You’re Fat and In Debt for the Same Reason – TheStreet

You’re Fat and In Debt for the Same Reason

by Rick Kahler

Over the years I’ve noticed a common trait among people with money problems: Many of those people are also overweight. Is there a relationship between overspending and overeating?

I recently read about a 2009 study by Dr. Eva Munster at the University of Mainz in Germany. Those deep in consumer debt are 2.5 times more likely to be overweight than those who have no debt, Munster found. Possible links include overeating because of the stress of debt, difficulty buying healthful food on a limited income or inability to delay gratification in spending and eating.

Based on my work with those in financial trouble, however, I suspect a deeper cause. Just as chronic money problems aren’t about money, chronic weight problems probably aren’t about food.

via You’re Fat and In Debt for the Same Reason – TheStreet.

Your Money and Your Life – The Six Basic Principles

Have you lost track of your life in the pursuit or money and “stuff”? Do you spend more time paying bills than enjoying life? If so, you are not alone. You may be suffering from a syndrome that has become known by the term “Affleunza”. Many Americans suffer from affluenza, which Wikipedia defines as:
1. The bloated, sluggish and unfulfilled feeling that results from efforts to keep up with the Joneses.

2. An epidemic of stress, overwork, waste and indebtedness caused by the pursuit of the American Dream.

3. An unsustainable addiction to economic growth.

Supporters of this term feel that the benefits of valuing material wealth are vastly outweighed by the costs. They claim those who become wealthy will find the economic success leaving them unfulfilled and hungry for more wealth. The condition is considered particularly acute amongst those with inherited wealth, who often experience guilt, lack of purpose and unconstrained behavior, as well as obsession with holding on to that wealth.

Those who have it are continuously struggling with how to make our money and our lives work. Some have called it the classic battle of “Your Money OR Your Life”. I like to think of it as “Your Money AND Your Life”. They are inextricably integrated. You cannot separate them – no matter how hard you try. You have to make them both work. And I believe that you can.

I have identified six principles that will allow you to live a life that is full, well-integrated, fully on purpose and puts money in it’s proper perspective. These six principles are:

1. Vision – know where you are going
I have been fortunate in my life. I have done a lot of traveling and have seen a lot of things – the Eiffel Tower, the Empire State Building, the Golden Gate Bridge, and extraordinary works of art in the Louvre. All of these things have one thing in common – they each were created twice – first in imagination and then in reality. A building is created in the mind of the architect before it rises into the air. A car is modeled in the mind of its master designer before it ever hits the highway. Your vacation is created in your mind before you actually get to enjoy it. Your life and financial successes will be created in your mind before they become reality. Having a clear vision of where you are going is key to a successful financial plan.

Sure – there are those people who stumble into something good, but they are few and far between. As a general rule, if you know where you are headed, you are much more likely to end up there. As the great philosopher Yogi Berra told us, “If you don’t know where you are going, you might end up someplace else.”

In his well-know classic “Alice in Wonderland”: Lewis Carroll reinforced the importance of having a clear vision with his story of Alice and the Cheshire Cat :
“One day Alice came to a fork in the road and saw a Cheshire cat in a tree. Which road do I take? she asked. Where do you want to go? was his response. I don’t know, Alice answered. Then, said the cat, it doesn’t matter.”

Where are you headed? What do you want? When do you want it? What will it take to get there? What will your life look like in 5 years? In 10 years? In 30 years?

Define your goals – and don’t just focus on things, stuff and money. Set goals for time to relax, read, maintain excellent relationships, etc.

The more crystal clear your goals are, the more useful your financial plan will be and the more likely you are to achieve your goals. A clear vision of what you want sets into motion all sorts of invisible forces that act to help you move in the right direction to achieve what you want and to have your financial plan be meaningful and successful. Although most people will agree that a clear vision is important, few people actually take the time to develop their vision. In fact, it has been said that people spend more time planning their vacation then they do planning the rest of their lives. I urge you to be one of those unusual people. Develop a clear set of written goals that will drive your life.
Take the time to know where you are going in your life.

2. Simplicity –
Thoreau said – “Our life is frittered away by detail… Simplify, simplify, simplify! … Simplicity of life and elevation of purpose.”
With complex lives, we waste time, money and energy. Simplifying our lives gives us back that time, money and energy – so that we can spend more of those things activities that are really important to us – the things we included in our vision of our ideal life.

Simplicity is fighting affluenza.

Richard Stine said “Is there not more to life than getting stuff? And getting More of it, Bigger of it, Faster of it, and then stuffing what you can’t use now somewhere so you can use it later. If this is so… what a sad routine. How really very, very sad. ON THE OTHER HAND… know for sure that you are rich, when your hunt for alternatives becomes sincere.”

