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Thanksgiving PDF Print E-mail
Written by John D. Buerger, CFP®   
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John Buerger

Here we are closing in on Thanksgiving - probably my favorite holiday of the year - and I am happy to say I am already full.

No, I haven't been sneaking into the turkey or apple pie early. I am just full of thanks - the reason for this holiday - but I would really like to hear about YOUR Thanksgiving so please leave a comment at the end and share with the rest of us.

MY STORY

Allyson and I have hosted Thanksgiving at our home for family members every year since before we were married except one. I get up early and prep the Turkey. Allyson makes the mashed potatoes and a number of other dishes (we collaborate on a couple, too). Invariably someone brings the apple (my favorite part of the feast) and pumpkin pies. We start eating at 2:00pm or so and basically don't stop until folks leave sometime well after 6:00pm.

What I enjoy most about the holiday is that it is ALL about relationships, conversations, some fine wine and being thankful for what you already have - as compared to Christmas which seems to be more about giving and receiving and in some way changing what we already have. Now maybe this is just some tryptophan induced myopia (there usually is a tryptophan induced nap somewhere in the middle of that day), but for me Thanksgiving is the ultimate high of the year.

Thanksgiving is a reflective time where most of the other holidays are more active and engaged. To me, life moves at a (too) rapid pace with most folks constantly pushing to get somewhere other than where they are. I embrace those rare opportunities (like this holiday) to slow down, take in the surroundings and embrace where we have already been.

This year, Allyson and I are extra thankful.

We have seen substantial growth at ALTUS Wealth Solutions. This is important to me for two reasons. The obvious and selfish reason is that my work is what provides food, shelter, clothing and an education for my family. Business growth means more income and a better financial picture for our family.

What really makes me happy, though, is to have been more effective at helping more people get control over their money. The size of our email distribution list has grown (register now if you don't get it). I have done more workshops that have been better attended so more people are getting access to my knowledge and experience. Folks are referring their friends and family members to us to help them (the best feedback we can get that we're doing a good job) so we are helping more clients in deeper and more meaningful ways.

One of my top "values" is to help others understand, reach for and ultimately realize their potential - to get to that "rich and fulfilling" life that they deserve. I believe that was what I was put on this earth to do and I get an incredibly satisfying feeling when it happens. It has happened far more often this year than at any time in my life. From the new biz owners who have watched their businesses take off to the families that have been able to send their kids off to great colleges without destroying their own retirement plans in the process - my work has been extremely effective and rewarding this year.

Thank you.

Hearing from a client (as I did just yesterday) how much they treasure their relationship with me as their Wealth Coach and how much value they find in having me as a resource, guide, friend, coach and source of encouragement was the perfect gift to start off the Thanksgiving week.

Maybe the capper for the year was to hear Dave Congalton (the local talk show radio host) tell his listeners that "What John has been saying here for the past two years about the economy has proven to be quite true." Sometimes, I wish that I hadn't been right and the economy was back to the hey-days of 1999 or 2006. But since that would have been impossible, I am grateful that I DID express these thoughts and that hopefully a few more people were better prepared for what has hit them the past couple of years than would have been the case had I not been there.

Just as important, Allyson and I are thankful for our family and extended friendships. Austin and Alexa are both enjoying banner years at Mission Prep. We have found good friends among the families of their high school classmates. We have survived the transition to teenage drivers, hectic high school schedules and (right now) the college application process. It's a whirlwind, but a great whirlwind.

This is the interactive portion of this website so let me finish by asking YOU to share with us what YOU'RE thankful for. Leave your comment below. That way we can all celebrate together - even if we're not in the same room, city, state or country.

On Thursday, I will raise a glass and toast all of our successes.

John

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Last Updated on Saturday, 30 April 2011 22:07
 
Negotiation PDF Print E-mail
Written by John D. Buerger, CFP®   
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John Buerger

If you were buying a new flat screen TV and you could save $1000 on the purchase, would you do it?

Most people would answer, "Yes!" to that question. Heck, with today's prices and a $1000 discount you could get a decent flat screen TV for free. But even if the TV in question cost $3000 (a really nice TV) you would still go for the discount and probably travel a hundred miles and jump through some other hoops to get it, right (provided you really were in the market for a new TV)?

Well, that may depend on what those other hoops are.

What if one of those hoops involved asking for the discount, would you still do it? Would you threaten to walk away from the deal if you didn't get the discount even after you asked for it?

These are parts of the negotiating process ... and negotiating is an excellent way to build wealth. If you can pay consistently less for everything you are going to buy anyway, you improve your cash flow. Cash flow (as we've written here before) is the key to building wealth. Yet like so many wealth building techniques that are tried and true and always work (like spending less than you make), very few people actually engage in them.

This may explain why only a very small percentage of Americans has any kind of financial freedom. It's not that the rich are robbing from the poor and middle class. Mostly it is that the poor and middle class refuse to learn the basics of building wealth. They aren't willing to do the hard work necessary to save their money and grow it. If a freebie is handed to your neighbors as a gift, sure they'll take it (which is why politicians are always offering gifts to their constituents in return for votes). But when it comes to actually working through a process that is inconvenient or uncomfortable, most people give up. It's just too hard.

The end result - most people pay more than they need to for just about everything in life because they are afraid to negotiate. The hassle, angst and emotional commitment of the process is too much for them.

MOVING ZEROS

One of my favorite exercises in personal finance is to add or subtract a zero. Doing so adds a whole new dynamic to any situation.

If you could save $100 on a $300 purchase (subtracting a zero), would you do it? Would you negotiate more or less? The cellular providers manipulate people all the time with this. They give you a $100 off a $300 phone and get you to sign a two year contract (for $100 a month) in the process. Does anybody buy a cell phone without asking for the promotional rate?

ADD A ZERO

If you could save $10,000 on a $30,000 purchase (adding a zero here), would you do it? How many hoops would you jump through for that kind of savings? Would you put up with more hassles because the reward was bigger?

