Out of the Mouth of Babes (It’s Not Just Cupcakes). Why Your Kids Are Better Investors Than You Are.

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“Kids say the darndest things,” Tammy Wynette.

funny child

It’s fun to teach the future generations about money.

Well, most of the time it is.

Those under thirteen tend to be an overly-excited group known to blurt out whatever is on their minds often at the surprise of adults in the room.

I always make sure to have plenty of treats for everyone at the end.

Since it was later in the day, the fourth grade class that made the journey to the office recently was especially ravenous, however I wasn’t going to change the routine-we learn at the beginning, ravage the cakes at the end.

This batch of cupcakes was especially fresh and frosty. But it didn’t matter: I wasn’t going to deviate from the plan I’ve used for years.

Out of the mouth of babes – lessons and behaviors we’ve clearly forgotten.  As adults we are relentlessly bombarded with the noise of daily living and sometimes we just don’t see things clearly based on our own biases. Children are overwhelmed with stimulus too, however they don’t have as entrenched a filter and they’re willing to see things as they are and happy to share an opinion.

There are wise words coming from the mouths of babes if you only listen.

Random Thoughts:

1). Do homework first – Many of the kids believe that before you make an important purchase, you do your homework. Now, their homework may not be as sophisticated as yours, however investors tend to forget, especially when the markets are more erratic, that emotions can overwhelm the desire to dig into facts.

We take action first out of fear or panic and deal with the repercussions later. The kids always seem surprised how many adults will buy and sell investments based exclusively on what they see or hear on television and radio. Mind you, these young students think it’s perfectly ok to purchase a breakfast cereal based on media, however acquiring an investment or “something that can go down,” (their words not mine) requires more time and effort.

During market extremes it’s timely to take your portfolio’s pulse (and yours) to determine whether you’re comfortable with your asset allocation plan-the division of assets into stocks, fixed income, cash and other investments. If your portfolio is gyrating more than the market up or down and you’re uncomfortable, homework is required to narrow down the investments causing the turmoil.

From there, it’s time to decide (based on the homework not heartburn), to take one of three roads as you evaluate financial holdings: Stay the course, buy more, or sell the investments causing distress. Again, base these decisions on your tolerance for risk and then maintain that risk profile through good and bad cycles.

2). Buy low – I know this sounds flippant or simplistic-for the mature crowd, buying low is easier said than done. They children believe they should try their best after research, to buy low into investments or at least they hope to accomplish this on a consistent basis. We teach the kids patience when they want a new video game, it’s time we teach ourselves some patience and let asset prices come to us. I know. Good luck with this one, right?

me know me funny

3). Buy what you understand – Another easy one, (in theory anyway). The kids feel strongly about buying what they know or understand. Occasionally, we make a portfolio allocation too complicated by purchasing investments we don’t fully grasp. There are a plethora of vehicles on the marketplace that are based on currency movement, bet against the markets or particular industries, and promise appetizing returns when the market is directionless.

What is the impact to the overall portfolio? If the addition appears overly complicated and you can’t explain it to a listening party, you may be better off passing on it. A complicated strategy is not necessarily a better one. Your investment plan needs to be realistic, actionable and comfortable based on your personalized goals and aspirations.

4). A sell Discipline, what’s that? – Children seem to embrace the idea of selling investments and moving on. For some of us grownups, this can be a challenge. We tend to be resistant to rebalancing or we allow one investment to swallow up a major portion of the portfolio, resulting in more risk. If you don’t have a discipline around buying and selling assets to restore your portfolio to an original target allocation, then ultimately you’re not controlling risk. Rebalancing requires a contrarian nature whereby you’re shaving down what’s done the best and adding dollars to those asset classes currently out of favor.

A concentrated position means that a stock, industry or sector makes up a disproportionate share of your total portfolio, usually 20% or more. The end results is more volatility in the portfolio as the key driver of returns, good or bad, depends on the performance of a large holding. Investors are sometimes reluctant to trim concentrated positions due to the tax implications of a large capital gain or an anchoring to a past price to minimize a loss. It’s important to maintain perspective on the risk as first priority.

5). Wait patiently for cupcakes at the end – Investing takes patience and a willingness to be disciplined. There must be goals established and when those goals are met, the sweet reward is certain to follow.

It was tough for the kids to focus on the lesson at hand with treats waiting; the children eventually learn that shortcuts to the baked goods don’t exist especially through my lessons! It’s similar with investing. We too, as adults, want our dessert first or seek to get rich quick based on shortcuts.

Ostensibly, when the market are not cooperating, back-to-basic strategies like saving more, decreasing debt or extending the time needed to reach a financial goal are usually the best.

What will you learn from the children today?

Keep an open mind and you may be surprised.

kid eating cupcake

 

Taking Stock In Your Kids – 4 Initial Steps To Get Children Excited About Investing.

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As featured in http://www.nerdwallet.com.

Begin talking with the kids about investing sooner rather than later.

Interestingly, many parents find it awkward to discuss stock investing, especially with their young children. Some adults don’t feel confident in their abilities to do research. What I’ve discovered is the discussion with young children actually helps less confident parents become better stock investors.

The conversation raises the bar for teacher-parents and the children willing to learn.

It’s a win-win.

winning

There are several milestones to reach. The adventure begins with these simple steps to consider when it comes to engaging the children.

Random Thoughts:

1). Build excitement – Creating passion around the investing process is important. Begin with a dialogue around the children’s brand loyalties (and they start at an early age). When I was young, I drove my parents crazy: I always “needed” the latest Mattel’s Hot Wheels car or Hasbro’s G.I. Joe action figure. I would only eat Kellogg’s Frosted Flakes, not the store brand.

