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Vegas Baby!!

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I just recently traveled to Vegas for the first time. There are so many lessons to be learned from one trip to Vegas and I will mostly keep with the theme “what happens in Vegas stays in Vegas” except for those important financial lessons that shouldn’t remain there.

As a financial advisor, people frequently ask me about buying individual stocks—“Should I buy Apple?” “What about Ford?”—and I have a difficult time responding to them.  If they are asking about buying these stocks because they heard something on the news or like the product, then my feeling is that buying that stock is not too dissimilar from going to Vegas and putting your money on red.  Some people enjoy Vegas for that kind of excitement.  As for me, I appreciated the shows, food, and late night drinking.  Yes, Apple, Ford, or other high quality companies could be good investments; however, if they are not part of a well thought out and constructed portfolio, then there are no guarantees about the kind of returns you can expect from owning them.

The financial markets have gotten increasingly more complex for individual investors.  There are a number of other buyers out there, including large hedge funds that use computer models to inform their buying and selling choices. With all the factors impacting each individual stock, it can be difficult to predict long- term performance.  In October of 2007, I owned Bank of America stock (through my 401k) at $52.07 per share.  I left Bank of America in July of 2008, and I had the option to sell the stock in my 401k at $22 or take the shares.  I thought it was crazy that Bank of America stock was trading at $22 (I just knew it would go back to $52 in the future) and OF COURSE I was going to take the shares.  Then I watched that portion of my IRA go down to $3.95 in February of 2009 and now it is around $14.61.  There are obviously a number of reasons why Bank of America in particular has gone through this price volatility; however, even intensely analytical investors do not understand why it still trades below its book value.  There are many stocks that have experienced similar price fluctuations that are difficult for analysts to explain completely.

So how do you keep from feeling like going to Vegas if you want to own stocks?  There are a number of things you can do to take away some of the stress.  The first is actually setting aside what I would call “play money” just like I would advise you do to if you were going to Vegas.  This is money that you don’t necessarily need for any particular life goal.  Then take that money and buy the stocks that you find interesting or want to own for personal reasons.  The next suggestion is that you buy a well-constructed stock portfolio where you own stocks of different sizes, different industry groups, and different geographic areas.  This diversification will help reduce the volatility in your portfolio.  It is not the same as putting your money on red and black, but it is much better than just being on red.  The final option would be to own pooled vehicles like mutual funds or ETFs.  These investments give you exposure to numerous stocks as determined by either a portfolio manager or an index.  Just purchasing a handful of shares of these gives you instant diversification to help lower your stock market risk.

No matter what your preference is for investing in the stock market, make sure you are informed on what you are doing and have fun doing it.  If you feel intimidated or scared, ask questions until you get the answers that alleviate those feelings.  The financial markets are complex, and just like you should know your odds before you play any game in Vegas, make sure you are fully informed on your investing!

 

Music Mondays – Hate That I Love You

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Yes, this song, Hate that I Love You, is about an unhealthy relationship between two people; however, I think we can all fill in the “boy/girl” part of the lyrics with an item or experience that we all indulge in and wish that we didn’t. For me, it’s shoes. I hate how much I love them. I hate that I love them so. As I embarked on the journey to become financially fit, I found it relatively easy to give up many things so that I could have a sexier bank account. However, shoes are a very difficult item for me not to purchase. I think we all struggle with our financial kryptonite. It is truly a relationship that we develop with our spending problems. We get emotional when it comes to that item or experience. We feel it when we don’t indulge. But like any unhealthy relationship, when it gets to the point where we are “unglued” from it, we need to stop and evaluate why we remain in it. Sometimes the relationship is not completely unhealthy, but maybe we need to spend less time on it.

When I work with clients who struggle with unhealthy spending relationships (i.e. shoes, purses, wine, cars, watches, travel, etc.) the first step is acknowledging that this is a weakness. Once we identify the weakness, then we can make the best plan to confront the issue. This plan ultimately leads to a healthy long-term relationship for my clients and more money in their bank accounts.

