UCLA Legendary Men’s Basketball Coach: The Wooden Effecting

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“Success is peace of mind which is a direct result of self-satisfaction in knowing you did your best to become the best you are capable of becoming.” John Wooden

During Coach John Robert Wooden’s career at UCLA overseeing the men’s basketball program, he led the basketball team to an 88-game winning streak and 10 NCAA championship titles. But Coach Wooden was equally revered for being a mentor and lifelong teacher.

John Wooden is a legend in basketball, but more important, he is a legend in serving mankind. He was a master teacher and mentor to many inside and outside the sport of men’s college basketball. His Seven Point Creed was a timeless gift that his father gave him as a teenager entitled “Seven Things to Do” – which Coach later coined Seven Point Creed. The Creed contained the following advice:

  1. Be true to yourself.
  2. Make each day your masterpiece.
  3. Help others.
  4. Drink deeply from good books, especially the Bible.
  5. Make friendship a fine art.
  6. Build a shelter (emergency fund, insurance, etc.) against a rainy day.
  7. Pray for guidance and give thanks for your blessings every day.

Coach Wooden also always carried his own creed on a card that read, ‘The Four Things a Man Must Learn to Do”, which are:

  • Think without confusion clearly
  • Love his fellow-men sincerely
  • Act from honest motives purely
  • Trust in God and heaven securely

Real success

Real success, according to Coach Wooden, is defined not by wins and losses, but by the daily development of yourself and giving your best in all you do. Simple as the principles might seem, truly delivering on them requires effort most won’t or aren’t willing to give.

Pyramid of Success

The Pyramid of Success consists of philosophical building blocks for succeeding at basketball and at life.

At the top of the Pyramid of Success was “Competitive Greatness” which Wooden defined as “Perform at your best when your best is required. Your best is required each day.” By pushing yourself to achieve competitive greatness—the apex of Wooden’s Pyramid of Success—you’ll not only achieve all the rewards in your own life, but also have a favorable effect on your family and everyone you come in contact with.

Wooden believed that his greatest responsibility as a coach and teacher was to turn his players into mature and honorable young men, who were well prepared for life beyond basketball, and that his student-athletes’ success should not be measured by grades and wins alone, but also by heart and character.

“Your reputation is what you’re perceived to be, Your character is what you really are.” John Wooden

Among Wooden’s maxims:

  • Failing to prepare is preparing to fail
  • Flexibility is the key to stability
  • Be quick, but don’t hurry
  • Seek opportunities to show you care. The smallest gestures often make the biggest difference

Key takeaways

Remember that success, according to Coach Wooden, is not defined by victories. Instead, he defined success as “peace of mind, which is a direct result of self-satisfaction in knowing you made the effort to become the best of which you are capable.”

Don’t be afraid to fail because if you are afraid to fail, you will never do the things you are capable of doing. If you have thoroughly prepared and are ready to give it all you’ve got, there is no shame if you fail-nothing to fear in failure. But fear of failure is what often prevents one from taking action.

Be confident but not arrogant since arrogance, or elitism, is the feeling of superiority that fosters the assumption that past success will be repeated without the same hard effort that brought it about in the first place. Thus, “I have never gone into a game assuming victory”, Coach Wooden said. “All opponents have been respected, none feared. I taught those under my supervision to do the same. This reflects confidence, not arrogance. Arrogance will bring you down by your own hands.”

Pay attention to the little things. As a coach, Wooden was known for teaching his players how to put on their socks and shoes on the first day of practice. The lesson: Every detail matters.

References:

  1. https://www.thewoodeneffect.com/success-december-cover-story-featuring-john-wooden/
  2. https://www.woodencourse.com/the-pyramid-of-success/seven-point-creed
  3. https://www.thewoodeneffect.com/wooden-life-lessons/
  4. https://www.success.com/why-john-wooden-inspires-us/
  5. https://parade.com/969195/megangrant/new-years-resolutions-ideas/
  6. https://www.success.com/words-of-wisdom-ucla-legend-john-wooden/

Purpose Driven Saving, Investing and Accumulating Wealth

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Investing with a Purpose – “Start with the Why” regarding saving, investing and accumulating wealth.  It’s about your values and life goals.  It’s about keeping your eyes on the prize and on the why you’re saving, investing and accumulating wealth.

There is an underlying reason why you invest your hard-earned money and it’s not just to earn more money.  While that may be the ultimate outcome, the “Why” or “Purpose” of investing is something completely different.  Simply put, you invest to achieve your financial goals in life. These goals are different for every person.  Maybe it’s retirement, a child’s college education, buying a beach house, or planning for the next generation. We all have our own goals, whatever they may be.  It’s your mission to plan out a clear path to achieve those goals. This is what is considered Investing with Purpose.

Purpose-driven investing thrives by instilling a sense of purpose into any investment.  People seek to achieve real-life objectives such as saving for your kid’s college or your retirement.

A firm purpose behind your saving for the future, investing for the long term and accumulating wealth will ensure that you are making the right money management decisions today to achieve long term financial success. Your risk will be optimized when your purpose for saving, investing and accumulating wealth matches your goals and timeline.

People Invest to Achieve Personal Financial Goals

“An investor without investment goals, objectives and a plan is like a traveler without a destination.” Anonymous

Understanding your values and what you want to accomplish in life is essential to “Purpose Driven” saving, Investing and accumulating wealth.  Saving, investing and accumulating wealth are deeply personal undertakings, which is why you must always start with a discussion about what’s really important to you. This helps us shape your saving, investing and accumulating wealth strategy around three key dimensions of your financial life: liquidity, longevity and legacy.

When people are asked why they invest, their answers typically are focused on family and future goals in life—buying a house, saving for emergencies, retirement, taking care of loved ones. Those are the big picture answers. But as in life, it’s often as much about the journey as the destination. Investors have specific expectations about the investment experience, as well as the outcomes.

