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History and Control

Patterned Behavior, The Psychology of Money | February 25, 2011

Two major keys to your financial success are tied to history and control. Understanding both can lead you to where you want to be financially. The question is…….will you study history (yours and the market’s) and will you give up control?

Typically, the most difficult people to convert to a new way of thinking are those that are most in need of a new way to think. Folks that do not save or invest their money wake up one day to find that for all of their hard work, they have nothing to show for it in the form of savings. You might think that would lead to an epiphany. “I need to start saving now. I need to start investing now.” Unfortunately, it usually doesn’t happen that way. Too often, people become embarrassed about the position that they find themselves in. They may even become depressed. Embarrassment and depression usually lead to inaction or coverup or worse of all, justification. “I couldn’t save because (insert reason here).”

A few years pass and the cycle starts again. No different than how most people diet or exercise. Cure one and you cure them all. Think about your habits. Commit to changing them. Live with the discomfort (it’s temporary – trust me, been there many times) and allow your nervous system to be reset. In the meantime, try to stop using a lack of knowledge as a roadblock for beginning the process. Hire an investment advisor, a trainer and a nutritionist. Don’t over worry if they are the right one. Use your gut. You can always change advisors later if you don’t feel synergistic with them. Getting into the process is the most important part. Start today and you’ll be one day closer to your goals. Don’t and you’ll be one day further away from your goals and your true self.

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Losing while winning

The Psychology of Money | October 26, 2010
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The Style of Your Life

The Psychology of Money | October 9, 2010

Have you noticed how commercials have changed over the years? Way back when, commercials used to show a product and let you know of it’s existence. The idea was to increase sales of the product by increasing awareness. Soon, that ad type was replaced by product spokespeople. You know, a famous entertainer or athlete telling you how they love to use the product. The hope was to get you to buy the product so you could be just like Mr.or Mrs. Cool. The approach continued to evolve (or devolve if you ask me), bringing us to today’s advertising style. The product has once again become the star, but in an entirely different way. The product is now going to save your life. So much so that the focus of the ad is not the product itself, but an illustration of how many women would love to party with you (beer). How much fun you’ll have running all over the earth with your grandchildren (drugs). And how envied you’ll be by women and how sought after you’ll be by men if you just buy our (clothes, lipstick, accessories).

Now, if you pay really close attention, you’ll notice that when you are at a party and you crack open your favorite beverage, seldom does it lead to all of the pretty women in the room running over to talk with you. And ladies, I’m sorry to tell you this but, men have no idea that you even have a purse (unless it is your husband, because that is where he likes to keep his keys and wallet so he doesn’t have to carry them around in his pockets all night). The truth is that advertisers know that if they can create a lifestyle statement that you can relate to, they can get you to buy their product ,which represents the lifestyle that you want. So, do you fall for it?

Most likely you do. Well, I would like to point out the part of the commercial that is missing. The part they don’t tell you about is your retirement lifestyle.

Commercials are made in order to get you to act today. Get excited! Right now. Don’t think about it. Just do it. If you call now we’ll throw in this special, operators are standing by, rush delivery, limited availability.

Retirement investing is the exact opposite. It is methodical and mundane. It is redundant. It is totally not exciting. UNTIL YOU RETIRE! Then it is fun! When you are actually spending time with your grandchildren because you have the time to spend with your grandchildren, that’s fun. When you travel with your spouse to far away places that you have always dreamed about seeing. That’s exciting. When you look at your account and know in your heart that you will be financially secure no matter how long you live. That’s powerful. And peaceful. And that is how it should and could be.

Here are the latest statistics: People are living longer. You are going to need enough money when you retire to last you for 30 to 40 years. Not only that, but most people are not willing to change their lifestyle very much. So you’ll need enough savings to keep your current standard of living for 30 years beyond your last day at work. Wow, this is getting tricky. Oh yeah, there is one more little item to consider. Assuming a 4% annualized rate of inflation, the cost of goods and services will triple over the next 3o years.