Interestingly enough, most people won't work much harder to save $10,000 on a $30,000 purchase than they will to save $1000 on a $3000 purchase. Even though the savings are the same (on a percentage basis), there is a threshold of how MUCH savings (on an absolute basis) people are willing to negotiate.

Folks who buy really expensive cars are more likely to pay the sticker price than those buying the budget model ... even though that expensive car has padded the pricing with loads more profit than the stripped down econo-car.

This little behavior quirk also explains runaway medical costs - especially on the more expensive procedures (which have a tendency to be about prolonging life for a few weeks or months on an otherwise terminal patient).

NEGOTIATING COLLEGE COSTS

I'm a College Funding Specialist. I help families find ways to afford college education for their kids. The average cost of attendance to a four year university is almost $30,000 and there are certainly many places that charge more. It is possible to save $10,000 on college outlays every year simply by positioning assets appropriately (for example - don't have money in your student's name in a savings account) and filling out and submitting the FAFSA financial aid form.

You would be shocked at how many parents refuse to even APPLY for financial aid. They are convinced they make too much​ money and they don't want to go through the hassles and inconvenience (​or appearing not to be at the top of the income ladder)​ of asking for help. Instead they will borrow money out of their home (if they have any equity left) or deplete their retirement savings to pay the bill - all because of pride.

IT​'S NOT TOO LATE

Here's my mea culpa - I used to pay full price for everything. I hated negotiating. I won't say that I like it much now - I still find the process uncomfortable and a bit unnerving at times. Allyson, my wife of 19 years, is the chief negotiator in our family and that is fine with me. But today I will always ASK for the discount, especially on the bigger ticket items.

Saving $1 on something may not be worth the hassle, but saving $1,000 or $10,000 definitely is.

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Comments (1)
1 Tuesday, 05 April 2011 19:17
Kevin@OutOfYourRut
Lack of negotiation might be an American thing--or dilemma, depending on how you view it. In many foreign cultures, haggling over price is a regular part of the buying experience. Buyers do it, sellers expect it. Somehow in America it isn't "cool" to haggle.

I'm guessing it's one of two things: 1) We don't want to offend the person we're buying from--maybe in the hope that no one will offend us when we're in the sellers shoes, or 2) haggling might convey the message that we can't afford something.

That being said, I think there IS a measure of financial freedom that comes with negotiating. The better we are at it, the less we pay for just about everything. It seems like a skill worth learning. And it is a skill!

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Last Updated on Monday, 15 November 2010 23:56
 
Realization PDF Print E-mail
Written by John D. Buerger, CFP®   
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John Buerger"You do not need a parachute to skydive. You only need a parachute to skydive twice."

Tomorrow is a national mid-term election in the United States​.  It is widely anticipated that the Republicans will pick up a large number of seats in both the House and the Senate from the Democrats.  The headline from Yahoo's Tech Ticker says "Americans Desperate for Change: Major GOP Midterm Victory Expected."

Somehow, replacing the current bunch of elected officials with a new bunch of elected officials will be the solution to our problems.

What I wonder is whether or not this "medicine" may just be a lot more of what made us sick in the first place?  Should you be paying attention to the shoes you're wearing?  Or whether or not you're wearing a parachute before you jump out of that plane?  That depends on which is more important - How you look when you land on the ground or whether you are alive AFTER you land on the ground?

THE 545

You have probably received the email reproduction of a Charlie Reese op-ed that is floating around about how 545 people (Congress, the President and the Supreme Court) control the destiny of 350+ million Americans.  There is a lot of truth to that message even if it may be presented in a polarizing way (originally written in 1985 and published in 1995 - even more true today in 2010).

Both sides complain about the deficit and blame the other party for creating it, yet both sides are at fault.  Neither side is willing to actually cut government spending.  Instead we debate whether we should increase taxes on just the rich or everybody ... or maybe find a new way to tax people (like the VAT) that is more "fair" ... or what if we just run a monstrous deficit so we don't have to increase taxes any more but can still hand out all the goodies to people who want them?

There are very few problems in the United States today that were NOT caused by government intervention.  So why do we think that the same people who brought us these problems can now all-of-a-sudden make them go away?

WHY THE 545?

Who asked the 545 to intervene in the first place?  Why, we - the voters - did of course.

Every time you or I agree to vote for someone who promises something for nothing, we sell ourselves a little further down the river.  Want to buy a house but can't afford it?​  Government will sponsor a plan to make housing affordable - now your neighbor can qualify for a loan they still can't afford in order to buy that overpriced house (overpriced because too many people who couldn't afford homes were out buying them anyway - thanks to easy credit - and bidding up prices).

Now we have Fannie and Freddie and the FHA.  They're all broke.  They are nothing more than a house of cards hiding trillions in worthless loans - a problem that will re-surface someday ... and we'll probably look to government to fix THAT problem when it happens, too.  Dumb.

The free market didn't create these monsters - government did.  It may have been well intentioned, but it is still to blame.

STOP THE MADNESS

Here is how it works - Have a problem?  Ask the government to fix it for you.  When their fixes make things worse or stop working all together (like right now), vote the politicians out of office and find new politicians in the hopes that THEY CAN fix it.  When that doesn't work repeat the process over ... and over ... and over again.

We have completely lost site of the fact that it really doesn't matter WHO is elected.  Government can't solve problems that government creates much less all of the other problems that exist as part of this life with 6 billion people on one small planet.  Life is messy.  There are good times and bad.  Some people are lucky, others not so.  Nobody ​- not the Fed, the Treasury, Congress or the President - can smooth out all of life's bumps​ and bruises ...

... but that won't stop them from selling you the hope that they can.

A NOVEL IDEA

I've said it a lot over the past two years - "Hope is not a strategy."  Anyone who projects "Hope" as a means to an end, whether trying to sell a book about the law of attraction or running for public office, is nothing more than peddler ... a cheap, snake-oil salesperson.