GI Joe Vintage

So, what products are your kids passionate about?

Create short-term activities to build interest. Come up with a deadline for completion. For example, have the children begin and maintain journals of the products and services they like or use. Have them track the prices of those items over the internet or when you head to the stores.  Remind the kids how the family is excited to hear about what they’re thinking and plan a family gathering around the topic.

One family created a big event around the journals. They had the children select their own notebooks and personalize them with money-related and other types of stickers. The kids paid for the supplies out of their allowances which created a stronger connection to the project.

2). Organize a family discussion – Once the children share their information at a family gathering, expand the discussion to include the products and services the family purchases or uses on a consistent basis, say at least twice a week. From soap to shoes, batteries to bandages – leave everything open for investigation. Nothing is off-limits. Now, you’re building a research list!

3). Watch your words – I’ll never forget when my uncle who was a specialist on the floor of the New York Stock Exchange, explained how I had the ability to own part of a large company. I was hooked. Wait: A poor kid from Brooklyn can own a piece of McDonald’s?

How does that happen?

kid surprise

The language used around stock investing is important to help the kids gain healthy perspective and a sense of pride in their selections and the investment experience, overall. The phrase “buying a stock,” is confusing when compared to “ownership in a company,” which in essence is what you’re trying to help the children embrace.

The concept of “stock” is nebulous for the younger ones to comprehend so it’s best to keep the language simple. Using words to connect ownership to investing creates a long-term investor mindset. You don’t want the children to focus solely on stock price movement; it’s best for them to strive to build discipline by focusing on the long-term value of a business – and all because you provided the perspective.

4). Begin with the concept of sales – It’s a good idea to introduce one simple concept before you begin specific stock-research homework. I’ve found kids relate well to the concept of sales. Whether you’re talking lemonade, girl-scout cookies, or school-related fund drives, children have an uncanny ability to understand that sales are positive and can lead to personal reward. It’s the same for a business. Generally, the more goods or services sold, the more favorable it is to the stock price over time.

kent soda

You don’t need to work through these initial four steps alone. Partner with a financial advisor to facilitate the discussion or utilize books and other resources to jumpstart the process.

I recommend the book “Growing Money: A Complete Investing Guide for Kids,” by Gail Karlitz and Debbie Honig.  Easy to understand and designed for children ages 8-12.

Want to engage the kids about several money concepts? There are 7 great money apps for kids reviewed by NerdWallet including my personal favorites – Virtual Piggy and Bee Farming.

You don’t need to wait (like I did) until you receive verbal cues from the kids to begin the engagement about investing.

You may never get them.

Even as early as age nine, you can begin a dialogue.

In the next report, I’ll take the investing discussion to the next plateau.

Until then, begin the conversations, start the journals, ignite the passions.

And the kids will never forget.

kids and stocks

 

 

 

Lending Money Can Be Dangerous To Your Wealth – 5 Ways To Protect Yourself.

Most of us have done it.

Don’t deny it.

I can see the scowl on your face when I ask the question.

How did lending money work out for you?

I understand the grimace.

grimace No, not THIS GRIMACE!

You’ve paid the price.

Lost money, lost friends, bad blood between family members.

What steps can you take to prevent falling into what I call the “kindness trap.”

Most likely, you don’t enjoy lending money to anyone. Admit it.

You do it because you care.

Deep down you know there’s a great chance the experience ends badly. But you’re willing to take the risk because you’re in DENIAL.

When you know the odds are close to 100% that lending money to friends and family is dangerous to your wealth. And you’ll never SEE IT AGAIN.

Here are steps to do it wisely (or not at all).

Random Thoughts:

1). Just say no – There’s nothing wrong with saying it: I do not lend money to friends or family.  Explain how you value the relationship too much to jeopardize it.

2). Consider it a gift right out of the gate. To keep the peace, I always think of loaned money as gifted money. It prevents hard feelings for people I care about.

3). Know your limits. Set a dollar threshold for lending. For example, establish a maximum. A client of mine has a steadfast rule: I will only lend up to $300. No more. So if I don’t get paid back, my finances won’t take a big hit.

4). Make it official. There should be a written agreement (term of loan, interest rate). Every month the IRS publishes an Index of Applicable Federal Rates that you can use to set your interest rate for the loan.  Ask your borrower to disclose his or her credit score. No. Demand it.

5). Multiple loans are a no-no. Don’t make it a habit of lending money. Never have more than one outstanding loan in existence at once. And be selective.  You don’t want to make lending money a habit.

And after lenders are stiffed once, they’re most like to treat their loans as expensive lessons they dare not repeat.

Neither should you.

Never forget what you paid in blood, in cash to learn it.

blood money

Dad Was Seduced By A Cougar: 4 Ways To Avoid Money Temptation.

Admittedly, she was a seductress.

Who could blame him for falling in love?

I still remember how she glistened in the summer sun.

Hot to the touch.

Smoking hot, actually.

I was as enamored as he was.

I was young, yet I remember like it was yesterday: “Her” name was Tammy.

Heck, I named everything “Tammy.” I had a mad crush on my babysitter.

1973Could be Tammy.

However, this “Tammy” was a 1969 Mercury Cougar convertible – a black-glazed exterior elegance with cool white leather underneath a rag top.

