Archive for Financial Planning

How to Know What to Do When It’s Hard to Know What to Do

Economy and Investing, Financial Planning, TheLiveBigWay® Digeston August 30th, 2010Comments Off on How to Know What to Do When It’s Hard to Know What to Do

I thought it was time to address some of the gloom and doom that has so dominated the news of late.  Not, by the way, with the intent of dispelling it (or supporting it, for that matter) but more with the aim of addressing the question of what we can best do to operate in an uncertain world. To begin, allow me to recap some recent developments:

The pace of economic recovery is slowing.  Second quarter economic growth in the US was revised downward last week from 2.4% to 1.6%.  At the same time, unemployment moved up a notch and home sales moved down a notch (or two).  Fed Chairman Ben Bernanke, observing these developments from the monetary policy meeting in Jackson Hole, suggested on Friday that a little more fiscal stimulus might be welcome.  He knows, of course, that this is currently a political non-starter.  Writing in yesterday’s New York Times, meanwhile, Laura Tyson, UC Berkeley economist and past chair of the president’s council of economic advisors, made the case for why the slowing recovery calls unambiguously for a second stimulus.  And just to round things out, Nobel Laureate economist Paul Krugman has declared that this is not a recovery in any meaningful sense of the word unless the pace of growth is fast enough to bring down the unemployment rate quickly and significantly. Few are predicting that the economy will resume such a pace this year.

The news is not all dire on the policy front, however.  Notwithstanding the lack of consensus for a second stimulus, the White House is pressing forward with several initiatives that could help.  None are anywhere near the scale of last year’s stimulus package, but each could have an incremental impact.  And, while noting that the Fed does not possess unlimited power to regulate economic growth, Chairman Bernanke nonetheless observed that the central bank still has policy options in its toolkit and made clear its commitment to using any and all of them to keep the recovery on track.

One of the things holding down the pace of recovery is the “savings binge” that consumers have engaged in as they work to pay down the excessive debt levels acquired during the real estate boom.  Businesses, likewise, are holding back on new hiring and fixed investments that could create a much needed boost.

While the “animal spirits,” as John Maynard Keynes termed business sentiment, have left American business people in a pessimistic mood, sentiment can change suddenly, dramatically, unpredictably. In this vein, it’s worth noting that American businesses are now sitting on a record $1.6 trillion in cash reserves, the deployment of which would cause a dramatic shift in direction for the economy.  Consumer and investor sentiment is likewise subject to unpredictable swings.  In the long run, I suspect that one counts out the American consumer at one’s peril.  Today, in fact, it was reported that consumer spending had risen in July, after four months of decline.

The real point of enumerating the foregoing pluses and minuses is this: I don’t know what’s going to come next for the economy.  No one does.  No one you see speaking on TV and no one you see quoted in newspapers or magazines knows what’s coming next.  There is sometimes an illusion of prescience, created by the fact that every possible outcome is being predicted by someone, every minute of every day.  As we look back at how events have unfolded, inevitably someone will have “called it right.”  That in itself isn’t particularly impressive.  What would be more so is if the same person got it just right again and again and again.  There’s not much evidence for that.

Of course, if someone did possess perfect foresight, they would never diversify.  Diversification is only a reasonable strategy in the absence of such prescience.

So, coming back to my opening question:

How are we to know what to do when times are so scary?  The answer, prosaic as it may sound, is to show up with a plan from the start.  And then stick to it (scuba divers like to say “plan your dive and dive your plan;” a good motto for our financial affairs as well). There’s a reason this is so hard to do, however.  As I’ve noted in prior writings, neuroeconomists have established that the prospect of financial loss activates the part of our brain called the amygdala. The amygdala is where our “fight or flight” responses live, so, naturally, when this part of our brain lights up, we feel the urgent need to DO SOMETHING!  This is certainly a functional response when one is being physically attacked, but far less so when it involves one’s portfolio.  As long as there are sufficient cash reserves to serve as an emergency fund, and as long as there are sufficient stable bond reserves to meet spending needs in retirement for five or six years, there really is no reason to take action when it appears that the economy might be hitting a bump in the road.

So, the motto should be: Plan Your Life and Live Your Plan.  And the next time the doomsayers are splashed across the front page of your newspaper, put it down and take the dog for a walk.  You’ll both feel better for it. And as Roger Lowenstein, pointed out in Friday’s New York Times (Taking Stock): “it is generally more lucrative to sell prophecies of doom than to act on them.”

The Yeske Buie Team

What does it mean to Live Big® in these trying times?

