You Don’t Need a Financial Planner, You Need Financial Teachers

The things I don’t know how to do dwarf the things I do. It’s sad really. Altogether, my incompetence is pretty staggering. I can’t speak any foreign languages. I can’t play any instruments or sing. I can’t listen patiently. I’m hopeless when it comes to plumbing, electrical work, bicycle and car repair. I don’t know how to sew and I can’t do my own taxes. I don’t know how to garden, bake bread, make beer, or fix the ice maker in our fridge. I can’t keep pocket gophers from tunneling all over our backyard. I don’t know how to backstroke underwater and html baffles me. I could go on and on, but you get the drift.

Despite this pathetic reality, I went against type recently and taught myself two things, how to create excel documents and how to prepare a Starbucks-like green tea latte. Life is especially good now that I don’t have to spend my weekends adding numbers or pay $4 for my daily kickstarter of choice.

Few people know how to manage money well so they turn to financial planners for help. Gail MarksJarvis ask whether there’s any value in financial advisors who get it wrong.* She points out that:

. . . the recently released 2008 Federal Reserve transcripts showed that even economists of the world’s most powerful economy didn’t have a clue. Even as Lehman Brothers collapsed, they expected the economy to grow, not go into the worst recession since the Great Depression.

That, she adds, should. . .

pierce an illusion many individuals embrace as they pour trillions of dollars into the hands of financial advisers they think can read the future and thereby deliver riches and safety.

Individuals, she says, entrusted about $13 trillion to advisers, ranging from financial planners to brokers and insurance salespeople, through the end of 2012.

Ed Gjertsen II, president of the Financial Planning Association admits, “We do not have a crystal ball. We make guesses.”

Gjersten laments:

Clients demand: Give me a hot tip so I can spend whatever I want. But the truth is, the individuals have more control over the outcome based on what they spend than the adviser has with investments.

MarksJarvis adds:

Even economists are more fallible than people might believe. The transcripts of the Federal Reserve in 2008 showed it relying on faulty models that didn’t take into account unique circumstances of the banking crisis. Based on little knowledge, they give very firm opinions.

In my early 30′s I taught myself how to manage money when it became apparent that the financial planner I hired didn’t really give a damn about my family’s future. Over time, I realized that he recommended investments that paid him generous commissions. Investments that not only took time and money to undue, but ones that performed worse than bond and stock index funds.

There are two types of financial planners—commission based and fee based. Fee based planners who charge by the hour are far better than commission based ones who are prone to recommend investments that enrich them more than their clients. What people really need are skilled financial teachers who can help people learn to manage their money themselves because of the lesson I learned the hard way two decades ago, no one cares about you or your family’s future nearly as much as you. But where are the financial teachers?

13 trillion dollars! Much of that spent on investment strategies that underperform market averages. What a travesty.

If the world’s most incompetent person learned to manage money, odds are you can too. Start with The Elements of Investing by Burton Malkiel. But don’t succumb to the widely held view that technical knowledge is the key to personal financial success. The key is defining “success” yourself and developing a complimentary mix of technical knowledge; self discipline; and dare I say, spiritual depth; to create the future you want for your loved ones and you.

* Thanks to the best ex-mill hunky for this reference.

How College Changed Me For the Better

I guess it makes sense given tuition inflation, but today, nearly every “is college worth it” discussion revolves around one consideration—roi—or “return on investment”. More and more people worry whether a college education will lead to more secure, higher paying jobs.

In the last week I’ve been changed for the better by a movie and two books that I probably wouldn’t have seen or read if my curiosity hadn’t been jumpstarted during college.

The movie, Wadja, was an engrossing window into what it’s like to be a woman in Saudi Arabia. Wadja has grossed $1,346,851 as of January 17th. That means few people are curious about what it’s like to be a woman in Saudi Arabia. Had I not attended college, where I learned to like learning about other people, places, and time periods, I doubt I would have sought out Wadja. I’m a more informed global citizen as a result of having watched Wadja.

