Alphabet Soup of Financial Planners

Our assumptions are that no one cares more about your financial future than you. So if you need and/or want help in making wise financial decisions, who can you trust with your money and your financial welfare? Most of us pick a financial advisor by asking a friend or relative. We might also stop in our bank, talk to our insurance agent, or hear about financial advisors that advertise in print, radio, television, or social networks. Many financial advisors will have letters behind their name to signify a specialty or that they have passed specific test and accreditation. Here is just a sample of the most common certifications you will see associated with financial advisors:

AEP - Accredited Estate Planner

CDFA - Certified Divorce Financial Analyst

CFA - Chartered Financial Analyst

CFP - Certified Financial Planner

ChFC - Chartered Financial Consultant

CLU - Chartered Life Underwriter

CMFC - Certified Mutual Fund Counselor

CPA - Certified Public Accountant

CRC - Certified Retirement Counselor

CRPS - Chartered Retirement Plans Specialist

NAPFA – National Association of Personal Financial Advisor

PFS - Personal Financial Specialist

RIA - Registered Investment Advisor

Just because a financial advisor has letters behind their name does not make them an honest person. The April 29th edition of the USA Today stated that in 2010 there were 87,222 Securities and Exchange (SEC) complaints/questions and 1,310 Financial Industry Regulatory Authority (FIRA) new disciplinary actions filed. To help you find a financial advisor that you can trust, research their certifications and accreditations and check out BrightScope Advisor Pages.  BrightScope post information on advisors such as their employment history, qualifications, amount of assets under management and complaints filed. Do your homework when selecting a financial advisor. You do not want to trust your financial well-being to the next Bernie Madoff.

The Harvest of the Incredible Front Yard Edibles

Call it editable estates, urban agriculture, reducing your carbon footprint, or a throwback to the American ‘Victory Garden’ of World War II -- Last year, we decided to plant at least one surprise edible in every garden plot in our back and front yard. Among the many fruits and vegetables, we had peppers beside are day lilies, strawberry plants as ground cover lining are front walk under the yews, and sweet potatoes climbing the fence as a back drop to the zinnias.

Not only have we been rewarded with the playful fun of edibles interwoven across the landscape, we have relished (no pun intended) in the harvest. We have feasted on fresh vegetables and fruits all summer and have been canning and freezing to carry us well past Thanksgiving with home goodies. Who knew that three cucumber plants would give us enough to can dozens of quarts of dill pickle spears and bread and butter pickles? This fall, our pepper jelly has been a huge hit at gatherings. We found a very simple, step-by-step recipe at pickyourown.org. With very little effort, we have been able to reap the bounty of the harvest.

As we pulled in the last of our harvest this past weekend, we are already thinking about growing our production next year. We challenge all of you to tempt the fun of it next spring, even if it is just a few small strawberry plants as ground cover or a blue berry bush next to your garage doors. Before you know it, you also will be indulging in the joy of fresh picked berries with your morning coffee and swapping zucchini muffin recipes with co-workers.

Nothing warms up a cold, grey, winter  day like browsing through a seed catalog such as that from seedsaver.org and imagining your own little garden, full of ripe tomatoes and chilies and cucumbers and zucchini and carrots and ... :). -Happy planning.

The Flywheel of Finance

You have probably heard it said before, “the first million dollars is the hardest to save.” As I continued teaching from Jim Collin’s book 'Good to Great', he speaks to how disciplined thought and disciplined action brings about disciplined results. It is like a  flywheel -- like starting a lawn mower, where it is hard to get started and then through continual little pushes (disciplined action) the flywheel begins spinning faster and faster until you reach breakthrough (the engine's running).

As I am reading this, I keep thinking about how hard it is to make your first million dollars (I’m a long way from my first million) and how the flywheel provides a great analogy to saving your first million. It takes disciplined thought and disciplined action to start saving on a regular basis. If you start out saving $25 a month, you are starting your million dollar flywheel moving. Every time you get a raise, receive a bonus or a cash gift, you can add more to your monthly savings and you are pushing the flywheel faster. The more money you have in savings, the faster the flywheel turns because of compound interest. If you have $100,000 saved and you get a 5% annual return, you have just added $5,000 a year ($416.67 a month) to your savings. If you have a million dollars in savings with a 5% return, you are adding $50,000 a year to your savings or $4,166.67 a month.

When you look at your retirement flywheel, what ever your magic number for retirement, it is a big, heavy flywheel. It takes disciplined thought and disciplined action to get disciplined results. The best way to get your retirement flywheel moving is through monthly automatic transfers to your retirement savings; 401k, Roth IRA, traditional IRA or other retirement investments. Whether you start off with $5, $25 or $250 a month, you are starting your flywheel moving. The more you contribute the faster your flywheel moves and the quicker you will reach your goal.

The goal should be to have your flywheel move on its own without you adding money to it with enough to cover your expenses. At that point, you are independently wealthy and reach your point of financial independence. Your passive income is making enough to cover all of your expenses. Jim Collins would refer to this as “breakthrough.” What is your breakthrough number --$1,000,000 in savings returning 5% so you get $50,000 a year? $2 million in savings returning 5% so you get $100,000 a year? What ever your number, you can’t get there unless you start making contributions to your retirement savings.

Start Pushing Your Flywheel…..TODAY!

