I'd like to relate a few recent experiences I've had surrounding financial planning.
I am not a Financial Planner. I'm an Economist. Ironically, since Economists deal with both the past and the future, I do some planning. In fact, because I take it seriously, I think I do a better job of financial planning than financial planners do.
Since they're more salespeople and asset managers than planners, I find that the current situation is surprisingly weak . . . which, considering the amazing resources at our fingertips in 2015, dismays me. I find the weak situation is attributable more to a poverty of imagination, creativity, attention span, and care than to a poverty of tools.
Last year I interviewed a local financial planner. I asked him how he planned. What was his favorite tool, or software, or whatever? He got a far-away look in his eye, paused, and muttered something about how he and his firm were in the process of shopping for one.
Short answer: he didn't have one.
I just bought and read Alexa Von Tobel's book Financially Fearless. She's on the cutting edge of a new field: "robo-planning" in which a client develops a removed, remote relationship with a distant, faceless financial planner. Everything is managed on the cloud. Investing philosophy is predominantly an index fund based, set-it-and-forget-it, buy-and-hold approach.
I see Dave Ramsey has come out with a new online "Gazelle" budgeting tool, too.
Over the years, I have read a lot of books about Personal Finance. Now in 2015, I was dismayed and under-whelmed by how light and hazy the book was. I was looking forward to learning the cutting edge, the state of the art in the industry. But what I found was something that was really light on details, hyper-emotional, focused a lot on fears; it had a chummy, cavalier tone; in some places it was profane; in others it alluded to drunkenness ("Drink a glass of wine while making your budget; heck, drink the whole bottle" etc.).
I found that both it and Ramsey's new tool make the same basic mistakes that I've seen so many books, web sites, and authorities make, like:
I learned we have great tools and technology, but we're still not using them very well to be thoughtful or realistic. Upon reflection, I find we're doing the opposite: it is as though we're expecting the tools to think for us, and missing out on the chance to use them to do some fantastic, unprecedented thinking & living.
I'm now incorporating these findings into my own SWOT Analysis.
Last week a client said to me, "I've probably worked with around thirty different financial people in my life: bankers, insurance people, accountants, stock brokers, financial planners and so on . . . but none of them has actually helped me plan things out like you have, to put my life into one complete, coherent picture that I can work with and understand."
I take that both as a high compliment, but also as a grievous indictment of the industry and of the profession. Going forward, I'll continue looking for best ways to make a positive difference.
Questions? Comments? Suggestions? Please contact me.
Respectfully submitted,
Kris Freeberg, Economist
Making End$ Meet
(360) 224-4322
I am not a Financial Planner. I'm an Economist. Ironically, since Economists deal with both the past and the future, I do some planning. In fact, because I take it seriously, I think I do a better job of financial planning than financial planners do.
Since they're more salespeople and asset managers than planners, I find that the current situation is surprisingly weak . . . which, considering the amazing resources at our fingertips in 2015, dismays me. I find the weak situation is attributable more to a poverty of imagination, creativity, attention span, and care than to a poverty of tools.
Last year I interviewed a local financial planner. I asked him how he planned. What was his favorite tool, or software, or whatever? He got a far-away look in his eye, paused, and muttered something about how he and his firm were in the process of shopping for one.
Short answer: he didn't have one.
I just bought and read Alexa Von Tobel's book Financially Fearless. She's on the cutting edge of a new field: "robo-planning" in which a client develops a removed, remote relationship with a distant, faceless financial planner. Everything is managed on the cloud. Investing philosophy is predominantly an index fund based, set-it-and-forget-it, buy-and-hold approach.
I see Dave Ramsey has come out with a new online "Gazelle" budgeting tool, too.
Over the years, I have read a lot of books about Personal Finance. Now in 2015, I was dismayed and under-whelmed by how light and hazy the book was. I was looking forward to learning the cutting edge, the state of the art in the industry. But what I found was something that was really light on details, hyper-emotional, focused a lot on fears; it had a chummy, cavalier tone; in some places it was profane; in others it alluded to drunkenness ("Drink a glass of wine while making your budget; heck, drink the whole bottle" etc.).
I found that both it and Ramsey's new tool make the same basic mistakes that I've seen so many books, web sites, and authorities make, like:
- Beginning the budgeting process with income (it should end with income; we write budgets to learn what income we need, to determine income goals);
- Presupposing that your current, actual income IS your budget;
- Using the Percentage of Income Method to determine saving and spending amounts, which is both naïve and disingenuous because it disregards the fact that some expenses are non-negotiable, some vary with income, some are discretionary, and savings amounts should be determined not by an arbitrary percentage of anything, but by the goals they must fund;
- Presupposing the mythical Average Month;
- Presupposing that readers have adequate, stable salaries;
- Ignoring business owners;
- Ignoring freelancers;
- Ignoring irregular expenses; and
- Ignoring recurring needs (like the need to replenish an Emergency Fund after it has been depleted, or to replace a worn out car).
I learned we have great tools and technology, but we're still not using them very well to be thoughtful or realistic. Upon reflection, I find we're doing the opposite: it is as though we're expecting the tools to think for us, and missing out on the chance to use them to do some fantastic, unprecedented thinking & living.
I'm now incorporating these findings into my own SWOT Analysis.
Last week a client said to me, "I've probably worked with around thirty different financial people in my life: bankers, insurance people, accountants, stock brokers, financial planners and so on . . . but none of them has actually helped me plan things out like you have, to put my life into one complete, coherent picture that I can work with and understand."
I take that both as a high compliment, but also as a grievous indictment of the industry and of the profession. Going forward, I'll continue looking for best ways to make a positive difference.
Questions? Comments? Suggestions? Please contact me.
Respectfully submitted,
Kris Freeberg, Economist
Making End$ Meet
(360) 224-4322