The books were Wild: From Lost to Found on the Pacific Crest Trail and The Unwinding: An Inner History of the New America. Together, Cheryl Strayed and George Packer challenge my assumption that privileged people like me will never truly grasp what it’s like to teeter on the edge of economic destitution. Thanks to their story telling genius I have a much better feel for why some people struggle to feed, shelter, and clothe themselves. And more empathy, an attribute in shorty supply these days, for poor individuals and families.

I may not have been curious enough about the people’s lives in those books if three decades ago I hadn’t studied history in college and became keenly interested in other people, places, and time periods. Thanks to excellent professors, challenging readings, constant writing, and discussions with classmates and roommates, I became more curious, insightful, and empathetic.

How does one place a dollar value on that?

Follow the Leaders

Jordan Spieth, a 20 year-old, made $3,879,820 playing golf this year. Two mil more than Rory Mcilroy. Spieth’s coach, Cameron McCormick, recently gave an interview that anyone that wants to get a job, or wants to get better at their job, should read.

McCormick says: A job came open at a private club, Dallas Country Club, one of the best clubs in town. I started teaching a lot at Dallas C.C. I’d do 40 hours a week in the shop and another 15 to 25 hours a week teaching. It was a quick trial by fire on what works and what doesn’t work and do I like to do this? And I did. I got some good word of mouth and some good results. I was there three and a half years. Brook Hollow, a similar club a few miles down the road, was hiring an assistant-in the fall of 2003, I became a full-time teaching pro. When I turned 30, I wrote renowned teachers in golf and asked, “Would you mind if I came and watched you work?” I wrote Butch Harmon and David Leadbetter and Randy Smith and others. Over the course of six months, I traveled around the country and observed these great coaches and gained an appreciation of what makes them great.

The “secrets” to McCormick’s considerable success: 1) When starting out, he worked 55-65 hours a week; 2) He actively sought out better opportunities; 3) He sought out respected people with much more extensive experience and spent six months traveling around the country studying the “secrets” to their success.

McCormick elaborates: I sent (letters) out to the top 75 coaches in the country and I got 25 or 30 responses. Out of those 25 or 30 responses, I got 10 or 15 affirmatives that you can come watch, with stipulations. Some of them respectfully declined, which I totally understood. The most surprising was Butch (Harmon). He said, “Absolutely, come on down, spend a couple of days,” and I did. He was fantastic.

This week I observed an excellent Spanish teacher at Lincoln High School in Tacoma, WA. After describing her teaching repertoire to the The Good Wife over dinner, she decided to carve out a day and drive 60 miles roundtrip to watch her teach. The Good Wife is already a very good Spanish teacher, but she wants to get better.

What do you want to get better at? Being a school principal, a nurse, a social worker, a swim coach, a fourth grade teacher, a pastor, a web designer? Make a list of more experienced and accomplished people in your field of choice, contact them, and carve out time to visit those willing to lift the curtain on their day-to-day work. 

Gordo Byrn is a cerebral triathlon coach whose writing I often like because it’s more philosophical than normal. I like how Byrn seeks out mentors for his personal life. For example, a relatively new father, Byrn has been intentional about sitting down with more experienced parents whose examples he greatly respects. He doesn’t observe them as intensively as McCormick did other coaches, but he asks them questions and listens carefully as they share parenting insights.

Byrn has carved out a great approach to life-long learning. Granted, it’s one that requires humility because it rests on the admission that other people have greater experience and are more skilled and insightful about what excellence entails. Byrn has taken the same approach to learning more about how to be a better husband; how to manage money better; how in the end, to be a better human being.

Follow McCormick’s and Byrn’s lead. Seek out mentors willing to share the secrets of their “success” whether in your public or private lives.

     

What Dave Ramsey Gets Wrong

Whenever personal debt counselor/media giant Dave Ramsey is criticized, he says something to the effect of “I help more people in an hour than they’ll help in their lifetime.” Ego aside, he’s right. When he sticks to what he does best, inspire people to reign in their spending and eliminate their personal debt, he’s golden. But when he uses his media pulpit to preach his conservative politics and personal theology, he’s completely full of shit.