Do you really need the bigger house? Or do you want it so that you can store the things that you don’t use and don’t need?

Is the pursuit of money and stuff stealing time from your family, your health and your relationships. As Richard Stine told us, you will be rich when your hunt for alternatives becomes sincere.
The most practical way of simplifying is to live within your means – and even well within your means. If you can’t afford it – don’t get it. In my opinion, this is the most important financial habit that anyone can adopt to increase enjoyment of life. Living within your means results in no debt, minimal stress and increased energy to spend on the things that mean the most to you.

3. Integrity – being true to yourself
Dictionary. COM defines integrity as “the state of being whole, entire, or undiminished.”
Spending time developing your personal vision of your ideal life helps you discover your unique dreams, gifts and talents – your purpose. Integrity is staying true to your unique self – to your values, your beliefs and your dreams. It means that every aspect of you is integrated – and is operating as one. Your actions are aligned with your values. Your values are aligned with your goals. And your goals are aligned with your unique gifts.
Too many of us are living lives that were defined for us by someone else – by our parents, by our friends or by society. The pressure to conform and the pressure to please are tremendous. Staying true to yourself if hard work – but it pays off.
Stephen Covey said: “I believe that a life of integrity I the most fundamental source of personal worth. I do not agree with the popular success literature that says that self-esteem is primarily a matter of mind set, of attitude—that you can psych yourself into peace of mind. Peace of mind comes when your life is in harmony with true principles and values and in no other way.”

4. Philanthropy – sharing your gifts

Each of us has been blessed with a unique set of gifts. Philanthropy is sharing those gifts. The word philanthropy is derived from the Greek language, meaning, “love for mankind.” Modern definitions include the concept of voluntary giving by an individual or group to promote the common good and improve the quality of life.
But, to a certain degree, we have been duped – into believing that when we give we have less. The truth is the opposite, as St. Francis of Assisi told us when we said “For it is in giving that we receive.” So many great people have told us about the personal riches that we gain when we give – that we really ought to believe it. Albert Schweitzer said, “I don’t know what your destiny will be, but one thing I do know: the only ones among you who will be really happy are those who have sought and found how to serve.” And, Winston Churchill told us that “We make a living by what we get, but we make a life by what we give.”

We are a generous nation. In fact, the United States is the most generous country in the world – and an incredibly prosperous one. As my friend Bert Whitehead says, “We are not a generous country because we are prosperous. We are prosperous because we are generous.” I believe that we are here to make the world a better place – by sharing our gifts. Philanthropy keeps the world moving forward and makes our lives worth living. Not only is it nice for us to give, some people think we are obligated to give. Albert Einstein said that “It is every man’s obligation to put back into the world at least the equivalent of what he takes out of it.”

Helping others is one of the best ways to help yourself. What you give comes back to you. Ken Blanchard said “I absolutely believe in the power of tithing and giving back. My own experience about all the blessings I’ve had in my life is that the more I give away, the more that comes back. That is the way life works, and that is the way energy works.”

The very rich can make a difference by sharing their fortunes, but all of us can help by giving of our time, treasures and talents. There are very few of us who have not been touched in some way by the generosity of others. My life was molded by those who shared their gifts with me – the scout leaders, the volunteer coaches, the Sunday school teachers, those who contributed to build YMCAs, to keep Scout Camps running, and to make little league fields available and then contributed their time to make these organizations run. I believe in “Practical Philanthropy”. For most of my life I have believed that “Love is a verb” – that what we do speaks much more loudly than what we say. Practical Philanthropy is a way of showing the love you have. Helen Keller said “Many persons have a wrong idea of what constitutes true happiness. It is not attained through self-gratification but through fidelity to a worthy purpose.” Your practical philanthropy can support your pursuit of a worthy purpose.

Share your gifts – and reap the rewards.

5. Gratitude – appreciate what you have

The first step in enjoying life is to be grateful for what we have – regardless of our circumstances.
Henry Van Dyke said: “Be glad of life, because it gives you the chance to love and to work and to play and to look up to the stars; to be satisfied with your possessions; to despise nothing in the world except falsehood and meanness, and to fear nothing except cowardice; to be governed by your admirations rather than by your disgusts; to covet nothing that is your neighbor’s except his kindness of heart and gentleness of manners; to think seldom of your enemies, often of your friends…and to spend as much time as you can, with body and with spirit. These are the little guideposts on the footpath to peace.”