As for me with my shoes, I created an allowance within my financial plan specifically for shoes. It is a dollar amount that allows me to buy one or four pairs depending on how well I spend my money. I like knowing that I have shoes in my plan; therefore, I don’t feel like I ever have to avoid a DSW or Nordstrom. However, I know I have a limited amount of money set aside for these shoes so it certainly makes me more discerning when I’m shopping. If the shoes don’t make my feet look and feel amazing the second I put them on, then I move on and wait for another pair to speak to me. If you have one of these relationships, I challenge you to identify, plan, and change it so that you can save yourself the heartache of being in an unhealthy relationship and become closer to achieving financial fitness.

Beware of the Money Pit

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Beware of “Too Good to be True”

When I was 8 years old, my mom took me to see the movie The Money Pit with Tom Hanks and Shelley Long.  I remember thinking at the time that it was one of the funniest movies I’d ever seen.  Just recently, it was on HBO, and I was reminded about how funny it is, but I actually appreciated it from a Financially Blonde perspective.  Walter and Anna were living in her ex-husband’s home and found themselves suddenly “homeless” when the ex returned home without notice.  Walter and Anna were shocked and caught unaware about where to live next.  They decided to look for a house, but on their budget they were limited in what they could afford.  They ended up finding a true “gem” and made a rash decision to purchase the house as it seemed too good to be true.  And of course it was.

Don’t make the same mistakes

The movie is an exaggeration of a situation; however, I see many people (myself included) make poor decisions around home ownership and find themselves in the money pit for a variety of reasons.  Home buying has dramatically changed since the housing crisis of 2007/2008.  There are a number of new banking regulations and many of the options that used to be available to home buyers are no longer available.

If you want to buy a home now, you need at least 20% of the home price as a down payment.  In addition, you will not be able to borrow against this money until your home value is at least 79% higher than the cash you have in the house, as the lending standards do not allow for it.  Then you will need cash for closing costs, which are frequently underestimated by your mortgage provider.  Then you should have cash saved for your first 6 months of your mortgage payments.  The bank will not require you to do this; however, I know that it is a Financially Blonde decision as you never know what can happen once you move into that home.  In fact, if you are buying an older home, I would also advise that you have a “rainy day fund” ($5,000­–$10,000) saved for when you discover some of the wear and tear that your home has faced that didn’t come up during the home inspection.

Buying a home is one of the largest financial decisions you will ever make, and given this, you should make sure that you give this decision the thought, time, and research that it needs before you make it.  It is Financially Blonde to have a substantial amount of cash on hand before making this decision. If you do not, then keep saving until you have it. You may dream of that perfect home for your family, but if you can’t truly afford it, then you will cause your family more damage than good by moving to the home too soon.

Ask lots of questions and preferably not from people who have a financial interest in your decision (like your realtor, banker, and financial advisor.).  The best sources I would recommend are people who have recently bought homes.  Ask for their input.  Or ask questions here on the blog, and we will get you what you need.  Don’t use Walter and Anna as a model of what to do when buying a home.

Below is a clip of one of my favorite scenes from the movie.  EVERY time I see this, I laugh as hard as Walter does over the tub.  So funny!

Music Mondays – Brand New Day

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I love this song by Joshua Radin for so many reasons.  He reminds us that when we wake each morning, we are given a clean slate with the hope and optimism that anything is possible. This is also true for your financial health.  You may have made poor choices in the past.  You may have made one today.  But tomorrow is a Brand New Day. You have the ability to turn things around and focus on making positive changes in your life.

Sometimes we get so fixated in living in the past that it prevents us from accomplishing our goals in the future. After I had my son, I was fifty pounds overweight, and I remained in that position until I decided to make a change when he was around five years old. The process of becoming physically fit was not easy and I had a few days where I was “bad” and I ate more calories than I should have, and I felt awful. However, I realized that tomorrow was a new day and I had a new opportunity to change things around and work harder, and I did. If I kept thinking about that bad day, then I would not give myself the opportunity of having many more good days ahead.

Just as I had bad food habits, some of us have bad money habits that we fall back into, and when those happen, I encourage you to listen to this song and do the following. Take two minutes when you get the chance and write down what changes you want to make tomorrow.  What about: only spend $20 all day?  Eat dinner in? Spend time with friends not spending money? Whatever your financial goal, write it down and do it!  Make it a reality!  And know that everything “will be okay.”