Last Thursday night, on the commute home, I caught the second half of a call from a wealthy person who wanted Dave to tell him it was alright to buy a $65,000 sport car. Dave said of course it was because $65,000 was a small proportion of his total net worth. Then he launched into a ten minute long harangue about the one problem that may “very likely be the downfall of the United States.” Not health care inflation, not a disappearing middle class or reduced food stamps for those living in poverty, not the achievement gap in public schooling, and not global warming. Our greatest threat is too many people are envious of the rich.

“What’s too wealthy?” he kept asking, only to add, “YOU DON’T GET TO DECIDE! YOU DON’T GET TO DECIDE! YOU DON’T GET TO DECIDE!” Obviously, Dave needs his own counselor. I’ve listened to him long enough to know his schtick. He reads the Old Testament book of Proverbs selectively, always highlighting the specific ones that seemingly endorse wealth. Meanwhile, I’ve never heard him mention Matthew 19:24, “Again I tell you, it is easier for a camel to go through the eye of a needle than for someone who is rich to enter the kingdom of God.”

As a multimillionaire Christian, Dave appears utterly unwilling to grapple with Jesus’s words or example in the New Testament. I’m certain he could explain Matthew 19:24 in ways you and I don’t understand. The same with Luke 6:20, “Looking at his disciples, Jesus said: “Blessed are you who are poor, for yours is the kingdom of God.” Dave would probably tell me I’m taking those verses far too literally.

Here’s a Proverb I haven’t heard Dave cite, Chapter 14, verse 31, “Whoever oppresses the poor shows contempt for their Maker, but whoever is kind to the needy honors God.” In his diatribe, Dave discounted the entire Operation Wall Street movement as just another example of class envy run amok.

Hey Dave, don’t take democratic critiques of free market capitalism so personally. What the Operation Wall Streeters wanted is what most Americans want, for us to keep closing the gap between the stated egalitarian ideals in our founding documents and our day-to-day economics and politics. Simply put, people want a more level playing field. Right now Dave, whether you’re willing to acknowledge it or not, the field tilts towards Wall Street bankers, you, me, and other people driving $65,000 sports cars.

It’s not that Dave thinks differently than me, extreme wealth and Christian faith is a topic that reasonable people can and do disagree about, it’s that he doesn’t think at all. He refuses to consider whether great wealth complicates faith. He is utterly unwilling to consider questions that might lead to insights into the relationship between faith and wealth. Questions like, how much is too much? Why is it easier for a camel to go through the eye of a needle than for someone who is rich to enter the kingdom of God? Or why is there a tendency to oppress the poor? Or why did Jesus identify with the poor?

I suspect he’s unwilling to ask those types of questions because he doesn’t want to consider lifestyle changes. Dave digs his luxury cars, his boats, his lake home, all the trappings of his considerable success. 

While unlikely, imagine Dave were to read this. “If Jesus of Nazareth doesn’t get to decide what’s too wealthy,” he’d roar, “Ron of Olympia definitely doesn’t!”

Choosing Debt

Something’s wrong.

I just finished reading a batch of student essays about whether money is important or not and what recent social scientific research suggests about money and happiness.

Some of my students’ families struggle financially. Those students touched upon their parents’ debt and the negative consequences that have resulted from it, strained relationships marked by stress and unrelenting tension. Being well-to-do is more important to them than to my students who take their family’s financial stability for granted.

Many of these students describe the loans they decided to take out. “You have to spend money,” one explained, “to make money.” They are desperately in need of adults who model financial self discipline.

At age eighteen, they are eerily comfortable with five figure debt. And if statistics are any guide, their precarious family foundations make graduating less likely. Even if they graduate, there’s no guarantee they’ll find work that pays enough for them to dig out of their debt.

It’s great they want to continue their education, and I like having them in class, but someone has to wake them from their slumber and tell them there are much less expensive paths to getting a good education. In particular, community colleges and public universities.

Their fallacies overlap and multiply. The first is that loans are a logical solution to financial problems. The second is that attending an expensive university leads to higher paying jobs.

