Organize Your Finances – Net Worth

Grown-up

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What is net worth?

According to Wikipedia.com Net Worth is the total assets minus total outside liabilities of an individual or a company. Net Worth is used when talking about the value of a company or in personal finance for an individual’s net economic position.

The equation looks like this: net worth = assets – liabilities

If you have more assets (think stuff) than you have liabilities (think debt), you are said to have a positive net worth. In other words, the value of your stuff outweighs your debt against that stuff.

There are several online calculators that can help you calculate net worth. CNN has a nice one here.

Why is net worth important?

Net worth, along with Cash Management, gives you a starting point for directing your finances to accomplishing your goals. It answers the “where am I now?” question and forms a starting point for future comparisons. Then, year after year, you can track your net worth to see if it’s growing. If it’s not growing, you can try to figure out why, and get yourself back on track.

I find it interesting that worth can be substituted with the word wealth. Wealth meaning prosperity in abundance of possessions or riches, from the Middle English wele “well-being” or weal, which is an analogy of health.[1] In other words, wealth is a form of health, but for possessions or riches.

This leads me to the idea that I’ve had in the back of my head for some time now that there is a connection between net worth and self worth. While I have not done the research to verify it, I’d wager, even though a large net worth might not equal tremendous self worth, a negative net worth might reflect a negative self worth.

To improve your net worth read my post Developing a Millionaire Mind with Net Worth.


12 Powers: Imagination & Money

Manhattan Central Park - Imagine Mosaic

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Last year my reverend gave a series of talks on a book he read entitled Twelve Powers in YouThe book describes  physical, spiritual, and emotional aspects of the 12 powers inherent in each of us. Fascinated by these talks, I’ve decided to expand on them through the money perspective that I often see things, being a financial planner.

According to Google, Imagination is the faculty or action of forming ideas, or images or concepts of external objects not present to the senses. It’s also the ability of the mind to be creative or resourceful.

Spiritually, imagination is the ability to manifest materially through your envisioning.

Emotionally (soul), imagination is the ability to envision or dream with our senses, adding feeling to our vision.

Physically, imagination is represented by your thalami. What’s your thalami you ask? According to Google thalamus are either of two masses of gray matter lying between the cerebral hemispheres on either side of the third ventricle, relaying sensory information and acting as a center for pain perception. It’s where we “make sense” of things.

What does imagination have to do with money?

Do you remember that commercial about “your number”? You know the one where the finance company said, “What’s your number?” and “Do you know your number?” That’s a way of saying, how much money do you think you need to retire? Once you’ve come up with your number, which most of us financial advisors would gladly help you do, you have a goal. You begin to imagine what it would be like to reach that number. For many, that’s being a millionaire. People think millionaires have fancy cars, a second home in Florida, and whatever else they’ve attached to the rich feeling of having a million dollars.

Having a number allows you to imagine your goal of retirement coming to fruition. It can also limit you. You may say you need $1 million dollars and find out it’s not enough. That’s why it’s important to imagine the lifestyle you desire and re-evaluate the amount every now and then as your awareness of money grows.


Simple Retirement Living in 3 Steps

For many of us dreaming about retirement, the idea of living a simple life, with no worries, comes to mind. Sitting on the porch, sipping tea and reading a book… Getting together with friends to chase that little white ball around the golf course… Or maybe just taking a nap on the beach as you listen to the waves roll in. The one thing most of us aren’t thinking about is worrying about our money. Here are 3 things you can do to simplify retirement living and worry less about money:

1. Consolidate Your Accounts – By combining IRA rollovers, old 401ks, current 401ks and other retirement accounts, you simplify your life in many ways.

First, you have less paperwork when tax time rolls around. This is especially so when you turn 70 1/2 and have to take required minimum distributions or RMDs. Instead of 3 or 4 1099-Rs, you have one. This costs less for your return, and is easier to follow and calculate RMDs with.

Another reason to consolidate is because you can manage your accounts more efficiently. If you have a target stock to bond mix of 60/40, you can look up one or two accounts, and know exactly where you stand. This is especially convenient when reviewing your investments against the target portfolio of your financial plan.

