The two biggest areas people are in constant search of gratification are in regards to money and looks.  For the purpose of this post we’re going to focus on weight and physically fitness in regards to looks.  Then for money we are going to looking financial situation or your financial health.

Development

an early age our perceptions of money and health take shape mostly for us.  We learn our thoughts and feelings regarding these areas from the major influences in our lives.  It might be your parents, teachers, friends, other family members.  It could be things you learn or things you can experience.  There are numerous ways in which your relationships with money and health grow over the years.  The key is to realize that your thoughts and feelings are a learned behavior because of this they can just as easily be unlearned or changed.

Our Society

Today we are a society that is struggling, to say the least, in these two areas.  There are people everywhere saddled with debt.  They don’t have the savings they need.  They become reliant on jobs and the income they provide.  To make matters worse, the economy is bad and unemployment is up.  Just as we struggle with money we struggle with weight.  Obesity in America is out of control.  We love what’s not good for us, maybe because it’s easier or maybe because it tastes better.  We don’t have time to exercise.  We also spend more time sitting than ever.  We sit at our job, in our car and in front of our televisions.

Caught in the Middle

Everywhere you look you are bombarded with extremes.  You are shown rich or poor, fat or skinny.  The in between has essential been buried in our society.  What fun are they?  They are boring right?  Who wants to be boring?  So you constantly deal with cognitive dissonance.  This creates a sense and feeling of being uncomfortable.  These extremes make it very difficult to change.  It’s almost as though you have to be one or the other.  So then if your are not rich, you must be poor and if you are not skinny you must be fat.

This creates a constant battle, a mountain to climb.  How do we respond to this?  We don’t have the patience or the time.  Some may argue that we are lazy.  We struggle with the lack of understanding of exactly what to do or where to start.  We seek out the quick fix.  We want to be rich and skinny now.  Isn’t that what we are suppose to be?  Isn’t that what is in the news and the magazines and on tv?

Quick Fixes

There are the diet pills and the lottery.  They advertise everywhere.  This one pill will make you skinny.  You don’t have to be fat, just as the lottery makes you rich.  We throw money at these get rich and get skinny schemes.  These two sections are in every grocery store across American.  The place to buy your lottery tickets and the section that has the diet pills.

Next we are faced with an overwhelming number of ways to get rich and skinny.  There is too much information, too many ways to make it work.  So we look around in our own worlds.  We scratch and claw to find someone who has had a bit of success so we know who to copy or follow.  Oh this diet plan or pill or book worked for so-and-so it will work for me.  I read about this on the internet or saw it on tv.  Maybe there is truth there I will try it.  We offset our constant struggles with constant little efforts.  It’s as if we just try a bit maybe something will happen to fix everything.  Or maybe we’ve come to accept that we are failing in these areas.  That would be scary, acceptance?

Last Resort

We are left with our final option, Bankruptcy or Gastric Bypass.  They are one in the same aren’t they?  Start over with a clean slate.  Wipe the fat and debt away.  Does it work?  It definitely can.  What it doesn’t address is the root of the problem.  The money issues you were dealing with first and the eating issues are still there.  They need to be fixed.  What it does is shrink the mountain.  Things become less overwhelming when you don’t have to go it alone and figure things out by yourself.

It Doesn’t Have to be This Way

That’s what I’m hear to tell you.  There is help.  You are the norm.  The majority of people our there are struggling with the same money and health issues you are.  Just because they don’t put them for you to see doesn’t mean they are not there.  There is help for you.  There are financial planners and personal trainers.  There are bloggers and information everywhere.  This can continue to be overwhelming so focus on three.   Three great services or people that can help and teach you.  You need to take the leap of faith and now that things will get better.

Your Chance to Fix It

Focus on the next 30 days.  Go out and follow your 3 things that are going to change your life in the next 30 days.  It might be a book, a blog and a personal trainer..  Maybe it’s a friend, a financial planner and/or Financial Samurai.  Whatever works for you.  Don’t worry about if it’s the best, find something you trust and stick with it for 30 days.  Maybe it’s an exercise video from BeachBody or a great book from Amazon or someone you were introduced to.  I promise it will make a difference.