Great lines and tough to ignore.

cougar exterior

Years later, I learned the source of the money to purchase the sporty model was set aside by my mother’s hard-working father who came from Italy and lived in two rooms above a Mulberry Street, New York grocer – also his employer.

I can’t imagine how long it took papa to save $4,000. I’m sure his entire life –a respectable nest egg on his measly wages. I still admire his strong saving discipline.

Before he died, Giuseppe Zappello instructed his daughter: “This money I leave behind is to be used for Richard’s college education only.” He wrote his last instructions on crumpled note paper and gave it to mom shortly before his death from pancreatic cancer.

For Grandpa Joe, it was important that I further my education; it was his only request. I know he wasn’t enamored with my father and felt it important to outline how he wanted the money utilized.

Shortly after his death she decided to hand over the money for the purchase of an automobile, taking an action grandpa would have hated.

I’m being kind here.

I believe mom probably caused Papa Joe to roll over in his grave.

For years, it bothered me she made this decision; it was troublesome that dad was short-sighted, too. I can’t imagine blowing my daughter’s education fund on a car.

Bad money decisions tied to financial infidelity are not new. Family members can be affected by them for generations; money mindsets forever forged by them.

A recent survey conducted by the National Endowment for Financial Education (NEFE) was conducted online among 2,035 adults 18 and older. The topic: Financial infidelity between partners. It was released on Valentine’s Day. Perfect.

From the results:

“According to the new survey, one in three couples who combine their finances admit to lying to their partner about money. The survey also finds that 76 percent of financial deceptions have an effect on the relationship.

The survey finds that three in 10 have hidden either a purchase, bank account, statement, bill, or cash from their partner or spouse. And 13 percent said they have committed more severe deceptions, like lying about the amount of debt that they owe or even the amount of income that they earn.”

I’ve been bad about following rules, especially when it comes to sharing my financial decisions with others. To be clear: I will share information however, I’m going to move forward on my intentions as long as no one is hurt financially, or others may prosper.

I admit – my money “imprint” is based on mom’s willingness to turn over my college fund to dad just so he can purchase a depreciating asset.

I ask:

Why is the definition of financial infidelity so narrow? Why can’t it occur between a parent and a child, friends, an individual’s actions vs. original intentions? Mom failed to follow through on grandpa’s last request.

She gave away blood money for a want, not a need which makes it more painful for me to understand.

She wasn’t strong enough to say “no” to my father.

just say no

Although, I believe a  measured dose of financial infidelity can be healthy.

For example, what if mom never told dad about the money earmarked for me? I figured the $4,000 she gave willingly could have been conservatively worth $8,000 by the time I needed it for college. Not a fortune, but it would have helped.

What can you do to avoid money temptation and financial infidelity?

Random Thoughts:

1). Broaden, outline and then communicate your definition of financial infidelity. Before marriage, make sure you communicate (write out and share) with your future partner specific actions you would classify as money cheating. I met with a couple recently where the man thought it was money infidelity for his fiancé to pay more than $10 for lunch without communicating with him first. In this case, the couple decided not to wed.

Consider broadening your definition to include those you care about including children. For example, I have clearly explained to my daughter how her college funds are for her, nobody else. Her mom is in agreement with this, too. If your definitions conflict or financial rules established are too restrictive at least it’s all out in the open for discussion.

2). Keep separate.  It’s important that separate property remain separate property. Assets held in trust should remain separate per the instructions of the grantor. Document each asset you plan to maintain apart from a future spouse. Communicate your intentions but don’t cross boundaries. These assets are yours. Don’t be talked into sharing.

Money earned before marriage should be maintained separately. If single, direct all your earnings into an individual account since wages, salaries and self-employment income will be considered community property in Texas (and other states) once you’re married. At that point, you should halt transfers of money into the account and maintain it as separate property going forward.

Inheritances need to be separate. It’s in your control to share. Or not. Your choice. Consider carefully whether or not sharing an asset with a spouse or future partner was truly the intention of the provider. In other words, think twice. Then think again. If you do decide to share, document the specific assets in question and sign along with the other receiving party.

Segment the cash you require to make daily purchases like lunches, nights out with friends, and clothes. I know a married couple who have agreed-upon “allowances” they direct automatically to separate accounts monthly from their joint account to cover personal expenses.

If additional money is required, they communicate and then jointly approve or disapprove the requests. I found this method effective for record keeping and accountability. It’s also useful to early detect wayward spending patterns.

3). Keep together. Property purchased during the marriage may be held in joint ownership. A bank, investment account, real estate held jointly is common and advisable if you intend to leave the asset to a spouse upon death. Depending on the size of your joint estate ($5 million or more), it’s advisable to seek an estate planning attorney to create trusts that will preserve estate-tax exemptions and outline your intentions for beneficiary distributions years past your death.

4). Keep away.  If you establish a custodial account for your child keep in mind that the money placed into it is considered an irrevocable gift. In other words, at age 21, the custodian (you) must turn over the asset to the former minor regardless of how uncertain you are of your child’s maturity level at the time of the transfer.

Custodial accounts are easy to establish which is a reason why they’re appealing. However, once money is deposited, it’s no longer yours. There have been cases where former minors have sued parents when custodial assets haven’t been turned over in a timely basis or were not notified of the accounts.

The lesson here is that assets earmarked for children and other loved ones should be considered solely for their current or future benefit. Keep your discipline. Strong mental boundaries should be maintained.

Make sure your intentions to keep away are clear to others.

And perhaps you’ll avoid being seduced by Cougars or other large purchases that drive across your path.

Classic cars are not cheap.