The last reason you might consider consolidating is because it’s much better for estate planning. Less records to track = less hassle for your spouse or heirs. It’s also easier to change or update beneficiary information when those grandkids finally arrive. While not everyone is thinking about estate planning when they first retire, or are approaching retirement, as you know, time flies when you’re having fun. If consolidating your accounts just happens to finish 80% of your estate plan, that’s one less thing to worry about in retirement.

2. Consolidate Your Services – Most people think diversifying their portfolio means having more than one financial advisor. This really means that your finances aren’t focused. You may have one guy trying to max your return, another guy being cautious with taxes, and a third guy worrying about your estate. None of them know what the other’s doing, and it creates a very messy, inefficient financial plan.

Consolidating your services should start with finding a good financial planner. The financial plan is the engine that drives your finances to fund your goals. This plan funds your goals with a target return needed from a mix of investments. It’s not necessarily a portfolio that will give you the highest return. If your goals are funded with a 3% return, you may be taking on too much risk if you’re shooting for a 10% return. In this case, another 2008 might make your plan unfunded. That’s why it starts with the financial plan that asks what are you goals. The plan shows you the allocation needed.

Someone that handles taxes can offer a whole new layer of advice by suggesting Roth conversions at the right time, saving you money in the long run.

Consolidating your financial planning, investment management, and tax services gets all your major areas of finances working together towards a common goal: Simple Living. It may even offer you a break in fees. Usually, the more money you have, the lower the commission or fee percentage.

3. Clean & Downsize - The third thing you can do to simplify your retirement living is clean & downsize. Downsize your lifestyle. Downsize your expenses. Clean your stuff. Cleaning makes room for energy to flow. Think about your home. Is it cluttered? What about your monthly expenses? Can you estimate them all without having to dig through piles of credit card and bank statements? Get rid of extra things that you don’t need. Instead of a owning a second vacation home, rent a place. This keeps things simple, lowers expenses, lower taxes, and you’ll have less stuff. You’ll also spend time on vacation, not working on your cottage.

The more simple your life, the more focused you can be when living a life with purpose because you can put all your energy into doing what you love, which may be sitting on the beach, and doing nothing.


12 Powers: Power & Money

Last year my reverend gave a series of talks on a book he read entitled Twelve Powers in YouThe book describes  physical, spiritual, and emotional aspects of the 12 powers inherent in each of us. Fascinated by these talks, I’ve decided to expand on them through the money perspective that I often see things, being a financial planner.

When I first thought of Power and Money I thought I was writing about a political soap opera. But unlike those dramatic soaps, this article has little to do with that kind of power and money.

According to Google, Power is the ability to do something or act in a particular way, especially as a faculty or quality, like “the power of speech”.

Spiritually, power is being able to transform thoughts into action.

Emotionally (soul), power is the ability to express truth through our words and actions.

Physically, power is represented by our voice, muscles, and limbs. What we say and do expresses our power.

What does power have to do with money?

Our power lies in our ability to be true to self. Our use of money reflects this power. If we spend it on gimmicks and material things that are meant to make an impression on others, we’re looking for acceptance from outside of us, and thus giving our power away. If we spend it on things, or maybe more appropriately, experiences that express who we are and enhance our self-image, we’re expressing our true power.

A good example of this is a friend of mine who we used to have over for dinner a lot before kids. The first few times I’d wear nice clothes and try to look really nice to impress him and his wife because I wanted them to like me. At the time I wanted that sort of acceptance because I admired him. When we were kids, he always seemed to be so secure in who he was. After we’d had them over several times I realized that he wore the same clothes he always wore. He was the same, true to himself. He was showing me how to be true to myself. Now when they come over, I wear what I want to wear because it makes me feel good, not because I’m looking for acceptance. We’re all more comfortable for it. How have you expressed your power with your money?


12 Powers: Wisdom & Money

Last year my reverend gave a series of talks on a book he read entitled Twelve Powers in YouThe book describes  physical, spiritual, and emotional aspects of the 12 powers inherent in each of us. Fascinated by these talks, I’ve decided to expand on them through the money perspective that I often see things, being a financial planner.

Wisdom is making good judgments, either from experience or knowledge.

Spiritually, wisdom is being able to balance our head and our heart, faith and love, intellect and intuition.

