Is it Time We Change how we Talk and Think about Savings?

What would have happen if we started to believe:

  •  To save is to be grateful there is money to save?

  • To save is to celebrate the resistance of the myth of consumptive satisfaction?

  • To save is acknowledgement of life being lived in abundance?

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A World Cup, creating memories and financial planning

I am not a sentimental person, but I will admit to some rare feelings of nostalgia as the World Cup begins in Russia.  Four years ago today, my wife and I boarded subway at Copacabana Beach and made the 45 minute journey to the famed Maracana Stadium to witness Argentina and their star Lionel Messi defeat Bosnia, in the first of four games we watched in Rio over the next week and a half.  

    I have been going through pictures and videos of our adventure and remembering what it was like to be at the world's biggest sporting event in a country that loves that sport like no other.  Looking back it is still a little surreal to me that we were there.  After all, I am a relative homebody, who had only fallen in love with the sport a mere four years prior during the same event in 2010. 

    In June of 2010, Tracy was nursing our youngest daughter. We were trying to figure out how to play man to man defense with the kids when previously we had gotten accustomed to playing zone.   It was a harder transition than I had imagined, and the World Cup was an "escape" I could make from the comfort of our home.  I didn't know a lot about the game then, but I watched with an open mind until the sport seduced me.  All those countries, all that passion. 

    I still remember to this day where I was when Landon Donovan slotted in a goal in the 91st minute against Algeria to save the U.S.  Ian Darke's call became one of legend in US Soccer.  

Go, go, go, USA!

And one doesn't have to speak Spanish to appreciate the thrill of Andres Cantor's call. 


    Four years later, after four years of saving (we didn't have a lot to save back then) we boarded a plane for Brazil and a trip of a lifetime. Next year and four more years of saving, we will do the same, this time with our girls in tow, as we go to the women's world cup in France.

    There are many things one can do with their money.  We have spoken with hundreds of people about their plans. As I reflect on those conversations, one thing that sticks out are the conversations I have had with people about their experiences.  The return on experiences seems to far surpass the return on material items.  

    We don't make judgments regarding one's expenses. We seek to allocate their resources towards those things they have identified as valuable and important to them.  If spending the bulk of your income on a house or a new car every three years satisfies you, then I am happy.  I can only say that from our conservations with people, more happiness is derived when money is used for a lifetime of memories rather than the fleeting satisfaction of a "new car" smell.  

    You see, most of us have finite resources. We have to make decisions about how our resources are used as there is only so much to go around.  Financial planning is about intentionally thinking about what money is available, how is it being used, where is it going, how it a can grow, and how one can avoid costly mistakes that endanger one's goals. It is about finding the right balance between the present and future need.  It is not easy and it requires some compromise but with the right planning more can be accomplished that one might think. If you think financial planning is only about investments and buying products, you have a greatly out dated impression. 

    Financial planning is about making memories, living life, providing for family, and preparing for the future.  Whatever it is that captures your imagination, we would love to talk with you about it. 

Enjoy this year's World Cup.  Let us know in the comments who you are supporting in Russia. 

A Financial Planning Story

In a recent newsletter I shared a personal story about how financial planning has informed a decision.  A lot of readers responded positively so I am sharing it here. Let me know what you think.  Do you have a story about how financial planning impacted you?

     Recently, my wife and I were making a significant financial decision. We had been looking at making a large purchase, the largest of our lives.  It has been on the radar for a while and the time had seemingly come.  We had many conversations. We talked about what we wanted, what we hoped for, what could be. 

    As you might expect, I ran numbers and we revisited our own financial plan.  We looked again at our financial goals, some of which had changed, some which had become more acute.  I ran various scenarios to model the consequence of such a purchase.  I talked to others both financial experts and trusted loved ones to ensure my interpretations were not overly emotional.   

    Together we wondered, how could such a purchase impact our retirement security? What about our current cash flow?  Would the need to finance the purchase cause us undue stress?  Could we continue to save for the kid's college?  How does it impact our charitable intentions? The questions rained down unrelentingly.  

   These are not easy questions, but the answers we give them are important.  Once again we found ourselves going through the financial planning process, not for the first time mind you, but here we were. Again clarifying our values, revisiting our goals, measuring our progress and letting those things help guide us in our decision making.  

   The numbers, while not a slam dunk, were positive.  We could do it. We talked some more.  Numbers are not life.  We recognized the role that emotions and desire were playing.  Together we considered risk, stress, health, the kids, the future. 

     We made an offer, uneasy, but buoyed confident by the a couple of months of running projections.  I pressed send, the email sent, the offer made, and then we waited. 

    I share this with you because I was reminded why financial planning is important. It is a dynamic, unending process, one stretching well beyond investments and returns. In fact, it could be argued that divorced from one's plan, returns are nothing more than numbers anyway.                

