Thoughts On Money [TOM]

For the month of October, my church is reading through Proverbs together. Conveniently, October has 31 days, and the book of Proverbs has 31 chapters. The marching orders are to read one chapter a day and to extract one nugget of wisdom to meditate on.

Yesterday was day 13 (October 13th), and this verse jumped out to me, Proverbs 13:11:

Wealth gained hastily will dwindle,

but whoever gathers little by little will increase it.

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Today is a bit different than normal.

Normally, I write an article and then gather a few of my colleagues to discuss the article over a podcast we produce weekly.

Today, I flipped the script – Deiya Pernas and I recorded an “unscripted” podcast that I would like to share with you all. No article coincides with our discussion, but rather it was an open dialogue between Deiya and me on a few finance topics that I find interesting – and I hope you will too.

I’ve been teaching Sunday school at my church for about 15 years now. What I have learned as a teacher is that each child has a different preferred learning style. Some learn from hearing a story; some prefer to act it out; others want to dive in and read it themselves. We, as teachers, try to deliver a message on all four fronts – visual, auditory, reading/writing, and kinesthetic.

I am an auditory learner, and I like to listen to podcasts and have discussions. Podcasts, for me, feel like I am actually in the room – a fly on the wall – listening to a few people dialogue on topics that interest me. Here at The Bahnsen Group, we have a lot of discussions throughout the day across many different departments, and we are always seeking to solve the riddle of how do we serve clients better. We have a daily lunch routine where these discussions often take place, and today’s podcast is an opportunity for you to be a fly on the wall.

So, please join us as Deiya and I discuss the following topics:

Investment Fees

Enjoy!

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Here in Thoughts On Money [TOM], we prefer to discuss relevant topics that are financial planning-centric, timely, and surrounded with misconceptions.  The housing market has become a hot topic recently, with current home prices checking all the boxes for a great topic to discuss here on TOM.   

In the last 12 months, the median sales price of houses across the country has jumped 15% - 20%, depending on the area you live in.  My wife and I bought our house in October of 2019 and recently had to have our home appraised, which was a value 33% greater than our purchase price just two years earlier. 

A jump in prices of this magnitude typically leads to three different types of responses: 

Sell while the selling is good 

For many savers/investors, their residence makes up a significant portion of their balance sheet, which means that this is a crucial planning topic to discuss.  The direction of the wind or the emotion of the hour should not dictate your buy and sell decisions when it comes to your home.   

As you can derive from the three common responses, I listed above, a jump in prices typically leads to rushed decision-making.  A feeling or need to "strike while the iron is hot." In the world of financial planning, pressure to accelerate a decision typically precedes bad decisions.  So, slow down, have a process and method for assessing your big financial decisions – none of this ready-fire-aim behavior that riddles our modern financial culture.    

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Trevor is joined by TBG colleagues Deiya Pernas, Sean Latimer, and Kenny Molina

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Trevor is joined today with Sean Latimer, Nate Straw, and Drew Dill

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That first article – Be Aware or Beware – was inspired by a question I was asked while sitting on an interview panel during a Sunday morning church service. I was asked,

“What is the number one mistake you see people make with their finances?”

Tough question, right? My whole career revolves around talking to people about their money, and I’ve seen some wild mistakes and missteps along the way, but here I was challenged to narrow my answer down to the most common financial blunder.

Hmmm…

My answer was simple. It was awareness. I felt like, in aggregate, most people didn’t have an awareness of how much they spend. When you boil personal finance down to its basic tenets, it really is just income minus expenses and what to do with the leftovers (hopefully, there are leftovers). Most people have an intimate understanding of how much they make (income), and they take great pride in knowing this figure. But with automatic payments, a handful of credit cards, multiple spenders in the household, etc., there is a major lack of awareness around how much is actually spent monthly and annually.

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A portfolio should be designed and constructed based on your financial plan. This design should be strategic in nature and be built to weather or endure the typical ups and downs of the typical business cycles. One should not be tinkering on a whim because of a spark in appetite, all based on recent performance.

There is a good reason why you should never grocery shop when you are hungry. Well, at least don’t do it without bringing along your grocery list. If you go into that store without a plan, and your tummy is a rumblin’, you are going to walk out of that store with a whole lot of junk you don’t need.

Often, your eyes are bigger than your stomach.

Links mentioned in this episode:

• http://thoughtsonmoney.com

What do Elon Musk, Jeff Bezos, and Richard Branson have in common? They are founders and entrepreneurs; they are billionaires, and they are all competing in this modern-day space race.

These three have achieved all their financial goals and much more. Long ago, they surpassed the status of financial freedom. And, at some point, they had to decide “what’s next?”

Their “next” was not small – they were dreaming big. The exclamation mark on their legacy will be to go where no man has gone before.

I am sure some, or all of these gentlemen, grew up reading sci-fi books, watching Star Wars or Star Trek, and wondering if they too could one day sail into the mysterious unknown of the universe at large. For Carnegie, it was library’s stretching across our nation. For Gate’s, it was and is his foundation, and for Mother Theresa, it was the example of her life that will continue to inspire others for generations.

A financial plan concludes with a legacy.

Links mentioned in this episode:

• http://thoughtsonmoney.com

Often financial planning will lead you to a fork in the road.  You will start by laying out multiple options for different financial objectives.  Through a process of elimination, you will narrow your options down to this or that.   

Sometimes one option will create a “better” financial outcome, but your preferences will lead you to go the other route.  This can be a conflicting exercise and cause some investors stress.  Why? Because they only measure what they can put in a calculator.   

Here’s the first question I want you to ask yourself – will this decision make or break my financial plan?  Most likely, the answer is no.  This means that you can choose either path. You absolutely don’t need to always lean towards maximization.   

Don’t stop here. 

Press further into where that preference you expressed comes from – pull on that thread.  This exercise will usually help you to learn more about what’s most important to you.  For some people, they’ve always aspired to be debt-free, so they choose that fork in the road.  Having multiple years of expenses in cash brings them an elevated peace for some people, so they choose that fork in the road.  For others, expressing their values and beliefs based on the way they invest outweighs chasing the highest possible returns, so they choose that fork in the road.   

Links mentioned in this episode:

• http://thoughtsonmoney.com

Our intuition leads us to believe that markets are subject to the rules of gravity – what goes up must come down. But, in reality, markets are the summation of American businesses, businesses that measure their results regularly and are striving to outdo last month’s, last quarter’s, last year’s results. Great companies thrive, struggling companies lay by the wayside, and the aggregate tenacity and industriousness of the US market continue to improve AND set new all-time highs.

All-time highs are the rule, not the exception; the expectation, not the hope. 

This week's TOM takes on the age-old question..." should I invest during all-time highs?" 

Links mentioned in this episode:

• http://thoughtsonmoney.com