No chance of leaving Pink Floyd out of the music and money conversation.

Released in March of 1973 on the “Dark Side of the Moon” album, Money is a bit of a criticism of conspicuous consumption.

Money, get away
Get a good job with more pay and you're O.K.
Money, it's a gas
Grab that cash with both hands and make a stash
New car, caviar, four-star daydream,
Think I'll buy me a football team

Conspicuous consumption or keeping up with the Joneses is a danger no matter how much income we have. Money can be confused with success and we chase the baubles that signify status in our society. We can fritter away fortunes and end up both broke and unhappy. 

A healthier view of money is that it is a tool to help us live happier more fulfilling lives. It won’t make us better people by itself, but it can give us opportunities and open doors that can make us better people. Money at its best allows us to pursue an education, care for our families, and give back to our community.

Continuing our Grammy week of musical financial planning.

Taxes have always been a vexing problem, reaching back to 1966 we hear the Beatles complaining about the taxman. Sorry no Beatles video, but we did find George Harrison.

If you drive a car, I'll tax the street
If you try to sit, I'll tax your seat
If you get too cold I'll tax the heat
If you take a walk, I'll tax your feet
Taxman!
Cos I'm the taxman, yeah I'm the taxman

Yes, minimizing the tax bite from your earnings and investments seems to be an ageless problem. So, don’t forget the basics save in tax advantaged accounts where you can. Delay paying taxes on your investments by holding for the long term when it makes sense. Use losers to offset gains when you can. Consider tax free bonds for your fixed income.
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On the other hand, paying taxes is not so bad, it means you made money.

The Grammy Awards are approaching and in anticipation the rest of the week our posts will be to relate a few songs to financial planning ideas.  We hope to have some fun with this.

In 1977 Johnny Paycheck had a hit with Take This Job and Shove It.  Sadly, it is about a man who is fed up with his job and wants to quit, but cannot find the courage to do so.

Please do not make the mistake of staying with a job that brings no joy to your life.  We spend too large a part of our lives working to be miserable while we do it.  Sometimes, the need for a steady check seems overwhelming, but in the end we all will be much better off doing work we find meaningful.
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Work that we find meaningful allows us to excel in that work which usually leads to higher income. Even if you must initially take a cut in pay to find meaningful work it will pay off in the end with a happier life and likely more financial rewards as well.

Back when Tiger Woods worked with Butch Harmon and was winning nearly every tournament he entered, Tiger and Butch would talk a lot about how real and feel were two different things in his golf swing.  Maybe something felt right, but it did not result in a great golf stroke.

That is often the same way things work with your investment dollars and the stock market.  Sometimes it feels right to own a ton of whatever company is hot for the day, but it really isn’t a good idea and can lead to ruin as quickly as it can lead to riches.  Sometime the markets ‘feel’ like everything is hopeless, but that is not real either.
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Doing the hard work of saving and investing and building a long term portfolio of great companies is what we should be focused on, not whether it feels like everything is coming apart at the seams.

If you think risk is the chance your investment dollar will go down today, then I challenge you to ask the question “When should I take on risk?”

If you choose to put your money in a CD or savings account, you avoid the risk of any fluctuation of the principle.  You do have the have the risk of interest rates. Will they be higher or lower a year from now? Five years from now? Twenty years from now? Your answer is as good as mine.

You are also taking on the risk of not reaching your goals. At 1%, about what you can earn on ‘safe’ investments today, it will take about 72 years for your investment to double.  How much help is that for funding your retirement?

If you choose to instead invest in the ownership of great companies who provide great products and services to the world’s population, you have a very real risk that your investment could decline tomorrow. But what about a year from now?  Five years from now? Twenty years from now?
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You can take risk now, or you can take risk later.  The choice is yours. 

In Lake Wobegon “All the women are strong, all the men are good looking, and all the children are above average”

Sadly, we know only 49% of the children can be above average or the median to be precise.  It’s true of children and it’s true of investors.  If you believe brains are what is needed to succeed with your investment plan, then you have to know that 49% of you will be disappointed.

