Can Bookkeepers Live With Spenders?

166008950 [Converted]-editIn a typical marriage, there are usually two types of people: one spender and one bookkeeper.  This is not always the case, but since we tend to marry our opposites, chances are if you’re a spender, you married a bookkeeper, and vice versa.

Spenders, see financial security differently than bookkeepers.  To the spender, earning a regular income is seen as financial security.  As long as there is a paycheck and someone else pays the bills, they are content to keep spending. .

The bookkeeper is the opposite.  To them, financial security is money in the bank.  Each bill is carefully analyzed to minimize the effect it might have on their bank account.  The bookkeeper wants to protect the balance in the account at all costs, and marriage to a spender-who shows no appreciation for the mathematics of spending less than is earned-can be extremely stressful.

When a bookkeeper is married to a spender, the spender often spends money or assumes a financial obligation, and then drops the bill off with the bookkeeper for them to deal with it.  The bookkeeper at some point feels pressure to confront the spender to stop them from spending, but they oftentimes prefer to avoid such confrontations. Spenders often incorrectly assume they are earning more than they are spending, and when confronted about excessive spending, they can accuse the bookkeeper of poor bookkeeping.

Much of the time, the two different philosophies balance each other out.  The spender gets what they want and the bookkeeper gets what they want, so long as there is a working relationship between the two.

But when that working relationship breaks down, financial chaos can—and most likely will—ensue.

So what can be done to maintain a healthy working relationship?  The spender needs to sit down with the bookkeeper and understand the finances.  Typically, the spender just knows when the money comes in and then spends it.  The bookkeeper then has to make sense of that spending and make sure it’s sustainable.

Ultimately, there needs to be a calm, rational conversation about savings goals and what level of spending will support those goals.  I recommend spender and bookkeeper spouses sit down with one another at least once a month to discuss the family finances. This will ensure the spender sees what the bookkeeper is seeing. WARNING: The spender needs to maintain a level of interest and empathy for the bookkeeper’s role during the meeting; bookkeeping is more stressful and important than the spender usually realizes. The bookkeeper shouldn’t attack the spender, and the spender shouldn’t accuse the bookkeeper of being a financial “buzz kill”.

Remember, if you’re married to your financial opposite, it’s a partnership, not a war zone.  Bookkeepers aren’t magicians; they can’t create money out of thin air to cover the spender’s expenses. Make a budget that allows for spending but also allows for savings.  I also recommend that both the spender and bookkeeper be allocated monthly Mad Money that allows each spouse the ability to spend (or save) without acquiring the permission or involvement of the other.  Mad money alleviates a lot of marital financial tension; make sure it is large enough to alleviate stress but small enough to ensure all family financial goals and obligations are met.

Yes Virginia, spenders and bookkeepers can live under the same roof, and truth be known, they probably should.

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Mad Money: Spending Money Without Getting Permission From your Spouse

marriage money-saidaonline“I am 40 years old; I don’t need to get permission to spend money on myself!”

Over the years, I have seen marriages fall apart as both spouses spend money on expensive items the family can ill afford.

We know one couple where the husband went out and bought an expensive home entertainment system and the wife retaliated by buying fine bone china and a complete dining room set; they aren’t married any more.

Every family’s income is finite, and most couples agree on the majority of their expenses (i.e., mortgage, gas, groceries, etc.); however, couples will often fight over items where they don’t share passion. The husband may want a hunting rifle, but the wife might enjoy buying clothes. It can be stressful to ask your spouse to allow you to spend family money on things they don’t find valuable. The solution to this challenge is “mad money.”

Mad money is a line item in your family budget, and every month it gets funded in the same way as  food, housing, utilities, etc.. Think of Mad Money as an allowance.  Each month, you fund, say, $100 each.  That money can be spent  by each spouse on anything, no questions asked.  If the wife wants to buy an expensive pair of shoes or wants to go out to eat with friends, so be it.  If the husband wants to use part of that money getting a sports pay-per-view channel or upgrades for the engine of his muscle car, that’s no problem.

Money carries with it great emotional weight.  We see money as our key to doing just about everything, and not having money essentially means we can’t do the things we want, be that buying new shoes, eating out at a restaurant, or seeing a movie with friends. When your budget does not allow for these impulse purchases, it can lead to stress.  I’m sure any married couple can recall at least one argument over the number of shoes a wife continues to buy, the amount of money a husband spends hunting trips, etc.  These often result from one spouse seeing the other spouse’s purchase as frivolous.  Mad Money solves this issue.