Change

We’ve come to talk about how we as a society got here.  It’s okay to be here.  It is normal to be here.  But you don’t have to.  You do, however, have to want to change.  There is a reason for this.  There is a purpose to change.  It’s different for everyone.  Now is your opportunity.  30 days is all I ask for.  So ask yourself two questions…

1. Why do I want to change?
2. What will be my 3 things for the next 30 days?

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A hungry donkey walks into a barn in search of food.  He finds two identical haystacks at opposite ends of the barn.  The donkey stands in the middle of the barn between the two haystacks, not knowing which one to choose.  Hours, then days go by, but the donkey just can’t seem to make up his mind.  Unable to decide, he dies of starvation.

This is my version of a story that originated with Aristotle and was later reinterated by the French philosopher Jean Buridan.

I would argue that the financial world is full of donkeys.  You might say politics more so but I’m not a very political person.  People know they need to save for retirement but get hung up on the details of doing so.  They end up not saving.  You might know you need insurance but which type, kind, policy, amount is right for you.  So you go without.  Congress needs to pass a bill to address a big picture problem in America, they just can’t seem to decide on the minor details.  They become stuck in the middle.  You want to purchase a new tv so you go online to research the perfect tv.  Thinking you know what you want, you go to the store to find that they have two tvs with identical features for the same price.  Unsure of which is better to go home to continue your research.  Maybe you buy a tv a few months later.

What do all of these examples have in common?  They didn’t take into account the consequences of not deciding.  For the donkey it meant death.  For the person not saving for retirement it might mean a lower standard of living and/or a drain on their family and society.  For Congress, the problem persists for much longer than necessary, who knows how many people become affected by it.

• What have you been putting off that you know needs to get done?
• Are you dealing with cognitive dissonance?
• Do you know you need insurance?
• Need to save more in an emergency fund or for retirement?

Or should the question I ask be..Are you prepared for the consequences of procrastination?

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When you look around at people’s lives there seems to be 2 things that show up in most people’s financial worlds.  If they aren’t there directly it’s 2 things that the people are working towards.  Any guesses?  They are both marketed to widely by the largest financial companies in the US.  Give up?  The 2 things are your 401k and your house.

Chances are you read everywhere how you should be contributing as much as possible to your 401k.  Most of these messages are initiated by two groups, the financial companies and the government.  Then you add in that your whole life you are told that you need to own your own house.  It is instilled in us at such a young age that most people never even question it.  They work to get a mortgage, in order to get their own house.  I have to ask, is this a good thing?

As I was reading The Best Way to Avoid the Worst Financial Problems from @wisebread it reminded me of the 6 principles of the Evolution of Wealth.  Honestly, I have put aside the principles that I originally wrote up.  Why?  Well I really don’t have a reason, basically because life happens and I’ve tried to let this blog go where it goes.  It was the following paragraph in that post that jumped out at me:

I can give it to you in once sentence: Keep the cost structure of your household flexible. That is, arrange your life so that you can react to a fall in your income by reducing your expenses.

This screamed principle #1: the power of LUC.  Did I forget the k?  No.  LUC stands for liquidity, use and control.  These are the main features of flexibility.  Now let’s look at the 2 most popular financial tools that play a major role in everyone’s financial world.

How does a 401k provide flexibility?  Does it provide liquidity, use and control?

1. Liquidity – Fail!  When flexibility is most important, it is difficult to access the money that you put into a 401k.  There are penalties and fees associated with the access as well as probably having to jump through a few hoops.
2. Use – There’s only 1.  It’s saving for retirement.  The money is in your account doing 1 thing, or should I say hopefully doing 1 thing.  People loose track of the main purpose or maybe the only purpose of a 401k.  Saving for retirement.
3. Control – Do you even have any?  The government dictates when and how you can access the money.  The employer or plan administrator dictates the rules surrounding access and investments.  Might you just be a pawn?

How about your house?  Any flexibility there?