Emotionally (soul), wisdom is often passed down from parents and their ancestors. We often judge people and things based on how our parents saw the world and taught us.

Physically, wisdom is represented by our 7 endocrine glands: pineal, pituitary, thyroid, thymus, pancreas, testes or ovaries, and adrenalin glands. These glands are energy centers fueled by hormones that reflect balance or imbalance by our judgments.

What does wisdom have to do with money?

Wisdom is being able to make balanced choices with your money. Save or spend. If we spend all our money, and don’t save, we run the risk of not being able to retire. We know we have to set aside some money in order to do things that we want to do in the future, but sometimes we don’t have the discipline to do so. We may have been raised with the habit of spending everything now. Likewise, we may have been raised with the habit of saving. Whichever side you fall on, it’s important to recognize it, and figure out the best way to move forward. If you were raised in a spending household, you may need to learn how to save by getting advice or reading books or websites. If you were raised in a household that saved everything and did/spent very little, you may need to learn how to enjoy your present life by spending on things you enjoy. Each of the glands represent a relationship we have around money:

Adrenalin reflects our ability to take action with money. Save or spend is a prime example.

Ovaries/Testes reflects our ability to develop or create, maybe earn income.

Thyroid represents our ability to spend, change, or metabolize money into an expression of life we enjoy.

Pancreas represents how we digest our spending habits. If we are happy, or unhappy with our consumption habits.

Thymus represents your ability to spend compassionately, which opens your heart and strengthens your immune system.

Pituitary reflects your ability for growth. Specifically your ability to raise your level of thinking around money. For example, feeling worthy of a large raise or increased income.

Pineal gland reflects our ability to be awake, or make conscious spending choices all around. I find it interesting that the hormone associated with the pineal gland, melatonine, is the only hormone you can buy over the counter without a prescription. Maybe we’re suppose to be asleep?… with our finances.

 

 


12 Powers: Strength & Money

Oak Tree

photo: MunstiSue

Last year my reverend gave a series of talks on a book he read entitled Twelve Powers in YouThe book describes  physical, spiritual, and emotional aspects of the 12 powers inherent in each of us. Fascinated by these talks, I’ve decided to expand on them through the money perspective that I often see things being a financial planner.

Spiritually, strength is having a strong will or inner voice that guides your actions.

Emotionally (soul), strength is being able to listen to that still small voice and persevere through adversity.

Physically, you would think that strength would be represented by muscles. It’s not. According to the book, the spinal cord and nervous system that send messages to your muscles represent strength.

What does strength have to do with money?

Our money strength is the ability to balance needs and wants. As a financial planner, one way I do this for people is to balance their needs for today with a desire for a better tomorrow.

Autonomic Nervous SystemA comparison drawn in the physical section of the chapter on strength was between the spinal cord and that of a tree. Like a tree with broad reaching branches, the spine has nerves that branch out. But also like a tree, it is the deep roots under the surface that enable the tree to stand and be balanced. Without deep roots, the tree would fall over. Without our nerves branching out from our body, we couldn’t move.

After reading this comparison, it was easy to see what this has to do with money. Many mutual fund companies and investment companies use trees as their logo representing the growth many aspire to with their investments. Most people only notice the beauty of the tree. But it’s the financial habits that we grow up with that form the foundation for our financial growth. If we understand that we must set aside some today in order to experience a better tomorrow, i.e. saving, we can begin to see our finances take root and grow. Little by little we save our 10% or 15% and by the end of our careers, we’ve growth a nice nest egg.

But, just like the energy that flows through our nervous system that have a positive and negative charge, so too can our financial habits be both good and bad. We all have a friend that always seems to have the latest and greatest gadget or gizmo. On the outside, they may look like they’re on the top of the world, but most of the time, they have little or no money saved and will have trouble in retirement.

The key is to balance your strength. For many that involves finding equilibrium between your head and your heart.

I love traveling with my family. Sitting in a nice restaurant enjoying my wife’s company, or seeing the joy spread across my kids faces at Disney, as we experienced last month,warms my heart. But we can’t spend everyday at Disney. We have to work so we can afford Disney, as I tell my son. So our head pulls us back into reality and says we must balance those heartfelt moments with a plan that allows us to experience more heartfelt moments. A plan build on good habits we create.