In order to reach your goals and improve your lot in life you must (1) know where you are, (2) know where you want to be, (3) have a plan and (4) execute on that plan.  That's it.  Hope isn't one of the four steps (although having a positive attitude does help as you push through resistance as you begin to implement the plan).

HOW IS THAT WORKING FOR YOU?

Let's see how we're doing on any of those four stages ...

As a country we don't know where we are.  Nobody (the media, politicians, corporate big shots) tells the truth.  Everything is obfuscated.  Most people don't even understand how the stock market works or how much risk is baked into that investment portfolio where their life savings are riding.  It's crazy.  We have all this information at our fingertips through the world wide web, but the truth is more hidden today than ever.   We definitely aren't doing well with #1.

We aren't doing any better on #2 - knowing "Where we want to be."  As a country we are rudderless with nothing to strive for other than to do what we can to stay one step ahead of our neighbor.  If that neighbor happens to be walking over a cliff (as with housing), so be it.  We're still determined to stay one step ahead.

Oops.

We do not have a plan (#3) so there is no way we can execute on that plan (#4).

A VISION

What we need is a Vision.  We had it with Kennedy and the race to the moon.  We had it at the turn of the century with the industrial revolution.  We also had it (unfortunately) with World War II - a unifying goal that we were all inspired to work towards.  In those moments American ingenuity went to work.  It sparked our imagination and channeled our cumulative energies.

We might have been sky-diving but we were doing it with precision targets in mind ... and because we knew we wanted to try it again a second and third time we also made sure we were wearing that parachute.

Somehow I don't think we're going to learn anything new when the polls close tomorrow or from what happens in the next year or two.

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Last Updated on Tuesday, 02 November 2010 05:23
 
Who Are You PDF Print E-mail
Written by John D. Buerger, CFP®   
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John Buerger

This week we are wrapping up a series of posts I have done that are focused on some simple (mostly financial) advice that will help you enjoy a richer and more fulfilling life everyday.

This is not a get-rich-quick process or some hyped-up multi-level-marketing program.  It DOES represent a simple but different way to view many of your daily choices, especially those that have to deal with money.  This series of posts gives you a new framework which will help you get more out of life while you are putting more into the lives of others.

This represents the ultimate in win-win situations.

QUICK SUMMARY - NO PITY PARTIES

This project started back in March, 2010 with "This is Shift" and a statement that there are No Hand-Outs and No Freebies.  Everything that is going on in your life is Up to You.  Mindset is everything: How you think about money, yourself and your relationship to others is all that matters.

You see, your mind controls everything: your choices, your actions, how those around you behave ... and YOUR RESULTS.  Your mind has all the power but it is also at the whim of your emotions.​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​  In "Money and Sex" we discussed some of the particulars of why smart people do dumb things with their money.  Mostly, it is because your brain approaches financial choices in pretty much the same way it approaches sex.

Using personal responsibility and human irrationality as the foundation, we got to the most popular post of this series where I shared my one simple piece of advice for how to "Get What You Want" in life.  I tweaked that advice to make it more "Be-Centric" in "Be-Have vs. Behave" and put it into practical and actionable terms in my explanation of the "Keys to Wealth" (you'll have to read the post to learn what they are).

THE BIG HAIRY QUESTION

All of these posts (and the conversations that have followed each of them) lead to​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​ one fundamental question.  I believe your answer to this question (and the depth of your understanding of that answer) dictates your success in life both personally and financially.  The question is ...

Who Are You?

Deep down inside, what kind of person are you?  What do you stand for?  What is most important to you?  How do you picture yourself?  How do you want others to picture you (hopefully the same as you picture yourself)?  How do you want folks to remember you in their thoughts?

When you understand these answers at the deepest and most fundamental level, you will then also understand what value you bring to those who are around you and/or you care about.  At that point, you will make better decisions, not just with your money but with your relationships, your time and your energy.  As Roy Disney (Walt's brother) said:

"When Your Values of Clear, Your Decisions Are Easy."

THE NEXT STEP

Once you understand who you are ... the next step is to find a way to share that understanding with everybody around you.  This process starts by making choices and taking action in a way that is in alignment with who you are.  If you feel you are kind and generous person, then BE kind and generous.  If you feel you were put on this earth to help people, then go out and help someone today (regardless of whether or not you get paid for it).

You are a unique person who is here with us in the sometimes messy thing we call life for a unique and special reason.  I encourage you to try to understand those unique qualities the best you can and celebrate them.  You're awesome ... and you're the most awesome when you are the most YOU. Finally, work to express those fine qualities every single day in as many things that you do as possible.

FOR BUSINESS OWNERS & MANAGERS

This last bit of advice is for my fellow business owners, entrepreneurs and managers - the leaders who tend to be attracted to my financial planning firm as clients.  Your business will be more successful as you become more successful at defining and communicating the fundamental values of that business.  It is likely that you and your business will share many of the same qualities, but don't just assume that because you understand these attributes in yourself that automatically are visible within your business.

Who Are You? is the ultimate question to ask yourself, your employees and your customers.  Once you understand your company values, then share them with everyone you meet.  This is the heart of good business marketing and will be the key to incredible success for your business, even in challenging economic times.

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Last Updated on Tuesday, 19 October 2010 17:21
 
Key to Wealth PDF Print E-mail
Written by John D. Buerger, CFP®   
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John Buerger

"Keep your eye on the ball!" - Coach Charlie Wright

Anyone who has ever played a sport has heard this phrase. It is the key to hitting or kicking the ball harder, farther and with greater accuracy. Of course there is a big difference between knowing what you should do and doing it. There are lots of distractions that help most sport enthusiasts (and even professionals) take their eye OFF the ball. That's when the trouble usually begins.

Building wealth is a lot like being better in sports​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​. ​​What is the one, single-most important key to building wealth?

CASH FLOW

The fastest, simplest and most productive way to build wealth is through control over your cash flow.