Universities absolve themselves of this problem, saying it’s up to the lenders themselves to assess peoples’ ability to repay loans.

I don’t know what to do. If I tell the “loaners” that there are much less expensive paths, they’ll probably conclude that I don’t think they can cut it at our pricey, private university. And if I follow my university’s lead and simply close my eyes when I know the train is about to jump the track, the students will continue down a very treacherous path.

Minimize End-of-Life Regrets

Writing faculty at my university get to choose their own seminar themes. When I chose “The Art of Living” for my first year writing seminar a few years ago, I wasn’t sure how it would go. Was I crazy to think that eighteen and nineteen year olds might find Epicurus, Seneca, and Stoicism almost as interesting as me?

I knew very few of their K-12 teachers had asked them to think about what they most want out of life. And psychologists say they have a sense of immortality. Why bother with how to live if you’re going to live forever?

One month in, I’m happy to report, they’re actively engaging with the reading material (primarily William Irvine’s The Guide to the Good Life and Roman Krznaric’s The Wonderbox) and one another. I love how comfortable they are disagreeing with our authors and one another. My greatest challenge is staying out of their way.

Some have experienced loss—one’s mother died a few years ago from breast cancer, another’s from a heart attack, and still another travelled to Winnipeg last week to attend her aunt’s funeral.

The first unit was on “philosophies of life”. More specifically, I asked the students to agree or disagree with Irvine’s thesis that to avoid major end-of-life regrets, everyone needs to have a grand goal of living and specific strategies to achieve the goal. Irvine argues most people have regrets at the end of their life because their primary pursuits—wealth, social status, and pleasure—are in the end, unfulfilling. His grand goal of living is to maximize tranquility and joy by reviving Stoicism for the modern era. Few people experience much tranquility, Irvine argues, because materialism, social status, and pleasure conspire against it.

The larger question we’ve grappled with is how intentional should we be in our day-to-day lives? What role, if any, should spontaneity and serendipity play? What’s the right balance?

The students fell evenly across the “intentionality/spontaneity” continuum, some quite certain that people need life goals, and associated philosophies with specific strategies for achieving them. Others pushed back saying, “Are you kidding? How can anyone expect people with our limited life experience to put forward grand goals for living let alone specific strategies for achieving them?” They thoughtfully argued that life would present unforeseen struggles and opportunities. For example, one said she never would’ve have fallen in love with French if she had been correctly placed in the middle or high school Spanish class for which she had actually registered.

When some of them argued for intentionality, I couldn’t help but think they’d have to recalibrate their specific goals and strategies (for example, to have a large loving family) if and when they commit to a life a partner with their somewhat different visions of the future.

What about your life? According to Irvine, your life is most likely an argument for spontaneity because our culture offers us an “endless stream of distractions” that keeps us from clearly identifying, and planning how to accomplish, what we most want out of life.

Be less distracted this week, and thanks, as always, for reading.

The Art of Living

The hippy title of my first year writing seminar at Pacific Lutheran University.

I just read my 32 students’ initial essays in which they summarize what they think they know about the theme and then describe their writing process, strengths, and weaknesses.

Most of them hope the class and I will help them figure out what to study and do upon graduating. That’s not terribly realistic, but I suspect they will spend more time thinking and writing about how they want to live their lives during our seminar than throughout kindergarten through twelfth grade combined.

First Born, starting her last year in college, is also thinking with more urgency about what to do for work after graduating. She’s a religion major without any interest in seminary or much in teaching. Everyone tells me she’ll land on her feet and I think they’re right.

The GalPal and I took her out for pizza recently in her Minnesota college town where she spent the summer working full-time in the college’s library. I was happy she got the library gig because given her passion for books, I’ve thought she might end up a librarian. Over pizza she explained that she liked her job, but doesn’t want to be a librarian, because “It’s not creative enough.”

I was impressed with her self understanding. She doesn’t know what jobs to apply for yet, but she has a pretty good feel for what type of work she’d most enjoy—creative work that is sometimes team-based, sometimes solo.