The Premarital Lovin’ Laws – Consider the Money Strings Before the Rings.

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There are many challenges to consider when it comes to taking a big step like marriage; conflicting money philosophies can wreak havoc on a relationship.

bad marriage

You don’t need be money twins about financial matters, just hold similar core values. If the relationship with money varies dramatically from your beau’s, you can rest assured conflict will eventually tarnish the bliss.

You may scoff at these overtures; some may appear radical. However, before the rings, discuss the strings. Money strings are the beginning of good or bad threads you’re going to bring to a marriage tapestry.

Here are a few money smart steps to consider:

1). In Lieu of a Wedding Throw a Debt-Relief Gathering – How romantic to slay one of the financial beasts of a successful long-term commitment. Forgo a wedding reception – throw a party for a quarter of the expense. On average U.S. couples spend more than $25,000 on a wedding. If you’re saddled with revolving debt like auto loans and credit cards, then it may be best to use gifts to pay them off or pay down debt dramatically. Throw a nifty party and focus monetary gifts on debt.

Create a written promise to each other that out-of-control debt monsters shall never arise from the dead.

debt monster

2). Create a Personalized Series of Make-or-Break Rules – If you’re serious, well then either the matrimony activities continue, are postponed or cease entirely based on jointly-held money rules.

Be specific when you create them. Here are examples:

If our individual credit scores are less than 700 (based on Fair Isaacs) then marriage needs to be postponed until scores are at least at or above the national average of 723. Marginal credit scores can mean more interest paid on loans including mortgage alternatives. Examine and follow steps to increase your scores on www.myfico.com and re-visit this commitment in six months.

I shall provide proof of my good money habits before the marriage commitment is made. Get ready for money vulnerability – break out your budget history, open the Quicken, outwardly show that you’re taking health care insurance and disability coverage at work. Divulge your liabilities (of the financial kind). Too much debt, lack of insurance and absence of discipline may encourage you to reconsider a marriage at this time.

If individual monthly debts are greater than 25% of our gross monthly incomes, then marriage needs to be postponed until debts fall below set thresholds. I know. I’m taking all the heart out of this, and that’s exactly the point.

As a famous Godfather once lamented: “It’s nothing personal, it’s just business.”

godfather

3). Write out your Personal Money Philosophy and Share it with your Future Partner – If you’ve never formally considered a money philosophy it’s an opportune time to think it through. And you do have one; your money DNA has been with you since youth. It was formed by your parents, friends, and other outside influences. Share the details of this exercise with your partner, yet work on this project alone.

The end result is a couple of sentences that spell out sincere reflection about your ongoing relationship with money.

Here are a few shared with me:

I’ve been afraid of debt for a long time and feel compelled to pay off debts quickly. My parents taught me to not dig a hole I can’t climb out of and I’ve always been that way.”

“I always make sure to have money in an emergency fund.?

“I try to save at least 5% of my salary in my 401K.”

These statements don’t need to be pretty, they need to be real and reflect values about finances.

Consider fun yet money awareness exercises with your financial partners like the card “game” available at www.moneyhabitudes.com. What an eye-opener when it comes to disclosing and understanding couples’ money personalities.

4). Consider Money Vows at the Wedding – Really want to shake things up? How about a money promise as a tie that binds? I’m not kidding! Here are examples from couples who incorporated money messages in their vows:

“I promise to never make a big purchase without you.”

“I promise to never hide a financial mistake from you.”

“I hope for mutual respect and open communication if money issues arise in our marriage.”

death wise

Well, you get the point.

It all seems romantic to me, but then I’m a money guy.

What rules and tips can you create today around  a successful money and marriage partnership?

Command Your Own Drones to Financial Success.

What public relations genius!

Jeff Bezos, the CEO of Amazon, made huge media headlines by suggesting the future of light package delivery may be completed by drones as opposed to the normal, albeit boring methods of delivery we all know now.

amazon drone Um hi!

I wondered.

What the heck is a drone?

funny drone

I know – seems obvious. But is it?

An unmanned aerial vehicle:  The flight is controlled either by computer or remote control of a pilot from a remote location.  Some can fly as high as 50 thousand feet and go supersonic.

Wow.

Got me thinking…

Financial success is automated activity from 50,000 feet above your wallet. Cutting out that extra latte is not going to make you wealthy; placing as many good money habits as possible on auto-pilot is the key to financial stability.

Here are some ideas on how to command your own financial drones to success:

1). Budget on auto-pilot.  When you budget on a daily basis it’s tough to feel the positive. It feels like dieting. Or dating. Or root canal. Keeping track of expenses manually is admirable. However, it’s inevitable you’ll give up because you’re human. You have a busy life. Even if you’re proficient at manual tracking, you won’t be able to effectively interpret your long-term spending habits. Analyzing longer-term spending trends (at a higher altitude) will expose where you need to make real improvement.

Budgeting is boring; many won’t continue for long. Take your analysis to a higher level and place on auto-pilot through www.mint.com. Mint allows you to accomplish three things: See where your money goes, make budgets to stay on track, and set financial goals for the future. Mint connects to your bank accounts and updates automatically. It’s free and safe as Mint utilizes bank-level encrypted security.

Easy-to-read graphs allow you to track spending, income, net worth and account balances over time.  After a couple of months of activity, sit with an objective financial partner. Together, create a game plan to cut the expenses that will make an impact to your bottom line.

Go ahead. Enjoy your fancy coffee. For now.  Mint will track your addiction!

2). Pay yourself first.

