Rick Kahler's Financial Awakenings

What does financial wellness look like?

A lot is written on the symptoms and consequences of poor financial health. These days we are surrounded by news stories of financial disease in individuals, corporations, and nations. Financial instability seems to be the new normal.

A recent survey done by Jean Chatzky found that 15% of US citizens are insolvent and 55% live month-to-month. Only 27% are “financially sound.” Just 3% are considered wealthy, which is defined as having a net worth of over $500,000. This is a very low threshold; I’ve yet to talk to anyone worth $500,000 who considers themselves wealthy.

The signs of personal financial disease are easy to spot: spending more than you make, not having one year of living expenses saved, not funding your retirement plan, no (or negative) net worth, a history of poor money decisions, and chronic emotional distress around money.

What we don’t hear much about are examples of financial wellness. Continue Reading »

As I cleared our dinner table the other night, I scraped some of my uneaten veggies into the trash. I immediately heard my mother saying, “There are starving kids in India that would give their right arms to eat what you are throwing away!”

She had a point. Affluence inherently breeds a certain level of waste. So do negligence and inefficiency. I could easily have avoided wasting those veggies by reducing the amount I originally scooped onto my plate. When I dumped them into the trash, I was also wasting more than food. I was literally “throwing money away.”

As a financial planner, I regularly consult with people who have been throwing real money into the trash on a daily basis. Here are the top areas where people waste money and what they should do instead:

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CD’s have a viable place in most portfolios, but they aren’t about return.  CD’s are more about insurance than yield, at least in this financial environment.  To learn some valuable tips about using CD’s in your portfolio, read Jean Chatzky’s interview with Rick, postedon DailyFinance.com.  You’ll find the  full article at DailyFinance.

Here’s an informative article on how people waste their money found in The Faster Times.  Sheryl Nance-Nash interviewed several money experts on ways people twitter away their hard-earned cash. One of the many areas she covers is advising people to look hard at investment products for hidden fees and commissions.

This includes mutual funds, insurance, structured notes, limited partnerships and annuities. “Cost can go as high as 10 percent of your initial investment to 5 percent a year. When you consider that an average return may be 7 percent, subtracting 5 percent in costs leaves a paltry 2 percent return to the investor,” points out certified financial planner Richard Kahler of the Kahler Financial Group.

 To someone investing $500,000, the cost of a bad investment could be $50,000 up front and $25,000 a year. “Of course, all of that is buried in fine print and not openly disclosed to you if you are dealing with a broker,” he adds.

You can read the rest of the article and Rick’s advice here.

So much for the silver lining. Most of my financial planning peers and I hoped the upside of the worst recession since the Great Depression of the 1930’s would be a newfound fervor to save.

Not exactly. The economic crisis of 2008 apparently didn’t last long enough to create significant change in attitudes about personal saving. The amount Americans save out of their paychecks was almost zero at the peak of the credit bubble. Near the bottom of the recession it rose to 6.4%. In April, it fell to 2.7%, its lowest level since the crisis began in the fall of 2008.

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US Consumers must feel the good times are here again. The U.S. saving rate dropped to 2.7%, its lowest level in two years.  At the peak of the market in April of 2008, the average U.S. saving rate was 0.8%. Worried consumers increased their savings rate to a high of 6.4% in May 2009, but the savings rate has gradually declined as consumers became more confident. During the early 1980′s, the average U.S. saving rate was about 10%.

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I recently helped my 13-year-old daughter open her first bank account, complete with checks and a debit card. We have agreements in place on her use of the card and the checking account, and we will go over her statements monthly.

This is a first step for her in learning good money management in the adult world. As she gets older and begins earning more money and making more of her own decisions, she’ll have more freedom in how she uses her account. By the time she gets to college, we hope she’ll have enough experience to manage wisely on her own.

One thing she shouldn’t be able to do as a college student is use a credit card to get into debt over her head. Continue Reading »

Hear what Rick said about what you could be doing today to get ready for the big changes coming tomorrow.  The new health care bill will affect the daily lives and wallets of millions of Americans. While we don’t exactly know what that impact will be, it isn’t too early to consider some of the possibilities and start planning personal strategies to deal with them.  Click here to listen and view this insightful presentation.

Good money habits start in childhood, says ParentDish.com in an article written by Meredeth Cardona. She states, “a survey from the bank HSBC found most people who described themselves as “active savers” started young: 57 percent said they had been saving since they were children and 51 percent started after getting their first job. More importantly, 73 percent said it was their parents who taught them the value of saving money.” Continue Reading »

In a couple of recent columns, I have suggested that building long-term financial health means developing the habit of living on as little as 30% to a maximum of 70% of your gross earnings.

I can hear the comments now: “Rick, you’re a fat cat financial planner who doesn’t have a clue. Why don’t you try living on eight bucks an hour and see if you can save anything?” Continue Reading »