Yes, investing is important and so is protecting the wealth you already have (usually through insurance), but by far the most powerful tool you have (and you have complete control over this tool unlike most financial instruments) is cash flow.

Isn't it odd that the multi-trillion dollar financial services industry - an industry that is always touting their success at helping folks create wealth - spends almost NO TIME or resources on cash flow management. As much as we have seen huge "advances" in financial tools like mortgages, investments and insurance products, most people are still using the same cash flow management techniques (budgets) that our great grandparents used.

That is so 19th century.

NO BUDGET

Budgets don't work.

For most of us, budgets are ineffective. They are restrictive in nature (people only "CUT" expenses ​​​​​​​​​​​​from their budget) but h​​​​​uman nature puts more value ​​​​​​​​​​on what is being sacrificed in the present than on what could be ​​​​​​​​gained in the future​​​​​​​​​​​​​​ through saving.​ Why? Because spending money feels good.

"Budget" is a four-letter-word (with six letters).

CASH FLOW MANAGEMENT

In order for you to stick with it, your cash flow management technique should be empowering, positive and even fun. What you need are tools that have more positive factors than negative - tools that are in alignment with the innate human desire to possess things and enjoy the thrill of spending (the pleasure that comes from buying those possessions).

Those tools ARE available to you, just not through normal financial advisory outlets - those folks are too busy selling their new fangled insurance or investment products. While you will spend some money getting and learning a useful cash flow management system, the cost pales in comparison to the money you pay financial salespeople (directly or indirectly) for their products (that don't usually work). If your cash flow system is effective, you should have at least three times the cost of implementation in additional savings in the first year alone.

A 300% rate of return beats anything your stock broker can promise you.

START NOW

Working on your cash flow is something you can and should start to do right away. There are no minimums with cash flow management. If you have money slipping through your fingers right now - and if you have any type of income, even unemployment income, this is the case -​​​​​​​​​​​​​​​​​​​ you can start working to improve your cash flow RIGHT NOW​.

The earlier you get started on saving, the better off you will be.

If you were lucky enough to start saving $5000 per year starting at age 20, by the time you were 60 years old you would have built up $1.25 million (8% growth each year) even though you would only have "saved" $200,000 over that 40 year period.

If you had STOPPED saving money after the first 10 years (but continued to allow the account to grow at 8%), you would still wind up with $728,867 by the time you were 60 even though you had only saved $50,000 ($5000 per year X 10 years = $50,000). ​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​If your neighbor STARTED saving at age 30 (the same age you stopped saving), he would only have $566,416 in the account at age 60 even though he had "saved" three times as much money ($5000 per year X 30 years = $150,000).

FEELS BETTER THAN SPENDING MONEY

$5000 may seem like a lot of money but it is just 10% of the average household income in America. I have gone through this cash flow exercise with dozens of people from all walks of life. It's pretty easy to find 4% in savings a year right away. Once you have had success at these savings rates for a few months, the jump to 10% is not that difficult. In fact, most people are anxious to make it happen.

Why? - It feels good to have control over your money.

It is not the same endorphen and dopamine laced high that comes with the thrill of spending. Being confident and in control works off a completely different part of your brain's circuitry. The high lasts much longer and generally helps you make better decisions on other financial matters, too.

HOW TO GET STARTED

There are plenty of books you can read. The Wealthy Barber is one of my favorites. I also like David Bach's Automatic Millionaire (see our bookshelf for more ideas).

Our own proprietary Cash Flow Hydrant™ system helps you identify the expenses over which you DO have control versus those that you can't change. It also aligns your spending with the things that are most important to you so you will end up with more of what really matters in life and less of what doesn't.

You gain access to this system through our Wealth Health Check-Up (which comes with it's own money-back guarantee).

Once you accept this reality and work with it - you will get control over your money before it takes control of your life.

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Last Updated on Monday, 04 October 2010 19:20
 
It's Not Your Fault PDF Print E-mail
Written by John D. Buerger, CFP®   
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John Buerger

For those of you who have read this blog for a while, the title of this post may surprise you.

I AM a big advocate of personal responsibility. Nobody wins in the "blame game." Your neighbor always loses when he claims to be the victim every time something doesn't work out the way he planned. This is especially true in the realm of personal finance.

My financial planning firm's slogan is, "Get Control Over Your Money Before it Takes Control Of Your Life." In Get What You Want I argued that your results are directly driven by your actions (not somebody else). In Be-Have vs. Behave we dug to the root cause of all your successes and failures. What matters most is who you are being when you taking those actions which are dictating the results you are getting.

Nobody else is to blame for any of your problems just as nobody else should get credit for any of your successes. How could a professional who preaches these ideas then say, "It's Not Your Fault?"

Before you start thinking I've fallen off the proverbial turnip truck, accuse me of losing my mind - or having gone completely soft on my principles - allow me this week's missive to explain myself. The reward for your patience will be to learn a new way to get more out of life every day AND build wealth and a more secure future for your family.

LINEAR THINKING

Most people (especially economists and financial advisors) are linear thinkers. Our view of the world is pretty simple, to the point of being formulaic. You plug in a few important variables and out pops a logical result. There is too much raw data to make sense of it all, so we simplify that data, eliminate the "noise" and get to those few critical variables that matter.

This is how we're all hard-wired. Humans seek patterns, throw out useless data and base decisions on a few key points.

As an example, when you're driving a car, you don't really have to worry about which windows are up or down or what color the paint is or even if the car is clean or dirty. It won't affect your ability to get to your destination. You only need to know that the gas pedal makes the car go faster, the brake slows it down and the steering wheel changes your direction.

IS THAT RATIONAL?

We all simplify our world through assumptions - it is a basic human coping mechanism. In the world of personal finance and economics, a major assumption is that humans are rational creatures always pursuing the greatest personal gain. This is what I call the "Rational Thought Hypothesis." It proves to be a rather poor assumption - the equivalent of believing that a red car always goes faster than a white car regardless of what is under the hood.