For example, some investors want long-term growth to build their retirement nest egg, but they don’t want to feel the volatility that can occur in the broader stock market. Others want regular income distributions after they reach retirement. Still others want investments that can help them manage through changes in the economic environment, or more personal economic challenges.

Create the future you want for yourself and your loved ones. New to investing or an experienced trader. To be great and successful at any endeavor, you’ve got to sacrifice and put in the work, because anything easy is just average. To become great you have to make big sacrifices and work really hard — much above average.

Wise spending is a subset of wise investing. And, it’s never too late to start investing.

When you invest in assets over the long term, you are buying a day in the present that you don’t have to work several days in the future.

I like this quote since it succinctly defines one of the primary reason for investing … “putting away money today so sometime in the future, you do not have to work to live”. And the seeds you sow today, will reap the financial harvest to live a life in retirement with dignity and financial security.

Your actions dictate the consequences. Reaps what they sow, they suffer or benefit as a result of their own actions.

Investments are the tools we use to make your financial plan successful.  With your plan as the guide, your stock portfolio should be designed around your personal situation, needs, and goals.

Long-Term Investors Have Almost Always Experienced Positive Returns

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S&P 500 rolling returns have been almost always positive over the long-term.

One of the best ways to invest is over the long term and it’s more important than ever to focus on long-term investing. It’s long-term investing strategy where investors can accumulate wealth. By investing long term, you can meet your financial goals and increase your financial security.

94% of 10-year rolling returns have been positive since 2000.

Rolling returns are measured over consecutive periods starting with the earliest period and finishing with the most recent. For example, the period of measure for a 10-year rolling return for an investment as of the end of February, would be 03/01/2010 through 02/29/2020.

Source: Bloomberg Finance L.P. as of 02/28/2020. Past performance does not guarantee future results. The referenced index is shown for informational purposes only and is not meant to represent the Fund. Investors cannot directly invest in an index.

Investing and learning to think long-term

While many investors of all ages think of investing as trying to time the market to make a short-term return on their investment, investing for the long-term investing is one of the best ways and a proven strategy for investor to accumulate wealth over time and achieve financial security. But the first step is learning to think long term, and avoiding obsessively following the markets daily ups and downs.

References:

  1. https://oshares.com/long-term-investors-have-almost-always-experienced-positive-returns/
  2. https://www.bankrate.com/investing/best-long-term-investments/

6 simple ways to take action in your financial life without hurting your long-term goals | Vanguard

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“It’s natural and human to feel like you need to take action and “do” something–anything–to stay in control and protect your financial interests.”

Scientific studies have shown that the human brain really likes to feel in control. We’re built to take action to protect ourselves and the people we love when signs point to trouble.

That’s why when markets become volatile, it’s natural and human to feel like you need to take action and “do” something–anything–to stay in control and protect your financial interests. You might feel anxious or worried. Don’t worry; you’re not alone in feeling that way.

Taking action during uncertain times may help you feel more confident about the way things will turn out. That said, if you feel like you need to make changes to your portfolio, it’s important to make sure that the action you take won’t put your long-term financial goals in jeopardy.

Here are some things you can do to feel in control without losing sight of the bigger picture:

Run some numbers

If you feel you have to do something, consider starting with your calculator. Numbers can give you a rational way of framing things that can settle some of those anxious feelings. For example, you can analyze how market conditions have affected your portfolio and compare it with the expectations you had based on your risk tolerance. Or compare your current asset mix with your target and rebalance if it differs by 5 percentage points or more.

Speak the language of action

Describing your strategy as “staying the course” or “doing nothing” may make you feel you’re not doing enough. Instead, describe what you’re doing as fighting the impulse to get out of the market or giving your portfolio an opportunity to rebound. You’re trusting your mix of assets to get you through market ups and downs, and that takes mental strength. Give yourself credit where it’s due.

Talk it over

Consider sharing your plan of action with others. Take a look at the Vanguard Blog for inspiration. When other people show support for what you’re doing and chime in that they’re doing it too, it can make you feel good about your choices. Helping others when they have questions can also go a long way toward building your confidence.

Take comfort in history

So far, every market downturn in history has been followed by a rebound. We don’t know when it will happen or how big it will be, but there’s good reason to believe that better times are ahead.

Think about what you can control

If you’re saving for retirement, you may be able to control how much you save or how long you can save (if you have a retirement date in mind). If you’re retired, you may be able to adjust the percentage of your portfolio you withdraw during a market downturn.

Your spending habits are within your control too. Of course, it’s probably not realistic to expect that you’ll start clipping coupons, switch to generic brands, and skip your afternoon coffee run all at once. Try cutting down your spending in just one area at a time to see what works best for your life.

We recognize that this is your portfolio, and you control your asset mix. We don’t recommend changing your asset mix in response to market movement, but if you’re determined to make a change to your portfolio, make it a small one. Some examples of small things you can do: Direct one of your stock funds’ investment earnings to a bond fund, or change the asset mix of a single account rather than your entire portfolio.

Lean in

Lean on personal financial advisors to provide you with the leadership you need to make it through uncertain times. Trusting a financial expert to bring order to a situation that feels out of control can help you ease anxious feelings.

Source: https://investornews.vanguard/6-simple-ways-to-take-action-in-your-financial-life-without-hurting-your-long-term-goals/?cmpgn=BR:OSM:OSMFB:OTHERS:072920:TXL:OTM:xx::OTHR:OTH:OTS:XXX::XX&sf235757186=1

Note: All investing is subject to risk, including possible loss of the money you invest. Diversification does not ensure a profit or protect against a loss.