So your morning coffee and bagel will jump from $5 today to around $15 thirty years from now. Mmmmm, appetizing!

So how do you make sure you have enough later? Simple. Start saving now. As much as you can. Every time you buy anything ask yourself if it is worth your future peace. Because that is the price you’ll be paying.

And don’t trick yourself. So many people put money in a savings account and then take some out later for “emergencies” like little Bobby’s birthday present. Hey, little Bobby deserves a present on his birthday but, if he’s not your little Bobby it sure isn’t an emergency (go back and read “Learn to Unjustify if you haven’t already).

What you need is a dedicated investment account and a dedicated investment advisor. Money goes in and never comes out (you have a separate emergency account for things that pop up). This is an account that you contribute to regularly and aggressively. You learn to feel good about contributing to it. It makes you feel powerful and proud. It enables you to retire and enjoy life.

So do it now! Unless of course you are tied up in an interesting conversation with a bevy of beautiful women that love you for your beer.

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Financial Success

The Psychology of Money | September 17, 2010

“Success is uncommon. Therefore, it cannot be enjoyed by a common person.” – Unknown

Do you have what it takes to be financially successful? Do you know what it means to be financially successful? If you think earning or having a lot of money makes you a financial success, well……. you may have some changes to make.

The simple act of earning or possessing money does not constitute financial success. Earning and possessing money tends to be a very dynamic and often transient process. We all know someone that has more than we do. It doesn’t matter how much you have, there are others with more. Money that is. The interesting thing is that more often than not, I find that the folks with the most money also have the most problems. That is where today’s quote comes in.

It is quite common to have a lot of money. If you live in America and you are reading this on your computer or smartphone, then you have more money than most of the rest of the world’s inhabitants. But you probably don’t see that. If you are like most people in our society, you see only what you don’t have. It is highly likely that the things you do have are often taken for granted. Their importance to your daily existence is not regularly acknowledged. For most of the people that I see professionally, the root cause of the problems that they bring to me is usually related to lack of gratitude. These are nice people. Well thought of in the community. They have plenty of money and could have excellent financial positions. Unfortunately, often they don’t because their focus is on what they don’t have instead of what they do have. They think about “compounding” rather than “methodically growing”. The former requires risk taking. The latter patience.

Who has time for patience when the Jones’ and the Smith’s are pulling ahead? Or are they?

I wonder if you have ever actually taken the time to think about these two things?

1) Are my friends, co workers and neighbors actually doing better than I am financially because they have a nicer car and go on more vacations? Or, is it possible that they just spend a lot more money than I do in order to look or feel more successful than they are?

2) Why am I impacted by what friends, co workers and neighbors do?

Truly, only the second question is relevant to someone seeking success. I only mention the first in order to illustrate a point. It is so easy to assume that everyone else is doing better than you when you focus on material things as a way of keeping score. True financial success is financial security. My definition of financial security is: having the things you need, a few things you really want and enough money to confidently keep you in that state moving forward. If you have more than that, good for you. But you don’t need more than that. Acknowledging that fact is the first step in financial success.

So here is a thought to consider…….. If just for today you were able to let go of chasing money, what else would you have time for?

True financial success is having the money you need, not the money you want. True financial success allows you to do the things in life that are important to you. If you agree, then it is time to change. It is time to acknowledge. It is time to reset your goals. Mostly, it is time to start saving more and spending less. Because while your friends and neighbors are buying the things they want, you can be confidently saving for the thing you really need………. time.  You see, it is possible to buy time. It is just highly uncommon.

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“Simplicity is the Ultimate Sophistication”

The Psychology of Money | September 3, 2010

The title of today’s entry is a quote made famous by Leonardo Da Vinci. It seems that even back in Leonardo’s day, people were faced with too many choices, too many possessions and too much to think about. I wonder what Mr. Da Vinci would think if he were alive today? Maybe he is and he is trying to tell us the same thing through another medium? If so, the word’s “I told you so” must be a part of his presentation. There is no doubt that choices create paralysis. People want simple. Don’t you?

