Tag Archive for 'Money'

Listening to your Money and Financial Wellness

Published by JS Wolff on May 8, 2009 in Financial Tools and Financial Wellness. 0 Comments Tags: , , .

I’ve heard it said that you can tell a lot about a person by what they do with their wallet. In our life, I would say that’s pretty accurate.   A few years ago if someone went through our checkbook and debit card receipts, there is would be a pretty consistent pattern tracking what we value most highly.  Repetitive expenditures after essentials are traveling to hang out with our adult “kids”, charitable stuff and keeping my wife’s horticultural degree in bloom by regular visits to the local nursery.

After 2008, although our values didn’t change, it seemed time to be more intentional with our money.  While we didn’t want economic fear to dictate our lives the reality was, things were different. Both as a family guy and professionally, as a financial educator, I found myself wanting to reassess the foundations of my core money beliefs.

This led to researching and compiling four different tools to look at several personal financial indicators. And since collectively, the data really felt like a good reading of our financial vital signs, we started calling the suite of tools, “Money Pulse”.  Descriptions follow:

  • The Personal Financial Wellness Scale – Wanting to gauge our current level of financial stress we found this simple eight question survey authored by Dr. E Thomas Garman, a Virginia Tech professor.  The resulting composite score also benchmarks our results against national averages.
  • Risk Tolerance Assessment – most of us have done have taken one of these but we wanted to find one that was not associated with any financial provider.  We found one that was sort of fun to take and yet had a fairly deep scientific approach. It was developed by another Virginia Tech finance professor, Dr. Ruth Lytton at Virginia Tech and Dr. John Grable at Kansas State University.
  • Essential Spending – We use Quicken but it still can get complicated to track where our money is going. So we built a simplified spreadsheet that only provided two categories of expenditures designations …Essentials and Non Essentials.  We wanted to find out how little we could live on if need be and where we could save on non-essentials.  Hmm, in which column does a latte’ belong?
  • Dream Survey – With all this hunkering down talk is there do we have to give up our financial dreams? Good question but in the process of trying to answer it, we found out our money dreams were not very well defined.  So we came up with a few questions that prompted our thinking about a hoped for future …and chart a better course to reach our destination.

Going through the Money Pulse process required digging a bit deeper into our money beliefs and practices, but given that financial issues seem to weave into our lives on a daily basis, it felt right to better understand the story our money was telling us.

Sleeping Financially Well

Published by JS Wolff on April 21, 2009 in Economy and Financial Wellness. 0 Comments Tags: , , .

According to the 2008 American Psychological Association’s Stress in America survey, money is often on the minds of most Americans. In fact, the results revealed that money and the state of the economy are two of the top sources of stress for 80 percent of Americans. And symptomatically, one third of Americans reported losing sleep over the economy and personal finance concerns, according to a recent poll by the National Sleep Foundation.

Know that we have a problem and understanding what to do about it are miles apart… and even further removed can be actually changing our behavior.

Some believe that we should start making better financial citizens before they enter the workforce. Sharon Lechter, a member of the President’s Advisory Council on Financial Literacy is on a mission to see that every student receives some form of financial education. Her goal seems closer with the recent introduction of a Congressional bill that would require every college and university receiving federal funds to provide a four-hour course on financial literacy.

This strategy and may provide much needed money sanity for the next generation and prevent future financial meltdowns, but what about those of us who don’t have time to go back to college? Let’s get real simple…

In last week’s entry we talked about four buckets of money

- Essential, Now (less that 5 years)
- Non Essential, Now
- Essential Future (more than 5 years)
- Non-Essential Future

This week’s post addresses why did I selected five years as the tipping point between now and later. It has to do with the trust level I have for where I park the money and how much chance is there to lose it versus the opportunity for growth.

For example, there is historical evidence that I can’t trust the stock market to park my money for less than a 5 year period. To illustrate, let’s take a quick look at the best and worst stock market periods over 1, 5, 10 and 20 year periods.

Best Worst
1 Year +61% -39%
5 Years +30% -4%
10 Years +18.5% -1%
20 Years +18% +5.5%

Although this data is historical and not necessarily a predictor of future market activity, there is a huge difference between the 1 and 5 year swings. While I’m not willing to take the possibility of a 39% loss for money I need in the near term, the risk of a 4% loss over a 5 year period seems more palatable.

So how does this help me? Concluding that exposure to the stock market will only be for money uses outside of the next five years, I can concentrate on more conservative vehicles for near term needs and wants… and be one of the poll respondents who actually can get a good night’s sleep.