Helping You Avoid Life's Financial Mistakes

Financial Tradegy: Does Fear Control Your Finances

November 21, 2008 By Leave a Comment

In the previous post I talked about taking control of you finances.  In this post I want dive in a bit further and explore some of the things that control us.  This post is about how fear effects the economy and more importantly your finances.

The Effect Fear Has On The Economy

This is a subject I’ve been interested in researching lately.  How fear has hurt are economy.  In fact I had a hard time writing this post due to the fact that it’s not something you can easily see or write about.  No fear is something that is felt. 

I’ll give you an example of an economy full of fear.  Just a few months ago AIG reported that they were about to go bust and they needed a bailout.  The news smacked the headlines of millions of newspaper and news broadcast everywhere. 

In fact I had several people ask me if they should pay there next months car insurance payment to AIG.  At this point I new it was to late.  As I suspected thousands of people got wind of this and began pulling there money out of AIG. 

For AIG though they luckily got a bailed out, for now.

This Happened Once Long Ago…

Does this sound familiar to you?  Maybe if you lived in another time you may remember this happening once before and if you weren’t around to see it you definitely read about it.

That’s right The Great Depression.

This is the same fear that magnified the great depression.  The market had a big lose and people got scared.  They pulled there money from banks all across the county.  The very blood that was needed for banks to survive was being taken from them at an alarming rate.

So how did the banks respond to this?

That’s right.  They forclosed there mortgages.  Even if you were current on your mortgage the bank was asking for you to pay up of move out.  These were tough times for many people.

Thankfully this wouldn’t be possible today.  With lending laws revamped home owners don’t have to fear losing there home like they did in the great depression.  

So as you can see fear has a big effect on the economy. 

The Effect Fear Has On Your Personal Finances

Let’s break this down a bit further.  How does fear effect you with your money? 

Here’s a good example.  On September 11, 2001 the fuel prices were around a $1.50.  That night because of wide spread fear of more terrorist attack people were lined up at gas station everywhere.  In fact a few people had called me telling me to fill up.  They told me gas prices were going up. 

I asked them why they thought it would go up and no one could really give me a specific answer.  In the end the gas prices didn’t go up they went down.  With all airlines grounded this created an instant supply of fuel and as a result prices dropped.

What Can You Learn From This?

Fear has a weird way of making us do weird things with are money.  It’s an emotional control that will make us spend money and do things we necessarily shouldn’t do. 

So what should you do to avoid this?

  • Stay calm.  It has been proven that if you are at a peak state of emotion meaning scared, angry, or upset you logical thinking is as a result a lot lower.  For example  have you ever been really angry and said something you didn’t mean?  This what I am talking about your emotional state is in control and your logical state is nowhere to be seen.
  • Focus on the good things.  Instead of focusing on all of the bad things going on in the economy focus on the good things.  For example currently gas prices are around $1.73 a gallon.  This can go a long way in saving you some money.
  • Stay away from the media.  The media has great way of exploiting things and making them sound worse than they really are.  Instead turn off the news and do something that make you happy not upset or angry.  I talked about this more in previous post so I won’t go in depth with this one.

How Does Fear Effect You?

Does it make you do things with your money you shouldn’t do?  Share your stories about your financial fears here. 

 

 

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Can You Control Your Finances Or Do They Control You

November 19, 2008 By 3 Comments

Do Your Finances Got You Trapped?

I recently read a great article about diversifying your income by earning money though other ways other than your job by a IttyBiz.  This particular post interested me because it made a valid point that there are more ways to earn income other than just your JOB.  In the past year she was able to earn $176,000 though various income streams.

Not Bad.

Though while I was reading the article it made me realize that she had one thing that not all American have, CONTROL.  She decided a long time ago that she controlled her income and that no one else does.  In today’s society with layoffs and companies going under I felt this post would be appropriate considering the times.

This post is all about the things you can control and the things you can’t.   By the end of this post you may feel like I do and ready and willing to take action.

What Can You Can’t Control?

When deciding to take control of your finances realizing that you don’t have control over everything is the first step.  Why you might ask?

One thing almost every person ( including myself) are guilty of is blaming, complaining, and criticizing others for things we have no control over.  In fact one of my favorite sayings has always been:

Before you criticize, blame, or complain walk a mile in that persons shoes.  This way if you do decide to criticize, blame, or complain you will be a mile away and have that persons shoes.

In all things being fair you can’t control everything.  For example you can’t control what the President of the United States will do.  You can’t control what others will say or do.  You can’t control when your bills are do. You can’t control what the markets will do. There are a million things that you can’t control. 

