CHAPTER 16
The Gift of Action
YOUR PLAN FOR MONEY AND LIFE
We have made reference in other chapters to the oft-quoted phrase about death and taxes. I enjoy history, so I had to trace its origin. It appears that Daniel Defoe, in 1726, was the first to make this now-famous claim, albeit more eloquently: “Things as certain as death and taxes, can be more firmly believed.” Much closer to the modern-day phrase, however, was Ben Franklin’s redux in a letter to Jean-Baptiste Leroy in 1789, in which he wrote, “In this world nothing can be said to be certain, except death and taxes.” Regardless of the veracity of this line of thought, I find it all quite depressing. But I do think that we could turn this into a phrase on which we’d all agree:
One guarantee in this world is change.
Ultimate Advice
Any change, even a change for the better, is always accompanied by drawbacks and discomforts.
Arnold Bennett
Fundamental and Practical Change
Do you embrace, reject, resist, or retreat from change? That you purchased this book tells me you probably don’t reject it. That you’ve read this far tells me you likely don’t resist it. The question now, however, is whether you will embrace it or retreat from it. The easier path is to retreat, because initially change is attended by anxiety. Regarding the intersection of money and life, there are two different types of change: fundamental change and practical change.
Fundamental change is seeing the world as a risk manager; practical change is altering your insurance policies. Fundamental change is shifting from a retirement plan to a fulfillment plan; practical change is taking degree or certificate courses that could lead to a job change. Fundamental change is seeing your estate plan as a legacy plan; practical change is updating your will.
In a perfect world, fundamental change happens first and practical change follows almost effortlessly. But fundamental change does not always come easily. Oftentimes, practical change precedes fundamental change as we allow a discipline to shape our view fundamentally.
Practical change, then, is cutting up the credit cards, your path to more; the fundamental change that follows is genuine contentment with enough. Practical change is beginning a giving program; fundamental change is having less of an attachment to material things. Practical change is writing your Personal Money Story; fundamental change is realizing its significance. Practical change is dealing with the dollars and cents in life; fundamental change is life itself.
Timeless Truth
We live in a world that, when it’s all said and done, there’s a lot said and very little done. You will not succeed in money or in life based on what you know. Taking action will not guarantee success either. Gaining enough knowledge to take the right action is what will bring that which you seek.
We live in an information age. We no longer suffer from the desires and hunger to know more. Instead, we seek to make sense and prioritize the myriad of facts and details before us. After reading this book, you certainly will not know how to do everything it takes to be successful, but this is not an excuse to do nothing.
My coauthor and I have tried to give you a glimpse into the kindergarten-through-graduate-school view of money and life. Far from being the last word on the topic, we are helping you find the first word along your path. It is not our aim to give you all the answers but, instead, to frame the questions so you can define success with respect to your money and your life.
You know that the journey of a thousand miles begins with one step. In this book, by the very nature of the topic, we were forced to give you an overview of the entire journey. While it seems daunting if you attempt to swallow it whole, all you need do now is commit to take the first step.
I have written a number of books and, hopefully, will write many more. For the most part, those books start and end with a topic or story fully explored. Your money and your life defy that kind of experience. We do not share an author/reader relationship. We are fellow travelers along the road to our own destinies.
My coauthor and I cannot tell you the definition of success for you and your family. In this book, we have shared some common ingredients that will be a part of every successful recipe. Do not look at these financial concepts as restricting your life and freedom. Instead, these concepts, tools, and principles will give you freedom, promise, and possibility.
For over a decade, I have written a syndicated column that shares timeless principles with people around the world. Each of these hundreds of columns contains different information, but they all conclude with the simple statement, “Today’s the day!” I feel this is the all-encompassing, critical message to leave with my readers, because it doesn’t matter what you know. It matters what you do. And when we look at doing things in this world, the only day that matters is today.
Jim Stovall
As we’ve learned, financial planning is not just about dollars and cents. It starts with the recognition of the role money plays in our lives, the history we have with money, and then reshaping our view of its purpose as a means, not an end. Then, we have the privilege of making a declaration of what will mark our lives—our Personal Principles—followed by the establishment of specific, measurable, attainable, and meaningful goals that are based on those principles. This step may also involve testing and eliminating any goals we had previously set that do not align with our principles or meet the necessary goal criteria.
The establishment of our Personal Financial Statements is where life planning begins to merge into traditional financial planning. A successful cash flow mechanism is at the heart of every good financial plan, whether your income is $10,000 per year or $10 million. Our financial statements will show us whether we are living with enough or for more. Real investing doesn’t begin until our assets begin to dwarf our debts, and the elimination of all debt should be a stated goal of every financial plan.
Debt is not an investment and neither is insurance. Insurance is a valuable tool, but one that should be used by a wise risk manager who seeks to avoid, reduce, and assume risk prior to insuring. Life insurance is one of the simplest parts of the financial plan that is made the most complex. Don’t let it be. Invest with investments and insure with insurance. The time you save in life insurance planning can be applied to ensuring that you’re not leaving catastrophic risks uninsured with the most ignored of all insurance—home and auto. Take advantage of the most tax-efficient account allowed by the IRS—the Health Savings Account—and fear not the most complex of insurance products—disability income and long-term care insurance—because too many don’t know they need them until it’s too late.