Personal Emergency Fund

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Emergencies—from a vehicle breakdown to a layoff—are a fact of life. When you’re faced with life’s unexpected events, you can be ready.

When things are going well financially and monthly expenses are being paid, emergency savings can seem unimportant. Yet, emergencies are unpredictable and can quickly derail your financial stability. And, a recent FINRA Study finds that 56% of people in the United States don’t have a rainy day fund that would cover 3 months of expenses.(1)

A sudden illness or accident, unexpected job loss, or even a surprise home or car repair can devastate your family’s day-to-day cash flow if you aren’t prepared. While emergencies can’t always be avoided, having an emergency fund can take some of the financial sting out of dealing with these unexpected events.

Being prepared for the unexpected – ensuring you’ve done what you can to protect yourself and the ones you love – can reduce stress and provide a good feeling. Many people at some time in life find they need to dip into savings during a rough patch, so make an effort to open an emergency savings account and try to make deposits on a regular basis.

An emergency fund are savings used to cover or offset the expense of an unforeseen situation. It shouldn’t be considered a nest egg or calculated as part of a long-term savings plan for college tuition, a new car, or a vacation. Instead, this fund serves as a safety net, only to be tapped when financial crises occur.

It is a good idea to work toward an emergency fund equal to 3 to 6 months of living expenses. But anything you can put away is better than being unprepared. Saving up emergency cash can be easier if your financial institution has an automatic payroll savings plan. These plans automatically transfer a designated amount of your salary each pay period – before you see your paycheck – directly into your account.

An emergency fund is useful for unexpected expenses, and to maintain personal financial liquidity and cash flow.

Reasons why emergency savings are important:

  • Being prepared – Issues like car or home appliance repair are common occurrences. However, since they do not happen regularly, people often overlook these costs as they create a budget. By anticipating these costs, you can be prepared for these potentially expensive items.
  • Avoiding debt – Emergency savings give you the option of dealing with the unexpected without having to take on debt. Without the cushion of emergency savings, you may be unable to pay regular bills if you face an emergency, and are more likely to take on debt.
  • Having peace of mind – Having emergency savings will give you peace of mind. Even if you can’t save much, a little money set aside may make a big difference when you need it and reduce stress.
  • Emergency savings give you the option of dealing with the unexpected without having to take on debt. Without the cushion of emergency savings, you may be unable to pay regular bills if you face an emergency, and are more likely to take on debt.

Thus, an emergency savings is a stash of money set aside to cover the financial surprises life throws your way. These unexpected events can be stressful and costly. Some of the top emergencies people face are:

  • Job loss.
  • Medical or dental emergency.
  • Unexpected home repairs.
  • Car troubles.
  • Unplanned travel expenses.

Emergency funds create a financial buffer that can keep you afloat in a time of financial need without having to rely on credit cards or take out high-interest personal loans. It can be especially important to have an emergency fund if you have debt, because it can help you avoid borrowing more.

The right amount for you depends on your unique financial circumstances. Most experts believe you should have enough money in your emergency fund to cover at least 3 to 6 months’ worth of living expenses in case of an unexpected financial emergency. This account should be relatively liquid.

For your emergency or rainy day fund, you’ll want to choose savings or investments accounts that are:

  • Safe from market risk. You want to know that your money will be there when you need it—especially in times of market or economic turbulence.
  • Easy to access. This will ensure you’ll be able to take care of your emergency quickly
  • Interest-bearing. The point of an emergency fund isn’t to make money, but don’t turn down the opportunity to earn interest on your savings.

If you lose your job, for instance, you could use the money to pay for necessities while you find a new one, or the funds could supplement your unemployment benefits.

Start small, but start.

Saving even small amounts such as $500 can get you out of many financial scrapes. Put something away now, and build your fund over time.

An emergency can strike at any time, having quick access is crucial. But the account should be separate from a bank account you use daily, so you’re not tempted to dip into your reserves.
Building an emergency fundCalculate the total that you want to save. To figure out how to add up your expenses for six months.

  1. Set a monthly savings goal. Get into the habit of saving regularly. One way to do this is by automatically transferring funds to your savings account each time you get paid.
  2. Keep the change. When you get $1 and $5 bills after breaking a $20, drop some in a jar at home. When the jar fills up, move it into your savings account.
  3. Move money into your savings account automatically. If your employer offers direct deposit, there’s a good chance they can help you break up your paycheck into multiple checking and savings accounts.
  4. If there’s no money left, cut expenses. See which parts of your monthly spending you can trim, so you’ll have cash left over to build your fund.
  5. Get supplemental income. If you have the time and willpower, get a side hustle or sell unused items from home to accumulate more money for your fund.
  6. Save your tax refund. Saving tax refund can be an easy way to boost your emergency stash. When you file your taxes, consider having your refund deposited directly into your emergency account.
  7. Assess and adjust contributions. Check in after a few months to see how much you’re saving, and adjust if you need to add more.

An emergency fund is for emergencies only. Usually it’s something that affects your health, your home or your ability to earn money.

What’s not an emergency?

  • Holidays, birthdays and mental pick-me-ups for yourself or significant others.
  • Vacations.
  • The chance to get a great deal on something you don’t need.
  • Expenses that aren’t surprises, such as car insurance.

When saving, draw a line between emergencies expenses and everything else. In fact, once you’ve hit a reasonable threshold of emergency savings, it’s a good idea to open multiple savings account for irregular but inevitable items such as car maintenance, vacations and clothing.

Everyone needs to save for the unexpected. Having something in reserve can mean the difference between weathering a short-term financial storm or going deep into debt. Emergency savings can help you handle unexpected events. With money set aside for emergencies like unexpected car repairs or sudden job loss, you can better take care of yourself and your family financially.

Building an emergency fund

Calculate the total that you want to save. To figure out how to add up your expenses for six months.