Financial Planning, Fun Stuffon March 6th, 2009No Comments
What does Live Big® mean?  Some may interpret it as meaning “spend big”, “live large” or a recommendation to some other form of overindulgence.  But Live Big is about the size of your life, not the size of your wallet®.  In these crazy economic times, it can sometimes be difficult to remember the areas in our life where we can Live Big without spending (much, if any) money.  But if we can find the place of gratitude for what we have, we can find joy in the most mundane of places, and, hopefully, at least get our minds off of how scary the world can feel at times.  We offer these ideas for your consideration.  And we will be updating this document with additions from anyone who wants to participate, so please send us any ideas you might have.
Walk the dog (borrow one if you don’t have one of your own)
Hug someone (be careful, in general it should be someone who you know)
Start a gratitude journal – every morning/evening, write down 5 things for which you are grateful
Read all those books you’ve been collecting, meanwhile drinking all that tea that has accumulated in your cupboard
Get Skype and call friends all over the world
Write a poem, or at least read one
Continue to make your Charitable Contributions
Watch “It’s a Wonderful Life” or “Love Actually” or some other super feel good movie
Make a game out of cooking dinner for a week using only ingredients already found in your pantry or freezer (adding fresh vegetables)
Have a book swap party with everyone bringing a few books they’d like to swap and a refreshment
Write a letter to a soldier
Exercise
Join Netflix (30-days free and then $8.99/month) and watch 100 -200 – 300 movies! (They’re available instantly on your PC)
Teach a teenager to balance a checkbook
Write an old fashioned letter to someone
Take an elderly neighbor lunch
Breathe, pray, meditate
Play cards or a board game with someone fun
Journal
Volunteer
Watch a comedy routine and laugh the day/night away
Burn an aromatherapy candle
Listen to music
Dance
Do a craft (find something on sale at Michael’s or another craft shop)
Make a hobby out of finding free weekend activities and planning outings with family friends
Look at old pictures and marvel at how great you still look
Make somebody laugh
Get fresh vegetables from a farmers’ market
Watch a thunderstorm – on a porch if possible
Donate blood
Catch a snowflake on your tongue
Volunteer at an animal shelter
If you get a premium cable channel, invite your friends over to watch shows they might otherwise not get to see
Give a stranger a compliment
Feed someone’s parking meter
Go to the library and check out books and DVDs  (for free!)
Pay a true compliment to someone who annoys you
Throw a Board Game Night at your house for friends, family, neighbors
Match all your mismatched socks
If you find a tails up penny, turn it over for someone else to find a heads up penny
Be a Big Sister or Big Brother
Create something (stained glass, a photo album, a collage)
Print the photos you’ve been meaning to get off of the computer and put them in a photo album or scrap book
Make a quilt
Color – with a child, by yourself, outside the lines
Have a special story time with your children/grandchildren
Organize a silly 2K or 5K walk/run in your neighborhood
Visit monuments and museums in your area
Put a puzzle together
Take silly/pretty pictures just for fun
Bake some bread or cookies ~ share them with a neighbor or friend
Plant some flowers or vegetables. Fun to watch them come up from seed
Discover a new park. Go for a hike
Take a leisurely walk around a new neighborhood in your city – be a “tourist”
Give yourself a beaming ear-to-ear smile for five minutes, just because you’re alive. A big grin triggers a flood of serotonin and endorphins, creating a virtuous cycle; literally creating happiness where none may have existed before
Stare at the spring flowers
Smell the spring flowers
Give special attention to your spouse who may be worried
Kiss your spouse who may be worried
Hug spouse who may be worried
Hug your pet
Write a letter to someone you love
Call a friend and tell them you value their friendship
Visit a Virginia winery to taste the new releases
Another happy movie to watch: About a Boy. If you don’t feel good after watching it there’s no hope
Pay it forward, volunteer, it comes back tenfold
Get an almost free vacation through a home exchange
Listen to your feel-good iPod list during your commute to work
Taking a yoga class at Mala Yoga
Reading my son a book, especially one by Mo Willems, who is hilarious
A square or two of Lindt 70% Cocoa Dark Chocolat
Petting dogs (We don’t have one — yet!)
Clean out the closets and donate good useable clothing and shoes to the Homeless Shelter program in town
Volunteer at the Homeless Shelter program in town. Get gratitude that you aren’t homeless and can help others.
Volunteer at the Food Pantry/Meals for homeless programs
Walk the dog with your partner (or just go for a walk together), enjoy discussing the day
Teach a class of 3-5 year-olds
Instead of going to a photo studio for family pictures, set up a “studio” at home and have a friend take the pictures
Don’t live in the wreckage of your future–enjoy today
Remember, if you pray, why worry?  If you worry, why pray?
Living simply (less stuff – more room for life)
Being grateful to have a good job (or just a job)
Being really grateful when matching funds remain a part of your financial plan
Feeling empowered when using a debit card (instead of a CC)
Trusting your financial planner to help optimize your financial goals
Going out to dinner and a ballgame with good friends and business associates
Listen to songs from different periods in your life. collect them on iTunes
© Yeske Buie Inc 2009

“Our deepest fear is not that we are inadequate. Our deepest fear is that we are powerful beyond measure. It is our light, not our darkness that most frightens us. We ask ourselves, Who am I to be brilliant, gorgeous, talented, fabulous? Actually, who are you not to be? Your playing small does not serve the world. There is nothing enlightened about shrinking so that others won't feel insecure around you. We are all meant to shine. And as we let our own light shine, we unconsciously give others permission to do the same. As we are liberated from our own fear, our presence automatically liberates others.” ~Marianne Williamson