Category Archives: Goal Setting

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Is this a new normal?

Do you call the time BC (before Covid-19) normal? Do you join me in hoping that life can get back to normal soon, but have serious doubts about that? What if this is normal? I believe we need to talk about what we have learned and how we might think about going forward.

7 Things to think about now

  • Ordinarily we financial planners are demonstrating the value of working longer, i.e. postponing retirement. But this month, we have been more engaged with evaluating those clients who are thinking of retiring earlier than originally planned. If you are eligible and have the assets or guaranteed income to retire now, this could be an attractive scenario. Of course, an early retirement nearly always results in less to spend for the rest of one’s life. I know that it might feel scary to even think about, but now would be a great time to determine the true cost of retiring now. Social security benefits factor into that and a Social Security Timing Analysis would be great place to start.
  • Do you find one of the benefits of being quarantined is that you are spending less and saving more? If you are like many we have talked with, your expenses have dropped a lot over the past three months. (I have bought one tank of gas since February and I still have a fair amount of it left.) Perhaps you have some pent up demand to get back out to restaurants or to travel, but several people tell me that they have been surprised to learn what they can do without. That doesn’t bode well for our consumption and debt-based economy, but it could truly be our new normal. Could these past couple of months be a good representation of what retirement spending looks like? You should add in some fun however, just to be safe.
  • Do you need a vacation? Like many of you, I still don’t feel safe getting on an airplane or cruise ship. The opening up of various countries is going to likely be pretty chaotic. Leaving the U.S. might be easy, but getting back in from some of the hot spots around the world could be harder in the coming months. We’ve heard more than one person plot their vacation with a plan to stay within a comfortable drive from home. Popular U.S. destinations could even get to be crowded, so if this is in the cards for you, plan early.
  • Of course, it’s never fun to think about updating your estate plan, but we are in the middle of a life-threatening pandemic. If not now, when? We can help you review your existing plan by mapping the current estate structure into a flowchart. We would then make suggestions for you to discuss with your lawyer if you don’t like the results. That’s all I will say about that.
  • I think you will agree that insurance of various types represents protection. It would be a good idea to review your current policies and to determine if you have the right type and the right amount. I was able to get my auto insurance premium reduced considerably with a revised estimate of how much I think I will drive in the next twelve months. It took about 15 minutes to save 15% and I didn’t have to switch to that popular company to do so.
  • Is it time to re-finance? Consider how much debt is appropriate for your current circumstance. And while you are at it, consider the kind of debt and the interest rate on any debt that you carry. We heard about sub-3% interest rates on home mortgages this week. Prime is 3.25%. Refinancing current debt loads should probably be high on your list. You are going to hear a lot about personal de-leveraging (paying down debt) as we move into the new normal. We see a lot of people switching from 30 year mortgages to 15 year.
  • Tax laws have changed a lot this year as a result of stimulus measures. Required minimum distributions from retirement plans have been waived entirely. If you have already taken your RMD, you can roll it back into the IRA and avoid paying the tax. You should likely consider a ROTH conversion this year. The first two estimated payments for 2020 have been delayed until July 15th, along with the filing deadline of 2019 returns. Student loan payments and interest have been deferred. The treatment of charitable contributions has changed. If any of these provisions could benefit you, a revised tax projection for 2020 and 2021 is in order.

It is so easy to let inertia set in and avoid any consideration of money issues. But as I’ve often said, “Better decisions today yield better outcomes tomorrow.” Your financial plan is your road map and it should be dynamic enough to handle multiple scenarios for casting a best-case, worst-case, and somewhere in the middle. If nothing else, these last three months should have been instructive in thinking about risk tolerance. We are here to help you with any of these things. Reach out with any questions. We are a phone call or ZOOM meeting away.

June 29, 2020

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No Partridges in Pear Trees Here

“Motivation is what gets you started. Habit is what keeps you going.” Jim Ryun

Day 1 of 12: On the first day of Christmas, my true love gave to me a partridge in a pear tree.  You surely know the song, “The Twelve Days of Christmas.”  Thankfully, my true love did not give me a partridge or a pear tree. She gave me a new Fitbit that tracks my heart rate and keeps track of my exercise and sleep.  I hope that means that she wants to keep me around and wants me to stay healthy.

Nearly two years ago, I attended a 2017 goal-setting course and made an important discovery–that my chief motivation for getting and staying healthy was that I would then have a better shot at seeing our son, David, graduate from college. (He was in the 8th grade at the time.)