  1. Set a monthly savings goal. Get into the habit of saving regularly. One way to do this is by automatically transferring funds to your savings account each time you get paid.
  2. Keep the change. When you get $1 and $5 bills after breaking a $20, drop some in a jar at home. When the jar fills up, move it into your savings account.
  3. Move money into your savings account automatically. If your employer offers direct deposit, there’s a good chance they can help you break up your paycheck into multiple checking and savings accounts.
  4. If there’s no money left, cut expenses. See which parts of your monthly spending you can trim, so you’ll have cash left over to build your fund.
  5. Get supplemental income. If you have the time and willpower, get a side hustle or sell unused items from home to accumulate more money for your fund.
  6. Save your tax refund. Saving tax refund can be an easy way to boost your emergency stash. When you file your taxes, consider having your refund deposited directly into your emergency account.
  7. Assess and adjust contributions. Check in after a few months to see how much you’re saving, and adjust if you need to add more.

An emergency fund is for emergencies only. Usually it’s something that affects your health, your home or your ability to earn money.

What’s not an emergency?

  • Holidays, birthdays and mental pick-me-ups for yourself or significant others.
  • Vacations.
  • The chance to get a great deal on something you don’t need.
  • Expenses that aren’t surprises, such as car insurance.

When saving, draw a line between emergencies expenses and everything else. In fact, once you’ve hit a reasonable threshold of emergency savings, it’s a good idea to open multiple savings account for irregular but inevitable items such as car maintenance, vacations and clothing.

Sources:

  1. FINRA Investor Education Foundation National Financial Capability Study, 2012, pg. 13
  2. https://www.nerdwallet.com/blog/banking/savings/life-build-emergency-fund/
  3. https://www.thebalance.com/do-you-need-a-rainy-day-fund-and-an-emergency-fund-4178821
  4. Building Emergency Savings, UMBC

Loss of Smell is the Most Reliable Indicator of COVID-19.

Aside

Mounting evidence has pointed to the loss of smell as one of the most reliable symptoms of COVID-19 and a majority of COVID patients report that they experience an altered or lost sense of smell or taste, according to Harvard Health Publishing.

A diminished or loss of the sense of smell, called anosmia, has emerged as one of the telltale symptoms of Covid-19, the illness caused by the coronavirus. Of all the early symptoms, this may be the clearest signal that you’re dealing with COVID and not something else, given how rarely this occurs in other illnesses. It is the first symptom for some patients, and sometimes the only one, according to the NY Times. Often accompanied by an inability to taste, anosmia occurs abruptly and dramatically in these patients, almost as if a switch had been flipped.

“Findings show that loss of smell and taste are highly reliable indicators that someone is likely to have COVID-19 and if we are to reduce the spread of this pandemic, it should now be considered by governments globally as a criterion for self-isolation, testing, and contact tracing,” Rachel Batterham, MD, study leader from University College London and University College London Hospitals, said in a statement. “People who notice a loss in their ability to smell every day household odors such as garlic, coffee, and perfumes should self-isolate and seek PCR testing.”

A recent study conducted by University College London, who studied 590 patients in the U.K. who reported suddenly losing either their sense of smell or taste; 567 of the patients were then given coronavirus tests. Their results, which were published in the journal PLoS Medicine on Oct. 1, showed that 80.4 percent of subjects reporting anosmia—aka, the loss of smell—and 77.7 percent of those who lost their sense of taste tested positive.

“There are altogether different things going on when it comes to smell and taste loss for COVID-19 patients, compared to those with a bad cold,” Carl Philpott, PhD, of the University of East Anglia’s Norwich Medical School, said in a statement on a related study. “It means that smell and taste tests could be used to discriminate between COVID-19 patients and people with a regular cold or flu.”

Scientists know little about how the virus causes persistent anosmia or how to cure it. Some experts fear that the pandemic may leave huge numbers of people with a permanent loss of smell and taste. The prospect has set off an urgent scramble among researchers to learn more about why patients are losing these senses, and how to help them.

If you find that you’ve lost your sense of smell or taste, it’s definitely time to isolate and get a COVID test. “Loss of smell and taste is a very common COVID-19 symptom and in fact, occurs more often than fever and lasts longer—five days on average compared to only two for fever,” explained Tim Spector, MS, professor of Genetic Epidemiology at King’s College London.

References:

  1. https://bestlifeonline.com/loss-of-smell-covid/
  2. https://www.nytimes.com/2021/01/02/health/coronavirus-smell-taste.html#click=https://t.co/GimBPkiMSI
  3. https://bestlifeonline.com/loss-taste-smell-coronavirus/

Financial Planning and Market Volatility

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“The first rule of investment is ‘buy low and sell high’, but many people fear to buy low because of the fear of the stock dropping even lower. Then you may ask: ‘When is the time to buy low?’ The answer is: When there is maximum pessimism.”  Sir John Templeton

Market volatility is a fundamental part of trading and investing. When market volatility strikes, it’s common for investors to succumb to temptation and follow the herd to panic sell stocks.

Financial Planning is About Long-Term Goals

“All financial success comes from acting on a plan. A lot of financial failures come from reacting to the market.” Nick Murray

Setting financial goals—and sticking with your plan—is key to potential long-term success. Rather than letting market volatility change your long-term financial plans, it is important to stay focused on your long term goals and disciplined in your investment philosophy.

“Your financial goals aren’t set in stone,” according to Mark Gleason, senior manager of investment products and guidance at TD Ameritrade. “Circumstances change, and what you want might change. When that happens, it does make sense to change your approach.”

