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Clueless PDF Print E-mail
Written by John D. Buerger, CFP®   
Tuesday, 16 March 2010 15:17
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John Buerger

I'm a pretty positive guy.  In the past, I have tried to be encouraging and (mostly) uplifting in my message.  For the most part I would have to say this tactic hasn't worked to your advantage.  With the exception of a very tiny few of those who read this post each week, nobody is responding to the message or taking appropriate action.

You're not fired up! Everyone is in denial ... willing to kick the can down the road hoping the problem will just go away if we ignore it.  It won't.  The can just went over a cliff, and we're like lemmings willing to follow it to our own demise.

It is time to be brutally honest!

Sorry, but I sense that this post (like last week's) will not be something most people want to hear.  Too bad.  Ignore this message at your own risk.

The Train Wreck

I've said this before ... There is an economic train wreck in our future.  It will prove to be the mother-of-all train wrecks (at least relative to anything we've seen in our lifetimes).  Many people will be destroyed and nobody will get through it unscathed.  The pain and loss will be almost unimaginable.

We can avoid the worst of this train wreck if we act now to derail the locamotive ... but that will still result in pain and suffering.  Horrible and challenging as that will be, it is much better for us all than if we do nothing.

Either we act now and give ourselves some chance of survival or we stay frozen in our tracks and surely deliver a far lesser future to our children.

The "Solution" IS the Problem

The bulk of the problem can be boiled down to two major issues:

(1) We are all too willing to let others make our decisions for us

(2) Collectively and individually we ignore a cardinal rule of life - you cannot take more than you give.

Let's review a few of our bigger economic issues:

Financial Literacy - We don't even teach the basics of money in the schools.  95% of Americans will NEVER be Financially Independent (which means that the same 95% will BE dependent on handouts from friends, family and the government to survive).  28% of American retirees have NOTHING saved for their retirement.

The Proposed Solution: The evil banks and mortgage lenders preyed upon unsuspecting citizens and forced them to sign loans and buy houses they couldn't possibly afford.  We'll punish those evil banks by saving them from bankruptcy (using taxpayer dollars) until they can find a way to get rid of those toxic loans on their books.   Finally we'll throw more taxpayer money to allow those people who can't afford their home to stay there anyway - they were just too stupid to make a smart choice and not buy the house in the first place.  We can't let them move into a small apartment ... one they can really afford.  That would be cruel.

Of course this means that we will eventually spend trillions of dollars the government doesn't have, but government is so brilliant at managing money (witness Social Security's 1% return on investment the past 40 years and our national debt which is approaching 100% of our annual domestic output), they will figure out a solution and save us all from the bankruptcy boogie man.  We keep hoping that we CAN keep taking more than we give (borrow from the future) and not have to pay the price for breaking that cardinal rule.

I told you this post was going to be blunt.

Health Care Costs - We now spend 17% of our GDP on health care.  Costs rise at 7-10% per year for all types of health care except elective procedures (which are less expensive than they were 10 or even 20 years ago).

Background: Our current health care system is laced with bureaucracy.  The financial side of most medical decisions is made by third parties - either a health insurer or government agency - rather than the doctor advising the patient and coming to an agreement over what treatment is both appropriate and affordable.  The doctor advises the patient on various possible treatments (usually recommending the ones that give the doctor the greatest profit).  The patient picks the proceedure that prolongs life or eases pain the most (regardless of cost) while the insurer or Medicare picks up the tab and negotiates with the doctor over how much he/she is paid to provide that care.

It's like a Menage-a-Trois without the sex (and fun - not that I would know BTW) ... and the results are disastrous.  Patients don't even pay the insurance premium in most cases, so they have no clue what their medical care costs.  There is no mechanism to keep costs in line ... so they escalate rapidly.

The Proposed Solution: More of the same - only on steroids.  Government will come in and solve this problem with a new, multi-trillion dollar program, adding more bureaucracy and more mandatory third party decisions ... because you are just too stupid to work out with your own doctor the kind of care that is right for you and how much you can actually afford to spend.  There is a debate whether all health care is a fundamental "right."  I don't believe it is, but that is not the subject of this discussion.

NOTE: The one area of medicine that has remained competitive is elective proceedures - which don't have insurance agencies or government bureaucracy.  The free market works if you can get enough of the socialistic, anti-market incentives out of the system.

