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


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.


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.     


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.