“Everyone has the brainpower to make money in stocks. Not everyone has the stomach. If you are susceptible to selling everything in a panic, you ought to avoid stocks and mutual funds altogether.” Peter Lynch

Just remember, the time to make adjustments to your long term financial plan are due to changes in life circumstances and should not be in response to market volatility. Here are four reasons to adjust your financial plan:

  1. Change in risk tolerance. If something has happened to change your risk tolerance, making tweaks to your financial plan can make sense. When a recent shakeup forces you to confront where you stand, it might be time to adjust your approach.
  2. New life events. Perhaps there’s been a death in the family. Or you’ve added a new baby to the mix. Maybe you’re getting married or going through a divorce. All of these life events can indicate a change in your financial planning approach.
  3. Shifting to a new life phase. Sometimes your approach needs to change as you actually start approaching your long-term financial goals. When you move from preretirement to actual retirement, your strategy is likely to change. Likewise, if you’ve been growing your child’s 529 and you’re worried about potential market volatility, you might make a few tweaks to the portfolio.
  4. Setting new financial goals. Most people set different financial goals as they move through life. Maybe you decide that buying a home isn’t the goal now; you’d rather get an RV and travel. Perhaps your target retirement age has changed. Whatever the new goal, you might need different financial planning in order to meet it.

Stay disciplined when investing.

Market volatility can cause discomfort, but it is important to realize that market volatility is short term and should not impact your long term goals and financial planning. You’ve set long-term financial goals designed to help you reach certain life milestones—and you don’t want to undo all your progress just to feel better during a market downturn.

“Why is staying the course so important?  As an extreme example, consider the investor who lost faith in the markets and cashed out on March 23, the low point in the U.S. stock market. Stocks subsequently rebounded more than 39% over the next three months; the unfortunate individual who moved to a money market fund earned a meager 0.14%. Vanguard’s analysis found that about 85% of investors who fled to cash would have been better off if they had just held their own portfolio.” (Source:  Vanguard, https://investornews.vanguard/a-snapshot-of-investor-behavior-during-a-downturn/)

Reference:

  1. https://tickertape.tdameritrade.com/investing/financial-planning-setting-financial-goals-amid-market-volatility-18160
  2. https://www.livewiremarkets.com/wires/ten-quotes-on-volatility-from-the-masters-of-the-market
  3. https://investornews.vanguard/a-snapshot-of-investor-behavior-during-a-downturn/

Creating a Comprehensive Financial Life Plan

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A Financial Life Plan can help you get on the path to financial freedom.

A comprehensive life financial plan provides a picture of your current finances, financial goals and any strategies you’ve set to achieve those goals. The plan should include details of your cash flow, savings, debt, investments, and other elements of your financial life.

Creating a life financial plan can help bring things into focus—it’s like a roadmap to help you figure out how to reach your financial goals. a clear picture of what you want to accomplish, but the details of how to make it happen.

Financial planning involves identifying financial goals you want to achieve and making sure you have the “what-ifs” covered. This can help guide you through key decisions in life and make you less vulnerable to setbacks and financial hardships down the line. You can feel more confident about financial decision-making when you have a comprehensive plan to guide you. Your financial plan might cover a number of areas, from managing debt and saving for the future to building wealth and protecting your money.

Financial Life Planning connects our financial realities with our values and the lives we dream to live. It helps both pre-retirees and retirees identify their core values and connect them with their financial decisions and life’s financial, health and emotional goals.

It is a financial planning and investing approach which helps people align their investment portfolio with their values and with the things which are important to them. Think of it like a holistic roadmap for your financial well-being.

Financial life plan focuses on the emotional side of financial planning. It considers people’s anxiety, habits, behaviors and other emotions (e.g., fear and greed) tied to investing money and accumulating wealth. People struggling with retirement and other finances really need a plan that helps them manage their attitudes, habits, behaviors, goals and resources.

“The right plan, executed faithfully, can be the difference between success and failure in any endeavor.” Brett N. Steenbarger, Ph.D., author of The Psychology of Trading

Whether you need to reduce spending and eliminate debt, increase your savings, or just refine the details, once you understand your financial mindset and associated behaviors; once you know where you are and where you need to go financially—a financial life plan can provide a more coherent sense of direction.

Market downturns and investment risk management

During periods of high market volatility and declines, financial life planning, when done correctly, assumes there will be these periods of volatility, panic selling and downturns like the equity markets are experiencing today as a result of COVID-19 pandemic. Any actions taken to significantly reduce or eliminate equity allocation could result in investors coming up short in retirement.

The risk of outliving their assets might be the biggest risk that retirees face today. With many of Americans living longer and the rising costs of healthcare in retirement, most retirees need a level of exposure to stocks in their portfolio for growth and to maintain their standard of living.