Educational Funding - College costs continue to rise 8% per year. 

Background: One major reason for this is the amount of money our US Government throws at the process through grants, Stafford loans and State School subsidies.

The Proposed Solution: More of the same.  Government realizes that a college education is getting more and more expensive - out of reach of more and more citizens.  The solution is to throw MORE money at the problem: more grants, bigger loan guarantee packages and more micro-managing from the state level.

The reality is that if you want to pay for college for your kids ... you should start saving for college now, not when your son or daughter is a Senior in high school.  By then it is too late.  But the government knows that you are just too stupid to manage your money, save for the future or negotiate with the college over what your educational funding dollars are buying.  So the government will be there with more handouts and low interest loans - all of which are easy, low-lying fruit for the universities to pick as they build out their infrastructure and pay their professors and staff six-figure incomes.

It HAS To Be You

--- In recent past posts I have tried the carrot approach - showing you the personal benefits of making smart choices with your money and aligning those financial decisions with your personal values (those things in life that are important to you).

It really does work that way.  You WILL enjoy life more every day if you follow a values-based holistic planning process, but I don't see people taking the free Wealth Health Index assessment on this website ... or clicking on the links from the BookShelf tab to buy and read books that will teach you the basics of financial literacy ... much less rushing to my door to start the financial planning process ... or even calling me with one or two pressing financial questions.  I've spoken with other fiduciary financial planners who all say the same thing - "Most people are in denial and are not seeking help from professionals."

... lemmings following each other and eventually over the cliff after the can.

--- I've tried challenging folks in an encouraging way to take that first step.  I've implored you with logic (if you keep on thinking and doing what you've always thought and done, you'll keep getting the same results you've already seen).

Last week I challenged everyone to get to the bottom of the post and do the exercises.  I don't know if anyone got that far or not, but nobody posted a comment and nobody sent me an email to tell me of their experience.  Hmmm.

--- This week I'm not going to be so nice.  Here is my perspective:

It absolutely HAS TO BE Up to You.  Nobody else can save you but you.  Nobody else but me can save me.  The same goes with your neighbor and mine.  If we each don't make the choice to take control of our own situations ... collectively we're doomed.

We can no longer afford to look to someone else, especially government, to save us.  They can't even save themselves and I'm certain you and I are nowhere near the top of their priority list.  The lobbyists and campaign donors are much further up that list than a single, lowly voter.

We have to - in a concerted way - ALL decide (or at least a vast majority of us) to each do our part to get this train derailed BEFORE it hits the end of the tracks.  Don't wait for someone else.  Start with that over which you have control (yourself, your mindset, your choices and your own life) and get working on getting that under control.

Challenge Redux

Last week I challenged you to (1) Send a link to this article to everyone you know.  (2) Post your comments right here on this blog - positive or negative and (3) (only for the truly brave) - Sign up for a Wealth Health Check-Up (follow the link - http://tr.im/whckup - for more information and sign up by sending me an email at jdbuerger@altuswealth or calling me at 805-476-0333).

A number of you must have done #1, because the article did get linked and we saw an uptick in site visitors.  Thank you ... although I wouldn't call the result VIRAL it was an improvement.

Nobody took me up on #2 or #3 - proof that my being the nice guy doesn't work to get you to SHIFT your thoughts.   We're still stuck in the same crappy mindset.

Maybe the politicians and lobbyists are right.  Maybe we're all too stupid to make good choices.  If that's the case, then we're going to get the train wreck we all deserve.

My optimistic mindset says that we'll figure this out sooner or later.  Winston Churchill once said that "America always does the right thing, but only after they have exhausted all the other possibilities." 

I certainly hope that we exhaust the "denial" option soon.

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Comments (3)
1 Wednesday, 17 March 2010 17:17
Sheila Mocket
Good blog...very true...but also very sad...Glad my house is paid off and we have almost no credit card debit...it was tough to start living more within our means in order to save, but glad we have...hope more of our peers learn to do the same AND teach their kids to so also.
2 Wednesday, 17 March 2010 17:29
Evolution Of Wealth
I just didn't want you to have no one comment again. I definitely agree with you as well.
3 Wednesday, 17 March 2010 18:03
Susan
I concur. My hope is that we wake up sooner rather than later. Thank you for tackling this tough, but necessary, subject!

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Last Updated on Wednesday, 17 March 2010 17:08