Don’t roll your eyes.

eye roll

You’ve heard this one before, right?

The best financial rule (and I’m critical of most financial rules of thumb) is easy to follow and from a higher altitude, or the long-term, will result in a substantial positive impact to your bottom line. Before expenses are paid, before you treat yourself to a movie, it’s important to save money for emergencies and for your future – FIRST.

How?

3). Set savings on auto-flight:  Pay yourself by initiating instructions to move three percent or more into a company retirement account every pay period.  Ask your HR department how to accomplish this simple task. Do the same by establishing instructions to automatically transfer a specific dollar amount, say $25 bucks a month from your checking account into savings.

4). Go stealth on a savings target: Every three months, increase the dollars directed from checking to savings by $10. Select an amount that works for you.  Think under-the radar increases.  Barely noticeable; yet over years, this tiny habit will result in big change (and dollars). You will look forward to saving money because you’ll realize how painless it is!

Forget buying more stuff you don’t need by drone delivery.

Now’s the time to establish your own small army of financial drones.

And fly your own path to financial success.

dont drone me

Emerged in Indigo – 5 Ways to Ride The Blue Spray to Better Mental Health.

“Yo, listen up, here’s a story. About a little guy that lives in the blue world. And all day and all night and everything he sees is just blue like him. Inside and outside. Blue his house with a blue rear window. And a blue corvette. And everything is blue for him. And hisself. And everybody around.”

Eiffel 65.

I woke up super early then. A teenage responsibility. To deliver New York’s “picture newspaper.” The Daily News. Sleeping residents would stir in a couple of hours expecting their papers. Along cement apartment grids. Ocean Parkway, Brooklyn.

It was one of the largest routes in the borough and I traveled it all on three-speed bicycle. I pulled a contraption rigged to handle 100 daily morning editions and the heaviest of Sunday’s news.

Before the sun was aware of its duty to Earth. Before the blue sky broke to orange. A first birth of light.

When the world was quiet. Stay quiet longer. A calm so loud it caused a ringing in the ears.

Not like this morning at 4.

News stations begin broadcasts at ungodly hours now. Roads are semi-clogged at 4 with volumes we once experienced two hours later.

I dislike how the world moves frenetic. So early. Stress. In the dark. Before the black dies to blue then blue surrenders to bursts of orange.

blue orange day

The world was simpler. Black to blue at a slower pace. Long ago you could enjoy the present. Appreciate atmospheric neon. Now – well, it’s different. 

Does it need to be?

world blue

Four in the morning was mostly test pattern territory in the 70s, accompanied by an awful buzz generated to scare the shit out of viewers and blow out mono-sound RCA television speakers.

What the hell was the significance of a test pattern anyway?

test pattern And what was with the Indian?

Seriously. Some young television producer seeking fame got lucky with a Spirograph and fooled a generation into thinking test patterns were something important. The noise that went along with them only added to the mystery. I always felt these test patterns were serious.

Like I needed to do something.

No sleep.

Seek shelter. That was it.

Evil was transmitted through black and white.

Through test patterns.

spirograph

Throughout decades, no matter who we are, where we’re from, colors have stained us. Monochrome, Technicolor. Some colors horrify. Others soothe. Many inspire. A few suffocate our spirit or maybe worse. Colors saturate memories, thoughts; alter our sense of smell, taste. Sex, lust, love, hate, anger, life, death, empathy, apathy – all just splashes of color.

Colors haunt us. Colors explode in our souls. Ignite brains, shut them down.

And once a color is attached to a thought, a moment, it’s impossible to change it. Although I’ve learned the shade can indeed, change.

The color that sticks, stays however. That’s the rule.

When I a kid. Really young, when my senses were newer and more alive, as early as five years old, the vibrancy of spectrums overwhelmed me.

In the spring, the smell of new grass glowed lime green – in summer, the aromas were windblown ribbons of yellow. Colors shaped the hours. Every day had its own color and every moment was a shade of that color.

Unfortunately, I had many gray days, too. And they puzzled me. It wasn’t until I was much older that I realized they were my depression days. Depression runs deep black in my family. Both sides.

Back to blue:

blue dude A blue one for the ladies. 

When I left the corporate cocoon (broke away, forced out, whatever) after 23 years, I lost my colors. My sense of security, sense of self, all I was. Gone. At least I thought. And after a colorless adventure physically, financially, mentally, I am beginning to not only see, but feel colors again.

As I lost the ability to live in the present, worried incessantly about my future, the blue evaporated from my spirit. I was able to recall, even as far back as five years ago, how I would stare at a blue sky and wonder what the color was. My blue was definitely closer to Prussian. Dark, heavy. I thought that was the way it was supposed to be.

Life was supposed to be well, colorless. I chalked it up to low T, a demanding, lifeless boss, a publicly-traded financial services company with draconian demands. So much out of my control. All of it designed to drain my blue. I see lots of blue-drained people now. They try to paint themselves true blue with new televisions, more toys, car payments. 

Long ago, I would close my eyes, before the paper route journey began for the day. When the air felt clean, before daybreak. I could freely bask in the present, breathe deep. I remembered that.

I was sad my blue disappeared.

Blue was my color of hope back then. A spray of Azure, I think.

And now it’s coming full circle.

Black is fading to blue. I see it now.

How can you ride the blue spray to sanity? To better mental health.

Random Thoughts:

1). Try. Hard. Try. Hard. Not. To. Lose. Your. Force. In the first place.  At the first sign of color loss, even a slight fade, step back and examine the origin. It’s a warning: The color of joy, hope, is fading from your soul, reducing your life force. Recognize and say no to people, ideas, fears that cause your positive colors to bleed light and your dark colors to deepen.