If you answered yes, then why do things often seem so complex? Have you ever thought about that?

Let me explain one answer to you. It’s on purpose. Laws are purposely written to be confusing. Then you’ll need a lawyer to translate for you. Who wrote the laws? Lawyers did.

Oh, did you think that was a coincidence?

Did you know that there are millions of people that keep their money either in cash under their bed or in a bank account that gives them basically the same return as if they kept their money under their bed? Why? Simple. Because they don’t know what to do with their money. Why? Because they are scared. Why? Because they are confused. Why? Too many choices.

So in order to delay feeling the fear they delay making a decision. Do you do this?

Since you come here for advice, let me give you some. Change your thinking. Every day that goes by with your money in a bank account is another wasted financial opportunity. If you were investing in quality stocks right now (rather than in your stagnant bank account) you would be making progress even if the market was going down. Why? Simple.

Even in a declining stock market, an investor is making progress because he is picking up quality stock at reasonable prices. The more you buy at lower prices, the more you’ll make later when values go up. And they always do. Did I just say “always”. Yes I did. I didn’t say they “only” go up. I said they “always” go up. And anything that goes up, must eventually come down. If you have been following the action, then you know the market has been down from it’s highs of the past few years. Does it make sense that you would buy “low” and sell “high”? If so, now is the time to be buying. You buy when the market is low. You sell when the market is high. Simple. Even more simple is that if you had a good broker doing it for you, it would be getting done with no need for you to do anything but contribute some money regularly.

Could it be any simpler than that?

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Magic Question

The Psychology of Money | August 27, 2010

If you are a regular reader of my work, then you are aware that I have spent a lot of time pointing out things that require changes in behavior. The reason for this is that it is very difficult to go East and West at the same time. When all of your thoughts, efforts and momentum are moving together in one direction, you’ll find the most success. With that logic in mind, I am encouraging you to get rid of everything you don’t need so that you can take stock of what you want and begin taking the steps necessary to get there.

Since this is a financial blog, we’ll apply it to money. As always, feel free to use the information on any area of your life. Good practices and positive change are applicable to any life situation.

So….. What can you live without? If you look closely, I’ll bet that you can find a long list of things, purchases, habits and rituals that cost you a lot of money but do not contribute to your happiness, health or well being. Do you need to eat out as often as you do? How many cups of coffee do you buy every week? Have you ever taken the time to add up the total cost of your coffee habit on a yearly basis? Do you give yourself a monthly cash allowance for spending or do you just visit the ATM machine whenever you desire money without any real concern for how much you have taken? Maybe you shop just to shop? Do you buy groceries without a list? If it looks good, do you buy it, whether you need it or not?

Why point these things out? Great question. The answer is that over the last 20 years, these are the types of questions that I have been asking the clients that hire me to help them become financially successful. I ask these questions in response to most clients insistence that they have no money to invest because “all of the money I make goes toward paying my bills and living expenses.” That may be true. Next question – “”Give me an exact breakdown of what your bills and living expenses are on a monthly basis.”

That always brings us to the original questions above. It is always quite interesting to see the reactions that these questions elicit. There are always so many things that we find that can be easily eliminated simply by paying attention and asking one simple magic question … “Do I really need this?”

Some clients go to great lengths to explain their “need” for coffee, music or a new app for their smart phone. And to be clear, I’m not saying that there is no room in your life for these things. I’m simply espousing that none of them should be classified as a need. Wants yes. Needs no. The list of needs is actually very short for most of us. Food, water, shelter, reliable transportation, exercise, sleep, security and an extra large serving of love. Why did I not put “money” on that list? Well, for most American’s, money is not a need. it is simply a means to an end. If money were a need, you would hold on to most of yours (you know, in case later on you ever “needed” it). The truth is that unless you change your views about what you need vs. what you want, you’ll never have enough financially. And that is true no matter how much you make.