That’s the beauty of Mad Money.  It forces people to prioritize what they actually want, while letting them “waste” a little on trivial things that we all are guilty of wanting.  And the best part is, since Mad Money is in the family budget, you can spend every penny without any guilt and without having to justify your purchase to anyone else.Getting-married-Dont-fall-for-money-myths-BN106A2H-x-large

In short, buying things we want can be cathartic, but without planning, it can easily break the most carefully-planned budget.  Mad Money ensures you are spending within your means while giving you all the emotional release of getting things we want without having to get permission.

Aristotle And The Friendship Of Virtue

One of my favorite books is Aristotle’s Nichomachean Ethics, and it is second only to the Holy Bible as my most often used reference for how to live an excellent life.  Awhile ago the weather was particularly nasty,  so I spent the afternoon thumbing through Book VIII, which is Aristotle’s treatise on friendship, and I jotted down a few notes. Recently a friend remarked on Facebook he is doing a study on friendship and he was soliciting for some resources, so I sent him the following.

Aristotle believed that friendships could be broken into three different types: (1) friendships of pleasure; (2) friendships of utility; and (3) friendships of virtue. While each type of friendship involves individuals displaying goodwill and decency towards each other, the reason why each type exists differs greatly.  Aristotle suggests that  understanding what a friendship of virtue is and how to experience one is an important element of a life well lived.

Children_marblesThe first type of friendship is that of pleasure. The friendship of pleasure is based on the foundation that some individuals simply enjoy each other’s company. As children, it is much more fun to play in the sandbox with someone else that it is by yourself. Adolescents and young adults enjoy spending time with one another, and mutual interests are often the magnets that draw them into a relationship. Sometimes it is a sports activity, a school club, a particular genre of music, or simply two individuals who feel better in each other’s company that draws two people together. The single purpose of friendships of pleasure is the enjoyment each party takes from the relationship. Because this type of friendship requires both parties to experience satisfaction, friendships of pleasure usually end when the pleasure diminishes. Aristotle suggested that friendships of pleasure are often found in adolescents, but I believe many adult friendships are centered on pleasure alone. This is a major reason why so many American marriages end in divorce.

Aristotle called the second type the friendship of utility, but I will call it the friendship of “usefulness.” The friendship of usefulness is based on the mutual profit both individuals gain from the relationship. This is the type of friendship we often experience in the marketplace, where we are gracious with the city clerk because we believe civility will encourage the clerk to help us, and the clerk is pleasant in return so we won’t complain to her superior. We also practice friendships of usefulness with our co-workers, believing it is better for all parties when we act decently towards one another. While we 1024px-Zonaspace-coworking-collaborationmay actually enjoy each other’s company, friendships of usefulness only last as long as the need for mutual gain. If the city clerk retires and no longer provides us service, we don’t go out of our way to maintain the relationship. Likewise, while many of us like our co-workers, we don’t usually spend our leisure time with them in addition to our work hours. Aristotle believed friendships of usefulness were demonstrated most often by older adults such as, individuals entwined in a business deal, neighbors sharing a common property line, or the relationships between supervisors and employees. Like that of pleasure, friendships of usefulness are based on what individuals take from the relationship.

The last type of friendship Aristotle describes is the friendship of virtue. Friendships of virtue are experienced when two individuals enter into a relationship for the single purpose of bringing good to one another. Unlike friendships of pleasure, where the goal is to experience enjoyment, or friendships of usefulness, where the goal is to achieve mutual profit or peace, friendships of virtue focus on the well-being of the other person. Pleasure and usefulness are often experienced in friendships of virtue, but they are merely incidental. Friendships of virtue are focused on what the parties bring, rather than take, from the friendship.

It's_all_about_loveAristotle explained that friendships of virtue can only be practiced by people of excellent character.  He believed that at least one person in the relationship had to be habitually virtuous and the other person must possess the potential and willingness to be virtuous.  Even in friendships where the virtue of the parties is unequal, the willingness of the more virtuous to teach and share with the less virtuous results in the increased happiness of both.  Like parents who love their children, or mentors who guide their protégés, the givers profit from the relationship as much as the receivers.

