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Archives For February 2012

It’s Your Move

February 22, 2012 — Leave a comment

 

We all desire to make good decisions, right?

 

Of course we do.

 

Is there a decision around the corner that you’re struggling with making? How about a decision you’re simply doing your absolute best to avoid? How do we know what the right move is and when to make it?

 

Unfortunately, life does not always provide us with a clear financial path to follow. In games like chess or monopoly, the game board dictates our next move. Some experts in these games can actually visualize two or three moves ahead. Wouldn’t it be nice to have a game board for making your personal financial decisions? Just think, this type of game board could, A) provide a way to test or verify all possibilities prior to defining your strategy and making your next move, and then, B) test that strategy prior to seeing it play out in the real world, where as you know, the consequences of our decisions can be enormous. A tool like this can mean the difference between success and failure at a time when, at least in my way of thinking, failure is not an acceptable option.

 

Imagine what your life would look like without that one poor financial decision. Imagine what your family’s future could hold if we worked together to minimize, or better yet…  eliminate, financial mistakes. Would that mean less stress for you? Could that lead to bigger opportunities for your children? Would you have the freedom to give more?

 

This kind of tool would be, and is, PRICELESS!

 

Over the next two posts we will be taking a look at the various aspects and strategies of the financial decision making process. Stick with me and don’t forget, “It’s Your Move”.

 

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Honey…Have You Read the Directions?

February 22, 2012 — Leave a comment

It’s Your Move: Part 2

In this series we are  looking at the different ways individuals make their financial decisions. In the last session we asked the question, what would life be like if we could eliminate financial mistakes? What would that mean to you or even someone you love? Could that mean extra trips, a better education, less stress or strain on relationships?
Have you ever torn into a new game or toy without first reading the directions? Most of us have done this only to hear our spouse say, “Honey… have you read the directions?!!”  I think it’s suffice to say that we have all engaged in this seemingly senseless routine. Of course, most of the time this is not a big deal because there are little to no consequences for our mistake. However, let’s not make these same mistakes relative to some of the most important decisions we’ll ever make… those regarding where and how we protect, save and invest our hard earned money.

 

Often decisions are made based on:

 

  • Others opinions
  • Limited information
  • Predetermined goals
  • Convenience
  • No model (without proof it will work)

 

When decisions are made this way it can prove to create an outcome that is both disorganized and limited. We describe this as somewhat of a financial junk drawer. This is really no different than tearing into the game without reading the directions! If you are making decisions with out any verification process, what will you say when your spouse asks the question, “have you read the directions?” What they’re really asking is, “Are you sure we are doing as well as we possibly can? Have we looked at all the options and made sure there isn’t a better alternative?”

 

The lack of a financial model will lead to errors and mistakes. The financial model that we eluded to in Part 1 is the Protection, Savings and Growth Model. This will serve as the game board or verification tool we desire that can help us with our financial decisions and allow us to have freedom from the worry that can sometimes surround these decisions. It also gives us the ability to say, “YES Honey! I have read the directions!”

 

In the future we will look at the Macro Economic Financial Model called The Protection, Savings and Growth Model. It’s one of the most powerful tools to use in order to make sound financial decisions.

 

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Good Greece. Bad Iran

February 21, 2012 — Leave a comment

 

 

Weekly Update – February 20, 2012

 

Despite a turbulent week filled with mixed news from Europe and rising Middle East tensions, stocks closed higher on hopes that Chinese assistance would mean a bailout plan for Greece. The S&P 500 closed at 1361.23, a level not seen in nearly a year, having gained 8.2% so far in 2012. Other major indexes also rose for the week, the Dow advancing 1.2% and the Nasdaq climbing 1.7%.[i] 

 

In not-so-great news, crude oil prices rose for a third straight day on U.S. markets Friday, topping $103 a barrel, sparked by increased saber rattling from Iran over its nuclear energy policies. A sustained surge in prices could weigh on the global economic recovery. Drivers are seeing the effect at the pump, with gas prices up by 0.9% since January, topping $3.50 a gallon in many places. Every added penny at the gas pump diverts roughly $1 billion in consumer spending away from other sectors of the economy.[ii] 

 

Thankfully, inflation isn’t looking bad overall. The Consumer Price Index (CPI) only rose 0.02% in January, which was in line with expectations. The Core CPI, which excludes food and energy, also matched expectations, gaining 0.02%. Year-over-year gains were 2.9% for the general CPI and 2.3% for the Core CPI. If overall inflation was higher, economic growth could be threatened by rising prices, and the Fed would likely respond by raising interest rates. The Fed’s statement following the January FOMC report described price pressures as “subdued”, and indicated that they plan to keep rates low until at least late 2014.[iii] 

 

In simple English, last week was really a mixed bag. While we are happy with the stock market’s performance, progress in Europe, and low inflation, unrest in the Middle East is a wild card. Every time bad news out of that region hits headlines, speculators drive gas prices through the roof. At this point, all we can do is monitor the situation, hoping that with diplomatic pressure, Iran will listen to reason.

 

ECONOMIC CALENDAR:
Monday:

U.S. Markets closed for President’s Day
Wednesday:

 

Existing Home Sales  
Thursday:

Jobless Claims, FHFA Housing Price Index, EIA Petroleum Status Report
Friday:

 

 

Consumer Sentiment, New Home Sales

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