    Financial planning is life and the acknowledgment in life we have to make financial decisions.  It is about making intentional choices. It is about being proactive so when opportunities come along we can take advantage of those opportunities.  It is being moored to something and not cut adrift in ceaseless seas beckoning for our consumption. It is waiting, as well, the practice of patience.

Financial planning is not about guarantees it is about possibilities. 

     I was grateful. We learned alot about us as a couple.  We marveled at how our situation had changed over the course of our marriage.  We recognized such a purchase would have been impossible to even imagine just a few years back. It wasn't income that changed things, it was years of making small choices, putting way small amounts, avoiding debt, and doing those things over and over and over.  

    I now had demonstrative proof that planning matters. It wasn't about investments, or insurance but rather intention. In this area (financially), we had acted responsibly and making that offer was testament to our efforts and sacrifice.  

    The offer was rejected.  Financial planning is not about guarantees it is about possibilities.  We didn't fight back.  We are okay with that decision.  While we didn't get what we wanted or could afford.  We were more confident. Confident that whatever disappointments life may bring we are better equipped to face them.

Home Buying Advice: Qualifying for a Mortgage vs What You Can Really Afford

Ahh, buying a home. It’s both scary and exciting at the same time and this is the time of year that doing it is in full swing. Whether you’re shopping for your very first home or you’ve got a few houses under your belt, it’s easy to get caught up in the shopping frenzy. What could be more interesting than touring someone else’s home that you could purchase and make your own? Well, perhaps buying a lot and working with an architect or builder to design your own new place, but either way, it stirs the imagination.

In all the emotions that revolve around choosing how many bedrooms and bathrooms your house has, the siding, fixtures, and everything else, there is a reality of how much it will cost and how you will pay for it. What impact will buying or building this new place have on your regular monthly expenses as well as your long term financial health? When you reach the point of asking yourself the all-important question of “Can I afford this?”, it’s critical to remember a few key points.

Just Because You Qualify For the Mortgage Doesn’t Mean You Can Afford It

Mortgage lenders are there to make money, which ultimately means getting you in the biggest, most expensive mortgage they can possibly qualify you for. This doesn’t mean they’re all out to get you, far from it. Some lenders are much better than others about not letting you get in too deep but they are harder to find. Just be aware that they have a profit motive to get you into a mortgage if they can and they will only consider your financial situation as far as their regulatory and underwriting rules require them to. They’re depending on YOU to put the brakes on when it comes to whether you max out your mortgage or not.

Why shouldn’t you max out your mortgage and get the biggest, best house you possibly can? There are a LOT of reasons not to do that, too many to cover in a single blog post. Suffice to say that if you’re carrying your maximum debt load and something, anything, comes along and trips you up financially, the fall will HURT and you’ll have a devil of a time trying to pick it all up and walk again.

Expenses Mortgage Lenders Don’t Ask About

Your family financial picture certainly includes housing expenses but if this is your first time buying a home, you need to know that the mortgage isn’t the only expense you’ll have. If you’ve previously been a renter, you’ve had the luxury of calling the landlord or property manager to get things repaired or replaced at their expense, not yours. Now that you’ll be the homeowner, there’s nobody else to call; it’s on YOU to fix it or replace it as needed and that costs time and money, sometimes a great deal of it. Lenders don’t ask you if you’ve put back money to cover repairs.

If this is not your first home buying rodeo, then you know the sort of repair expenses I’m talking about. If you’re upgrading to a bigger, more expensive home, keep in mind those repair expenses will get bigger right along with it.

Are you looking for a home that is much larger in square footage than you previously had, possibly because your family is growing? Remember, with larger square footage comes larger utility bills; heating and cooling 1,500sq/ft is a vastly different situation than 3,000+sq/ft. Can you handle going from a $200/month electric bill to $500+/month along with that bigger mortgage payment?

What about retirement savings? Nope, they don’t ask about that. Why not? Because it would reduce the size of the mortgage they put you in. Retirement is your concern, not theirs.

How about other things like braces for the kids, saving up for a replacement vehicle or car repairs? Or how about saving to send your kids to college? Nope, those aren’t on the checklist for a mortgage lender either since that would, again, reduce the size of the mortgage you can afford.

I could go on with a list like this but hopefully you get the idea. There are many, many more demands on your money than just the mortgage and there are items that have a higher priority than just getting the biggest house you can possibly afford. If you put yourself in a situation where you are “mortgage poor” and have no money left to do anything else, other aspects of your life will suffer for it.

Consider Talking With A Fee-Only Financial Planner Before Buying

It’s always a good idea to get an objective third party to look at your financial picture before you begin shopping for that new home. Why a Fee-Only Financial Planner though? A fee-only planner won’t try to sell you anything; they will take a complete look at your financial life to help you determine what you can REALLY afford by considering all your other goals and financial demands, not just what size mortgage you can qualify for. Remember, life is full of other goals and priorities that need financial resources beyond just the mortgage payment.