Retirement Answer Man

Setting retirement goals can be a big waste of time.

In my 23 years of advising individuals and families, I've rarely found someone that had clear retirement goals.  Guess what?  They were still able to live a great life and retire comfortably.

In this episode I'll explore the problems with setting retirement goals and offer a better way to plan.

Retirement Tip of the Week

How to Prepare for the Unthinkable: a House Fire

Recently someone close to me went out for a movie and returned to find their home burnt to the ground. They lost everything, including their dog.  In a few short hours they had no home, no clothes, no furniture, no family photos, no records, no nothing.

This is the type of thing that can never happen to us, right? It's the type of thing that happens to "other" people. Think again.

Here are some simple tips to help you prepare for this unthinkable crisis.

Complete a Video Inventory

  • Work room to room
  • Narrate, describing items (brands, models, amounts)
  • Specifically document valuables (jewelry and artwork)
  • Don't forget the garage
  • Keep copy of video outside the home
  • Update annually

Back Up Important Documents

  • Tax returns
  • Photos
  • Contracts
  • Estate plan
  • Financial information
  • Keep back up offsite (loved one's safe or safe deposit box)
  • Update Annually

Understand Your Home Fire Coverage

  • Full replacement cost coverage
  • Market value coverage
  • Personal property coverage
  • Valuables rider for expensive items such as Jewelry, etc.

After the Fire

  • contact insurance agent immediately
  • Ask for advance on your claim to cover short-term costs
  • Secure your property
  • File claim right away
  • Keep track of all living expenses (with receipts)
  • Don't stop paying your homeowners insurance premium
  • Don't close your claim out too fast
  • Get grief counseling

Feature Presentation: Screw Retirement Goals, Here's a Better Way

Retirement Goals. In my experience, few people set them and even fewer stick to them over the long-term. Retirement goals are something we are told we need to have so we can plan for them. Traditional planning forces them upon you and then shows you all the saving and sacrificing you'll have to do to achieve them.   No wonder nobody plans.

Recently a mentor of mine, Michael Hyatt, wrote a great blog about the problem with the traditional concept of retirement (Why Retirement is a Dirty Word). I agree with him.

If retirement and retirement goals are outdated concepts than how do you plan for the future?

In this episode, I'll explore some of the problems with setting retirement goals and show you a more productive way to plan for the the future.

I discuss:

  • The problem with traditional retirement goal setting
  • Why we don't stick with retirement goals
  • How you might be limiting your future
  • How you might be limiting your current life
  • The importance of priorities
  • How to turn your financial priorities into actions
  • How to negotiate with yourself
  • How to live a more balanced life

QUESTION:  Do you have retirement goals?

  • If so, are they meaningful?

  • If not, Why?

Let me know via Twitter 

Direct download: The_Retirement_Answer_Man.mp3
Category:Finance -- posted at: 8:57pm CDT

If you chose to invest in real estate as part of your retirement plan, you better understand what you're signing up for. 

Most "educational" classes, workshops etc. focus on all the benefits of real estate and gloss over the realities of doing it. Buying, owning and operating rental properties is hard work.  This week, I talk with Philip Wetzel about the real work that goes into investing directly in real estate.

Retirement Tip of the Week

3 lessons from Jim Collins' books Good to Great and Great By Choice that you can use to make smarter financial decisions. 

Two of my favorite business books are Great By Choice and Good to Great. Last week, I had the pleasure of hearing the lead author of each, Jim Collins, speak. It was awesome.  The lessons learned from his research on what made companies great can easily be applied in managing your financial life. Here are 3 that you should start using today...

  • First who, than what
  • Confront the brutal facts (yet never lose faith)
  • Fire bullets, then cannonballs

Feature Presentation: What You Should Know Before Investing in Real Estate

Investing in real estate can be a good thing-as long it fits your situation, you truly understand the risks and work involved and stay diversified.

There are plenty of workshops, classes, seminars, infomercials systems, etc. out there to "teach" you how you should do it. Unfortunately, they are typically strong on the benefits and light on all the work needed to position yourself for success.  In this episode, I start to give you the rest of the story.

Some of the topics we cover are:

  • Why you need to run it like a business
  • How to do your homework before you buy your first home
  • Why passive real estate investing is not really passive
  • The difference between flipping house and real estate investing
  • The importance of having cash reserves
  • The advantages of being a handyman
  • The advantages and dangers of using leverage
  • Why you need to put 20% down when you buy a property
  • The importance of finding quality tenants
  • How management companies work


Direct download: Plan_Well_8.18.14.mp3
Category:Finance -- posted at: 9:45pm CDT

My financial records are a mess. Are yours?