Steps to creating a Comprehensive Financial Life Plan

  1. Develop a Positive Financial Mindset
    The most important step in developing and following a financial life plan is to examine your mindset about money.
    – Are you ready to accept responsibility for changing your financial situation?
    – Do you believe that you can and will change the way you make financial decisions?
    – Can you identify at least one benefit you hope to gain by changing your financial behavior?
    Financial mindset consists of a predetermined set of beliefs, thoughts, habits and behaviors an individual has about saving by paying yourself first, investing for the long-term and accumulating wealth for financial well-being.
    Every person has a set of financial beliefs, thoughts, habits and behaviors about money and personal finance. Even if they can’t express what their thoughts and mindset are, they still exist both consciously and subconsciously. Just by observing your own financial reality and outcomes, you can begin to better understand your financial mindset, behaviors and habits.
    Thus, it becomes important to develop and nurture a positive financial mindset. Since, it is difficult to develop the good financial habits and behaviors that will be necessary to lead to an improved financial outcome and overall financial well-being without a positive financial mindset.
  2. Write down your goals
    One of the first things you should ask yourself is what you want your money to accomplish. Financial goals will differ in the length of time needed to achieve them. Be sure every goal has a specific purpose, a dollar amount that it will cost, and a realistic target date. Make sure your goals are realistic and not set too high, or frustration may keep you from reaching them.
    – What are your short-term needs? Short-term goals are priorities that can be accomplished within two years.
    – Mid-term goals are priorities that can be accomplished within two to five years.
    – What are you saving for long term? What do you want to accomplish in the next 5 to 10 years? Long-term financial goals are priorities that may take more than five years to accomplish. Most long-term goals require investing.
    It’s easy to talk about goals in general, but get really specific and write them down. Which goals are most important to you? Identifying, prioritizing and aligning your goals with your values, your goals will act as a motivator as you dig into your financial details.
  3. Create a net worth statement
    Achieving your goals requires understanding where you stand today. So start with what you have.
    – First, make a list of all your assets—things like bank and investment accounts, real estate and valuable personal property.
    – Now make a list of all your debts: mortgage, credit cards, student loans—everything.
    – Next, subtract your liabilities from your assets and you have your net worth.
    If you’re in the plus, great. If you’re in the minus, that’s not at all uncommon for those just starting out, but it does point out that you have some work to do. But whatever it is, you can use this number as a benchmark against which you can measure your progress.
  4. Know your cash flow
    Cash flow simply means money in (your income) and money out (your expenses). It will show you if you’re spending more or less than you earn.
    – How much money do you earn each month? Be sure to include all sources of income.
    – Now look at what you spend each month, including any expenses that may only come up once or twice a year. Do you consistently overspend? How much are you saving? Do you often have extra cash you could direct toward your goals?
  5. Your budget and manage your expenses
    “A budget is telling your money where to go instead of wondering where it went.” John C. Maxwell
    For most people, financial success depend solely on how much they spend. This, it is important to find out where your money is going. Your budget will let you know how you’re spending.
    – Write down your essential expenses such as mortgage, insurance, food, transportation, utilities and loan payments. Don’t forget irregular and periodic big-ticket items such as vehicle repair or replacement costs, out of pocket health care costs and real estate taxes.
    – Then write down nonessentials—restaurants, entertainment, even clothes.
    Does your income easily cover all of this? Are savings a part of your monthly budget? Examining your expenses helps you plan and budget when you’re building an emergency fund. It will also help you determine if what you’re spending money on lines up with what is most important to you.
  6. Start (or build up) your emergency fund.
    Building a strong financial foundation starts with saving for emergencies. When you have a safety net for unexpected expenses, you don’t have to worry about throwing your budget out of whack. You can be confident that you’re ready for a car breakdown, home repairs, medical expenses or other emergencies that pop up. It’s OK to start small—saving $50 in an account you’ve designated for emergencies is a good starting point. You might work up to saving $1,000 and then eventually aim to save enough to cover three to six months’ worth of living expenses in an emergency fund. An emergency fund is essential because you need to absorb life’s surprises without making things worse. Without a stash of cash, you may have to take on debt for unexpected car troubles or surprise medical expenses. And, the fund can be kept in a savings account kept separate from your regular checking account. It’s not an account that should be dipped into often — unless there’s an emergency.
    If you already have an emergency fund, consider giving it a boost. An emergency fund should consist of three to six months’ worth of expenses, which is a different different amount for everyone. If you don’t think you’d survive financially if you missed a paycheck, then your an ideal candidate for needing an emergency fund.
  7. Focus on debt management
    Debt can derail you, but not all debt is bad. Yet, freedom from debt is an achievable goal for everyone.
    Some debt, like a mortgage, can work in your favor provided that you’re not overextended. It’s high-interest consumer debt like credit cards that you want to avoid. Try to follow the 28/36 guideline suggesting no more than 28 percent of pre-tax income goes toward home debt, no more than 36 percent toward all debt. Look at each specific debt to decide when and how you’ll systematically pay it down. Do you know how much debt you currently have (credit cards, student loans, auto loans, mortgage, etc.) and how long it will take to pay off each debt at your current rate of payment? It’s important to make a long-term plan for debt repayment so you can focus your efforts on the most efficient ways to reduce your debt. This might include tackling high-interest rate debts first or loan consolidation. Create a running list of all your loan balances and interest rates so you can see where you stand today and identify ways to make a dent in your debt. For example, you might make extra payments on your loan with the highest interest rate. A financial advisor can help you review your debt and create a debt elimination plan. Use our Debt Roll-Down Calculator to find the best way to pay off your credit cards.
    If you’ve been struggling with old debt, such as credit cards, student loans or medical bills, now is the time to pay them off for good. If you’re not sure which debt to pay off first, consider the one with the highest interest. High-interest debt, like credit cards, can compound through hefty interest charges, late fees and other penalties. pay down the principal of your student loan. The sooner you pay it all off, the less burden you carry.
  8. Get your (retirement) savings and investing on track by paying yourself first