It’s not easy.

This year proved to me it’s tougher that I would have ever believed.

As I look to the past, now in the present, I observe the shifting wave of blue spray. It’s right there. Ready to wash over me. Hope is returning. The shade is different however; I’ll need to examine why as I move forward down the blue road.  Once I recall hope as Azure; today it feels more Brandeis.

2).  Surround Yourself with Spirits Who Share or Enhance your Color. Now that the spray is in my grasp, how do I contain it, bold it up? Move the spectrum to blue, or dark blue? I’m learning to surround myself with blue spirits. I’ve gotten so good I can see a blue glow around the right teachers. The blue spirits come in all forms – human, animal. Young, old. They’re awash in the spray.

I can pick up on the color of a prospective teacher in a few seconds. The “fade shaders” as I call them, or the color absorbers are immediately discarded. They are removed from my mental space. Their sprays are lethal and tough to lighten once they hit you. 

3). I Feel the Blue in Those Who Eliminate Big Debts. Recently, I met with a son of a client who just paid off $30,000 in credit card bills through a strategy we worked on together. When he told me he was released from the massive debt, I could feel his blue spray return. And it felt good. It enhanced my blue. The progress which allowed him to reach a financial life benchmark changed his world for the better. He was more hopeful, powerful. A bluer world for me too.

4). Blue Signifies Cool. Cool can cleanse, preserve, enlighten, awaken. It’s that first exhale of fall when the air is cool and your breath is warm. Deep breathing allows blue spray to wash over you.

5). Batman’s Cape was Blue.  As a kid I would run around the house with a blue towel safety-pinned around my neck. Blue was the color of hope and strength. It represented helping those who needed it the most.

Naturally, I ran into shit like a dumbass and once knocked our 12 inch black & white television off a poorly constructed aluminum stand. Helping those without asking for anything in return will deepen your blue spray, embolden consistency.

Blue is indeed honorable.

Good friends are Cobalt.

Your teachers, your mentors are Sapphire.

Your spirit once black, is ready to burst Electric Indigo.

In a colorless world.

Allow your blue to emerge.

And anticipate the orange.

Of your ever-emerging life force.

batman cape

4 Lessons From Dead Muses – Keep Your Cool, Keep Your Money.

I find stock market history fascinating. It’s a sickness. I know many in the financial services industry suffer from the same affliction so this isn’t a shocker.

wall street bull

I shake my head as we seek to match up current market behavior to years past. It’s 1937. No, it’s 1987. Frankly, current markets are comprised of multiple personalities of decades of market history so I find the exercise beneficial.

The study allows me to be less of a deer in the headlines through market cycles and provide clear, concise guidance to clients. It allows me to say confidently – “This time is NOT that different.” Sure, it feels different to you because you haven’t lived through a similar cycle – Investors before you have gone through this. Something like it.

Or worse.

We always seek to find patterns. In everything. It makes us feel smarter. Finding (or creating) patterns creates an illusion of control. I guess when humans were hunting for food, uncovering patterns was the way to find a food source (and avoid becoming a hearty meal). With investing, becoming too overconfident in a perceived trend can lose you money.

What stands out throughout my detective work, is the predictability of our emotional behavior when facing investment decisions. The same mistakes are made, repeatedly.

Did you know that most retail investors lost money during the greatest stock bull market in history? Seriously. How? Oh, by getting in to the markets late in the cycle – only to suffer great losses from the tech bubble in 2000.

sentiment cycle

Investors commit capital at Euphoria, Thrill, Excitement, even though they claim to seek “value.” Let’s face it – we are addicts to chasing performance. There’s enough household financial carnage to prove the fact. You can’t time market entry/exit perfectly, however many investors bailed out big time at the market bottom in March 2009 – specifically at the Point of Maximum Financial Opportunity.

Smarter investors had the common sense to avoid an “all or none” decision. In other words, they didn’t sell out of stocks completely, they just buffered their portfolios by raising more cash to weather the storm yet they remained invested and took advantage of the market’s cyclical bull now going on five years.

 As I prepare my second book on lessons from Wall Street sages long dead, I came across a first edition of a classic from 1896 titled “Ten Years In Wall Street” by William Worthington Fowler. 

A section “How To Make Money In Stocks” outlines common mistakes of the “Wall Street Operator.” The lessons are worth repeating and stand the test of time. Not surprising we are making the same mistakes over 100 years later! I’ll list them straight from the mouth of the dead along with ways to avoid these mistakes.

1). Time fights on the side of the man who buys stock at a fair price and pays for it, inasmuch as the material interests of our country are steadily advancing. Owning companies at attractive or cheap price levels based on fundamentals and paying cash, not  margin, places greater odds of success on your side. Time. Let’s just say for those who can hold a stock position longer than a week.

Currently, sentiment wins out over valuation. No matter what I examine – a Gordon growth model, CAPE, Q-Ratio: Stocks aren’t cheap.

In the long run, valuations using historical earnings determine returns. However it can take years for these long-term valuation metrics to adjust stock prices accordingly. Be selective at this juncture. Do your homework. There aren’t many bargains out there right now.

2). The man who can keep his position in spite of the temporary condition of prices, is the man who, in the end, wins. I’ll add – If you pay a fundamentally sound price. So, if I paid a good price for the risk taken, the short-term gyration of that price is not going to shake me out of a position. I may even use a dip to purchase additional shares.