Human beings are not rational creatures, especially when it comes to money. We may be armed with the most powerful cognitive brain of any creature crawling the face of this planet, but all that logical brainpower gets tossed out the window when it comes to financial decisions.

Think about it for a minute. Why do people enjoy their retail therapy addictions so much? Why did your neighbor buy that hot looking sports car to drive to and from work? Answer - because spending money feels good. For your neighbor, the thrill of driving that racy car validates having spent the money on it! Why is there a tinge of admiration when you see your neighbor driving that car? The same reason - and it has nothing to do with logic or rational thinking.

STARTING TO GET IT

In the past 10 years, studies in Behavioral Finance (a pioneering blend of psychology and personal economics) have generated reams of clinical proof of what we should have known all along ...

Especially when it comes to money, human beings are NOT rational.

First of all, every person defines "personal gain" in a different way. For some it is money in the bank. For others it is toys in the driveway. Still others seek better relationships or more powerful experiences (thrill rides). Most of these value judgments are based on emotional triggers, not rational ones.

The premise of the "Rational Market Hypothesis" is simply not rational.

THE MARKETERS WIN

One group of people have understood and exploited this fundamental aspect of human psychology for decades - the marketers: product salespeople and politicians. Practically since the beginning of time, marketers and advertisers have known that they can influence your spending choices simply by appealing to one emotion or another.

Sometimes their efforts are straightforward - the car ad that emphasizes how much fun the car is to drive is pretty direct. Other times, their methods are more subtle.  Robert Cialdini's Influence, the Art of Persuasion has loads of great examples.

A NEW LANDSCAPE

Once we wipe away the "Always Rational" assumption, your personal-finance decision-making-process takes on a totally different look. Until you accept the reality that you make every financial decision in your life based on emotional factors rather than rational thinking, you are going to be at the whim of every marketing scheme, sales pitch and influential manipulation out there.

But nobody is out there helping you see or understand that truth.

When was the last time a teacher, advisor, coach, politician or any other person of power and influence told you that you are prone to making emotional decisions, not logical ones? For many people, this article may be the first time they see this idea in print.

WHY IT'S NOT YOUR FAULT

The framework through which most people view most of their financial choices is built on a lie - a faulty assumption that permeates everything you were taught as you were growing up. From an early age, you have been taught that you always can, should and will make rational choices.

Parents reward "good behavior" (Behave vs. Be-Have). Our education system force feeds "facts" (which are often not facts at all, but emotional interpretations of data and events that are presented as facts by teachers) and rewards memorization - a purely cognitive skill. The process of thinking through and solving a problem takes a back seat to having "the right" answer. This system has little time for emotions and teaches us to stuff those emotions and behave like our schoolmates.

If you graduate from school with decent grades, you are told to think of yourself as "smart." You have been trained to believe that you will therefore ALWAYS make "smart" choices. Because logic beat out emotions throughout your schooling experience, you believe that it will continue to work that way the rest of your life.

EMOTIONS DRIVE YOUR CAR

What I am suggesting (and this is supported by those studies in behavioral finance and emotional intelligence) is that a vast majority of your choices in life are actually driven by your emotional circuits - not your cognitive brain. But since the power of your emotions has been downplayed, squelched or put aside throughout your formative years, you have almost no clue how to understand or manage those emotional impulses.

So it's not your fault.

You didn't stand a chance. You're driving a car the way you were taught - by using the gas pedal, brakes and steering wheel ... but that car is actually locked onto an emotional roller coaster track. What you do with the controls has very little real effect on where your car ends up. Your emotions are always there and they are constantly being manipulated by everyone else around you.

Once you accept this reality and work with it - you will get control over your money before it takes control of your life.

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Comments (1)
1 Saturday, 23 October 2010 16:02
Kevin Condon
I follow until the last sentence. What makes you think that a cognitive realization will override your emotions NEXT TIME?

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Last Updated on Monday, 20 September 2010 19:24
 
Be-Have vs. Behave PDF Print E-mail
Written by John D. Buerger, CFP®   
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John Buerger

Do you like taking orders from other people?

In my last blog post (Get What You Want), I offered some free financial advice. Something clicked - after just 10 days it is the most popular article on the RichAndFulfilling.com website.

This week I want to take the discussion we started in that blog just a little bit further.   In fact, in light of recent work I have done on my own process, I will tweak that simple advice a bit in order to make it even more useful for you.

Before I get started, I do want to give thanks for all of your support. I am in the advice-giving business so I appreciate it when more people are willing to hear, share and hopefully take my advice – it validates my work and the hours I spend writing this blog. Even if you only take the “free” advice that I give (which pales in comparison to the help I provide my paying clients), I know I am affecting change and helping people reach to their potential – both being major elements of my purpose for being here on this earth.

Do You Like to Behave?

When your mother told you to eat your vegetables or brush your teeth, what was your reaction?

If you were like most any young person you fought every demand you could ... or at the least did the task grudgingly.  It certainly didn't make the process any more enjoyable because someone else was telling you what to do.

I am a notoriously independent person, but I don't think I am unusual when it comes to “honey-do” lists. I love my wife and would do just about anything to make her world a better place. However, when I get a honey-do list, oddly enough the projects that are on that list always seem to get put off to a much later day. This is simply a natural reaction to being told what to do rather than doing something on your own free will.

The Behavior Modification Dilemma

Those of us who give advice professionally (including doctors and lawyers) are often faced with a dilemma. Much of the advice we give goes unheeded. C. Everett Coop gathered all the data and did a fabulous job of communicating precisely how bad smoking cigarettes is for any person's health. Today, while smoking is less common, there are still millions of people purposefully buying cancer sticks.  New, young people are signing on to the practice every day.  It goes against all logic.

Thanks to “free will” most people will do almost anything BUT whatever they are told to do, even when the advice is offered in their best interests.