    Whatever your age, retirement saving needs to be part of your financial plan. The earlier you start, the less you’ll likely have to save each year. You might be surprised by just how much you’ll need—especially when you factor in healthcare costs. But if you begin saving early, you may be surprised to find that even a little bit over time can make a big difference.
    Spending time today to plan your path to retirement can provide you peace of mind in the future. Getting started is the most important step you can take—it’s never too early or too late to save for retirement! The key is to continue saving consistently and make retirement savings a priority in your budget. Individual retirement accounts (IRAs) and employer-sponsored retirement plans, such as 401(k)s, offer tax benefits that can help your savings grow faster. As you near retirement, you’ll want to set a strategy for tapping retirement assets.
    Your financial plan should outline your retirement savings goals and ways to boost your savings (e.g., increasing your contributions every year or when you get a bonus or raise). Run the numbers using our Retirement Planner Calculator or review your retirement plans with a financial advisor.
    Calculate how much you will need and contribute to a 401(k) or other employer-sponsored plan (at least enough to capture an employer match) or an IRA. Save what you can and gradually try and increase your savings rate as your earnings increase. Whatever you do, don’t put it off.
    And, make the savings a priority by paying yourself first. This means that instead of saving what remains after paying your monthly expenses, individuals should pay themselves first by setting aside at least 10% to 15% of their monthly income as their first expense, and then pay the rest of their monthly expenses. Paying yourself means that your savings and other financial goals are taken care of before you allow yourself to spend money on less important items.
  9. College Savings.
    Parents and guardians face the challenge of balancing multiple financial demands, including your own retirement and future health care costs as well as education expenses for your dependents. Having a financial plan helps ensure you’re taking the right steps to address all areas of your financial life. Choosing the right college savings vehicle and planning ahead to take advantage of financial aid, loans and scholarships can help make college more affordable.
    Determine how much you want to save for college and the best way to grow your savings. Our College Savings Calculator can help you estimate how much you’ll need to save.
  10. Stay invested in the market for the long-term and check-in with your portfolio regularly.
    If you’re confident in your financial life plan and investment strategy, leaving your investments alone during short-term market corrections and Bear markets could help you accumulate wealth over the long-term and help ensure your retirement nest egg.
    When was the last time you took a close look at your portfolio? There are no guarantees when it comes to investing, but it seems that fear and uncertainty tends to put investors on the sidelines when markets plunge and become highly volatile.
    Markets go up and go down down in the short-term which can have a real effect on the relative percentage of stocks and bonds you own—even when you do nothing. And even an up market can throw your portfolio out of alignment with your feelings about risk. Don’t be complacent. Review and rebalance on at least an annual basis.
  11. Make sure you’re adequately insured
    Having adequate insurance is an important part of protecting your finances and family. Insurance is essential to protect your family and your financial future. Having health insurance, auto insurance and homeowners or renters insurance protects you when you need it. You may consider options for life and disability insurance, which can help protect your family’s finances if something happens to you. Review your insurance coverage and beneficiaries, especially if you’ve had any major changes in your family and life. A total risk assessment with an insurance professional can make sure you have the right level of coverage.
    We all need health insurance, and most of us also need car and homeowner’s or renter’s insurance. While you’re working, disability insurance helps protect your future earnings and ability to save. You might also want a supplemental umbrella policy based on your occupation and net worth. Finally, you should consider life insurance, especially if you have dependents. Review your policies to make sure you have the right type and amount of coverage. You never know what the future may hold—but it helps to be prepared for anything. What if you or a loved one experienced major medical issues or needed assisted living or nursing home care? Making decisions about long-term care can be stressful and emotionally difficult, and the costs can drain your family’s finances.
    You may want to explore options for long-term care insurance to help pay for long-term care needs such as nursing home care. You may also decide to write an advance care directive regarding your wishes for medical care and name a power of attorney to make financial decisions on your behalf if you’re unable to do so.
  12. Know your income tax rate
    Taxes are one of the most insidious destroyers of wealth, along with debt. You should make sure you’re prepared for the annual tax season and review your withholding, estimated taxes and any tax credits you may have qualified for in the past. The IRS has provided tips and information; take advantage of tax deferred accounts like IRAs and 401(k)s can help you save money on taxes and accumulate wealth more efficiently.
  13. Create or update your will and estate plan
    At the minimum, have a will—especially to name a guardian for minor children. Also check that beneficiaries on your retirement accounts and insurance policies are up-to-date. Complete an advance healthcare directive and assign powers of attorney for both finances and healthcare. Medical directive forms are sometimes available online or from your doctor or hospital. Working with an estate planning attorney is recommended to help you plan for complex situations and if you need more help.
  14. Invest in yourself and continue to learn
    “An investment in knowledge pays the best interest.” Benjamin Franklin
    While college is a great self-investment, there are other ways you can invest in yourself. Consider taking courses in a field or industry you’re interested in pursuing.
    If you’ve been contemplating a career change, use your money to invest in that switch. If you need capital to start your own business, this could be your chance. Also consider using it to give yourself a much-needed break. Whether this is a vacation fund or simply money for a massage or spa day to recharge, reset and refocus. Focused on what would improve your well-being in the long-term, not a quick fix. Continuous learning and growth are the key.
  15. Three Pillars (financial wealth, physical health and emotional well-being)
    Financial assets like stocks, bonds and real estate are forms of personal wealth. However, Americans need to also focus their attention on staying emotionally and physically healthy. Self-care is paramount in all three facets of life which include financial wealth, physical health and emotional well-being. Eating a balanced diet, exercising, getting enough sleep and connecting regularly with family and friends, are essential to live a purposeful and fulfilling life.
  • Take control of your future with a financial plan for the next five, ten or more years.
  • Insurance Protection. Ensure you have adequate Medical insurance and consider purchasing Long-Term Care insurance.