Philosophers and spiritual teachers have celebrated gratitude. The world’s major religions, embrace gratitude as a morally beneficial emotional state that encourages reciprocal kindness. Pastors, parents and grandparents have long touted the virtues of gratitude. But until recently, scholars have largely ignored gratitude as a subject of scientific inquiry. This has changed with the recent study at Southern Methodist University and the University of California at Davis, which discovered that gratitude plays a significant role in a person’s sense of well-being.

The results of the study indicated that daily gratitude exercises resulted in higher reported levels of alertness, enthusiasm, determination, optimism and energy. Additionally, the gratitude group experienced less depression and stress, was more likely to help others, exercised more regularly and made more progress toward personal goals. According to the findings, people who feel grateful are also more likely to feel loved. The researchers also noted that gratitude encouraged a positive cycle of reciprocal kindness among people since one act of gratitude encourages another.

These results also seem to show that gratitude works independently of faith. Though gratitude is a substantial part of most religions, the researchers say the benefits extend to the general population, regardless of faith or lack thereof. The researchers suggest that anyone can increase their sense of well-being and create positive social effects just from counting their blessings.

To do this (count your blessings), many people recommend that you keep a gratitude journal. Just sit down once a day and write – “Today I am grateful for …” and then make a list of everything that you are grateful for. A few online gratitude resources include:

I think that Albert Schweitzer summed it up best when he said “To educate yourself for the feeling of gratitude means to take nothing for granted, but to always seek out and value the kind that will stand behind the action. Nothing that is done for you is a matter of course. Everything originates in a will for the good, which is directed at you. Train yourself never to put off the word or action for the expression of gratitude.”6. Invest intelligently
If you follow these guidelines, both your money and your life will be fine, your life will be fully on purpose and well-integrated. You have a vision and a purpose for you life, you are living simply, you are being true to yourself, you are sharing your blessings and you are grateful for all that you have. Because you are living simply, and living well within your income. You are saving 10% or more of your income for your financial independence.
The final principle is to invest this money intelligently. Intelligent investing is not difficult. It involves creating a well-diversified portfolio of passively-managed, low-cost mutual funds that is risk-appropriate for your personal situation and then rebalancing that portfolio annually to take advantage of the principle of “buying low and selling high.” Have confidence in this approach and practice discipline in adhering to it. Do not listen to the TV pundits. Do not try to time the market. Do not try to chase hot stocks or hot sectors.
You should work with a financial planner who has your best interests at heart and who does not receive compensation for “selling” products, but instead are compensated on a “fee-only” basis. The benefits you will gain from this advice will far outstrip the cost you will pay for the advice.

These are simple principles, that will allow you to live a simple and rewarding life.

Malkiel on Diversification: Buy and Hold Is Still a Winner – Seeking Alpha

Burton Malkiel — professor of economics at Princeton, author of A Random Walk Down Wall Street, and perhaps the most intelligent person in the world regarding investments — published an article in the Wall Street Journal reminding investors that nothing is more important than putting together a well-diversified portfolio, rebalancing it appropriately, and letting it grow through good times and bad. The 10th edition of his classic book will be published on January 10, and without even having seen it yet I’m ready to recommend it enthusiastically to every investor.

Malkiel’s two most forceful points are the importance of diversification (“Diversification has not lost its effectiveness”) and the importance of reducing fees and expenses (“The one investment principle about which I am absolutely sure is that the less I pay to the purveyor of an investment service, the more there will be for me”). He quotes Jack Bogle of Vanguard Group: “In the investment fund business, you get what you don’t pay for.”

via Malkiel on Diversification: Buy and Hold Is Still a Winner – Seeking Alpha.

In Mutual Funds, Is Active Vs. Passive The Right Question? – Forbes

In Mutual Funds, Is Active Vs. Passive The Right Question?Comment NowFollow CommentsWhether we’re talking about sports or investing, people have an urge to win. In investing, investors seek outperformance. Thus, most mutual fund shareholders aren’t satisfied with the performance of a humble passive benchmark such as the S&P 500 Index. Instead, they search for an actively managed fund that they believe will beat the benchmark. Gerstein Fisher examined the perennial active vs. passive question from a few vantage points and made some interesting discoveries.

via In Mutual Funds, Is Active Vs. Passive The Right Question? – Forbes.

Rick Kahler: Market timing for expert fund managers only | Financial Awakenings

“Keep your hands away from your investments and back away from the market reports.

”That pretty much sums up passive investing, the approach I have practiced for years. I’ve preached it for years, too, and did so in a recent column. The wisest way to build wealth is by investing in a variety of asset classes, setting target allocations in each asset class, and then taking your hands off except to periodically rebalance to the original target allocations.

via Rick Kahler: Market timing for expert fund managers only | Financial Awakenings.

