Rick Kahler's Financial Awakenings

What do money and meditation have in common? Find out during our teleclass when Rick Long, Clinical Supervisor of Onsite Workshops in Cumberland Furnace, Tennessee, explains the scientific functioning of the brain and how meditation can help you make better money decisions. Previous to his employment at Onsite, Rick was in private practice as a therapist. He is one of the pioneers in the field of integrating experiential therapy and money. His personal story of financial transformation has been featured in the Wall Street Journal and most recently in the book The True Cost of Happiness, by Stacey Tisdale. Join Rick and Rick on Thursday, November 15, at 4 PM MST/6 PM EST. Don’t miss it! Click Here to register.

I just finished reading a front-page article in USA Today: “Friendly Skies Gone For Good? – Nothing upsets passengers more than flight delays, surveys show.” I read it during the 12th hour of another annoying delay in a flight home to Rapid City, resulting in an overnight stay, all courtesy of Northwest Airlines.

Anticipating and experiencing travel delays have become the norm for any airline traveler. Just as in planning a budget you need to factor in one-time unexpected expenses, as a traveler, you’ve got to assume you will not arrive at your destination at the promised time in the itinerary. In fact, the statistical probability that a flight to or from Rapid City with one stop will get you to your destination on time is around 40%.

Flight delays affect more than the person traveling and the airlines. They raise the cost of doing business to both the provider and consumer. Professionals, entertainers, and loved ones who don’t show up at the appointed time cost additional travel expenses, lost wages, increased staffing costs, rescheduled appointments, and lost revenue from refunds.

As a frequent business traveler and speaker, this presents me with an interesting dilemma. Whenever I am away from my office I lose revenue, so my speaking fee includes an amount for travel time. Naturally, the organizations to which I speak are always interested in my fee being as low as possible. Keeping my travel days and time out of the office at a minimum means booking either the last flight out of Rapid City the day before a morning speech or the first flight in the morning on the day of my presentation.

As any savvy traveler knows, if you want to have the highest chances of arriving at your destination on the same day of travel, you should not leave on the last possible flight that will get you to your event on time.

However, allowing time for travel delays means adding half a day at each end of my trip, which adds a full day’s travel cost to my speaking fee. The additional two hotel nights can increase my expenses to the organization by as much as $350. And by far the highest cost to me, which cannot be compensated in dollars, is an additional two nights away from my family.

This leaves me pondering several issues. I wonder what is more important to my speaking clients, assurance that I will show up on time at a cost of more than double the needed fees and expenses, or saving around 65% and taking a 50/50 gamble I’ll be a no-show? If you were the event coordinator, what would you choose?

It all comes down to two factors: how much does an organization want to hear what the speaker has to say, and how much does the speaker want to share the information? For example, if I am passionate about my message or believe the group I address may result in benefits (like book sales or new clients) that exceed the speaking fees, then I may be willing to absorb all the risks of travel delays myself. If there is no additional benefit in my speaking appearance other than the fee, and I am not evangelistic about my message, then it will be up to the organization to determine how badly they want me as a speaker. Certainly the higher costs will limit the number of audiences that will be able to afford my services.

I have more questions than answers around this at the moment, but it’s time to shut down. We will—at last!—be landing shortly.

In last week’s column I suggested the value of setting up a support system if you are trying to change a pattern of overspending. Part of that system is finding a financial mentor to support you as you work your way toward financial health.

A financial mentor is someone who “walks the walk,” who is qualified to serve as your guide because he or she has traveled the same road you want to take and has done so successfully. For an overspender, a financial mentor will be someone who is able to control debt, live within his or her income, and save for the future. This is someone who can model successful money management, help you develop a plan for financial change, and hold you accountable to keep your commitment to that plan and stay within the limits you have set up together.

A good mentor won’t necessarily tell you what to do, but instead will act as a “sounding board” and help you decide what changes you need to make. He or she needs to have the strength to confront you when your behavior falls short of your goals, but also needs the skill to do so without attacking or shaming you. Preferably, a mentor is more of a partner than a parent figure.

The details of working with a mentor can vary, but it is important to get together regularly, whether in person or by phone. You may initially meet quite often, perhaps weekly, but over time the frequency of your meetings may decrease to once a month, and eventually to an “as needed” basis.

Typically, spouses should not serve as mentors for one another. Nor is it generally a good idea to ask a parent, a child, or another close relative to serve in this capacity. It’s often wiser to look for mentors among trusted friends or professional colleagues. One option is to find a financial planner who specializes in cash flow management. Unfortunately, very few planners offer this service, and finding one may be difficult.