This is a great video for the song.

Music Mondays – You Can’t Get What You Want

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I confess that I wasn’t too familiar with the Rolling Stones song, You Can’t Always Get What You Want, until it was performed during the Glee Season 1 Finale (find the clip below).  It’s a great song with an even better financial fitness message.  As you embark on your path to becoming financially fit, one of the first things that you need to know is that you can’t get what you want.  We all have our spending weaknesses.  Mine are shoes and dresses.  My husband’s is wine, and his mom’s is purses.  We like to indulge in our weaknesses because they make us feel better when we do; however, in reality, we can’t afford to keeping making these choices.  The sad truth is that when we are making purchases or thinking about purchasing things, we need to hear this song in our head.  Even millionaires need to hear this song because no matter what our money situation, cash is a finite resource that will eventually run out if we don’t stop ourselves.

Just as the song suggests, though, just because you can’t get what you want, does not mean you won’t get what you need and you won’t be happy. When I first sit with clients, we go through an extensive exercise of determining their wants and needs and the best way to go about accomplishing attaining these. If you remember that the things that you don’t want or don’t need are keeping you from accomplishing your goals, then you will be less likely to indulge in them.

The next time you are about to spend money, I challenge you to listen to this song. Let it put a smile on your face rather than the product you are about to buy and let it stop you.  Your bank account will thank you!

Below are videos of the Glee Cast as well as the Rolling Stones.  On a side note, it made me sad to revisit the Glee Cast version and realize that Cory Monteith was no longer alive.  I hope that wherever he is, his soul is at peace.

 

 

Music Mondays

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A clock radio and a dream

I love music! When I was a little girl, we did not have much money growing up, so my “prized possession” was a clock radio that I listened to for my entertainment. Because of that clock radio, and Casey Kasem, I have a particular fondness for 80s music, but I love all kinds of music now. I love when I listen to a song, and feel like it was written just for me. Feeling connected to a song like this makes me feel less lonely or part of a community. There is nothing like having our feelings validated, especially through song. As I embarked on the journey to achieving financial fitness, I thought about many of my favorite songs through a different filter. I almost made it a game to find a financial message in every song that I played.

Music Mondays

As a financial trainer/planner, I take many approaches to help my clients understand what I am trying to communicate. We all learn differently and sometimes a song can be my best teaching tool. Most of my clients are given a playlist when they get their financial plan that is tailored specifically to what that client needs to work on financially. I thought it would be fun to bring some of this inspiration to my blog, so, every Monday, I plan to post “Music Mondays” where I’ll blog about a song that illustrates an important concept that will move us toward our goal of becoming Financially Fit.

 

 

First Blog Post EVER!

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Hi and welcome to my blog, Financially Blonde.  At 35 years old, I am officially writing my first blog post.  Why have I waited so long?  Quite frankly, for the past 13 years, I have been limited by my employers about what I could write, and I never thought I had something interesting or relevant enough to blog about.  A few months ago, I left the world of corporate and retail finance to start my own company, NextGen Financial.  In the process, I discovered that I do have interesting and relevant information to write about.

I spent the first decade of my “adult” life in what I call a “financial fog.” I really had no concept of personal finance despite working in financial services. I had what I now know are very wrong views about what constitutes “smart” personal financial choices. One of my many problems was that I thought a smart financial choice would not be fun. I also don’t handle the word “no” very well.  Once I became a financial advisor and starting helping others, I realized how detrimental it was to live in a financial fog.  I now have made it my life purpose to help others avoid the fog. You’ll see that it is possible to make smart financial choices (or what I call Financially Blonde choices), while still enjoying life and not feeling like you are being deprived.

I started this blog in the hopes of inspiring others who are on their own financial journeys toward achieving financial fitness to keep up the great work and realize that you are not alone and that the path to financial fitness is a long and curvy one with lots of bumps along the way, but it can also be a fun one as well.

I hope that through this blog, you will find tips and tools that will help you live a fun, fabulous, financially fit lifestyle!