“Duh!” you say. “Doesn’t everybody have the goal of seeing their children, or even grandchildren, graduate and grow into adults?” Well yes, but there is a big distinction to be made between aspirations and goals. Seeing David graduate is a wonderful aspiration and serves as a useful motivation, but is not a well-defined goal.  As financial planners we are compelled by our professional standards to ferret out client goals, but too often clients settle for expressing only aspirations.  Even “getting healthy and staying healthy” is too vague to be a well-defined goal. I re-crafted my goal: “Exercise for 30 minutes a day, 5 times a week, starting on January 10, 2017.” This is a habit goal.

Habit goals, such as “save 10% of income” unlike achievement goals, have a beginning date rather than a target for getting them done. Determining the best way to move toward the goal led me to one of my best investments yet: a treadmill to put in my basement. My goal of 30 minutes, 5 times a week was “installed” on March 30, 2017.

Fast forward to the fall of 2017 and my annual physical.  My internist told me that I might be the healthiest he has seen me in 30+ years.  I have kept up the exercise and this year added a new habit goal to my treadmill routine: Exercise 3 times a week with weights for strength and yoga for balance. That one took a bit longer to “install” but I’m happy to report that I have the habit.

With the new Fitbit, my goals are even more measurable than they were before. I am so grateful that Jennifer is encouraging habits that are good for me.  Next up, “Schedule and have a date night with her each week, starting December 28, 2018, and continuing until “installed.”

If you need help simply setting goals, click here for a step-by-step guide. 

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Creating a crisis is never anyone’s goal

But getting through one should be in your plan

What exactly constitutes a personal financial crisis? Chief among those crises we have heard is experiencing an unexpected event that consumes all readily available cash and having no one to turn to for help. If you have never been in that situation, you likely have little appreciation for the level of anxiety, or outright panic, that it can create.

Backing off from such an extreme example, what would it take to label something in your life a crisis? The dictionary defines crisis as “a time of intense difficulty, trouble, or danger.” Indeed, there are many situations that can cause intense stress, fear, and anxiety. While the consequences may or may not be dire, they can seem so amidst the emotional turbulence experienced during times of personal crisis. Fears around an uncertain future, played out in our minds today, can create an imagined crisis even before the event occurs. Decisions unrelated to money can give rise to a crisis mindset and often the reaction to that imagined crisis can lead to bad outcome.

Dealing with The Effects of Crisis

Often when faced with the emotional stress of a difficult situation, a natural response is to procrastinate. It is a human tendency to avoid the problem by pursuing activities that have nothing to do with it.  Lack of clarity as to why the circumstances are the way they are can also intensify the stress and induce a sense of hopelessness over the situation. Remember that negative emotions can act as a warning and a call to action.

We cannot be in control of everything that happens to us. Some circumstances must be accepted as outside our sphere of influence. We can, however, decide what we will do in the moment of difficulty or challenge. A significant roadblock to an accurate assessment of our situation, and finding a solution to it, is our perception of what is happening and why. Whether a set of circumstances is our fault, moving to blame or shame can perpetuate negative emotions and intensify hopelessness and despair over the situation.

Five ways to manage the stress of a crisis

  1. Reframe the situation in your own mind. Rather than blaming yourself for your ignorance or poor decision-making, remember that you’re not the only one in your situation. Many people experience the same or similar circumstances you face.
  2. Think more positively about a future. Envision yourself beyond the crisis. It may take some hard work to get through it, but there are plenty of examples of life beyond difficult periods.
  3. Engage in stress-reducing activities. Prolonged periods of negative stress are harmful to the body. Getting enough sleep, taking part in simple forms of exercise, and even play will help you maintain your health and mental focus. Take 15-20 minutes of “me-time” every day. That means you and you alone, no devices, and no guilt.
  4. Be smart enough and courageous enough to ask for help. While experiences of crisis can embarrass us, an outside perspective by someone with a non-anxious presence can be invaluable. Make the most of the situation to learn and grow.
  5. Get emotional support from friends and family. Sometimes we need to be reminded that we’re known and loved through—and apart from—our troubles.

Can Planning Avert Crisis?

Just as practicing risk management doesn’t prevent future risks from entering your life, having a plan will not help you avert every potential crisis. Yet proper planning can help mitigate the effects of a crisis when it comes. You know the adage: “hope for the best, but plan for the worst.”  The value of a plan is not in it being failsafe, but rather in having it in place to begin with. Not only can a sound financial plan lessen the severity of a personal financial crisis, but it is also a place to deal with its effects. The government uses stress tests with banks to plan future capital requirements. Your financial plan should be stress-tested before the need arises.

A plan means the difference between being worried, concerned, or stressed to the point of ambivalence or paralysis—and being confident in one’s ability to handle the situation. Having a plan in place can turn a significant financial crisis into a temporary setback.