Recently it was reported that 70% of US workers “are not particularly excited” about their jobs or “are actively disengaged” and “roam the halls spreading discontent”. If we use world history as our frame of reference, I’m guessing that number would be well north of 90%. Most of the world’s people most of the time do monotonous work to feed, clothe, and shelter themselves.

So when my students write that they want to enjoy their work and First Born says she wants creative work, they’re planting a distinct, 21st century, privileged stake in the ground. Normally, the concept of “privilege” has negative connections since it’s associated with preferential treatment and a sense of entitlement; however, in the case of my students and First Born, their preference for meaningful work is undeniably positive.

They want to earn enough money “not to have to worry about it all the time,” but beyond that, they want to be like me and 30% of US citizens for whom work is creative, engaging, and meaningful. Every young person should embrace that form of privilege.

My Not So Redeeming Personal Quality

A better title would have been “ONE Of My Not So Redeeming Personal Qualities”.

To quote my eldest daughter, who just turned 21, from last night’s Skype session. “You routinely jump to erroneous conclusions based upon incomplete information.” Flattering stuff huh?

Some context. Growing up, my older brothers teased me mercilessly. And then my friends and I took turns ripping one another. That’s my excuse for being sarcastic, it’s the legacy of my childhood.

Sarcasm is a very tricky thing, because the line of how much is appropriate is always shifting. Every person, and therefore every small or large group, has a different level of tolerance and comfort with it. My hypothesis is that the more people grew up being teased, the more relaxed they are about it as adults. And vice versa. Some members of my fam have a low tolerance for teasing. I know that because I’ve crossed over their lines so many times.

Somehow, Eldest Daughter (ED) got accustomed to it, so much so, that she gives as well as she gets. With such a quick and keen wit, it’s almost impossible to ruffle her feathers.

A little more context. She’s living in a house just off her Midwest college campus with four roommates. She’s working full-time this summer. The GalPal and I are paying for all of her expenses including rent, utilities, and food in the hope that she can save what she’s earning.

And a final bit of context. Recently ED reconsidered her longstanding vow to never friend me on Facebook—one of my greatest life accomplishments. Last week on Facebook she posted a few pics from her birthday including one of her sitting on her nice lawn with a few girlfriends and a few six packs of CRAFT BEER.

Finally, now you’re ready to eavesdrop on our Skype exchange from last night.

Me: Regarding the Facebook birthday pics, there’s something I have to explain to you. Most college students, no make that most people in their 20′s drink beer that’s just one small step above horse urine.

ED: What?! What are you talking about? [Her head then dropped so that all I could see was a cascade of blonde hair. Which I interpreted as an admission of guilt. So I pressed the pedal to the metal.]

Me: Yeah, you’re normally SO articulate, and now, mired in guilt, all you can do is stammer and evade.

ED: [Smiling ear to ear.] No, no, you don’t understand.

Me: You don’t understand. You’ll remember we weren’t sure how much to allocate for food. Seeing pictures of your friends and you with CRAFT BEER convinced me we’ve allocated too much money for food and drink. Most college students, no make that most people throughout their twenties, drink beer that’s just one small step above horse urine. [Now she's laughing hard, which I interpret as an obvious mea culpa.]

Me: [Yes, you're right, it should be her turn, but the best defense is a good offense.] Most people wait until they’re making $50 large in their thirties before buying CRAFT BEER. We’ve given you too much money if you’ve already leap-frogged the decade-long horse urine stage altogether.

ED: No, you don’t understand. I and E were visiting [I was returning for her senior year at Notre Dame and E accompanied her from home base in Olympia, WA. Both are close high school friends who she never expected to see in her college town. Thus, excitement.] and they insisted on buying me craft beer for my b-day. I didn’t pay for any of it.

Me: Oh.

Me: Is this another example of me jumping to the wrong conclusion based upon incomplete information?

ED: YES, just ONE of MANY examples!

Sadly, you can find numerous posts in this blog’s archive on the pitfalls of prejudging people, and yet, there appears to be a log in my eye (Matthew 7:3). I hereby recommend taking any future “pitfall of prejudging people” posts with large grains of salt.