In this episode, I'll outline the framework I'm going to use to get my recording keeping in order. 

Could you find that important docuement if you needed to?

If not, listen and we can get organized together.

In the Retirement Tip of the Week, I'll give you a framework for lending money to friends or family so you can help out without ruining the relationship.

Direct download: Plan_Well_8.10.14.mp3
Category:Finance -- posted at: 7:26pm CDT

Is the stock market correction here?  In the last week of July the S&P 500 index lost 2.7%. The worst weekly loss in over two years. It didn't take long for the sensationalist headlines to pop up. Here are two of my favorites.

Warning: That plunge in stocks is just the beginning

3 market warning signs predict 20% stock tumble

Insight: When these indicators flash together, it’s time to sell


Strategies to Help You Handle Market Corrections

I'm all about investing wisely for retirement. If you are a trader, market timer, trend follower, etc. you might want to click away. For the rest of you, here are my suggestions to help you invest wisely and sleep better at night.

1. Have a Plan

Sounds simple but most people don't. They invest based on intuition, emotion and trust rather than facts, process and purpose.  Your plan doesn't have to be elaborate it just needs to be clear and actionable. It should include:

  • Goal for investment assets
  • Investment timeframe
  • Risk/reward target
  • Target investment allocation
  • Rebalancing policy
  • Communication and evaluation schedule

2. Have adequate cash reserves

More than anything, this may the most practical strategy to weather market corrections. One of the biggest mistakes you can make is  to sell an investment at the wrong time because you need the money.

With interest rates on savings accounts near 0%, it is tempting to put all your money "to work". Don't. Cash reserves give you the flexibility to weather uncertain times in your life as well as the markets. (in episode #17 I discuss cash reserves). Here are the basics of cash reserves

Emergency fund (3 months to 2 years living expenses) + Expected expenses within the next 12 months=Less emotional decisions

3. Have at Least a 3 Year Investment Timeframe

Anything under a three year time frame is speculating not investing. Investing wisely requires time.

4. Be Well Diversified

Every time I say this I feel like the teacher in the Peanuts cartoons...Blah, Blah, Blah. Diversification and asset allocation help you avoid the trap of trying to pick winners and losers. They position you to participate in the economic growth of the world. That is the point of investing.  The more you try to game the system, the more likely you'll miss out (Here is a recent episode on investing mistakes).

One thing you can do right now is make sure your allocation is rebalanced back to the target you should have set in the beginning. Over the last 4 years, the stock markets have done quite well. If you haven't rebalanced to your target you probably have a lot more equities than you originally intended. This could mean you have more volatility than you bargained for. Studies have shown that rebalancing your portfolio regularly helps you achieve better results. Rebalancing Feels bad, but works good.

5. Understand Market Corrections are Healthy for the Markets and Your Portfolio

You've heard it said that investing is like gambling. In a sense that's true. If you invest based on intuition, emotions and the advice of the financial press, you're just one of the suckers walking into the casino. If, however, you invest based on history, research, process and prudence you are more likely to have the odds of the casino over the long-term. That is investing wisely.

Retirement Tip of the Week

Try it Before You Buy it

You need to be very careful when you are in the Retirement Nesting stage of life. Retirement Nesting occurs during the 3 years prior to retirement and the 2 years after you retire. This is the time of retirement lifestyle dreams. AND a time when you are susceptible to marketers selling the retirement dream.

The Retirement Nesting stage is a danger zone for poor financial decisions. Don't fall for the emotional urges to buy an R.V., vacation lot, condo or big toy. They can be great but you need to be certain, very certain, that it is something you will truly use. Just recently, I had to help a gentleman unload a beach condo he purchased on a whim 5 years ago. He lost over $100k on the deal (and only used once). Don't be that guy.

Here are some tips to avoid the same mistake:

  • Do LOTS of research over  a 12 month period before you buy
  • Always pay cash.
  • Rent the object of your desire for the first 2 years to see how much you actually use it. It is easy to rent anything anywhere nowadays.
  • Test drive vacation homes, R.V.s and resorts over the first 5 years of you retirement. It can be great fun and save  you from making a costly mistake.

Resources Discussed

Direct download: PLAN_WELL_8.4.14.mp3
Category:Finance -- posted at: 9:53am CDT