core-type broadly diversified ETFs (notice the lingo) is the same as if I said, choose “plain vanilla, nothing fancy, ETFs”.  The frightening part is another kind of ETFs is wandering into the market place.  Embedded-Strategy ETFs (ESETFs) encompass a broad range of strategies which may lead you down a different path with undesired risks.

This “stuff” isn’t always easy to understand at the onset. The more you immerse yourself in the information, the more you will grasp tidbits that will eventually make sense.  Repetition is helpful.  Exposure to articles, webinars, and conversations with financial advisors and financial planners will increase your understanding.  When you reflect on your life, you will see many things in your past that you didn’t master at the first crack, (riding a bike, using a computer, or driving a vehicle).  Be patient but be persistent. Learn.  

Here are places to learn more about ETFs.

1.   Credential Direct, an online trading brokerage firm, invited Dan Bortolotti, in September, to lead the educational webinar, 7 Steps to the Perfect Portfolio.  Dan is known for his infamous blog posts at Canadian Coach Potato and numerous articles for Money Sense magazine. Dan walks investors through the process of planning, building, and maintaining a low-cost, diversified portfolio of EFTs. You will be grateful for the time invested in this session.

 

2.     Another article worthy of your time is “Make an Informed Decision When Investing in ETFs.” Kevin Rusli, a lawyer, provides a list of five topics to discuss with your financial advisor prior to investing in ETFs.  Kevin is a partner in the Investment Products & Asset Management Group at Blake, Cassels & Graydon, LLP and regularly advises asset managers.

 

3.     I cannot end this blog without adding a book to your homework assignment.  At the onset of the financial crisis of 2008-2009, I recall Danielle Park making her national TV debut and instructing people to “run for the hills”.  Well, that’s not exactly word-for-word what she said. She was advising investors to move from the equity market to cash. The title of her book speaks for itself. Juggling Dynamite provides an inside view of how to protect your investments.  In her book, Danielle Parks opens Chapter 13~~Building and Preserving a Rich Life~~ with a quote from Henry Ford. “If money is your hope for independence, you will never have it.  The only real security that a man will have in this world is a reserve of knowledge, experience, and ability.”   My perspective from this message, “Arm yourself. Learn all you can."

Thursday, October 6, 2016

Why Choose a Fee-Based Financial Planner?



 
Can you create your own financial plan?  If you have in-depth knowledge about financial products and strategies along with a financial planning program, it is possible. But if you don’t, who do you ask?

Even before you answer this question, you are probably wondering, “Do I even need a financial plan?”  Let’s consider this in another context.  If you were planning a vacation to a foreign country, would you consider asking a travel agent for their help? There are many unknowns when you travel to an unfamiliar destination.  Your life’s journey is similar in many ways.  As you navigate through life events, asking for financial advice provides clarity and peace of mind so you can enjoy life’s journey.

Every word written in my first blog, What Does A Financial Planner Do, holds true about the role of a financial planner.  My responsibility is to help you have a clear vision for what you hope to accomplish in your lifetime…and we all know it takes money to make that happen. Think of your financial plan as a roadmap to your many destinations.

The cost in preparing a financial plan may not be a concern when the value is obvious. The article, 10 Questions to Ask Your Planner, poses the question “How will I pay for your services?”  Financial planners may be compensated in one of three ways: from the cost of the product; percentage of assets under management; or fee for service.   

I am a self-employed CERTIFIED FINANCIAL PLANNER® professional.  My fee is charged at a flat hourly rate similar to an accountant or lawyer.  I do not sell financial products, such as insurance or mutual funds, so you can be assured the financial planning advice is unbiased.  Your financial plan is created based on observations and recommendations to match your needs.  Most definitely, you require a team of advisors, your dream team, to pull together all the products and services you require.   My role is to act as an educator and help you understand why specific processes are important and to provide you with a detailed financial plan.  

Your trust in exchange for my competency to provide sound advice and to ensure our dealings are confidential is vital to our relationship. This isn’t a sales pitch. It’s your assurance that I am guided by internationally recognized professional standards of competence, ethics, and practice that are set and enforced in Canada by Financial Planning Standards Council (FPSC®). 

Education is an important part of being a competent financial planner.  The more I learn, the more I realize I have more to learn.  Some basic fundamentals of financial planning stay the same.  However, tax-related topics are complex as they revolve around new legislation brought forth with changes in government.  An example is the changes to Federal tax brackets in 2016.   Being an expert comes with a heavy burden to stay on top of the latest trends in the financial planning industry.  Attending conferences, professional development days, webinars, and networking with like-minded professionals ensures I do.  

If you are seeking additional information on choosing between a fee-only financial planner or a commission-based financial planner, you’re invited to read Tom Drake’s blog, Need Financial Advice? Consider a Fee-Only Financial Planner. Being a fee for service financial planner ensures that I always have your best interests in mind.  I am accountable to you. That’s important.