The Broccoli and Pizza Portfolio

August 16, 2013

For some of us, it’s hard to give up on the idea that investing should be exciting. Picking stocks can be fun, after all, and there’s nothing like getting your timing right and bragging about it later with friends.

For all the accumulated wisdom about asset allocation, risk, diversification, and discipline, some people seem bound to see investing as an end in itself rather than a means to an end. For these folks, picking stocks is a hobby. They follow the gurus and soak up the financial media. Despite evidence to the contrary, they’re convinced they can build a consistently winning strategy by exploiting perceived mistakes in market prices.

Part of the reason is the human tendency toward overconfidence. For instance, we all like to think of ourselves as above-average drivers, when that’s simply not possible. Likewise in investing, many of us believe we have powers of foresight not evident in the wider population.

A Duke University study of corporate executives published in 2010 found a dismal record of prediction among a group you might think would do well. Indeed, of 11,600 forecasts for the S&P 500 over nine years, the survey found executives’ estimates of future returns and actual outcomes were negatively correlated.1 (This is a technical way of saying the executives were hopeless forecasters).

Research also suggests the tendency to trade a lot and make confident forecasts about stocks has a gender bias. Whether it’s a testosterone-driven instinct among men to boast or something else, study after study shows men find it harder to accept that they are unlikely to “beat” the market.2

For these red-meat eaters, an investment approach that advocates working with the market, diversifying around risks related to an expected return, trading efficiently, exercising discipline, and watching fees and taxes is going to sound like the financial equivalent of a broccoli and walnut salad: healthy but boring.

Surely the point of investing is to try hard and, Don Quixote-like, to charge at those market windmills? Are we not men?

There are a couple of ways of confronting this mindset. One is to hope for a change in human nature and persuade each would-be master of the universe to separate his urge for ego gratification from his need to build wealth patiently and efficiently.

This is not impossible, of course. But one suspects it would take some time and would require a lot of face saving.

A second approach is to separate the investment nest egg from the play money. If someone really wants to speculate, he can be allowed to do that with the proviso that long-term retirement money be invested the boring way.

This way, the investor can buy some (expensive) entertainment and accumulate a few war stories to share at his next golf game without compromising the asset allocation painstakingly designed for him and his family.

It’s understandable that investing is a kind of a hobby for some people. After all, this is what keeps much of the financial services industry and media in business.

But in separating the concepts of speculation and investing, you can still enjoy the occasional treat while maintaining a balanced diet.

Call it the broccoli and pizza portfolio.

1. Ben-David, Itzhak, John R. Graham, and Campbell R. Harvey, “Managerial Miscalibration,” Duke University (2010).

2. Barber, B.M., and T. Odean, “Boys Will Be Boys: Gender, Overconfidence and Common Stock Investment,” Quarterly Journal of Economics 116 (2001).

What to Realize Your Dreams? Have Fun in the Meantime!

Mindful Money Minutes — #162

 What to Realize Your Dreams?  Have Fun in the Meantime!

Sometimes we are so busy trying to realize our dreams, we forget to let go and have fun in the process.

I’m guilty of this.  I want things to happen, I work harder, and then one day I realize that I’m “working,” not enjoying.  Part of the process of life is to enjoy the journey, so don’t sacrifice everything today for chasing your dreams of tomorrow.

Sometimes you have to let things unfold and that may take a little time.

So, are you having fun today?  Having fun raises your vibration which helps you in realizing your dreams.  Find something to smile about today — listen to your favorite music, get out in nature, pet a dog, watch a funny video — anything that makes you smile, and laughing is even better!

Until tomorrow,
Janet Tyler Johnson, CFP®

Mindful Money Maven*

Do you like Mindful Money Minutes?  Want more?  Sign up for a FREE membership to the JATAJ Membership Sitea membership site dedicated to helping you live an extraordinary life.”

*Maven is described as an expert who wishes to share knowledge. That would be me!

Cash Flow | Financial Awakenings

With all the talk about tax rates and the fiscal cliff, hardly anyone has mentioned what is probably the most effective and least understood tax in the federal arsenal: inflation.

Wait a minute. Isn’t it confusing to call inflation a tax?

It is. That confusion is exactly why inflation is the ultimate stealth tax.

One of the few deficit-reducing measures that has the support of both parties and President Obama is a change in the way the government measures inflation. Our lawmakers have agreed on another in a series of adjustments to the way they calculate the consumer price index CPI. The proposed changes will understate the future CPI even more than the current formula already does.

via Cash Flow | Financial Awakenings.