If this makes sense to you, start taking the time to ask yourself the magic question before you buy anything. If the answer is yes then go ahead and buy it. If the answer is no, then walk away. When you master this, you’ll gain control over marketing and ingrained habit. In addition, you’ll start to see a balance in your bank account.

Once you commit to getting yourself to that point. I’ll show you how to grow your wealth. So go ahead. You first.

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Learn to Unjustify

The Psychology of Money | August 18, 2010

How many times in your life have you justified?

You know, doing something and then having a conversation with yourself about why it was a good thing to do. Hundreds? Thousands? Still doing it?

Dino’s Advice? Stop.

Anytime you find yourself justifying things, you are most likely taking an action that should not be taken. Think about it. When you do something right or good or pleasant or compassionate, do you justify your action? Of course not. Want proof? When you hold the door for an older person, do you mutter to yourself ” I could be walking in the building already but I suppose I’ll hold the door for this person because they are old and I’d feel bad if I didn’t hold it?” Probably not. If you are a door holder, you hold the door because it is a nice and courteous thing to do. It makes you feel good. It shows good manners. It requires no justification.

Contrast that with “I really can’t afford this dress but I haven’t bought myself a dress in months and it’s so cute.” Or, ” This car costs more than I should spend but I’ll just spend less on other things later to make up for it.” Isn’t it simple to see that everything up until the word “but” is the truth and everything after is the justification? Isn’t it also easy to see that the justifications are silly?

I just read that Abercrombie and Fitch has discounted many of their jeans by 40% in order to grab a larger share of the back to school market. That news undoubtedly will make many people happy and they’ll go out and buy 4 pairs because of the discount. I wonder if they will stop long enough to think about this……. How long has Abercrombie been selling their jeans at a price 40% more than today’s price? Also, if they can make a fair profit at this new price, how did they justify the 40% higher price in the past? Oh wait, they didn’t justify the higher price. You did. And when you stopped, they lowered the price. And they are hoping that the lower price will cause you to justify buying more than you need. Will you?

Justification costs people billions of dollars in impulse purchases. My question? How come there is no such term as “Impulse Investing?” Wouldn’t it be great if we were all walking around saying “You know, I really should buy a bunch of new things that I don’t need but I just can’t resist contributing more money to my investment account because I think it is so cute when the balance goes up?”

If you have trouble not justifying everything, try changing what you justify. Start justifying why you should save more and spend less. Once you get in the habit it becomes easy. Just like it is now easy to spend too much because that is your current habit. And while you’re at it, stop listening to the government justify why it is your responsibility to spend your way to economic recovery. Save your money. Invest wisely. You work too hard to waste it.

Oh, and if we all wait, those jeans will soon be 50% off.

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Choosing your financial future

The Psychology of Money | August 7, 2010

“You have a brain in your head and feet in your shoes. You can steer yourself any direction you choose!” – Dr. Seuss

Do you wish you could just decide what your financial future would look like and then have it come true? Would it shock you to know that you already possess the ability to make that happen? You do. All you have to do is choose to do it.

The simple reality is this…… wherever you currently are financially is where you have brought yourself. Want to change your reality? Change your action and your expectations. That and a bit of patience will get you where you want to be.

And don’t fret or blame yourself. That is a waste of energy. Whatever you are currently successful at is also a result of where you have brought yourself. Just duplicate what brings you success in your field of endeavor and translate it to money.

Doing well? Most likely, you spend a lot of your time thinking about and pursuing financial success. What you need to look out for is balance. There is a reason that so many rich people have a lot of money and a lot of problems. Concentrating all of your effort on money matters often leaves you lacking elsewhere.

Likewise, if you are not having the financial success that you would like to have, you would benefit by spending more of your time picturing a financially positive future. If you can not visualize where you want to be, you’ll have trouble getting there. It’s simple really. How would you begin to take the steps necessary to build a better financial future if you do not have a clear picture of where you want to be? It is equivalent to driving West from New York City without paying attention and expecting to end up in Nebraska. It’s possible that you could get lucky and find yourself surrounded by cornhuskers. It is more likely however, that you will find yourself somewhere else. With a map in hand and close attention to the signs, Nebraska would be relatively easy to find. It is no different with finance or anything else.