Friendships of virtue are the highest form of friendship.   When two individuals covenant to help one another towards excellence, the benefits are extraordinary. While friendships of virtue are certainly magnificent, Aristotle laments that they are also extremely rare.  People are lucky in their lifetimes to experience even one friendship of virtue. This is due in part because most people regrettably are not virtuous.

Although rare, friendships of virtue are not nonexistent.  In my community I am surrounded by excellent people who are engaging in friendships of virtue.  There are husbands and wives striving to out-serve one another. I know mentors who selflessly teach their charges to be excellent, and I worship with people who give more than they take from their relationships.  While it appears at first glance that such relationships are drudgery, the result is the exact opposite.  Excellent people engaging in friendships of virtue are happier and more content.  I consider myself fortunate to have so many examples of friendships of virtue to observe and emulate.

Years ago I had a pastor who regularly taught us that:

“Love is the demonstrated preference for the well- being of another, above ourselves, even at great personal expense, with the help of the Holy Spirit.”

This definition of love I believe is the quintessence of the friendship of virtue, and I believe Aristotle would approve.

The 1/3 Rule: How to Organize Your Estate For A Stress Free Retirement

Too much of a good thing can rapidly become a bad thing, and  I have noticed investors entering retirement with too many assets they like and not enough assets they need. This is why I created my “1/3 Rule” for helping clients identify a target allocation for their retirement assets.

Here is the 1/3 Rule:One third rule

1) No more than 1/3 of estate’s value in “user assets.”
2) No more than 1/3 of estate’s value in illiquid assets like rental properties and/or business holdings; 3) At least 1/3 of estate’s value in liquid investments like cash, stocks, bonds, mutual funds, retirement plans, annuities, etc..

For many Americans, their most valuable retirement assets  are their “user assets,” which include primary homes, vacation homes, automobiles, campers, boats, etc.. User assets are things we own and use, they have values and can be sold, but they generally don’t create income for us in retirement. In fact, I usually treat user assets as liabilities because they cost money to own and operate them.   There are several reasons why people tend to accumulate too many user assets in retirement, and here are just a few: 1) it is preferable to eventually own our homes than be lifelong renters; 2) the tax code provides several  incentives for owning a home but none for renting; 3) HOMEhome prices have appreciated over the last several decades as interest rates have been falling; and 4) we have more time and money on our hands when the kids grow up and leave the nest, and we can quickly accumulate campers, boats, snowmobiles, vacation properties to fill the void.  If we are not careful, we could end up in retirement with 80% or more of our net worth tied up in user assets. This can cause a real retirement pinch if we are living on a fixed income of social security and a possible pension but our property taxes, insurance, and maintenance costs continue to increase while the values of our toys decrease.   In order to enter retirement with minimal stress, I  recommend clients  aim for no more than 1/3 of their net worth allocated to their homes and toys.
Some of my clients have successfully owned small businesses and rental properties during their working years, and because they are familiar with both, they often end up having a large percentage of their net worth in these mollys_front_w_wraptypes of enterprises. This  can cause problems if the economy turns sour near a planned retirement date , especially if a business or a rental property must be sold in a hurry.  Additionally, businesses and rental properties can be a real hassle to pass on to heirs who must manage or sell them, especially if the investments and/or heirs are located outside your state of domicile.  Because these types of investments can be illiquid, (difficult to sell),  I often recommend retired clients  keep no more than 1/3 of their net worth in businesses or rentals.

Finally, I encourage clients to shoot for having no less than 1/3 of their assets in liquid (easy to sell) investments such as cash, stocks, bonds, mutual  funds, etc. by the time they retire.  I suspect the main reason why people retire with too little in liquid assets is they are too easy to convert into cash in a pinch. When people need money for a kitchen remodel or a daughter’s wedding, it is much easier to sell $30,000 of stock than it is to sell $30,000 of a rental property or a piece of your home.  If people are not careful, they can end up with too much money invested in their homes or savingsbusinesses and not enough in income producing liquid assets. Unfortunately, many people got caught up in the real estate bubble in the early 2000’s, and they found out in 2008 how dangerous it could be having most of their net worth invested in businesses and real estate and too little in liquid assets.  To avoid this danger, be sure to invest in your employer’s retirement plan,  your own IRA’s, or in self-directed investment accounts such as those offered at Coco Enterprises.