1. Liquidity - Is it easy to get money out of your house?  I guess you might be able to convince me if and only if you have a large equity line of credit established.  Oh, what did you say?  Banks are taking those away?  Guess this is a FAIL too.
2. Use - You could make an argument for some use here.  It provides shelter.  It provides some tax benefits.  It might provide some rate or return (emphasis on maybe).
3. Control - This should be a good one…who controls your house?  Let’s see, you need to ask permission and prove that you should be able to pay just to get a mortgage.  Then if something bad happens, just when you need there help the most, the bank says ‘NO’.  Doesn’t sound like much control to me.

Might the 2 most widely used financial tools also be the worst based on Principle #1 and wisebread.com‘s “Avoiding the Worst Financial Problems”?

Related posts:

1. Max Out Your 401k Math
2. 401k, God or Devil?
3. 6 Reasons Not to Max Your 401k

Have you seen Fidelity‘s commercials with the green line:

[youtube=http://www.youtube.com/watch?v=U7atn5Zj5hY&feature=related]

Isn’t it that easy?

Have you ever sat down with a financial planner that drew a straight line like the one in Fidelity’s commercial?  Isn’t that what they do when they print out those stacks upon stacks of papers showing an ‘analysis’ of where you will be in your future?  They draw you a nice straight line from the point you are today to the point you will be in the future.

Did you ever ask why the line is so straight? The financial planner assumes.  They make assumptions about taxes, rate of return, inflation, time frame, asset allocation, salary increases, money needs, life expectancy, I think you get the picture.  Do we know what any of these things will be tomorrow, none the less in 30, 40 or 50 years from now?

Did you ask about the assumptions? They will probably go on a schpeel about how they build long lasting relationships and need to do annual reviews to make adjustments to your plan.  What does that mean?  Does that mean we need to change things every year?  That doesn’t sound like fun.

Did you ask about costs to make changes? This is a great way to differentiate between a bad, good or great financial planner.   This is where it becomes important to understand how your financial planner gets compensated.  It could be expensive to make changes every year.  Or even worse, you might not realize how expensive it is.

Maybe the funniest part to me is that when I went to Fidelity’s website their green line showed up on the left in an advertisement for “Income Protection”.  When I clicked on this I was brought to a MetLife variable annuity that offered a Fidelity fund of fund with a Guaranteed Withdrawal Benefit, that’s it.  A bare-bones insurance product with a 1.90% annual expense ratio.  In Fidelity’s defense this advertisement did rotate on my next visit.

We all love guarantees so here’s mine: Your financial plan, or your straight green line, are guaranteed not to happen.  Your assumptions will change.  Your future will change.  You cannot predict it, you can only hope to prepare for it.  Do you think they could draw you a jagged line?  Maybe an array of points?  Oh that’s why they came up with Monte Carlo simulations.  They still couldn’t predict 2008 thought huh?  What are we left to do?

Follow my feed, follow me on twitter and e-mail me.

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This is an update to DIY Scare that I wrote yesterday.

I’m pretty sure I figured out what happened.  Today, I did the next step for Insanity which is a plyometric cardio workout.  It’s a pretty ridiculous workout especially for the first one.  I was dripping sweat after like 5 minutes.  I’m not one for all the cardio fitness stuff but this was pretty cool.  I’m a fan of plyometrics from my college athlete years.  This was a ton of jumping, running in place, high knees, more hoping, power squats and a few push-ups thrown in for good measure.  Yes, this time I made sure to exercise with my girlfriend.  I definitely wasn’t going it alone.

So then at the end of the program we were stretching out as part of the cool down.  I started to get a bit dizzy and then I heard something.  On Insanity the guy said to make sure to rise up slowly with your chin on your chest.  Viola, it worked.  I was okay.  No nausea or dizziness.  I mean the work out kicked my ass but I didn’t feel like I was about to pass out or throw up or anything.  I asked my girlfriend about it and she’s like yeah everyone tells you to do it that way and it definitely works.  Stupid me, I should have known.

Make sure to check out Shakeology.

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1. DIY Scare

I have to say it must be the way to go.  It’s the popular thing nowadays.  It’s everywhere.  On the internet the ads are all over the place.  If you work in the industry you are bombarded by offers.  Online insurance quotes are the way to go.