The mentor doesn’t necessarily need to be a financial professional, however. What is most important is that this person demonstrates the kind of financial behavior you want to emulate. A mentor doesn’t necessarily have to manage everything perfectly when it comes to money, but that person does need to have a clear commitment to achieving and maintaining financial health. If you have trouble finding a mentor, another possibility would be to establish a mutual support arrangement with a friend who is also working toward financial balance.

We’re accustomed to the idea of developing relationships with mentors to help us learn and grow professionally. It’s far more difficult, however, to ask someone to serve as a financial mentor. To some degree, you will need to bare your financial souls to each other. You will need to obtain enough information from your potential mentor to satisfy yourself he or she is qualified. In turn, you will need to honestly and fully reveal your financial circumstances, which can bring up huge amounts of fear and shame. When it comes to managing money, almost all of us believe we “should” know how to do it right. Trusting another person with your financial information, including your past mistakes, your debts, and your less-than-perfect checkbook register, takes a great deal of courage and a strong commitment to change.

It may help to remember that working with a mentor does not mean giving up financial control to that person. The mentor’s role is to help you follow a money recovery plan of your own choosing, which ultimately can help you regain financial control in your life.

When you receive your TD Ameritrade statements for October, you will see that cost basis is now listed for any investments, in non-retirement accounts, that were purchased at TD Ameritrade.

Any non-retirement investments that were transferred to TD Ameritrade will not have cost basis. However, TD Ameritrade allows you to add cost basis for those investments, using your password-protected TD Ameritrade online account. When you log into your TD Ameritrade account, any non-retirement accounts that don’t have cost basis will give you a pop-up message about putting in your basis numbers.

Please keep in mind, KFG does not calculate basis figures. This is the responsibility of your accountant. We will, however, be glad to assist you in adding them to your TD Ameritrade statements.

America has an epidemic of overspending. Among the evidence supporting this conclusion is a 2005 study, published on the US Department of Labor website, of the retirement savings behavior of baby boomers. The study found that 56 percent of baby boomers live hand to mouth, at best: 19 percent indicated they spend more than their income and 37 percent spend every penny they receive. Money trouble is the number-one cause of male spousal suicide and the number-one stressor of Americans.

How do we reverse this trend? It’s not easy. How do you get someone who is overweight to begin an exercise program and modify their diet? Give them a book? Or more information? Keep reminding them that obesity kills? We all know none of that works. Telling an overspender to get on a budget or quit overspending doesn’t work, either. The roots of overspending, just like the causes of overeating, go much deeper. Change requires far more effort than just “getting on a budget.”

Financial planners are trained to help people who can save money, who have an inherent ability to pay themselves first and live on the rest. Most planners run from anyone who is an overspender. I know in the past I didn’t have any tools to help someone who could not save money.

In the past three years, in conjunction with my work and writing with Drs. Ted and Brad Klontz, I’ve discovered some methodologies that can turn overspenders into savers. Here are some guidelines I’ve learned:

1. Have a support system in place, to include a financial mentor, financial therapist, a professional bookkeeper, and one other person (not your spouse) whom you agree to be accountable to. The mentor needs to be someone who models the behavior you are working toward—who is able to successfully pay taxes, fund a retirement plan, save and spend no more than his or her income. The therapist needs to be someone who has done his or her own therapy around money.

2. Understand that, for many people, curing a chronic overspending problem is rarely about money. It typically has everything to do with deeper unresolved emotional issues.

3. Be willing to do the deep emotional work needed to change your destructive financial behaviors.

4. Learn about mindfulness meditation and commit to setting aside five minutes every day for meditation practice.

5. Hire a professional bookkeeper who will set up your books and determine your historical spending for the past 12 months.

6. Establish two bank accounts, one for discretionary spending and one—which you cannot access—for paying bills.

7. Empower your bookkeeper or financial mentor to control the bill-paying account.

8. Cut up all credit cards and terminate any further sources of credit, such as home equity lines.

9. Work with your bookkeeper and support team to develop a printed spending plan, month by month, for the next 12 months.

10. Print a monthly report comparing your spending to your spending plan and share that individually with each member of your support team.

11. Take time to clarify your values, define what you really aspire to have and to be in your life, and set goals to help you achieve your aspirations.

12. Before you make any purchase, ask yourself whether it will serve to fulfill your life goals.

I’ve discussed the first component of this approach, healing the emotional issues that keep you financially stuck, in previous columns and in my two co-authored books, Conscious Finance and The Financial Wisdom of Ebenezer Scrooge. I’ll have more information about the second component, developing a structured plan and support system, in next week’s column.