A great example is provided by sports. Have you ever wondered how a professional athlete making millions (and sometimes hundreds of millions) of dollars often find themselves broke just a few years after their career is over? The last number I saw on this subject said that fully 85% of National Football League players are broke (no assets) within 5 years of their last playing day. At first glance, that number is hard to believe. But if you apply my advice above, it is not only believable, it actually makes sense. The same things that make the athlete a dominant player on the field (hard work, singular focus, concentration, confidence and ability) is what does them in financially. Most of these men have focused all of their attention on becoming a great football player. So much so that they are severely lacking in other matters. The money they earn is soon lost because they do not have the time, want or skill to properly manage and invest it.

I can hear the questions already. “But there are professional money managers that can be employed to manage and invest their money. Why don’t they hire one?” They do. There are a few problems though. Again, because their focus has been on a singular quest to become dominant athletically, most of them (based on the 85% broke number) have not cultivated the ability to do other things successfully. Many of these players have relationship problems and money problems. Picking the right money manager requires using your experience and gut instinct to select a person that is in concert with your goals and risk profile. If you don’t have the skills necessary to pick the good ones, you’ll probably end up with poor financial performance. This is the reason that most players simply follow the advice of their agent or their uncle or their teammate. The quicker they can rid themselves of responsibility for their financial success, the better. That is why they often end up with someone that takes advantage of them and their money. Imagine if they used this same technique with their athletic career? Try to imagine an elite athlete entrusting their career to poor coaches and trainers. They don’t. When it comes to their career, they find the best guru’s in their field. Whether it is nutrition, speed, agility or skill development, they will find the absolute best person to help them achieve their goals.

Now imagine if they did the same thing and took the same time and made the same effort to find the right person to help them achieve their long term financial goals.

Now look at yourself. Are you doing that?


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Rule # 5 – Think Positive Thoughts

The Psychology of Money | July 26, 2010

I work with a large cross section of clients. They range from Fortune 500 CEO’s to Artists (some of the artists are doing better than the CEO’s). Remember that, Mom and Dad, when junior likes to draw and doesn’t love calculus.

In any case, no matter what the client’s title is, there is one commonality. The people that are the most positive have more financial success than those that are negative. Now before you go all “of course people with money are more positive than people without money” on me, lets do one thing together. Let’s define financial success. You may have jumped to a conclusion (see rules 3 and 4 for advice about not being reactive or anxious). My definition of financial success is – having a positive relationship with money and meeting your own expectations for where you are financially. Need an example? Lets use a teacher. Do you know any teachers? If you do, do you think they became a teacher to make a ton of money? I can tell you that I have many friends and clients that are teachers and I don’t know any that are flying on their own private plane to their vacation home in the South of France. That said, I do know plenty of teachers that are happy, have a reasonable amount of debt and live in nice homes with a comfortable lifestyle.

The reason? I believe that teachers may be realistic types that have understood for a long time that their career choice comes with many benefits (serving society, positively influencing young people, some time off in the summer) in exchange for an income that is often less than they might earn had they chosen another profession.

The important factor is that most of the teachers that I know love to teach. That makes them happy with their job and lifestyle. As long as they live within their financial means they would be, according to my definition, financially successful.

We can check our math by looking at the other side of the equation. I also have experience with many folks who live in giant homes, drive fancy cars and have every toy you could imagine. They work at a frenzied pace to keep the money rolling in to pay all of the bills that they accumulate. They “work hard and play hard”. Unfortunately, many of them worry constantly, are physically worn down and have no time for many of the things they really want to do. Is this an example of “financial success”? I don’t believe it is. The main reason is that it is difficult to remain positive when you are in this situation. And without positivity there can be no real success.