The Behavior Modification Solution

Oddly enough, one group of people knows how to persuade you to do what they want you to do. Those are the marketing professionals who have mastered the art of persuasion. For a fascinating read about how this all works, check out Robert Cialdini's “Influence, the Art of Persuasion.” It won't stop you from being a victim of marketing schemes, but it may help you catch yourself before you go too far.

The question becomes, what do the marketers know that the professional advice giver's don't?  I believe much of that has to do with the Be-Do-Have equation.

Actions Have Consequences

Human beings are all hard wired to want stuff. There is something about the structure and interplay between our sophisticated cerebral brain and the emotion based limbic system that makes us treasure meaningless trinkets. Other animals (like dogs) are motivated by food (hunger), but could care less about how they're dressed or what kind of car they drive.

At a very young age, we teach our children that in order to HAVE stuff that they want, they have to DO stuff. Actions have consequences. The reason why your friend got the results that he did was because he did (or did not do) certain things.

Your results are determined by your behavior.  Your neighbors results are determined by their behavior.

The Wrong Question

Professional advice givers eat, live and breathe in the “behavior modification” arena.  Financial Planners all are taught to preach: (a) Your results are a direct result of your previous financial choices. (b) If you don't like your results, you must change your choices and actions.

You - as the client are on the other side of the equation - seek out help from a financial professional because some aspect of your financial life is in pain.  The pain is the motivation to go through the (perceived to be) uncomfortable process of getting help.  Nobody ever sought help because everything was going perfectly well.

You have pain in your life and you want that pain to go away. The advisor is trained that your pain is a result of misdirected actions and poor financial choices. Their prescription follows one of two courses: (1) they sell you a product that will mask the pain and justify your failure (and pay them well in the process) or (2) they give you advice on how you need to change your actions in order to get different results.

To use a medical analogy, they either prescribe you a pill (a product which does nothing to fix the underlying problem but may make the pain go away for a while) or they give you a completely new diet and exercise regime which restricts just about everything that is “fun & relaxing” or “tastes good” in your life.

F. Scott Fithian wrote, “A great answer to the wrong question is completely useless.”

Here we have a whole industry that gives “a great answer to the wrong question.”  Financial Services workers are trained and motivated to either sell products (which don't solve problems but mask the symptoms) or give clients a laundry list of action steps which they should do but never will.

The Missing Link – Be-Do-Have

The missing link is the Be-Do-Have connection.

You see, it isn't enough just to DO certain stuff in order to HAVE the stuff you want. The DO-ing all must come from who you are at a foundational level. Actions that are not genuine are impotent.  That is why I hear your neighbors complain all the time, “I'm trying to save. I'm cutting back on frivolous expenses. I'm working two jobs … and I just can't seem to get ahead!”

The trick is to understand that what is important is not just what you are DOING. What is important is who you are BEING (or trying to BE) while you are DOING what you are doing. The BEING is what dictates what you get to HAVE in the end.

Most financial advisors spend all their time trying to modify behavior – what their clients are DOING – not on helping those people change who they are BEING.  I'm sure you are starting to understand why this doesn't work and why everyone around you is fed up with their financial situation.

Good Advice = Good Marketing

The great marketers understand the Be-Do-Have connection. Great marketing focuses on what a person wants to BE and then places the product or service on the path to that end. Whether it's being strong (Bow-flex), fast or sporty (various cars), a world class athlete (Gatorade & Nike) or a sexual god (Viagra, etc), they paint a vivid picture and let you decide that you want to BE like that picture.

The sad thing with marketing is that a person can't really BE different than they ARE just by buying a product or service.  It takes changing yourself and your thinking about yourself at a foundational level to create that shift.  At best the marketing "fix" is temporary.  This is good for the marketer because it keeps people coming back for more and more of their products.

More of What You Want – Revisited

My original advice last week was to “Know what is most important to you and why - and get as much of that as you can. Don't buy stuff you don't want ... and ferociously protect what you already have..”  It's great advice … but I have decided that it is not BE-centric enough, although it doesn't take much to tweak it:

Know what is most important to you and why. That is your BE.
Do whatever it takes to BE as much of that person as you possibly can every day. 
Judge every choice (financial and otherwise) through this lens:
“Will this allow me to be more of who I am or less?” 
Then ferociously protect what you already ARE that you like.

Fortunately, there are some advisors out there who understand this concept and practice it every day (not many, but some). They know how to help you define who you are and what is important to you. They can give you the tools and proper framework to live your life under this principle.

Seek out one of us.  The planning process with a BE-centric advisor is fun and exciting because it lets you be more of who you want to be, not less.  There are no restrictions or people telling you what to do … and there are no painful side effects like there are with all financial products (and pills).

There is just more of you being that glorious you that you were put on this earth to be.

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Comments (2)
1 Tuesday, 31 August 2010 02:45
Kevin@OutOfYourRut
"What is important is who you are BEING (or trying to BE) while you are DOING what you are doing." An advertising manager once told me that the secret to good advertising is to "sell the sizzle and let the sizzle sells the steak".

So they work to create a desireable image--as a result of the product they're pitching--then the prospect actually wants/desires/"needs" what they're selling. Mission accomplished.

That's why it's often so hard to sell people on advice even if it's useful. A vivid picture of the end result needs to be illustrated, otherwise the advice giver appears as little more than another authority figure.

I agree though, that the listener/buyer of the advice has to be committed in his own mind to act on the advice, otherwise it's just another decoration to sit on a shelf and collect dust.
2 Tuesday, 31 August 2010 03:47
John D. Buerger, CFP®
Thanks Kevin - My point in this article is that advice givers need to shift away from "giving advice" that nobody wants to hear and start taking a page or two from your ad manager's handbook. Right now people don't ask for help (even though they could really benefit from it) because they don't want to be told they've been stupid and this is what they should do instead. They've done that before. It didn't work then and it won't work now.

There are (a few) advisors who are starting to embrace this in their process. I'd like to think my firm is at the cutting edge, but I know I am not alone.