Leadership and Personal Finance

In my Senior Seminar class at Mount Mercy University we are reading "Good to Great" by Jim Collins. Chapter 2 is on Level 5 Leadership. As I read this chapter, I couldn’t help but to think how each one of us can be a leader in personal finance and how we can take some of the principles from Jim Collins and apply them to our daily lives. Collins describes a Level 5 Leader as someone who “builds enduring greatness through a paradoxical blend of personal humility and professional will.” We all want our families to be successful and I want my kids to be more successful than me (building enduring greatness).

A central theme of this chapter is setting up the company for future success and not worrying about individual success. Our last blog entry was on how much money it will take to retire so I naturally put the two together. I want my kids to be able to retire and live successful lives, so I want to set them up for future success. The questions are how do I do that and am I doing the right things.

What we decided to do is a Roth IRA "parent match"; matching up to a certain dollar amount each year, dollar for dollar, that the kids put into a Roth. For the kids, they are doubling their money. For us (the parents) we are giving them their inheritance early and hopefully instilling in them the importance to save for retirement. At age 17, Clay has a Roth IRA which will be tax free income when he retires. Fifty years of compounding will really cause his Roth IRA to grow.

We have also helped the parents of our grandchildren to set up 529 college savings. I know it doesn’t sound exciting, but at Christmas and birthdays, we contribute to their 529 accounts. We like to look at it as long-term love. Over 15-18 years, 3-year-old Jordan’s and 5-month-old Emmy's money will grow and ease some of the cost of a college education.

So I guess what I’m trying to say and do is that it is not so much about us anymore as it is about the future of our family. We all try to do the right things, share our love, and now share our knowledge and finances. We make a comfortable living and it would be nice to have more, but I would rather cut back a little so we can help the kids and grandkids with their future expenses and saving goals; in personal finance and leadership, taking our family from "Good to Great".

What is it Going to Take to Retire?

In reading the Sunday, September 26th Cedar Rapids Gazette, there was an article “From Boom to Bust” by Susan Tompor that got me thinking what it would take for me to retire. Susan also wrote the article “How to Prepare for Retirement” to help you plan. One of the things she stated in her “How to Prepare” article is “that you want to spend 4 percent or less each year from your retirement saving.” So….how much is it going to take? Other experts say that you will need 80-100 percent of your pre-retirement income in retirement.

If we put together all of this, and for ease of numbers, say you make $100,000 before you retire, you want 100 percent of your pre-retirement income, and you are only going to spend 4 percent of your retirement per year, you would need $2.5 million in retirement savings.

Now this does not include your Social Security income. Right now, you can start collecting Social Security at ages 62, but if you want to receive your full Social Security benefit, you must wait until you are 67. It might be earlier deepening on your ages. You can check what you will receive from Social Security at http://www.ssa.gov/.

All I can say is that I’m really glad that I have a job that I love and that it is a secure job. I don’t know when I will actually retire or if I will just slow down and travel more. It’s good to know your retirement numbers; no matter how scary they look so you can plan. A favorite quote of mine as it relates to retirement savings is “The best time to plant an oak tree is 20 years ago. The next best time is today.”

Perspectives

On Monday, our oldest son returned back to Colorado Springs from Afghanistan after being deployed for 13 months. We were able to meet him at the Denver International Airport after his 72 hours of travel from Kuwait. It was so good to get the hugs and see him face to face. We helped him get settled into his apartment, pick up his new Jeep and took him out for non-army food, complete with non-disposable tableware and actual glass goblets.

As we sat eating dinner at the Blue Star Restaurant in Colorado Springs, Nate said something that really stuck with me. “Everyone should be required to spend a few days in Afghanistan. They would really appreciate what we have here in the United States a lot more.”

Our army captain has been deployed 25 of the last 30 months, first to Iraq and then he volunteered for Afghanistan. He enjoys the little things a lot more; like a shower that he doesn’t have to walk 200 meters to, a bed that fits his 6’5” frame, with more than a 2” mattress, no sand or dirt in his coffee. I can only imagine what life was like on his deployments.

Some families have been up against some financial hardships and it calls for tough budgeting to pull through these times, to really draw a hard line between needs and wants. I would like to challenge everyone reading our blog is to mentally go to Afghanistan or Iraq for a moment and think about what your life would be like. When you return from your mental trip, I hope you feel as I did; the appreciation of everything you have, what the United States has to offer, and for the men and women deployed away from friends and family.

Thanks to all the men and women serving in our armed forces; And may every son and daughter serving, return home safely.

Fitness and Financials

Four weeks to my bucket-list triathlon sprint. It is the last hour panic of must get healthy, must get fit activity. I had forgotten how good you feel when the endorphins kick in after a run. What’s so great is that you can do it all so cheaply. 

You don’t need to spend money on a gym or buy equipment to get fit. Running outside beats the tread mill for cost and keeping you fresh and inspired. Public Television broadcasts workout programs you can record and follow. The internet has a great yoga videos you can follow along for free. Staying healthy- staying fit helps keep your healthcare cost low and keeps you feeling great.

If you are paying a gym membership, now might be the time to suspend it and spend your time outside running or riding a bike. Grab friends to join you on the run or bike ride and make a day of it. Not only will you be saving the cost of your gym membership but you are building a tighter community of friends; all getting healthy together.