1. Where else can you get 2-3 phone calls within 2 minutes of submitting the information? You raise your hand to say that you are interested in insurance and they call you right away wanting to sell it to you.  Perfect.
2. It’s the best way to get the cheapest policy. That’s what it’s about right?  Price.  It’s an easy choice who to go with just take the lowest priced policy.  All insurance is the same.  What’s company rating?
3. They know what’s best for me. In only a few minute conversation or maybe no conversation at all, I get my quotes.  People call and can give me exactly what I need right away, perfect.  That brings me to my next point…
4. They are here to help me. They want me to have the best insurance policy on the market.  I can trust that they are going to help me and my family be protected.  And they get their 80+% commissions.
5. I might need other insurance. It’s great that they pass my information around to people who sell other types of insurance.  I love getting more phone calls from people I don’t know trying to sell me something.  Auto, health, homeowners, renters, business, I might just need it all.
6. They’re the insurance best-of-the-best.  Think about it.  The most successful insurance people must be the ones buying the leads.  It’s the successful ones that are waiting around the phone to call as soon as they get the lead in their inbox and then get into a price competition and sell something to someone they have never met.

It’s really the perfect scenario.  I type my personal information into a website I saw on tv.  They send it to 4 or 5 people who can really help me.  These people call me right away with all the answers to my problem.  They know what’s best for me and sell it to me as quickly as possible.  Go to the websites and put your information in now.

Follow my feed, follow me on twitter and e-mail me.

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1. Networking Online

Okay, here’s a true story that just happened to me tonight.  Well my girlfriend got Insanity in the mail last week.  She was excited to start it today and was wondering if I wanted to do it too.  I said sure.  For those of you who don’t know what Insanity is it’s a new at-home workout put out by Beachbody.  I would even go so far as saying that Beachbody might be the leader in at-home fitness.  For those of you that are do-it-yourselfers this experience changed my view on going it alone.

Insanity starts with a fit test.  Earlier in the day, my girlfriend did hers while I was busy working from home.  Then this evening she had to work so I figured I’d get my test in and make sure I beat her scores.  I don’t pretend to be in great shape.  To give you some background, I try to exercise 2-3 times per week and it mostly consists of pick-up basketball and then sporadic running.  I have pretended to be an athlete my whole life.  I use to play 3 sports in high school and went on to play 2 in college but this was all many, many moons ago.  My point is that I’ve been through a lot of different types of workouts with no real problems.  Today was different.

The fit test consisted of 8 exercises in which you do as many reps as you can in one minute.  The Insanity workout is described as max interval training.  Instead of doing a few minutes of low intensity then 30 seconds of high intensity, it does a few minutes of high intensity followed by 30 seconds of low intensity training.  I made it through the fit test which grueling doesn’t begin to describe.  Then I was doing the stretching/cool down at the end.  I stood up and felt like I was going down.  I’ve never fainted before but I didn’t think I’d be able to stay on my feet.

So I sat down and it wasn’t helping.  I really didn’t know what to do.  Is it better to stand, sit or lay down?  Should I have my head up or between my legs?  I had no idea.  So I sat down first.  It wasn’t helping, I was actually feeling worse.  So I put my head down and that just made me feel like throwing up.  I can’t remember ever getting sick from a workout.  Then I laid down.

The scariest part for me was that I was home alone.  I figured I was fine it’s just really weird to feel worse than you ever have before.  I don’t even know how to describe it.  I didn’t know what to do.  First, I called my girlfriend but she was busy and I didn’t want to bother her.  Then, I called my mom, not because I’m a momma’s boy, because she’s a nurse and I wanted to know what to do to feel better.  She said lay their with your feet up, drink water and check my pulse.  She said my pulse was fine but the water was on the other side of the room and I definitely didn’t feel like moving.  So I laid there for like a half hour and finally got up to get some water and have something to eat.

There is probably a good explanation for what happened and I’ll probably talk to someone to help figure it out or maybe someone will read this and give me some advice.  I know for sure that next time, yes there will be a next time, I won’t be home alone.  In fact, I’ll have an expert around.  As I lay on the floor it made me think of all the d0-it-yourselfers out there.  It’s a lonely feeling.  What do you do when you don’t have help?  Who do you call?