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Last Updated on Tuesday, 31 August 2010 00:36
 
Get What You Want PDF Print E-mail
Written by John D. Buerger, CFP®   
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John Buerger

If I could pass along one piece of financial advice to you, what would that be?

This piece of advice will likely sound different from what you've heard from other financial professionals.  You won't see this on the big financial firm websites ... or hear it suggested by financial experts on TV.  I'm not going to package it in a sales pitch or mash it in between a bunch of jargon that is either boring or confusing (or both).  You won't have heard this from your parents or any other person you know and trust.

As different as this advice is (and it is well off the beaten track) - IT WORKS!  You can embrace it no matter your income, your current wealth, your education or your knowledge about personal finance.  Clients from many different walks of life have told me that they enjoy each day more, have less stress about financial issues and feel more confident that they are on track in life.

If I could take all of my writing in this blog (three year's worth and counting) along with my eight years as a financial professional and fiduciary advisor and condense it down to one nugget of wisdom, what would that be?

Here it is ...

My Advice

Know what is most important to you and why - and get as much of that as you can.  Don't buy stuff you don't want ... and ferociously protect what you already have.

That's it!

And people pay me hundreds of dollars an hour for that?  Amazing but true, they do.  Why?  Because while this advice is simple and anybody could do it, most people won't ... but some hand holding (coaching) and a watchful third party to point out when you're going astray can be worth thousands of dollars in lost wealth each year.

What is the price for true happiness AND peace of mind?  That is for you to decide ... and "true happiness AND peace of mind" is what you get through this philosophy and our unique planning process.  Here are some more details on each piece of that advice:

Know What You Want

Life is long and complicated, right?  We spend decades on this planet from birth to death.  But what is the purpose of all this?  What really matters?  If you are like most people, there are only a few things in life that are so important, you would sacrifice just about anything else to have them.

The more clear you are on what those things are, the better for you.

Maybe your kids or other family members are the most important to you.  How about your spouse?  An animal?  Music?  Art?  Telling stories?  Fine Wine?  Great Food?  Your relationship with God?  These are just a few ideas.  I'm certain you have many of your own (send me an email at jdbuerger@altuswealth.com or leave a comment on this blog and share yours with me - I'd love to hear about them).

For me the most important things in life are my relationships with others: connections and conversations.  Finding solutions to problems - mine, my clients and my friends - is also at the top of the list.  If I could have my way, I would have an endless bar-b-que in my back yard.  We'd have great food, fine wine and endless deep conversations, solving problems and being thankful for all that is good in our lives.  If my wife and kids were part of this, I'd be in heaven.

These things in life that are most important to you - are your Values.  "Values" is not a dirty word.  Having them is a good thing because a life in alignment with your values (the things that are most important to you) is a life of happiness, pleasure and peace of mind.

Know WHY You Want It

The "Why" is critical because without it there is no motivation.  Without motivation there is no action.  Without action you would never purposefully move towards getting what you want.

You need "Action" to get "Results" and people need "Motivation" to take "Action."

You can academically know exactly what is best.  Any traditional personal finance advisor will gladly tell you what this is.  The "experts" on TV say it over and over: "Spend less than you make.  Invest in a well-balanced portfolio.  Pay down debt, etc."  These are all true statements.  Academically they are great advice.  But in the real world, your neighbors (and 98% of Americans) won't follow that advice.

Why? - Exactly!

The reason why they won't follow the advice is that their "Why" is important, but it is completely missing or misunderstood.  It started when you were three and were constantly asking "Why?"  It doesn't stop just because you become an adult.  You are still driven by the same organic structure you had as a child.

Your "Why" is critical to your success in getting what you want.

Human beings are - at the core - emotional creatures.  We are blessed with the most advanced cognitive brain of any animal on this planet.  Yet the vast majority of your choices in life - including almost every single financial choice - is based on your emotional circuitry, not logic.  Whether or not you want to admit it, you have a deep, complicated and passionate relationship with money.  It is a relationship that trumps ALL logic.

If you don't have the "Why" figured out, your best efforts will forever be compromised by advertising, marketing, politicians and salespeople who know how to manipulate your behavior to get more of what they want (product sales) regardless of what is best for you.

Buy More of What You Want

Once you know what you really want - those super-values for which you would sacrifice just about anything - get more of it.  Sometimes that is easy and inexpensive.  Sometimes not.  The better defined this goal is, the greater will be your motivation to make it happen, though ... so cost becomes less important.

REMEMBER: You need "motivation" to take "action" in order to get the "results" you want.

When you have the motivation, you will bulldoze through any barriers - including cost - to get those results.  Make a point every day to be sure you add more of something you truly want to your life.  Feed your passions.  Feed your soul.  Feed your values.  Make this your #1 priority for every day.

Buy Less of What You Don't

It is amazing the amount of money we are hoodwinked into spending on stuff most of us don't need and don't even want.  We do this for a number of reasons.  Marketing and advertising is effective at pitting our hyper-emotional centers against our more logical brain system.  The chemical forces that are unleashed in the midst of a "retail therapy addiction" shopping spree are very strong, even if they don't last very long.

Traditional financial planning advice is centered around archaic and ineffective tools like "budgets" and "saving for the future."  These tools appeal to the logical mind but have no chance of working for most humans.  Why?  Because they DO NOT appeal to the emotional centers in the brain.  While they are academically correct, they are missing that critical "Why" component.  There is no motivation in their application.  No motivation means no action.  People don't follow budgets any better than they follow diets.

The end results are the same: your neighbors waste lots of money buying stuff they don't want just as they eat food that isn't good for them and makes them fatter - then they feel bad about it because they didn't have the "self discipline" to make an intrinsically failed process work.

It's a vicious cycle that only makes the financial advisors and diet companies a lot of money and loads up the citizens with the attitude that they are helpless: they can't succeed at anything (but have to keep paying to try).