Did you know that aside from the brain, the heart has the most nerves endings running into it? If you’d like to learn more balancing your head and heart, check out my posts on Faith and Love. What would you say is your Strength power when it comes to money?


By | March 27, 2014 |

12 Powers: Love and Money

20140202_085829Last year my reverend gave a series of talks on a book he read entitled Twelve Powers in YouThe book describes  physical, spiritual, and emotional aspects of the 12 powers inherent in each of us. Fascinated by these talks, I’ve decided to expand on them through the money perspective that I often see things being a financial planner.

Spiritually, love brings life to the world. When we love, we experience life in its fullest. This is evident if you’ve visited anyone near death. The times they’ve felt the most loved are the times they felt the most alive.

Emotionally (soul), when we can live and express from our heart, we open barriers and experience the most growth in our life.

Physically, love is represented by the heart AND the circulatory system. We think of the heart intuitively because it is constantly giving us life, but it’s the circulatory system that moves that  life (blood) around in our body.

Interestingly, if our brain (Faith) didn’t have blood (Love), it would begin to die after only a few minutes.

So what does Love have to do with money?

Love moves our life in certain directions. You might work in a job you don’t like because you want to support your loved ones. Just as your heart pumps blood to your body, you life (love) is a reflection of the circulation of your cash flow, knowingly or unknowingly. If you’ve ever heard a spiritual leader speak of being awake, you can think of it as being aware of your life, or in this case, awaken to your finances or cash flow.

So how do you purify your cash flow and change your  life? Figure out what you’d LOVE to do in life! 

Most people go through life yearning for something better, but never take the time to sit down and spell it out. When you clarify in writing what you’d love to do with your life, you bring love/life to the world. You change that intuitive feeling into something you can mentally and physically grasp. Once that’s born you can start to look at your current cash flow, or where you’re spending your life, and make adjustments.

Some of you might say, I can’t do it. It’s not that simple. That’s where Faith comes in. Without faith, love can’t flourish. Just like without blood, the brain dies. In order to examine your cash flow, I’d suggest reading Organize Your Finances – Cash Flow.


12 Powers: Faith and Money

Rock Garden Stone

“You are Peter and upon this rock I will build.”

Last year my pastor gave a series of talks on a book he’d read entitled Twelve Powers in You. The book describes  physical, spiritual, and emotional aspects of the 12 powers inherent in each of us. Fascinated by these talks, I’ve decided to expand on them through the money perspective that I often see things being a financial planner.

According to Google, faith is complete trust or confidence in someone or something.
Spiritually, faith it is a strong belief in God or good. For others it is a belief in the doctrines of a religion based on spiritual apprehension rather than proof.
Emotionally (soul) we have faith based on our limited experiences. These experiences change our view of the world. Just ask someone recently divorced if they have faith in marriage.
According to the book, faith is physically represented by our brain. What you believe, or have faith in, is often a reflection of your thinking.
So what does faith have to do with money?
For many of us, faith is about being able to say, I’m going to start saving 10% because I know I have to. Rich says I need to. And I don’t want to end up not being able to retire like my parents. Faith is saying, I have no idea where it’s going to come from, but I am going to start saving today. When it comes to finances, that’s having faith. The best part is that in my experience, once you start doing it, once you start saving, you’ll wonder why you haven’t done it all along. The same can be said for faith on many other levels, I’m sure.
Here’s a story of someone we all know. I have a friend that has never saved, always has the best cars, and lives in the biggest house in the neighborhood. Why can’t he save? He doesn’t think he could afford to. One day, his car dies. He needs a new car, so he goes to the dealer and buys a new one. For 6 years he pays off his $40,000 car loan. A loan at 6% with a $663/mo payment. At the end of the 6 years, his car is worth $12,000 and he’s paid (663 x 6yr x 12mo) $47,736.
In other words, for 6 years he’s saved $12,000 and paid $47,736. Does he start saving when the car is paid off? Unfortunately, no. He’s just got out from under his payment, why would he start saving now when he can finally breath? The truth is, the $663/mo is always there, his thinking isn’t.
Somewhere, someone along the way put it in his head (emotion/soul) that he couldn’t save, or that maybe he wasn’t worthy of saving. Yet he also has very strong beliefs that he needs the best cars, maybe to make good impressions. Here’s where faith and money comes in to play. IF he believed that he needed to save $663/mo in order to retire as much as he needs to have transportation, saving would come naturally. 
A good way to approach this article is to look at your money scripts around money. See my article on Financial EmotionAsk yourself, what are your limiting beliefs around money? Change your thinking! We’ll talk more about how to tap into your other powers (think heart) and change your thinking around money in the next blog on 12 Powers.