Now only three questions remain.

1) Is it only a matter of time before she unfriends me in order to keep her personal purchases more personal?

2) Is she bullshitting me?

3) Is my questioning her veracity just one more not so redeeming personal quality to add to the list?

What say you dear reader?

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What I’m Reading

Book—College (Un)bound by Jeffrey Selingo. The subtitle, “The Future of Higher Education and What It Means for Students,” is representative of Selingo’s clear and descriptive writing. A must read for anyone interested in the present state and probable future course of higher education.

Magazine essay—Michael Lewis in Vanity Fair, Did Goldman Sachs Overstep in Criminally Charging Its Ex-Programmer? The central character, Sergey Aleynikov is a fascinating case study. And Lewis is on my list of writers who I read irrespective of the topic. On the surface this essay is about a computer programmer, high-speed trading, and Wall Street avarice. Deeper down it’s about human nature, passion, personal transformation, and happiness.

Blog post—The Surprising Effect of Small Efforts over Time by MMM. Here’s a three minute intro to MMM. Wonderful insight, small efforts, repeated over time, will almost always surprise you.

Embrace the Waste

I love that about a quarter of PressingPause’s readers are from outside the United States. Hard to know of course if they’re ex patriot readers, or as I assume, genuine article foreign nationals. The contents of this post will most likely strike them as odd. Especially those with no firsthand experience of living in the United States.

Americans are unusually productive and wasteful. We work hard Monday through Friday and then buy lots of things on Saturday and Sunday that we don’t need. Yin and Yang. Over and over. As a result, our homes, no matter the size, get filled up with all sorts of ridiculous stuff. By which I mean The Magic Bullet. The technical term is clutter.

Given this national characteristic, many moons ago, a tradition was born in the U.S. The garage sale. A garage sale is when a family spreads out all of their leftover, unused stuff in front of their home and offers it for sale to anyone that’s interested. Our neighborhood designates the first Saturday in June to be a “neighborhood garage sale”. Too bad you missed ours or you could have bought a Charlie and the Chocolate Factory DVD; some unused, unopened 10w-30 motor oil; or an outdoor umbrella real cheap. Since my family is more frugal than most, we don’t normally participate. But this year I decided it was time to do some “thinning” of our worldly possessions since it’s been a long time and the youngest is getting ready to depart for college. It was especially fun to partner with her.

American wastefulness is often stomach turning, but Saturday during our garage sale, I realized it also provides opportunities. The sociologist in me loved the garage sale. For four hours I talked to a cross-section of society that I almost never get to. Many were first generation Americans smartly taking advantage of multi-generational American waste. For many it was a weekend ritual that they took very seriously.

Rule one, show up early. If the newspaper advert and signs say 8:00 a.m., start cruising the hood at 7:30 a.m. That way you might just luck into a free wheelbarrow or a nice $20 edger. Remember, the good stuff goes fast. My favorite part of the morning was foreign speaking customers who appeared to be just getting going in the U.S. using their smart phones to research prices.

If you have the time, join the garage sale masses. There are excellent bargains all around. Just make a list of things you need first or you’ll soon find yourself on the selling end.

In the U.S., people routinely fill up their garages so that they have to park their cars elsewhere. And sometimes, the garage isn’t nearly big enough for all of their stuff, let alone their cars. When that happens, people rent a second garage in a storage facility. Thus, if you have a lot more capital than time, invest in a storage facility.

A shiny new one recently opened near us and every time I drive by it I think to myself, “Damn. That’s the perfect investment.” Americans’ waste knows no bounds. You can bet on it. And invest in it. And profit from it. Especially where there’s population growth. Simple to build, storage facilities require little overhead. Unlike a rented house, no one is every going to call you at 1 a.m. to complain that the toilet is clogged again. There may be downsides to the investment, but I don’t want to know them. My ignorance makes me blissful.

Do not try to talk me out of it. I’m taking the $160 I made this weekend, embracing the waste, and going all in on another storage facility. I probably need other investors to buy the needed land. Care to join me?