For young investors, it is not unusual to have most of their net worth in their homes or their businesses; however, I recommend they keep an eye on their net worth statements to ensure they  don’t become under-invested in liquid investments. Like steering an aircraft carrier into a harbor, it is easier to steer your retirement assets towards the 1/3 rule if you start making your adjustments well before you are at your destination.  If you are a business owner, start planning an exit strategy, and if you own rental properties, be sure you aren’t too heavily invested.   If you need guidance on how to use the 1/3 rule to reduce stress and uncertainty in retirement,  give us a call to schedule an appointment.  We can help you develop a plan to organize your assets to ensure your retirement will be as good as you imagine.

Incorporate a Healthy Diet into your Healthy Budget

USDA food costsIf you are one who follows a monthly budget, no doubt a majority of your expenses come from the food items in your grocery cart. Monthly stock up trips are punctuated by weekly if not daily grocery runs for the forgotten item or the perishable items that need to be used right away.

The USDA publishes a monthly food cost report, which provides a snapshot of the typical cost of food for households of different sizes, individuals, and spending levels.

You can use this report as a guideline for setting your food spending level.

When buying food you need to keep your priorities in check. If you stick to these 4 guidelines you will have a healthier wallet and waistline:

Priority 1: Nutrition: your food choices should focus on nutrient dense foods consisting of high quality proteins, vegetables, fruits, whole grain carbohydrates, good fats ( those with polyunsaturated and monounsaturated fatty acids) fiber, vitamins and minerals. The USDA recommends making ½ your plate fruits and vegetables at each meal, at least ½ of your daily intake of grains whole, and choosing from a variety of protein sources including seafood, beans and peas, and nuts as well as lean meats, poultry, and eggs.

Priority 2: Cost versus Value. Be careful where you put your money. That bag of chips or 16 pack of soda on sale is a marketing tool known as a loss leader used by stores to bring you inside. Keep in mind buying nutrition is your first priority; therefore, put your dollars towards getting the most bang for your buck nutrition wise. To fight the urge to splurge on junk food when you see it on sale, have a list of nutritious alternatives with you when you go grocery shopping that will give you the will power to resist the marketing pressure.

seasonal eatsPriority 3: Flavor. Being cost-conscious does not necessarily mean sacrificing flavor. Fresh is best. Buying fresh fruit and vegetable items that are seasonal will deliver the most flavor to your tastebuds with the lowest impact on your wallet. Go in with another family and buy a whole cow, or if you enjoy fishing, bring home your fresh catch. With a little bit of imagination, anyone can eat great tasting food that is packed with nutrition void of additives.

Priority 4: Convenience: Rely less on preservatives, hidden sugar, and fat-laden prepackaged and frozen foods. While quick and convenient, you are paying for the processing more than the actual nutrients derived from the food. Cook from scratch more often; control your ingredients; and cook in batches that you can freeze and save for another meal later.

Many Americans have their priorities inverted. They choose foods that are convenient and tasty, yet they sacrifice their finances and health in the process; however, with the above priorities in mind and your nutrition needs forefront, you can be assured you are feeding yourself and your family optimally.

How Does Greece’s Money Problems Affect US?

1628271-1424185220617286-AlphaIdeasIt seems like every day I come to the office and look at the news there is a story about Greece and how it is affecting our markets. With an economy only 1.4% the size of the United States, how does Greece obtain so much interest? Today I want to illustrate three reasons why tiny Greece has become so important in market news lately.

The first reason why Greece’s financial woes are affecting world markets (including U.S. markets) is because of fractional reserve banking.  Most of the world’s financial systems operate using fractional reserve banking. This is a complex system where central banks actually create money out of thin air.  For example, If you were to deposit $100,000 into your local bank, through fractional reserve banking,  potentially $900,000 of new money could be lent out to borrowers. If the bankers were to loan this new $900,000 out to borrowers who don’t pay back the loans, the prudent depositor would be justifiably concerned about his $100,000 deposit.  Similarly, this is what has happened throughout the European banking community. Millions of European citizens have made deposits into European banks, and the banks lent some of those funds created through fractional reserve banking to Greece. If Greece doesn’t pay back their loans, it can have a catastrophic cascading effect on the safety of millions of European deposits.