The worst part of this all though is that we worry about these things like the sky is falling.   In the end though we can influence people all we want but we can’t make there decisions for them.  So why spend all of are time worrying about things we can’t control and look at the things we can control.

What Can You Control?

Obviously IttyBiz didn’t worry about these things and neither should you.  In fact this is a tactic the rich will use.  While most people are in fear the successful rich are calm and in control.  They look at life from a different perspective.  What they can control.

So what can you control?

You may not have much control over how much you get paid from your employer but that doesn’t mean they can tell you how to spend it or earn money though other sources.  Such as starting a part time business. 

You may not have control over the market but that doesn’t mean you could take steps to invest correctly such as investing long term and diversifying your money. 

You may not have control over your bills but this doesn’t mean you  couldn’t watch your spending and pay them on time. 

The point is you have control over a lot of things when it comes to your personal finances.  However with as much control that people don’t think they have they tend to play victim to being stuck in debt.  Does this sound like you?  Leave a comment and tell me about it.

What Can You Do To Take Control?

  • Except responsibility.  Are you blaming others for your financial problems.  You are the only person who pays your bills, spends your money, and makes your financial decisions.  Except responsibility and you are on the road to success like the great ones.
  • Put a budget together.  Learn where your money goes.  Put a monthly budget together and plan out where your money is going then track to see your true results.  Knowing where your money is going will help in being more cautious.
  • Put a debt plan together.  A true debt plan will give you the exact way to get debt free and stay that way.  With a debt plan designed with your goals in mind it will go a long way in stopping further problems down the road.  You can put your personal debt plan together free here.
  • Start a part time business.  Starting a part time business puts you in control of your money not your employer.  It also gives you the power to learn how to improve your business while you have a full time job helping diversify your income just in case you lose your job.  Here’s a great post on starting a part time business.
  • Educate yourself.  I say this a lot but I feel I can’t say it enough.  Learning more about your money and how you can control it better helps you time and time again.  Take time now to educate yourself and sign up for my RSS and check out my blogroll of other personal financial bloggers who will help to put you on the right track.

Are You In Control?

Do you have your finances under control?  Do you play the blame game?  It may be hard to admit this to yourself but it’s the first step to taking control of your financial future.

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How To Hire The Right Financial Planner?

November 14, 2008 By 1 Comment

Do you have a financial planner? 

When I was in financial services a common question I would ask people are, “Do you have a financial planner?”

With most people this would be a resounding NO, some aren’t sure and about 5% of my clients had a financial planner.  But what was even more astounding was when I asked them, “When was the last time they had talked to them?”  I got the usual blank stare with a guess that they weren’t even sure about. 

So in this post I hope to give you some tips on what to look for in a financial planner as well as what questions you should be asking when your looking for one to help you out.

What your financial planner should do for you.

In the previous post in this series I talked about things that you should watch out for when talking to financial planners.  Here are things you should be looking for.

  • Look for a financial planner who does financial plans for FREE.  This may be a bit harder than it seems but some financial planners will charge anywhere form $250 to $2500 or more to put a plan together for you.  Personally I can’t see why someone should charge that kind of fee to you just to repeat the same information back to you.  There are planner who will do it for free you just have to look for them.  When I was in financial services I did every one of my plans for free. 
  • Should be a great listener.  The point a financial planner is to listen to you and provide solutions based on your financial problems.  However I have seen many planner skip right past this and push a product.  You will be able to tell who is a good listener and who is not.  A good listeners will ask mostly questions and the others will have a bad case of diarrhea of the mouth were they won’t even let you get a word in.  If you have a planner like this turn around and run in the other direction NOW.  They aren’t  interested in helping you in your situation.   
  • Should look professional.  You would think this would just be common sense but you wouldn’t believe how many don’t do this.  In financial services I mostly wore a suit but in certain cases dressed business casual.  If they come in wearing ripped up jeans and cutoffs this may not be someone you can’t trust.  A professional look does more than give a good appearance it shows trust that they are professional and knowledgeable.
  • Does in-person annual reviews.  This is a big one.  Not one client I ever had had a planner who did annual reviews of there finances.  When I was in financial services I not only did annual reviews but I did them in person at the client kitchen table.  Talk about service.
  • Educates you on your finances.  Again you would think that this would be part of the package deal.  Education on your finances is very important to you in making the right decisions.  Financial planners shouldn’t just be pushing a product on you they should be educating you how products work and how they will benefit you.
  • Have a great attitude.  I did this one last because it’s not as common but I have seen it before were they may get a bit unhappy with you for not doing what they want you to do.  Usually the planner should be genuinely interested in you and what you have to say.