By | January 30, 2014 |

On Giving

As a verb, give means freely transfer the possession of. It can also mean cause or allow to have. As a noun, give means capacity to bend or alter in shape under pressure. According to Google, give has recently seen an upsurge in usage.[1]

Interestingly, to give can illustrate the give of something. The two are obviously related. For example, if you give breath into a balloon, you’ll see it’s give through the expansion of the balloon. If you give too much breath, it’ll pop. Too little breath and the balloon never takes it full shape.

Life is like that too. What we give is a direct reflection of who we are. I am a advisor,  I am a teacher, I am a husband and father; therefore, I give advise, I give instruction, I give knowledge and love.  

This rings true for our gifts of money too. Often times I hear from clients that they want to leave money to causes that they believe in. Many times these are causes that they’ve already donated time and talent too by serving on boards or committees. This makes sense because we give to that which we believe in. That’s probably why most of the prosperity courses I’ve taken always say tithe to where you are spiritually fed, and give that which you want to receive. You are fueling that which fuels you. For most people, that’s their church. But have you ever given money to someone that you’ve learned a great lesson from? The gratitude shown through their eyes is a heart felt experience that can’t be expressed in words.

The holidays re-mind us about giving, particularly those that celebrate the idea of giving. There’s a reason most of these holidays fall on, or around the winter equinox , when things begin to go dormant for winter.  Winter is a good time to reflect on the gift of life. Having just experienced the passing of my godmother, I appreciate her gifts. Remembering her quiet demeanor and loving gaze will always re-mind me of her.

Recall Winston Churchill:

We make a living by what we get, but we make a life by what we give.


By | December 13, 2013 |

The Journey of $1 Million Dollars Begins with 1%

Shells

photo: jfl1066

Many of us think about adding money to our 401k or 403b and we panic with fear. We tell ourselves that  if I put (any) more away, I might not have enough now! But that’s a pre-conditioned fear we’ve created for ourselves about money.

About a year ago, Jim Blankmenship, who authors the blog www.financialducksinarow.com, challenged his readers and fellow bloggers, to spread the word about the 1% challenge. This year he’s declaring November the 1% month.

Why 1%? My take is that most people can put an additional 1% away and not even feel a difference. If you put 0% away two years ago, and 1% after the first challenge last year, and 1% this year, seeing how easy it is, next year you might put 2% away, then 3% and 5%, or 8% the following year?

The growth you’ll see in your savings as a result of accepting the 1% challenge can be exponential. Physically, your savings may grow faster. Seeing this growth you may think, I can do more. As a result, you change, and maybe inspire others to change. By increasing your savings 1%, you’re taking a step forward from doing nothing. And we all know that the journey of a thousand miles begins with a single step.

Last year I accepted the challenge and increased my savings. It didn’t hurt much at all. As a result, I decided to set up automatic monthly contributions to my family’s ESAs, Roths, and other retirement savings, instead of contributing at tax time. All as a result, I’ve seen steady growth through automatic savings and a favorable market. More importantly, I’m not worried about 1% anymore. Take the challenge today!

Other 1% articles:

The 1 Percent Solution by John Davis, @MentorCapitalMg

Friday Financial Tidbit-What increasing your retirement contributions 1% can do for your retirement account by Jonathan White, @JWFinCoaching

THE 1% MORE BLOGGING PROJECT by Robert Flach, @rdftaxpro

A Simple Strategy to Maximize Open Enrollment by Jacob Kuebler, @Jakekuebler

Take a Small Step: Increase Your Savings by 1% by Jim Blankenship, @BlankenshipFP