You can do much better than that.  Viewing financial choices through the lens of your values allows you to have more of what you want and stop wasting money on stuff you don't want and can't afford.  This is because your "values" have a strong emotional component to them.

Your values are motivating in a deeply powerful way.

Protect What You Already Have

The last part of this advice is possibly the most important because I have seen some of the richest lives destroyed by careless neglect.  Once you have worked hard and built up some wealth (even if it is your first $1000), it is critical to make sure you don't lose that hard earned wealth by exposing it to needless risk.

Be like a momma bear watching over her cubs.  Be ferocious.

Note: The key word here is "needless" risk.  There are two natural laws that exists here, "No Risk = No Return" and "Risk Cannot Be Eliminated."  These laws are just as immutable as the Law of Gravity.

Risk cannot be eliminated, but you don't have to expose hard earned wealth to needless risk which is something almost all Americans do - even (especially) experienced investors.  Here are just a few examples of needless risk:

Following the herd - doing something because everybody else is doing it.  Especially when it comes to your money, there is no safety in numbers.  Markets crash precisely when everybody thinks they are completely safe.  Any doubt?  Just look at the real estate market the past five years.

Mistaking the News for Reality - The news media (especially the financial news media) is there to make their advertisers happy.  They are there to sell products and services.  They are there to alter your perception of what is going on in the world around you so that you will spend more money with their advertisers.  In the investment world, that almost always means exposing your hard earned wealth to needless risk (like the Stock Market Roller Coaster) or spending it on (financial) products you don't need and can't afford.

Unless someone can show you how a product, service or even process can get you more of what you really want in life, then you are probably exposing your money to needless risk.  Remember the second natural law (Risk Cannot Be Eliminated).  Risk is in everything.  The better you understand the risks of a particular product or service, the less likely you will expose yourself to needless risk.

You Can Do This - Go Prosper

A Rich and Fulfilling Life - a life where you are adding more of what is important to you every day.  A life with less stress and fewer worries.  A life where you are confident that you are on track to having more of what you really want.

What's wrong with that?

Nothing - and it is exactly what you will get if you follow this simple advice.   And yet most people won't stop their busy lives (full of agonizing tedium and running around chasing their own tails) long enough to embrace this concept.  Why?  Because that is how we're all wired.  Nobody likes change and especially change that comes with it's own perceived reality check.

There is a sort of insane comfort with letting your emotions drive your financial choices.  It's like comfort food - probably not all that great for you, but it is easy and it feels good (for now).

I encourage you to push through that natural resistance ... at least long enough to understand what is possible.  Anybody can have a richer and more fulfilling life than the one they have now no matter where you are on the quality of life continuum.  You are never "done" with that.  If you want some help, feel free to contact me or continue to read through posts on this website.

The Ultimate Tool to Help - a Shameless Plug

Since I created the concept three years ago, I have done dozens of Wealth Health Check-Ups (a one-shot-fee-for-service review of everything in your financial life).  I should have done hundreds of these in that three year time frame.  It is inexpensive.  There are no strings attached - you don't have to sign on for any other services and it comes with a money-back guarantee ... but people are afraid of the process.  They are afraid of the reality check - learning the truth about their financial situation.  They perceive the Wealth Health Check-Up™ to be a painful process.

It isn't painful - it is empowering.  I love doing these check-ups because I have yet (at least so far) to find a case where we couldn't help the client get a lot more of what they want in life and stop wasting money on stuff they don't want or need.  People always leave realizing they are BETTER OFF than they thought they were (the perceived pain of the reality check turns into pleasure) and loaded with ideas on how they can make their lives even better.

I encourage you to sign up for your Wealth Health Check-Up™ by sending me an email or giving me a call.  Ask about our current $100 discount (for a very limited time).

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Comments (6)
1 Friday, 20 August 2010 18:30
Kevin@OutOfYourRut
John, I think you've just described the key to happiness in life. Most of us never find it because we're too scattered in our focus. At a minimum, if we could concentrate on one thing at a time, achieve it, then move on to another goal, we'd get far more done than we do now with all of this over-rated multitasking.

"Nothing can add more power to your life than concentrating all your energies on a limited set of targets"--Nido Qubein
2 Friday, 20 August 2010 22:05
John D. Buerger, CFP®
Kevin, thanks for the comment and the quote. Studies have shown that shifting from one area of focus to two cuts the probability of getting either result in half. Sad that most people cannot articulate their values. Can you get any more fundamental than knowing exactly what is most important to you?
3 Wednesday, 25 August 2010 15:27
Norm Trainor
Great article John. Reminds me of Clayton Christensen's article How Will You Measure Your Life? in the Harvard Business Review.
You have touched on a number of important points and it is great to see an advisor such as yourself taking the time to really understand his clients and what is important to them. I hope you continue to empower those around you.
4 Wednesday, 25 August 2010 18:50
John D. Buerger, CFP®
Norm, it is great to see your comment here. Thanks for sharing. Those interested can read the article at http://hbr.org/2010/07/how-will-you-measure-your-life/ar/1 It is an interesting read.
5 Sunday, 29 August 2010 17:31
Stephen - Rat Race Trap
John, this is a fabulous article! I think the whole article can be summed up with this sentence:

"Unless someone can show you how a product, service or even process can get you more of what you really want in life, then you are probably exposing your money to needless risk."

You might have meant that to apply to financial service products, but as far as I'm concerned it applies to buying a bag of potato chips at Wal-Mart.

"If I could have my way, I would have an endless bar-b-que in my back yard."

When you fire up that endless barbecue, let me know and I'll move in next door.
6 Sunday, 29 August 2010 18:58
John D. Buerger, CFP®
Great point, Stephen. Spending your money in alignment with your values is the ideal. While we're at it - and since you've covered this at http://RatRaceTrap.com - Spending your TIME in alignment with your values is also critical. In general, when ALL of your choices are made within the values-based framework, you will enjoy the life at the highest level.

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Last Updated on Thursday, 19 August 2010 16:50
 
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