References:

  1. https://www.brownleeglobal.com/financial-life-planning/?preview=true&frame-nonce=60592dd178
  2. https://www.schwab.com/resource-center/insights/content/10-steps-to-diy-financial-plan?SM=uro#sf228155652
  3. https://www.cnet.com/personal-finance/how-to-invest-your-tax-refund/
  4. https://www.moneymanagement.org/credit-counseling/resources/financial-literacy-month

Financial Literacy and COVID-19 | Charles Schwab Foundation

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“89 percent of respondents to a Charles Schwab’s survey believe a lack of financial literacy contributes to larger social issues—from poverty, to fewer job opportunities, to wealth and gender inequality.” Carrie Schwab-Pomerantz

  • Even in the wake of a global health crisis, Americans value financial education.
  • An overwhelming majority of Americans believe that a lack of financial literacy contributes to larger social issues.
  • Americans want our schools to take the lead in providing our youth with a financial education.

The impact of financial illiteracy is not lost on the American public. 89% of Americans agree that lack of financial education contributes to some of the biggest social issues our country faces, including poverty (58%), lack of job opportunities (53%), unemployment (53%), and wealth inequality (52%).

“Financial illiteracy is insidious. The antidote is financial education, which gives people the skills they need to make smart money decision and can help improve their lives.” Carrie Schwab-Pomerantz, president of Charles Schwab Foundation.

Americans indicated they wish they had better money management skills, according to a Charles Schwab survey. When asked what they would teach their younger selves about personal finance based on what they know today, Americans said the value of saving money (59%), basic money management (52%), and how to set financial goals and work toward them (51%).

From the survey, it is apparent that every person in America should be taught the fundamentals of money management including budgeting, saving, avoiding debt, setting financial goals and investing.

“The pandemic has underscored just how critical basic personal finance skills are in preparing for the unexpected. Financial literacy is a survival skill that everyone needs.” Carrie Schwab-Pomerantz

Carrie Schwab-Pomerantz recommends five key steps every American can take to help shore up their finances during this period of global health crisis and economic uncertainty.

  • Start an emergency fund (or add more to it) to help protect yourself against an unexpected drop in income or expense shock. Set aside whatever you can – every little bit counts. Try to aim for $1,000-$2,000 to get started, and then work your way up to 3-6 month worth of essential expenses over time.
  • Create a budget to help you prioritize and assess your financial resources. Self-isolation has led to different spending patterns for many people, including cutting back on what we may have previously thought of as “essential.”
  • Create a financial plan to help you navigate from where you are to where you want to be. You don’t need to have a lot of money to need a financial plan. Consider it a roadmap to reach your financial goals, whether that’s to pay off debt, build savings, or make a large purchase.
  • Ask for help if you’re struggling. Given the scale of this economic crisis, the government, lenders and creditors are trying to work with borrowers through this difficult time. Don’t hide from creditors – that can make things worse.
  • Focus on what you can control. You can’t predict or control the market, but you can control how you manage your investments, your savings rate, having a financial plan and how you react to events.

“The need for financial literacy is especially urgent for women and minorities, who continue to face unique challenges at home and in the workplace,” said Schwab-Pomerantz.

However, financial literacy isn’t a cure-all, but it is an essential key to unlocking doors to opportunity and financial security.

References:

  1. https://www.schwab.com/resource-center/insights/content/americans-want-financial-literacy-now?SM=URO#sf237483690
  2. https://pressroom.aboutschwab.com/press-releases/press-release/2020/Charles-Schwab-Financial-Literacy-Survey-Exposes-Grave-Impact-of-Lack-of-Financial-Education-During-COVID-19/default.aspx

Focus and Mindset

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“Anything is possible if you have the mindset and the will and desire to do it and put the time in.” Roger Clemens

Financial mindset consists of a predetermined set of beliefs, thoughts, habits and behaviors an individual has about saving by paying yourself first, investing for the long-term and accumulating wealth for financial well-being.

Every person has a set of beliefs, thoughts, habits and behaviors about money and personal finance. Even if they can’t express what their thoughts and mindset are, they still exist subconsciously. By observing your own financial outcomes, you can begin to better understand your financial mindset, behaviors and habits.

Without a positive financial mindset, it is difficult to develop the good financial habits and behaviors that will be necessary to lead to an improved financial outcome and well-being.

A positive financial mindset means knowing that if you just hang in there long enough, things will work out financially with the correct financial habits and behaviors. Even if you partake in one positive action each day, your confidence and belief will grow, along with your wallet.

Focus and Thoughts

“If you’re trying to achieve, there will be roadblocks. I’ve had them; everybody has had them. But obstacles don’t have to stop you. If you run into a wall, don’t turn around and give up. Figure out how to climb it, go through it, or work around it.” Michael Jordan

Mindset is basically about your thoughts and a harbinger of what you focus on in the short and long term.

When you focus a thing, be it positive or negative, your mind has a tendency to heighten your attention on that thought. As a result, by focusing on one thing, such as the fear and uncertainty caused by the COVID-19 pandemic, you have a tendency to miss other things good and positive happening around you. Essentially, your focus becomes the filter in which you observe your world.

Focus on opportunities

“No matter how dark things seem to be or actually are, raise your sights and see the possibilities, always see them, for they’re always there.” Norman Vincent Peale

This too will pass is a common refrain worth remembering in trying times like these created by the pandemic. History and good old common sense tells us that crises always come to an end and this COVID-19 will be no different.

We can control our thoughts, mindset and where we focus our attention. Thus, it behooves us to focus our thoughts on those things we can control and to think about what we need to do now, in the short term, to survive the current storm and prepare our paths for future opportunities and better days.

It’s about doing things now, in the downtime, in order to be prepared and prime to operate in the uptime. It is about laying the groundwork for tomorrow’s long-term financial success during today’s challenging times.

By focusing on the negative and on things outside our control, we can miss the other things and opportunities happening around us.

Positive Attitude

“Our attitude toward life determines life’s attitude towards us.” John N. Mitchell

Nothing is going to change in your life unless you change a negative attitude and mindset. And, you can change your life almost immediately if you can change your attitude and mindset. Many have said that, “A bad attitude is like a flat tire. If you don’t change it, you’ll never go anywhere.”

Furthermore, John N. Mitchell said it best when he said that, “Our attitude toward life determines life’s attitude towards us.” We’ve all heard about the power of our attitude, and that it’s our attitude can determine the altitude of your success in life.

References:

  1. https://www.verywellmind.com/what-is-a-mindset-2795025
  2. https://www.cnbc.com/2020/04/30/why-you-should-create-a-daily-money-mindfulness-practice.html
  3. https://graciousquotes.com/norman-vincent-peale/