For example, I purchased additional shares of Boeing (BA) for several allocations in mid-July when sentiment turned negative which turned out to be good strategy.

3). The frequency of operations is another fruitful cause of losses. Frequent trading for most, is an unsuccessful venture. Brad M. Barber from the University of California, Davis and Terry Odean finance professor out of Berkeley conducted a study of active traders back in 2000 which still proves timeless.

Individual investors who hold common stocks directly pay a tremendous performance penalty for active trading. Of 66,465 households with accounts at a large discount broker during 1991 to 1996, those that traded most earned an annual return of 11.4 percent, while the market returned 17.9 percent. The average household earned an annual return of 16.4 percent, tilted its common stock investment toward high-beta, small, value stocks, and turned over 75 percent of its portfolio annually. Overconfidence can explain high trading levels and the resulting poor performance of individual investors. Our central message is that trading is hazardous to your wealth.

Trading is Hazardous to Your Wealth.

If you’re compelled to trade actively, isolate a small portion of your cash in a separate account designated solely for trading. I have nothing against trading especially if you can use it to gain knowledge about stocks.

You need to do your homework and study technical analysis. One of the best books to read is “Technical Analysis for Dummies,” available on Amazon.

3). The practice of selling stocks short will be found, in the end, to be invariably a losing business. Decent short sellers make headlines. Professionals can hold out longer when they’re on the wrong side of the trade. Most of the population should stay away from this hot mess. You can’t win. I wouldn’t bother with it. Want to protect your portfolio? Increase cash.

4). Cut short your losses and let your profits run. Most investors do the opposite. They’ll hold on to losers “hoping” they’ll come back and sell winners too soon. Keep in mind the dog doesn’t always return home. It’s better to face the fact and move on.

Since we hate losses twice as much as we appreciate gains, I understand the burning desire to get even. It’s a losing strategy. Before you purchase a stock, have a sell discipline in place.

I use negative changes to cash flows, operating margins, a breakdown in the charts to alert me to a possible sell candidate.

Dead sages are great muses.

Old lessons remain good lessons.

They’ve made the mistakes first.

Learn from them.

The Condition of Chronic or – How to Survive When a Piece of you is Dying.

“This appears chronic.”

chronic kidney

Chronic. What’s that? Sounds like a newspaper. Like the Houston Chronic.

“Well, your kidney doesn’t have much meat.”

Hmm.

“Doc – Are you sure they didn’t scan my groin instead of a kidney?”

Laughter.

Curtain close.

thats all folks

Besides the ongoing, nagging throb coming from the right flank, like there’s a little alien dude in there clawing its way to freedom, I’m reminded my kidney is dying every day.

The doctor’s visit brought memories of a word from long ago. Thrashing. When my father was dying. He was in hospice care. The woman (saint) who helped us make him comfortable, advised me: He’s going to fight the death process by “thrashing.” Limbs will convulse. Expect sudden bursts of muscle movement. It’s a body’s last gasp before going under permanently.

And he fought. Boy, did dad thrash.

Yea. The kidney feels like sometimes it’s in a death throe, or playing ping pong with a marble. And I’m sad. Because I’ve become very attached to my internal organs. I’m sensitive to the pain because my right kidney and I have become very close. We sort of grew up together.

It’s weird when a piece of you thrashes.

And then.

Random Thoughts:

1). I’d rather lose three-dimensional over multi-dimensional any day. If I needed to make a choice, I’d lose a kidney over the ability to possess knowledge, maintain a sharp mind, stretch my imagination. Well, I’d rather have my cake and kidney too, but I’ve learned, especially as of late, you can’t keep everything.  Parts of you will eventually die. While you’re still alive. Dreams will require burial. The challenge is to keep as much of yourself as alive as possible before the entire system you’ve grown to depend on, folds up like the banking industry in 2008. This also includes your spirit to continue pursuing your dreams.

2). What dies first? You will go off the deep end. Your brain will die from panic if you try to control the outcome of a physical challenge. All you can control are your actions in the face of it. Focusing on the present and not trying to make the problem bigger than it is (or worrying about a worst-case scenario which may not occur) will only cause your sanity to die first.

Kamal Ravikant writes in his new book “Live Your Truth” that you must live in the moment and suffering occurs when we resist the moment. We are far stronger than our pain. It can come in waves, move through us, spice up our lives (yay) but suffering, that happens when we fight it, shut the doors and hold off, shouting – “No you should not be here..”

Don’t “thrash” or fight shit you can’t control; you’ll only expend  precious energy – end up nowhere. One the obstacle rolls over you, once you surrender, there’s an eerie calm and clarity to your thought process. I know. I’ve been there. Kidney, you listening? Now roll over.

3). A  greater piece of your net worth potential dies daily. If you’re not aware or just plain ignore the pitfalls of your saving and investment behaviors, every day your financial situation is gonna die. Progress can only come through acceptance of bad money habits and no longer making excuses. Ease also comes from living in the moment from a money perspective.

Take out five bucks (yes, actual paper money).Pass your finger tips slowly over the fibers in the currency. Look at the bill up close. Smell it if you dare. Then take out a pen and paper – write down what having money means to you. Write down short list of quick sentences. Focus on small actions you can take right now to save more, reduce debt or invest smarter (even if it means you require professional guidance getting it done).

