The Ultimate Financial Plan

Balancing Your Money and Life

Jim Stovall, Tim Maurer

• Publisher: Wiley
• Year: 2011
• ISBN:
  9781118107966
• Edition: 1
• Topic: Desarrollo personal
• Subtopic: Finanzas personales

How to build a financial plan that really blends into your life

The latest volume in the bestselling Ultimate series, Jim Stovall and Tim Maurer's The Ultimate Financial Plan: Balancing Your Money and Life is a one-stop, comprehensive, personal financial planning book exploring the intersection of money and life. The Ultimate Financial Plan examines the connection between actions, thoughts, and feelings when it comes to all things financial. The key to getting the most out of your wealth, the authors argue, is certainly found in the wise utilization of tools, like budgets, bank accounts, 401(k)s, IRAs, Roth IRAs, education savings plans, and real estate, as well as home, auto, business, health, disability, and long term care insurance, but even more so in the contentment found in balancing money's influence in our lives with personal values and goals.

• An insider's look into the recently humbled "Big 3"—the banks, brokerage firms, and insurance companies—and the inner workings that often set their proprietary goals and objectives above all
• A critical examination of the role of various financial sales people, advisors, planners, and consultants
• A guide to navigating Economic Bias—a conflict of interest involving money—and how it affects every financial decision we make

The Ultimate Financial Plan is the application of the resources at your disposal for the purpose of living your life to the fullest, and this book will show you the quickest route to getting started on the path to ultimate success.

CHAPTER 1

The Gift of Money

MONEY 101

Money is the most misunderstood commodity in our society, even on our planet. People today understand the price of everything and the value of nothing. There have been more conflicts, divorces, and disputes over money than anything else. In order to begin to have healthy attitudes toward money, we must understand that it is nothing more—or less—than a neutral tool or vehicle.

Ultimate Advice

“Money is nothing more than a tool. It can be a force for good, a force for evil, or simply be idle.” This is one of the primary lessons Jason Stevens learns in The Ultimate Gift and it’s exactly where The Ultimate Financial Plan picks up.

It is also critical to understand that money is not inherently bad, unimportant, or irrelevant. Many have misquoted and misused ancient wisdom, proclaiming that “money is the root of all evil.” The context here is imperative: “For the love of money is a root of all kinds of evil”1 is the actual quote, and the difference is profound. Nothing can take the place of money in the things that money does, but outside of the scope where money is useful, it has no value.

When it comes to your health, family relationships, or personal well-being, for example, money is of little importance. It serves us best when it is a facilitator of relationships, not an end in and of itself. This understanding will keep money and its detrimental pursuit in check. Once you see money with new eyes, you’ll use it better and more effectively.

Timeless Truth

There are only four things you can do with your money: Acquire stuff, buy security, create memories, and make the world a better place. There is no right or wrong place to put your money regarding these four areas. As in most life decisions, balance is the key.

Acquiring stuff has become our national pastime and obsession. Most people spend more time working than necessary so they can acquire stuff they don’t have time to use because they spend so much time working to get it.

Security is an admirable pursuit. But if you’re not careful, you will fall into the group of people who spend their whole lives preparing for a rainy day and it never so much as sprinkles.

Creating memories is a vital component in a fulfilled life. Those memories can never be taken from you, but if all you do is pursue memories, you will spend your entire life looking in the rearview mirror. It’s nice to look back there every once in a while, but if you drive through life very long looking only in the rearview mirror, you are bound to get a rude awakening.

And, finally, money—like any other tool—can be used for good or for bad, but it can, indeed, help to make the world a better place when it is put in the hands of the right people. You must be cautious here as well, because among those sincere souls who seek your money for admirable pursuits, there are many who—under the guise of good works—are prepared to rip you off.

Apply the following litmus test for proper money usage: Money used wisely enhances relationships; money used poorly is a relational stumbling block.

How would your life be different if money were no object? This is a difficult question to consider, because we seldom make any decisions that are not based on money. This is a poor way to look at the world. Decide what is good or right or meaningful, and then worry about the money.

Jim Stovall

The Value of Money

You may be interested to know there has never been a money shortage. There is, however, from time to time a creativity, service, or value shortage. Money is nothing more or less than a result of creating value in the lives of other people. If you stop worrying about money and concern yourself instead with creating value in the lives of those around you, you will have more money than you need.

What is the actual, literal value of the dollars in our pockets? Nothing. There was a time when that was not the case. The Bretton Woods Agreement, forged after World War II, pegged the value of a U.S. dollar to 888.671 milligrams of gold. Other currencies were then pegged to the dollar, and the U.S. pledged to convert dollars to gold, but the U.S. went off of the gold standard in 1971, never to return. Now, as Dick Wagner puts it, “we have traded money of intrinsic value for perceived value.”2 While some claim that perception is reality, perceived money is simply more easily manipulated, for better and for worse. Prior to our most recent recession, the value of a U.S. dollar steadily declined relative to other world currencies. The U.S. dollar, however, is still the currency used to conduct business around the world, so as the recession deepened, the inherent need for dollars to transact business around the world helped the dollar increase in value again.