I’ve been reviewing a lot of homeowners and auto insurance policies recently and have grown concerned that clients are not keeping up to date with their policies. In about 75% of my reviews, I am finding homes underinsured by 25 to 50% of replacement. I typically find auto liability limits low, as well.

Therefore, I thought it might be time to bring in an expert on property/casualty insurance for this month’s tele-class. On Thursday, October 25, at 4PM MDT, our guest will be George Frear, a property casualty expert with First Western Insurance. George says the timing of his appearance as a guest is perfect, as he has just returned from a week-long property casualty update workshop in Minneapolis.

This will be your chance to learn more about your auto and home insurance, including umbrella policies, medical coverage, uninsured motorist coverage, etc. Click here to reserve your spot at the teleconference and to receive the call-in phone number the day prior to the conference.

The October issue of Financial Planning magazine included an article, “CyberSocializing–Here’s how financial planners are making the most of social media,” which featured the ways various financial planners use technology to support their clients.

Reporter Gwen Moran called me as a result of seeing my videos on YouTube. I was pretty surprised. The idea of posting my weekly video column, which is posted to my website and this blog, to YouTube was somewhat of an afterthought. The audio portion of the video is also uploaded to the KFG website and additionally sent to iTunes and available as a podcast for downloading to an iPod.

She says in the article, “Kahler now has approximately a dozen videos on the site, some having been viewed more than 100 times.” When you figure the most popular videos on YouTube have been viewed millions of times, a 100 viewings is not all that impressive. However, Moran suggested that anything over a 100 viewings for a financial planner was impressive! I guess we are a pretty dull lot.

To read the article, click here.

The brother of one of my acquaintances suffered a critical head injury in a car accident a few years ago. After being in a coma for several months, he died. Because he was a widower, it was not clear which family members had the authority to make medical decisions as his next of kin. His children and his parents disagreed on several crucial matters, especially whether to remove him from life support. The resulting conflict added a great deal of pain to what was already a tragic situation for the family.

Some of that conflict could have been avoided if this man had completed a medical power of attorney, designating a family member or some other person to make medical decisions for him if he should become incapacitated.

These documents have become well known in recent years, especially after several high-profile cases made national headlines. If you check into a hospital, you will probably be given a power of attorney form. Many financial planners, myself included, encourage clients to complete such forms.

Unfortunately, many people regard medical powers of attorney in much the same way as they think about wills. They are something for the future, something to do someday, something that is important for the elderly.

True, every elderly person should execute a medical power of attorney. However, the need for these forms certainly is not limited to older people. Consider a few other circumstances where they may be especially important:

1. Couples who live together without being married. This is increasingly common in our society, for many types of couples. If partners are not legally married, however, they are not legally considered next of kin. Even though they may be the most appropriate persons to make medical decisions for each other, partners may be barred from those decisions if they have not been given the necessary authority in writing.

2. Middle-aged adults who are single, divorced, or widowed. If they have adult children, it may prevent conflict and heartache to designate one of those children as the primary power of attorney. This might be a child who lives close by or one who is most familiar with the parent’s wishes. If a single adult has no children, it may be even more important to designate a sibling or close friend to make medical decisions if necessary.

3. Unmarried young adults. College students are often still covered under their parents’ medical insurance. It usually comes as a surprise to both generations to realize that, once the kids turn 18, their parents don’t necessarily have the right to know about their medical conditions or make treatment decisions on their behalf. A medical power of attorney won’t let parents have access to information the young-adult children want to keep private, but it will allow parents to make necessary choices in case of an accident or an incapacitating illness.

Executing a medical power of attorney is not difficult. The requirements vary from state to state, but the forms don’t need to be prepared by an attorney and may not even need to be notarized. You can find forms online, at your public library, at your doctor’s office, or at a local hospital. They are generally straightforward and quite simple to complete. You can designate one person as the primary power of attorney and another person as the secondary.

Once you have completed the form, give copies to your doctor, the person you’ve chosen to make decisions on your behalf, and perhaps your attorney and financial planner. The most important thing to do with a medical power of attorney form, however, is to complete one.

Recently, a client asked about how ‘safe’ his portfolio was if TD Ameritrade was hit by a natural disaster. Another client wondered what would happen if TD Ameritrade suffered a financial implosion. These are legitimate questions every person should ask of their custodian. Join Scott Leak, Vice President – Institutional Sales, TD Ameritrade and Rick for the answers to these questions. Click here to go to the KFG Client Only section of our website. Use your password to log in, then search under “Teleclass”. If you do not have a password or are having trouble with your current password, call Lindsay at 605-343-1400 and she will assist you.