You build your investment portfolio from the ground up yourself or you put together your own financial plan.  Then 2008 and the market tanks.  What do you do?  Do you chase returns?  You can’t call the writers of the books and blogs that you read.  The investment companies give you an 800-number.  Does that really help?  You’re all alone feeling the pain  or maybe you just have the woozy, light-headed feeling and you are about the pass out or throw up.  Who do you turn to?  Are they qualified to help or just shooting from the hip?  I know next time I do Insanity it will be with my girlfriend around, she’s a personal trainer.  I also know that because I work in the financial world I have people I can go to with questions.  Who I go to depends on the question.  I have a fairly extensive background in exercise, working out and playing sports, so I never expected this to happen.  But it did.  I’ll learn from it and do my best to make sure it never happens again.  It was a horrible experience with even worse feelings.  Good thing I know someone who can help.  Do you?  E-mail me, follow me on twitter and follow my feed.

Learn about the Healthiest Meal of the Day.

Update:  I think I figured it out!

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1. DIY Scare: Update

Have you read Seven Financial Mistakes That Ended Badly?

I’ll give you a short summary…

1. The Dream-Car-For-A-Year The woman finally gets her dream car just to have all kinds of problems with it in the second year she has it.  Doesn’t go into much on the financial side, I’d love to hear how much this cost her?
2. The Expensive Student Loan To me it’s the normal college kid who doesn’t know what he wants with his life and then ends up graduating with college loans, $42,546.  I actually can beat this but I’ll save this for a future post.
3. The Business Financed by Credit Cards Pretty self explanatory how his dreams were bigger than his wallet.  He did end up selling the business off but not without first damaging his credit.  I assume this has some lasting effects.
4. The Risky 529 Thinking His son had a long timeframe and could be more aggressive and ended up taking a huge hit with in the recent market.  “Sorry little buddy, maybe you’ll decide to skip college”  Ouch!
5. The More-Than-Expected Home Wanting to build their dream home they went way over budget.  To make matters worse it means higher assessment, higher taxes, higher insurance, higher mortgage payments and more interest.
6. The (Un)Spectacular Day Trading Imagine day trading going back.  He didn’t know what he was doing and is now a buy-and-hold guy.  He lost $10,000.
7. The Eggs-In-One-Basket He thought he could make money in the stock market and didn’t know what he was doing.  Put all his money in 1 stock that he thought would take off.  It didn’t and he lost half his money.

Which of these scenarios offers the most to learn for you?  For me, numbers 1,3,6 and 7 will never come into play.  I’ve already learned these lessons.  Maybe #5 will because I do want to build a dream home someday so this is good advice, mostly due to the trickle down effect.  I’m still living #2.

That leaves #4.  I just have this picture in my mind of a father and son sitting at the breakfast table with their bowls of cereal in front of them.  The father asks if they can talk and the son nods his head chomping away at his cereal.  The father says I have some bad news and tells him about the 529 plan.  The son stops eating looks up and says “that’s okay Daddy, I still love you”.  Then goes back to munching away.  The good kids always forgive their dad.  Or maybe he just doesn’t comprehend what’s just been said.

Let’s talk about avoiding this situation, e-mail me.

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Have you ever heard of cognitive dissonance?  This is how Wikipedia defines it:

Cognitive dissonance is an uncomfortable feeling caused by holding two contradictory ideas simultaneously. The “ideas” or “cognitions” in question may include attitudes and beliefs, the awareness of one’s behavior, and facts. The theory of cognitive dissonance proposes that people have a motivational drive to reduce dissonance by changing their attitudes, beliefs, and behaviors, or by justifying or rationalizing their attitudes, beliefs, and behaviors.

So what exactly does this mean?  This means that at points in your life you are going to feel uncomfortable about things that you do and/or believe.  The reason you feel uncomfortable is because you behaviors and your beliefs aren’t lined up.  They aren’t balanced.  You’ll be sitting on a seesaw and won’t be flat.  So what are you going to do?

Have you ever been stuck at the top of a seesaw?  It happened to me when I was a little kid.  I didn’t know what to do and I definitely didn’t like it.  This is cognitive dissonance.  You believe that gravity will pull you down.  However, you realize that you’re stuck up in the air.  You’re uncomfortable because your feet are off the ground.  I know I don’t like that.  You begin feeling nervous and it’s getting worse.  So, you try to squirm or struggle a bit to see if you can get the thing moving.  It shakes a little and nothing happens.