4). Stress will kill. The more friction you create by trying to control outcomes in your life, the more kidneys you will lose (and you’re usually blessed with two, only). The real power you possess is focus. Focus on your efforts. Now, are your odds of success more favorable if your efforts are true? Sure. Are your efforts guaranteed to lead to the outcomes you seek? No. When you learn to be responsible for the actions taken and truly understand deep inside, how the outcomes can be far from what you expect, (or predict), the inner peace experienced will reduce your stress. The odds of maintaining those lovely organs you’re attached to, will increase. And that’s a good thing. You’ll laugh more in the face of adversity. You’ll crack funny jokes like I did (take my kidney, please).

Chronic is not death.

It’s the universe shaking you. Making you aware of a problem.

Chronic doesn’t regret to inform you that you need to do a better job.

Or your entire life will turn to shit.

What part of you will die today?

Which piece of you will live?

You decide.

fail kidney

Cool Perspective in a Warm Breeze: 5 Ways to Work Through Turbulent Times.

Just when you think you’re going under.

Just when you believe your life hits a point beyond anything bad you’ve felt before.

Just at the time you feel you’re going to break, even though you’ve been strong your entire life.

Just when you question everything and can’t come up with positive, reassuring answers.

There’s a shift in perspective.

The wind changes.

whirlwind

Perhaps it’s self-preservation. Cowardice. Not sure.

There was a point a few months back when I questioned the unquestionable:

Is it worth being here? Where was my value?

Did I ever provide value to begin with?

Was it all an illusion?

Was I my career, my job, my writing, my knowledge?

What the fuck happened over the last nine months, can anyone tell me? 

I examined it from various levels – 40,000 feet, mostly. Then a nosedive to ground zero.

I  was working to convince myself: Perhaps my time in this life had run out. I wanted the control. I wanted to release the coil. To discover where the energy goes. I mean everything runs its course, right?

I asked myself the following:

Would I have better hair? Straighter please. Like David Cassidy.

Would I have private parts that more resembled my father’s as opposed to my mother’s? (Self-deprecating humor is healthy, people).

Would I be famous, more accomplished, a better writer, a more empathetic person, richer, would I have a better nose?

Would I make wiser decisions for clients, friends, loved ones?

Would I be fooled again to trust, to love, to cherish?

Would I still be lactose intolerant?

I couldn’t answer any of these questions. Because you can’t lay out a path for the unknown and your past tricks you to answer negatively. 

I realized how important it was, is, to focus on the present.

The breeze taught me so.

At a Valero station. As I pumped gas. I closed my eyes. Focused on where I was, what I was doing. The beauty of the moment. I was grounded. I was still here after all the mental anguish.

Then from nowhere, a breeze came. Warm. It hit my skin and burst around me. The wind (ok, a breeze squared), rare in Texas, felt like nothing I ever experienced.

Why?

Because it’s 100,000 degrees in Texas and just plain felt good? Maybe.

hot in texas

Or was I in the present? Aware of the now, which accentuated the sensation. All these years I’ve spent building toward the future, I never fully appreciated where I was today. What a waste.

What a waste to treat the now like it’s merely a weigh station between what was and what was to be. Especially when you realize, life, who you are is right now. Today.

Maybe that’s why I love financial planning so much as I’m always trying to paint the picture of a financial future, when I should be increasingly focused on where people are financially right now.

I’ll never forget that breeze of enlightenment.

Random Thoughts:

1). Realize your ego is the greatest enemy. Your ego thrives on tricking, misleading you. It’s like those hot kids in high school who incessantly reminded you how unworthy you were to hang with them. You weren’t perfect – too short, your face was ugly, too fat, too skinny. My ego constantly reminds me of how I’m not successful enough and if I hit a certain level of success (my ego has not defined) I will be happy. The ego is flowing with conditions and impossible goals that can’t be reached. And if you do reach them, your ego says “listen asshole, you’re just keeping up here. Move to the next level and then I’ll deem you worthy of existence.”

I have learned that the more I focus on what’s underneath me and not what’s in back or in front of me, I can shut that ego down. Focusing on today distracts the ego from its goal – to destroy your self esteem. Limit your potential. It wants you to fail so it can tease, bully.

2). Learn from the past. But don’t let it weigh down your present. I have learned some valuable lessons from people in my past. For a time, those people made me angry. Not any longer. The lessons I’ve learned from the past, help me appreciate the present even more. Some experiences have made me who I am today, added to the texture who is me. Appreciate your layers, who you are, faults and all. The faults, the dents, are great arsenals to appreciate the present.

3). Breathe more. Sounds stupid, I know. During the day, I use deep breathing to gear me to focus on the present. Breathe in deep – hold for 6 seconds. Release. Three times. I then close my eyes and open wide. It’s like I stopped a film, mid scene. Then I ask: What am I grateful for RIGHT NOW AT THIS MOMENT? I can’t tell you how this has stopped Mr. Ego in his wicked tracks.

4). Don’t take out fear and greed on your portfolio. Fear, greed, are ultimate destroyers to portfolio returns. The S&P 500 is off roughly 6.5% from its high point in May, and we’ve seen incredible overreaction by bond and stock investors to sell. If you have specific, written rules for rebalancing your portfolio (buying and selling based on specific guidelines), then you can take advantage of swoons (buy low) and manage euphoria (sell high).

5). Appreciate your humanity. Nobody is perfect. Perfection is an illusion of the ego. I’ve learned “perfection within imperfection” where imperfections allow for differences, discussions and if you’re open-minded: Learning.

The wind was warm today but it was there. From nowhere.

I’ll believe it came just for me. To add perspective.

Appreciation.

Where will your breeze come from?

What will it be?

Today.

Now.