While Greece isn’t alone in having a national debt problem, their situation appears to be worse  than most other western 1200x630_298422_greece-peaceful-anti-austerity-rally-icountries. With an annual economic output of approximately $238 billion, the Greek government owes over $360 billion to various lenders, such as the International Monetary Fund (IMF), The European Central Bank (ECB), the European Financial Stability Facility (EFSF), and various other European financial institutions. Since the global financial crisis of 2008, Greece has been pressured by its many lenders to adopt austerity programs, which is a fancy term for:  “Stop spending more than you collect in taxes!” The lenders want to get paid, so they are demanding Greece reduce its public spending and raise taxes on their citizens. The Greek government is arguing that prolonged austerity will lead to a reduction in  their economic output making tax collection more difficult. The citizens of Greece have been less than enthusiastic about reductions to their government pension checks or liberal social entitlements, and being a social democracy, they are voting accordingly. As a result, Greece has threatened to default on its loans. If they do, it will have a catastrophic cascading effect on the integrity of the European banking system.


The second reason why Greece is so important is there is little consensus on how Greece should be treated if they default on their loans. If they are treated with kid gloves, other countries (such as Italy, Spain, and Portugal) operating under similar lender imposed austerity programs, may choose to default as well.  While the European banking system might be able to absorb Greece’s default, it might not be able to absorb multiple defaults by nations whose citizens have grown weary of living under austerity. The final concern of a Greek default is the strengthening of the U.S. dollar relative to the euro. As investors and governments continue to lose faith in the Euro out of fear of a Greek default, they have been flocking to buy U.S. dollars. When the demand for U.S. dollars increases, so does its price in currency exchanges. While a strong dollar is good for tourists vacationing in Europe, it is horrible for any American company that wants to sell their goods and services there. All other things being equal, American companies will find their prices less competitive in Europe if the dollar continues to get stronger relative to the euro. If American companies see a decline in their exports to Europe they will experience lower profits and declining stock prices.
Investment markets hate uncertainty, and the actual impact of a Greek default is difficult to predict. Whenever markets experience uncertainty they tend to react with pessimism.  In the short-term, Greece’s financial problems could have a negative effect on U.S. stock prices; however, history has shown that individuals and nations rarely focus their attentions on fixing small problems until they become big ones, and it isn’t usually until big problems become crises that we actually demonstrate the resolve necessary to implement distasteful solutions.  Therefore, a Greek default might actually be the catalyst for long-term positive change in central banking protocols.

True and Proper Worship

Therefore, I urge you, brothers and sisters, in view of God’s mercy, to offer your bodies as a living sacrifice, holy and pleasing to God—this is your true and proper worship.~ Romans 12:1

pg-worship-570x194When it comes to worship, churchgoers love to talk about the who, when, where, and what of worship, but do we really know HOW God wants us to worship?

When the occasion arises that we are in search of a new church to attend, we often focus on the experience of worship. Was the music jazzy enough? Did we find peace in the process? Did other members welcome us? How long did it take for communion? Did the congregation say the correct version of the Lord’s Prayer?

When we invite our non-member friends to worship we often refer to how we feel after a service or how great the sermon was or what beautiful songs the choir performs. While these are all integral parts of our Sabbath Day experiences, these acts are not what the Lord our God had in mind when He calls us to worship Him.

If we relegate our worship to the experience we have on Sunday morning, we are going against what Paul advised his followers in Romans 8:7 (The mind governed by the flesh is hostile to God; it does not submit to God’s law, nor can it do so. ) By placing our worship experience in church first, have taken a very self-absorbed approach to worshipping God. We have lost sight of what the act of worship is all about.

God wants us to worship Him in all that we do. “Take your everyday, ordinary life—your sleeping, eating, going-to-work, and walking-around life—and place it before God as an offering.”   Rom. 12:1a MSG.  He wants our lives to be lived to His glory so that all that we do is an act of worship before him. That means, when you are at your desk on Monday morning do your work with the spirit of God leading you; when you go to lunch carry the grace of God to your server; when you walk your dog tender His love on the least of these; when you pick your child up from school thank Him for this precious precocious one. That is how God wants us to worship Him.  We have different gifts, according to the grace given to each of us. (Romans 12:6) Use them for His glory. Worship Him by using them well.