View investing also as a risk manager, not fearful of risk, but calculating. Don’t trust the market to be a benevolent force that will deliver your hopes and dreams; that’s your job. But remember the clearest investment minds manage risk, not returns, with full recognition that it is easier to lose money than it is to make it back. Don’t stop rooting for the home team, the U.S.A., but recognize the best investment gains of the next century lie south and far east of our borders. Annuities—don’t buy them, but be careful getting out. Don’t pursue investment strategies for the primary purpose of tax privilege, but take full advantage of free money (401k employer match), tax-deferred contributions (401k), and especially, tax-free opportunities (Roth IRA).
Education is invaluable, but not priceless. If you compromise your own financial health for the sake of your children’s education, you do them a great disservice, because they may have to bail you out in your retirement years: a much more expensive proposition than paying off a student loan. The three-legged stool of retirement is now a pogo stick, but don’t panic, because you should have a fulfillment plan, not a retirement plan. You don’t need to be happy about spending a pretty penny to sit down and talk about your demise with an attorney, but it doesn’t have to cost you a fortune, and those documents are the most important you’ll ever write, when you need them. And be picky about who you choose to partner with you as your advisor. The vetting process won’t be easy, but it will be worth it.
Economic Bias Alert!
Do you remember the news from the last chapter? Everyone is biased, and we all exhibit a personal economic bias as well. Your authors have an economic bias. Yes, it’s true. We’d like people to buy this book!
But you have a personal economic bias as well. You’ll have a tendency to go through a book like this and be receptive to the recommendations that aren’t going to cost you anything. You may be a young parent whose number one financial planning priority should be to get a will done, but you know that it’s going to cost several hundred dollars. Or, you may know you have to get around to paying off those credit cards because it will put you on the path to financial freedom, but you don’t do it because it means you won’t be able to take the vacation you want this year. That’s personal economic bias, and like all economic bias, it’s not evil or bad—it just is—and you’ll be better off when you acknowledge it.
As you’ll see if you fan the pages of this book you’ve already read, financial planning contains a lot of information, and this book only attempts to highlight the most important themes of personal finance. That is why it is imperative you have a way to collect and organize the information in your financial life. Think back to when I mentioned you can always take principal you’ve put into a Roth IRA back out with no taxes or penalties at any age. That information is only valuable if you know how much you’ve contributed in the first place. Like dieting, brushing your teeth, and budgeting, information management is relatively painless if you discipline yourself to do it as you go, but very difficult to catch up on after years of neglect. The maintenance of this information can be done by you, manually or electronically, or it is a service that some financial planners provide.
Timely Application
Action Plan
The Action Plan is broken down categorically into the various sections of the book. As you organize your Timely Applications, you’ll be able to carry the actions you’d like to take over to the Action Plan. Each section will give you an opportunity to describe the fundamental change you want to improve your life as well as the practical change steps that you intend to take. Beside each action in each section, you’ll be able to name a responsible party to complete the action. It may be you or your spouse, or it may be an action that an estate planning attorney or financial planner will help you complete.
Then, you’ll have a column in which you’ll be able to prioritize all of these actions. Even if you have the money to implement everything at once, you definitely don’t have the time. If you don’t prioritize, you may be overwhelmed with the task at hand and give up. Finally, you’ll have a column to write in a date when it’s completed. Give yourself the chance to feel that endorphin rush of checking off a to-do. You deserve it!
Visit www.ultimatefinancialplan.com to find a template to use in creating your own Action Plan.
Tim Maurer
So what now? If you’ve been keeping up with the Timely Applications and our online exercises, you probably have a head start, but it will be very difficult to keep everything organized and moving in a purposeful, prioritized direction. That is why our final Timely Application is designed to help you organize and prioritize all this information into your own personal Action Plan.
The Timeless Truths will endure, but the Timely Applications will perpetually change. As we emerge from this Great Recession, we will see numerous changes in the financial industry that will impact our lives. We would like to partner with you as you navigate the financial landscape. You have likely visited the web site to retrieve Timely Application exercises, but personal finance topics are always in a state of flux, so we invite you to stay updated and join the conversation on www.ultimatefinancialplan.com.
We invite you to bring your questions to the blog regarding how to implement strategies outlined in the book, but also questions we may not have addressed that impact your personal finances. We would love to hear your success stories as you implement your Action Plan but also struggles that arise. We also invite you to share the frustrations you face in completing the Timely Application exercises. Stumbling blocks are the norm—not the exception—because life is not lived out in the black-and-white letters on these pages. We will continue to walk through this with you in the form of an ongoing conversation on www.ultimatefinancialplan.com. And we know that the best applications are created in practice, so if you find potential improvements to any of the Timely Application exercises, we welcome and invite those suggestions and will implement them for everyone’s benefit.
Your Personal Money Story is already partly written. It may be a rags-to-riches story, it may be a riches-to-rags story, or it may be a rags-to-rags or riches-to-riches story. But remember that the riches part of your story is not the primary indicator of success, nor is a story lacking riches a failure. Genuine wealth—contentment—is success. You can have wealth with millions or hundreds, and the beauty of that is you can have it today. A friend of mine closes his e-mails with the following phrase: “Keep moving forward.” Whether you have more money than you could ever spend in this lifetime or a negative net worth and mounds of debt, that recommendation applies to all.
Please stay in touch and in conversation with us, because this book is not our last word on the subject, nor can it be. Very little in the realm of personal finance is a matter of right and wrong. It is a blend of science and art, or MONEY and LIFE.
Ultimate Advice
You can be very successful in this world, be admired by everyone, have endless possessions, a lovely family, success in your work, and have everything the world can give, but behind it all, you can be completely lost and miserable. If you have everything the world has to offer you, but you do not have love, then you are the poorest of the poorest of the poor.
John O’Donohue