Now you have two choices.  You either convince yourself that you are up there for a reason.  By doing this you are actually modifying or changing your belief that gravity should be pulling you down.  This would then make you feel more comfortable about being stuck up in the air on one end of a seesaw.  Does this actually make your situation better?  Maybe it makes you feel better about it but it doesn’t fix anything.  You’re still stuck.

Your other option is to do something drastic to get down.  Squirming didn’t work so we know it’s going to have to be drastic.  Maybe you jump.  There is a risk in jumping.  You might get hurt.  It’s a long way down.  The difference is if you jump, if you make a drastic change, things get fixed.  You’re not just figuring out how to deal with the problem, you are fixing it.  You don’t have to deal with being stuck on a seesaw anymore, you’re off that seesaw.

How does this relate to personal finances you may ask?  Well I’m writing this at night.  The time you go in to kiss your little girl or little boy goodnight, I want you to look them in the eye and tell them the truth about your life insurance.  Then tell them the truth about your disability insurance.  Climb into bed with your spouse and tell them the truth.  Tell them the truth about your retirement.  Do you know the truth?  Tell them what you know and how you feel.

It will probably go something like this:

“(your child’s name here) I just want you to know that I have no life insurance (or not enough) because I’ve convinced myself that I will live a long and happy life.  I’m convinced that I will have plenty of time to make the tough decisions about dealing with something bad happening.  The truth is though (remember I told you to tell the truth) that when something does happen, it will be too late.  And because I’ve become comfortable with this, you will NOT be financially prepared for when something bad happens to me.”

Could you say that?  Could you repeat those words?  How about to your spouse about the two of you’s retirement?  Then do something about it.  Jump off of that seesaw.  If you ask the right person they will even help you down so you don’t have to jump.  I’m right here.

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I see more and more people referencing self insurance as their goal.  What does that mean?  I mean maybe I’m slow or I’m missing something.  So from what I hear, the goal is to grow your wealth (savings, investments) to a big enough amount while also paying off all your debts.  Once your debts are paid off there is no reason to have life insurance.  Is that what you read too?

I was reading Life Insurance Basics: Part One on Personal Financial By The Book the other day.  Listed under the heading “Does everyone need life insurance?” was the following paragraph:

Anyone who is self insured. What do I mean by self-insured? Those who have done so well managing their finances that their survivors will do fine without needing a life insurance payout. These people would have paid for houses, no debt and a healthy retirement and investment portfolio. This, by the way, should be everyone’s goal.

This really got me thinking.  I’m not saying Joe is wrong.  I mean he is a Dave Ramsey certified financial coach.  So he is out helping people and I think that is great.  People need help.  Now as for Dave, there are parts that I think are great and parts I definitely don’t agree with but I’ll let you make up your own minds.  I think he’s great for the right person.

First, I never want to have no debt and I never want to pay off my house but that’s just me and that’s not what this post is about.  I do want to be debt-free.  Read Debt-free to me to learn my views on being debt-free.

So now let’s say I’m debt-free or maybe I reach Joe’s goal above.  Now I should let my life insurance go?  If that’s the case then why stop there?  Should I drop the limits on my car insurance to the minimums?  Raise deductibles to the max?  Drop my disability and liability insurance.  Mortgage is paid off I could just drop homeowners coverage right?  I mean I have no debt and a ‘healthy’ portfolio.  I didn’t even mention health insurance I could probably self insure there as well.

Wait why do we call it self-insured?  Shouldn’t I just say no insurance?  Isn’t that the same?  Why is it that I only hear about self insurance with life insurance?  Shouldn’t it apply to all insurance?  Or is there a pecking order I don’t know about? 

Have you read the definition of self insurance on wikipedia?   I don’t think that applies to 99% of the population.  I hope I’m wrong with how much I see it as a goal.  The funniest thing might be that self insurance is mostly mentioned in terms of life insurance.  When I look around insurance that’s the only one that’s certain; death and taxes.  I wish I could get tax insurance.

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1. Debt-free to me