My recently college-graduated daughter has now entered the brave new world of employment and financial independence. I’m heartened that she is seeking financial advice early in her career, but it’s odd that she seeks advice from friends as opposed to her CFP dad.
It’s really an education looking at the stuff that shows up on her Facebook page, some of which is good and some of which is really awful. “Invest $17,000 per year in your 401k.” (Good advice if you don’t have any living expenses.) “Do a Roth instead of a 401k” (and thereby miss out on the company match). “Invest in the most aggressive funds”, (even though she has never invested in a stock in her young life). “Accumulate 6 months reserve in a savings account.” (I would argue 3 months if you have disability insurance, but I won’t quibble.)
It was stunning to see how many people are so ready to give financial advice while at the same time not knowing a thing about the person’s financial situation and temperament. A person can do real damage to another by offering advice in a vacuum. Can you imagine a newly minted member of the workforce investing half her income in aggressive growth stocks and watching it drop 25% in the next market meltdown? You don’t have to guess what would happen. We know that people panic, sell at the bottom, and swear off stocks forever, thereby seriously jeopardizing their future retirement. But the one dispensing such advice won’t have to live with the consequences.
And then there is the budgeting angle. If you have been successful in establishing and living by a budget, you are among a small percentage of the population who is capable of tracking and recording where your money goes. You are also a better person than I am. I have been a financial planner for over 30 years, and I have never lived by a family budget. This is not to say I haven’t instituted spending discipline. I just go about it in a more pragmatic way.
Here’s what I mean.
Budgets are absolutely essential for businesses, organizations, and governmental entities. (Please stifle your snickers at that last one). But every household has something that these entities do not have. Entities have a long list of needs. They do not tend to spend money on frivolities. (Again, please don’t laugh. We’re talking about the ideal here, not human stupidity). Households, however, if life is to have any pizzazz, must have a certain amount of “just for the fun of it” money that gets spent just because we want to. That’s a very real part of living a fulfilled life. Those things are very hard to budget for and can bust a budget fast.
Understanding the simple fact that individuals are not businesses and therefore operate under different parameters, I recommend a different approach. I start with client objectives and then try to quantify those objectives. I search for the “one number”, the number they can focus on. In most cases the one number is how much that person needs to save and invest each month. Thus we start with the question of how much to save as opposed to how much they need to spend. Once you have that number and are saving that amount, there is little need to budget. After saving, you can spend what you have any way you want based upon your own priorities.
There is clearly a risk in this framework. You just might lose track of how much you spend every month, something that’s easy to do if live on plastic. I never said that you won’t need self-discipline. Whether you budget or not, you must still exercise self-control and a little arithmetic. That might mean reduced use of credit cards. It might mean setting spending priorities. In any case you become accountable for how much you save before you make any decisions on where to spend. How you spend after saving is negotiable and flexible, and it bears a closer resemblance to how life really works.
Tuesday, July 17, 2012
It often seems God is in some remote corner of his universe on some more important endeavor than my poor problems.
Some time ago, when I was going through one of my periodic trying times, an acquaintance suggested keeping a journal of “God moments”. At the end of each day, I was to open my journal and write down the incidents where God’s day intersected with mine. Often I pray for God’s protection on my family and me. At the end of the day I might recall that if I had not been delayed at the office, I might have been engulfed in the middle of a jackknifed eighteen-wheeler instead of in the traffic back-up behind it. One time a friend happened to pop into the office on a particularly dreadful day, and he was able to lend some perspective that made the day easier.
After two weeks of logging God moment after God moment, it finally penetrated my bullet-proof head that God is right there every day pulling little strings and easing major burdens without my even knowing about it, let alone appreciating it. A burden was lifted and gratitude resulted. If you wonder whether God has forsaken you, keep a journal of your God moments. And then say a prayer of thanks.
Posted by Lenny Cacchio at 7:24 PM
Saturday, July 14, 2012
I used to believe that it is good for the government to decide groundrules in the name of good order and the general welfare. But in my evolution toward the light I have come to support the right to choose.
I support the right to choose the size soft drink I want or to choose not to have one at all.
I support the right to choose the milk I drink the way I want to drink it.
I support the right to choose my own retirement plan.
I support the right to choose my own health insurance plan that covers procedures I want and not what someone else wants.
I support the right to choose whether to own a firearm.
I support the right to choose which political action committee to support.
I support the right to choose which vaccinations to accept.
I support the right of parents to choose their children’s school.
I support the right to choose the person or charity that will get my support.
I support freedom to choose those things that involve the heart and the head, and not the false promise of freedom that involves what happens from the waist and below.
Add to my list those things which are for you to have the freedom to choose.
Posted by Lenny Cacchio at 9:41 AM
Wednesday, July 4, 2012
Then the LORD God said, "It is not good for the man to be alone; I will make him a helper suitable for him." (Genesis 2:18)
There you have it. Women were created to be the man’s helper. This proves women are inferior. Right?
Not so fast. Let’s see who else is called a helper.
The helpless commits himself to You; you are the helper of the fatherless. (Psalm 10:14)
Hear, O Lord, and have mercy on me; Lord, be my helper! (Psalm 30:10)
Behold, God is my helper; the Lord is with those who uphold my life. (Psalm 54:4)
Because You have been my help, therefore in the shadow of Your wings I will rejoice. (Psalm 63:7)
But I am poor and needy. Make haste to me, O God! You are my help and my deliverer;
O Lord, do not delay. (Psalm 70:5)
In the New Testament we read this:
And I will pray the Father, and He will give you another Helper, that He may abide with you forever -- the Spirit of truth, whom the world cannot receive, because it neither sees Him nor knows Him; but you know Him, for He dwells with you and will be in you. I will not leave you orphans; I will come to you. (John 14:16-18)
"The Lord is my helper; I will not fear. What can man do to me?" (Hebrews 13:6)
In light of these passages, is it possible to conclude that the Biblical view of a helper is that of an inferior? Maybe it’s a good idea to listen to the Apostle Paul:
There is neither Jew nor Greek, there is neither slave nor free, there is neither male nor female; for you are all one in Christ Jesus. And if you are Christ's, then you are Abraham's seed, and heirs according to the promise. (Galatians 3:28-29)
Posted by Lenny Cacchio at 7:47 AM