Have any other great tips to add to this list?  Add them below in the comments.

What questions should you ask your financial planner?

When asking these questions take it from the point like you are hiring this person to work for you. 

  • How long have they been in financial services?  If they’ve been in financial services for some time this will help because this means they have seen many different financial situations and will be able to come up with a few more ideas.
  • What licenses do they hold?  Your planner should have several licenses so they will be able to design a program for you based on your needs not there licenses.  They should have at least a life and health license, Series 6, Series 63, and possible a series 65.  They may also have a P&C licenses and a CFP ( Certified Financial Planners)  Obviously the more the better.
  • What do they specialize in?  Usually a financial planner will specialize in a certain area.  Maybe it’s investments, or insurance, or advisory services.  Knowing this will allow you find out what there major objective is as a planner.
  • Do they do annual reviews?  Again you know why this is important.  Make sure you don’t forget to ask.  One thing I got in the habit of a lot with my clients was to set an annual review the following year this way it was always set and I never had to worry about forgeting to do this. 
  • What product providers do they work with?  Knowing what product providers they deal with will allow you to research those companies, see what kind of rating they have, and if they are a good company overall. 
  • What are there fees for there service and cost on product they recommend?  Not all planners will charge fees but there will be a cost on the product that you buy.  Be careful of high cost  products.  A good way to check this is to get a second opinion fro another planner.

These are probably some of the bigger questions that I would ask however there may be other you have thought of that I didn’t mention.  Please feel free to list it below in the comments.

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Does Your Financial Planner Have Your Best Interest In Mind?

November 12, 2008 By 7 Comments

Not All Financial Planners Are Fair And Equal.

Do all financial planners have your best interest at heart?  I use to believe this at one time.  I thought they all did the same thing.  It didn’t matter which one you went to they all did the same thing.  Invest your money, set up some insurance policies.

Sound pretty simple right?

From being in financial service for the last 5 years I learned that they all aren’t the same and some don’t have your best interest at heart.  So in this post I would like to point out a few things to watch out for when hiring a financial planner.

What a financial planner is suppose to do.

A financial planners position is to listen to and review your goals and financial concerns for you.  He should take notes of your financial situation and in most case put a financial plan together for you.  His decisions should be based off of your input so he can make the right recommendation for you.

Once he recommends the right product that is specifically suited for your needs he will implement it on your consent.  Now most would believe that this would be the end of there financial planner.  This should only be the beginning.

From this point on your financial planner should be scheduling an annual review for you.  The reason behind this is because no one persons situation ever stays the same.  At the very least they should set up an annual review and if you prefer have them give you a call every 3 to 6 months to make sure things stay in order.

What To Watch Out For.

  • Watch out for those that have the one solution that fixes all.  This is hardly ever the case.  For example maybe you’ve heard the term “BUY TERM AND INVEST THE DIFFERENCE.”  The only thing they can do is set up a term policy and invest your money in a mutual fund.  It don’t matter who it is it’s the same thing over and over again.  You may also see someone promote just one product all the time and that’s it.  One product will not solve everyone’s problems.
  • Watch out for the fast talkers and the hard sellers.  These people have no interest in listening to you.  In fact they see a sucker coming a mile away.  They aren’t interested in educating you or helping.  They will typically just try to talk you into a certain product without letting you get a word in.  They will give you every reason to buy the product and no time to think it over.  Then once you do buy you’ll usually never see them again.
  • Watch out for financial planners who make big promises.  Financial planner should never make promises bigger than they can keep.  In fact if it sounds to good to be true it probably is.  If they make any guarantees telling you’ll get 12% on your account or you’ll get that life insurance policy for sure don’t count on it.  Also if they tell you they’ll give you a gift for buying an investment or policy don’t count on it.  Finally, if they tell you that they will pay for referrals don’t count on it.  The reason I say don’t count on it because they are all illegal to do.
  • Watch out for financial planners with limited licenses.   Planners without proper licenses won’t be able to give you what you may really need.  Instead you’ll get what ever they can do with there current licenses. 
  • Watch out for financial planners who don’t take care of you.  These are usually harder to spot.  They may help you out but seem to enter the witness protection program once you sign on the dotted line never to be seen or heard from again. 

Does Your Financial Planner Have Your Best Interest?

Has your financial planner done some of the things I’ve pointed out above?  Have they done other things to you that I didn’t mention?  Feel free to leave me a comment about it.  I’m sure there are others so I will probably do another article on some of your comments listed.

Now that I’ve gone through all the things you should watch for check out Friday’s post were I will be discussing which financial planner you should hire and why.

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