Yes, you read it in magazines and newspapers, “our analysts are smarter than your analysts” but that doesn’t make it true.  Consider your own situation, you have a job, you have a family, you have a life.  You cannot devote all your time and brain power to your investments. Even if you could, you will probably be below average, if brains are the only source of investment returns.  You aren’t smarter than most of the guys on Wall Street and you are certainly not smarter than the combined wisdom of all the participants in the equity markets

The good news is brains are not the determining factor for investment success.
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You only need two things to insure long term investment success. Faith and Patience.  Faith that the stock market may go down, but will not stay down and patience to leave your investments alone and let the magic of compound interest do its work.

Usain Bolt is the fastest man in the world when it comes to sprinting.  The gun fires and Bolt is off and in less than 10 seconds Usain has crossed the finish line.  Unlike the mad dash speed of a sprinter, reaching you financial goals is more like running in a marathon where pacing yourself and perseverance are keys to completing the race.

Marathon runners have to think about the race they are running.  Rather than focusing solely on the finish line, they focus on intermediate targets.  A marathon runner will have a time goal for different milestone during the race, they know they must be mentally prepared for the boredom and pain of a long distance run.  Marathoners know things will go wrong once they start the race and have a backup plan for dealing with those problems.  They know they will “hit a wall” and want to give up, but they prepare for that moment and learn to break through.
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All of this is more closely related to achieving lasting financial success.  You should have intermediate financial goals as well as long term goals.  Perhaps, you can establish a date to pay off your mortgage or credit cards, or a monthly savings goal.  You should know that things will go wrong along the way and have a plan B for dealing with setbacks.  You should be aware that you will “hit a wall” and be mentally prepared to work your way through, over, or around the wall. You should know all of this will be hard, but with discipline and perseverance you can successfully complete the course.

Greg McKeown, author of the book Essentialism: The Disciplined Pursuit of Less conducted a session at a NAPFA conference in San Diego last spring and the one thing that stuck in my head was the advice that if the answer to the question isn’t “Hell, yes!” then the answer should be “No”.

While Greg was speaking of time management, the concept translates well to your investment selection process as well.

Now, I believe a broadly diversified portfolio is necessary to long term success and that buying index funds to participate in the long term ups of the stock market is the most sound approach for most individual investors, I do realize that many want to add a little spice to the mix.  So if you are someone who likes to select some individual stocks for your portfolio, then repeat that mantra every time you are considering a purchase.  If you can be excited and say “Hell, yes!” then go ahead, but if it’s more of a “Meh” then just add that money to your stock index fund instead.

Joe Taylor

Posted by Bryan Taylor

Everyone wants free money but I know too many of my peers who don’t care enough about their money to get it.

Yes, it takes time, effort, extensive budgeting- and most importantly discipline, but if you are in control of your money you can truly make it work for you- even without investing it. I know many people who don’t participate in a  retirement plan (even if their employer offers a 401k or 403b plan WITH A MATCH!) and certainly don’t have a taxable brokerage account. However, if they plan things right, they can earn free money just by being in control of their own. 

For instance, I recently opened a bank account with an online bank that was offering a $300 bonus if I committed to a direct deposit of my paycheck to the account for 3 months. This is FREE MONEY for simply giving my employer a different account number to directly deposit my check into. I don’t have to keep that account open once I’ve received the FREE MONEY (I read the terms and conditions to be sure!).

Another example is properly utilizing credit cards. Yes, credit cards get a terrible rap from millennials, because we grew up hearing the horror stories of the older generation borrowing until their heads turned blue. This nightmare manifested itself in revolving interest payments on credit cards at astronomical rates and in extreme cases to the point of losing their homes and the icky “bankruptcy” thing during the Great Recession. Don’t be scared, be in control. 

I technically don’t “borrow” money from my credit card company. I use my credit cards each month on EVERYTHING I can. Why? Because I earn cash back when I pay them off each month. If I can put it on a card, I will, because I am IN CONTROL of my money. I don’t spend more than I receive in income each month (it’s called saving), so I just pay off the card, earn whatever % back as FREE MONEY on the total I paid completely off, and move on.

You may prefer to earn travel miles, gift cards, event tickets- whatever tickles your fancy, but you would be remiss not to take advantage of these free offers. The credit card companies’ strategy is centered around you screwing up and actually “borrowing” from them, at which point you give them FREE MONEY. So don’t be the bug, be the windshield.

There are many other instances when being in control of your money actually gets you FREE MONEY. You just have to stay ahead of the curve, be disciplined in your financial habits and realistic about your capability to do so.​