Why Your Finances Are Never In Perfect Order

No matter how much time and effort you put into financial planning, there is always another item on the to-do list, another concept to research, another change to be made in the budget.

Not only do regulations and tax laws change, but our career paths and income levels and personal lives change as well - and sometimes all at once! Nothing is constant. A new career, marriage, layoff, divorce, raise, child, medical problem, or inheritance and and often does require changes to your budget, insurance policy, estate plan, retirement contributions, and so on.

This is obvious I suppose, and should be expected. But it can still be a bit frustrating if you're a perfectionist (like me). Here is a list of things in my financial plan which are causing angst, despite the fact that I read and write about personal finance every single day:

• I feel guilty for spending so much money on shopping and restaurants.


• I worry about whether my tenant will pay rent on time or whether I'll have to dip into reserves to pay the mortgage.


• I struggle to get my vacant rental unit leased.


• I know I should have more cash reserves.


• I wonder whether I should be saving for future goals that I don't really have yet (new car, wedding, kids, vacations)


• I don't know what kind of monthly bonus I'll get, so budgeting is now and endless task.


• I'm dipping into savings to pay off my credit card again???


• I haven't reviewed my home insurance policy in awhile, and I have this nagging feeling that if something were to happen I wouldn't be covered. I assume auto is OK, and that the disability coverage I get through my company is sufficient...


• Surely I don't need a will or an estate plan...I'll do that after I'm married. But what if that never happens? I should at least update my beneficiaries and write up a holographic will...


• I should probably talk to a CPA about some tax planning...that's been on the to do list for awhile.


• I should do some research about putting my rentals into an LLC. Or getting an umbrella insurance policy. Or both.

Retirement Plan Brings Peace of Mind

There's a lot of angst surrounding my personal financial plan in general. Despite this, one area of my financial plan is a happy, confident, closed book: My Retirement Plan.

Why you ask? How can I be so content with my retirement plan when the markets are uncertain and social security is strapped and soon there will be fewer workers paying more retirees?

Because first of all I know what to do. This is key. Budgeting and investing in rental properties requires constant analysis and management and all the variables are constantly changing.

But for all practical purposes, retirement planning is pretty simple. I started early, it's all automatic, and if I keep on keeping on I should end up in great shape (unless the whole system fails, in which case I'll have bigger problems and everybody will be in the same boat anyway!).

Get this:

• I opened a Roth IRA when I was 18 years old, and each January since then I've contributed the maximum allowed. Current Balance is around $21,000.


• I opened a Roth 401k the day I became eligible when I was 22 years old and since then I have contributed 10% of my gross income each and every month. Current balance is around $15,000.


• My employer kicks in another 3% to my 401k (and next year that will bump up to 6%!!).


• All retirement funds are invested in very low cost broadly diversified index funds.


• I intend to keep this up for as long as I'm eligible for those accounts (otherwise I'll save at least 10% of my income in a taxable account).

Between my employer and me, this year I'll invest $12,800 into retirement accounts, and I plan to increase that annually until I contribute $22,000 at age 35. At that point I should have $325K in retirement funds assuming an annual return of 8% between now and then.

Even if I stop investing altogether at that point, my retirement funds would grow to be over 10 times that amount by the time I'm 65 (assumes 8% annual return). Of course that's before inflation is factored in, but it's still pretty amazing. Best of all, that money is in tax free accounts from which (unless laws change) I'll be able to withdraw 100% tax and penalty free. And even if I go bankrupt that money will be protected (again, unless laws change).

I intend to keep saving after 35, and I intend to have rental properties paid off and generating additional income - but you never know what can happen. The fact is that my "retirement" is so far off I can't even begin to try to plan or imagine it. But no matter - I'm saving now so that I'll have flexibilty to make plans later. And I'm sleeping soundly as a result.

Model Employee vs Model Parent

In my last post I quoted Jack Welsh as asserting that "There's No Such Thing as Work-Life Balance."

Trying to "balance" work and life is very difficult, which is why the topic generates so much discussion. Doing both at once requires constant effort and calculation: "Thursday I'll leave the office early and catch Timmy's soccer game, but Saturday I'll play golf with my colleagues...I'll go on the business trip next week, but I'll make sure to leave early and get home in time for dinner the week after that..."