Today’s rule is simple. Just keep thinking positive thoughts. Don’t worry. If you find yourself always worrying about the same things, maybe it is time to let go of those things in order to make more room for the positive things that you desire. “How am I going to make my car payment?” can be replaced by selling your expensive car and trading down to something that is easier to afford. Maybe you’ll work a few hours less now that you’ve reduced the pressure on yourself. Maybe you’ll start an exercise program with the extra hours or spend more time with your family. That extra time will bring things into your life that no automobile ever could. What if that first step led you to feeling more relaxed and seeing things and people a bit differently than you had before? What if it took the edge off of you?  What if your employees, co workers and customers took notice of your positive change and started responding differently to you? Maybe wanting to be around you a little more. Maybe wanting to do more for you and with you. What if it actually helped your business rather than hurt it? What if you made more money because you were a positive influence on all of the people around you?

That is what I would call “financial success”.

Good luck selling your car! Let me know if you need any help negotiating with the buyer.

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Rule # 4 – Don’t be Anxious

The Psychology of Money | July 17, 2010

Note: The following article is not intended to tell you that it is easy to overcome feelings of anxiety. On the contrary, it is meant to serve as an inspiration to help you take the first step if you are inclined to do so.

There are many definitions of anxiety. There are regular meanings, clinical meanings and personal meanings. They all have one commonality. None of the definitions have any positive meaning or usefulness associated with them.

If you took all of the things that get in the way of financial success and could only get rid of one – anxiety is the one you should choose. My definition of anxiety is: “Fear of the Future”. Anxious thought is always in the future.

“What should I wear?”

“What will they think?”

“Who will be there?”

“How much should I spend?”

Who? What? When? Why? How?

Any time you try to project into the future you are setting yourself up. After living as many years as you already have,  you should now be certain that you have little control over almost anything. So why give it any of your time?

In my practice, I see chronic levels of anxiety. It is present no matter how much or how little someone has. That makes it easy to dispel a lack of money as a root cause of anxiety. For if only lack of money caused anxiety, rich folks wouldn’t be anxious. I find that rich folks are more anxious than poor folks are. So does having money make you more anxious? Maybe. I think it depends on how much of it you spend.

You didn’t come here for a thesis so let me simplify anxiety for you. It’s no good.  And it’s bad for your finances.

Are you anxious? You know if you are.

If you are,  it is possible that you may have forgotten what it feels like to be free. Good decisions, financial and otherwise, come from a free mind.

A free mind is a present mind. Would you like to be free of anxiety? Then live in the present. You heard me. Right now. Live here. In this moment.

How? Well, its simple but not easy.

Frankly, you don’t have to do anything. Just stop thinking. When your mind is without thought, it is free to enjoy the present moment. You won’t miss anything that is happening now while you are thinking of what you will be doing later. And since whatever you think you’ll be doing later is going to be different than you thought anyway, you won’t continue to fantasize your life away. Meditation, guided imagery, tai chi etc. are all good studies to assist you with this. There are many other things you can try as well. Get curious. Try a few things. Enjoy the process!

So what does this have to do with money?

If you are a regular reader of mine then you know the answer.

Everything!

If you start to spend your time thinking about being grateful for what you have, you will see that you probably don’t need much more. You probably already have much more than you need. Once you realize that you already have everything you need, your mind becomes free of wants. When you want less, you have more. Does that make sense?

No. Well how about this? If you already have everything you need and you don’t want much more, then what will you do with your money? You know, the money you used to spend keeping up with the Smiths. The money you used to use to comfort yourself when you had a bad moment or two. The money you spent out of guilt, or obligation or habit. That money.

I’ll tell you what you’ll do. You’ll save it. You’ll invest it. You’ll help others with it. You’ll give yourself and your family financial security. You’ll have money for your retirement so that your kids won’t have to take financial care of you. Instead, they’ll be able to take care of themselves because they had a mom and dad that took the time to free themselves and their kids from anxiety. Do you need a better reason than that?

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