The primary method used by the U.S. government to combat our current recession is “printing money”3—making cash more easily available to financial institutions in the hope that they make it accessible to the consuming populace in the hope that they spend it. (Hmmmm . . . sounds eerily similar to the problem that got us in trouble in the first place, doesn’t it?) The drastic increase in money supply is an attempt to avoid the deflationary downward spiral that occurred in the Great Depression. It will inevitably, however, play a role in a further devaluation of the U.S. dollar as we begin to forget about the Great Recession. The increased supply of dollars will result in a lower value for each dollar.

Ultimate Advice

If money be not thy servant, it will be thy master. The covetous man cannot so properly be said to possess wealth, as that may be said to possess him.

Francis Bacon

Therefore, money has no value other than that which we attribute to it. Academically, this makes sense, but why does it actually matter how we view money? Isn’t it only splitting hairs over semantics? How then does the once-almighty dollar have such a hold on us in our daily lives?

Over 50 percent of first marriages end in divorce. The majority of those suggest financial disputes as the primary impetus for the breakup, and not one of us can attest to money not playing a primary role in some relational disruption with family or friends. We must then be giving money power over us.

How do we give money power, and how do we recognize when we’re doing it? Let’s first examine the symptoms. My wife and I were on one of our first dates many years ago at a restaurant in the northern suburbs of Baltimore. While enjoying the romantic, candlelit environment, I displayed chivalry by inviting Andrea to be the first to give our server her order. She ordered the crab cake; I don’t remember what I ordered. The reason I’ll never forget her crab cake is because, as the waiter walked away, I scoffed at Andrea’s foolishness to ever order a menu item at the rate of “Market Price”—like the crab cake—without first asking what the market price is! I thought I was doling out financial wisdom, but Andrea heard that I thought money was more important than she. Romantic, huh? After what happened there, I’m lucky to be married! What was my money belief that brought about that embarrassing snafu?

Money Beliefs

Rick Kahler and Ted Klontz, a financial planner/psychologist duo, collaborated on the topic of personal finance culminating in the must-read, The Financial Wisdom of Ebenezer Scrooge.4 Note their explanation on how our beliefs about money and our actions surrounding it are likely to correspond:

Very early in life, people begin to internalize messages about money’s purpose . . . how it works, what it promises, its overall significance. . . . [T]hey translate what they see and hear into unconscious rules about life, including any internalized messages about money. . . . [E]very financial behavior, no matter how seemingly illogical, makes perfect sense when we understand the underlying beliefs.

In my first date example, it was not that I actually believed that money was more important than my wife, but that is certainly the message she received. And sadly, I think she’s received that painful message many times since then even though I’ve never intended to send it. What then could help us better understand our own beliefs about money and how they were formed?

What you believe about money will determine what you will do for and with it. Right thinking leads to right actions, but those outward actions do not spring from nowhere. In his 1902 work titled As a Man Thinketh, James Allen said, paraphrasing Proverbs 23, “Every action and feeling is preceded by a thought.” Ralph Waldo Emerson asserted, “The ancestor of every action is a thought.” This isn’t esoteric philosophy without application; it is practical advice that leads us to a better understanding of our interaction with money, and thereby, a better life.

Timely Application

Personal Money Story

Write your own Personal Money Story. What is the earliest memory you have about money, and how old were you? For many, it will involve some combination of a piggy bank and an allowance or birthday gift somewhere between ages 3 and 6. Then rate this experience numerically between +10 for a great experience and −10 for a scarring memory. Continue this pattern, marking all of the notable experiences you had with money—good and bad—throughout the course of your life. Then, with the +10/−10 continuum on the vertical axis and the timeline on the horizontal, plot out a visual picture of your history with money.

If you’re single, consider journaling on your experiences and/or sharing your conclusions, and any resolutions you make as a result, with a close friend or family member. If you’re married or heading in that direction, conduct this exercise individually and then share it with your loved one. You may have a “lightbulb moment” that changes the course of your life, but at the very least, you and the people who love you will better understand your background with money.

With that greater level of understanding, my wife will be less likely to see me as a greedy monster when she shares passionately about an improvement that she envisions for our home and I respond, “How much?” Conversely, I’ll be less likely to utter those words at that moment in the first place!

Visit www.ultimatefinancialplan.com to find a template to use in creating your own Personal Money Story.

Tim Maurer

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