You might be able to strike a balance that works for you - and that's the whole point of course - but being a model employee in a traditional professional setting just isn't compatible with being a model parent. Don't believe me? Consider the following profiles:

Being A Great Employee
Those who are model employees (and future executives) are those who are dedicated, reliable, hard working and well connected. This means that you are the one in at 7am and still in at 7pm, doing anything and everything that needs doing. You are the one who can be counted on to come in on the weekend to finish a big project. You take time to train and mentor others. You are always trying to improve, always excelling - and you are continually on the lookout for ways to minimize costs or increase revenue.

You never turn down an invitation to socialize with colleagues. You are spending time after work and on weekends networking, attending industry events, sitting on boards, playing golf with colleagues or the competition. You are constantly on the lookout for ways to impress and get friendly with your boss. You grab any opportunity to get more development or training even if it's an out of town seminar; you plan your social life around rubbing elbows with important people in your field;

Being A Great Parent
Those who are model parents are a constant reliable presence in their kids lives, consciously monitoring and assisting their development. They never miss a teaching moment, have the time and patience to properly discipline their kids, and keep their children engaged and stimulated.

They're scouring the internet for the safest, best, most cost effective crib/stroller/bike. They're analyzing the household budget to trim excess and make room for extracurriculars and college savings plans. They prepare three balanced meals a day for their kids. They somehow manage to keep their kids and homes clean and safe.

With small kids they play games so their brains develop properly, shower them with attention so they don't develop emotional attachment disorders, take them to parks and activities to get exercise, supervise play dates so they learn proper social interaction and read to them.

Older kids need help with homework so they maintain a decent GPA and get shuttled to as many valuable extracurriculars as possible so maybe they can get into a decent college one day. They need supervision so they don't end up pregnant or on drugs. They may be resentful and rebellious but you persevere, enforcing rules and checking in and meeting their friends' parents and not being afraid to embarass them - or yourself - in the process.

Comparison
To me the Model Employee sounds like the much easier job! Both can consume 100% of your attention and energy, but the Employee has more tangible rewards - respect at work, recognition in the way of bonuses and promotions, and the security of a benefits plan and salary.

The Model Parent doesn't have as much control along the way or security in the outcome of his or her efforts. Of course you CAN be a parent and work at the same time - millions of people do. But I think we can all agree that it's impossible to reach your full potential in either capacity when trying to balance your time and focus in both areas at once.

No Such Thing As Work-Life Balance?

A generational catch phrase if there ever was one, the "work-life balance" is currently discussed at length in books, articles, seminars, universities, and even in company policies themselves.

Men and women alike are beginning to recognize the importance of creating a "work-life balance," but appreciating the concept and implementing it on a daily basis are two very different things, especially if you are pursuing a traditional corporate or professional career which requires you to be away from home for 8+ hours a day.

Consider these words from former General Electric Co. Chief Executive Jack Welch in a recent Wall Street Journal article:

Welsh has some blunt words for women climbing the corporate ladder: you may have to choose between taking time off to raise children and reaching the corner office.

"There's no such thing as work-life balance," Mr. Welch told the Society for Human Resource Management's annual conference in New Orleans on June 28. "There are work-life choices, and you make them, and they have consequences."

Mr. Welch said those who take time off for family could be passed over for promotions if "you're not there in the clutch."

First of all, we should recognize that Welsh's comments apply to both men and women - she OR he who chooses family over work on a regular basis is not likely to be the one promoted fastest or farthest.

The hard truth of the matter is that you CANNOT be a model employee and a model parent at the same time. You can't be fully present and dedicated and engaged to your job AND to your kids at the same time. You can't plan appropriately and put in enough time and dedicate your best energy to your job AND to your kids at the same time.

IT IS RENTED! New Tenants Moving In

FINALLY, after two long months of toiling, I have officially leased the vacant unit in my duplex. Technically I only toiled to rent it for about 6 weeks, but I lost out on two solid months of rental income (May 15 - July 15).

I am really excited about the couple who finally rented it, and I think they will be a much better fit than the other folks who showed interest along the way.

It's a husband and wife, middle aged, steadily employed, and very excited about living in my place. They've been in an apartment and miss having a yard and a garage. The woman has taken to giving me big hugs, which seems weird but fits her big shining personality. I'm sure they'll get along well with the neighbors.

The woman teared up when she told me the story of how they toiled for years and finally bought a house and then lost it when her husband fell ill and couldn't work last year.

Their credit was ruined and she was so afraid they wouldn't qualify to rent my place. I kept assuring her that bad credit scores alone wouldn't disqualify them (past evictions and unverified income are the main red flags I look for). She hopefully gave me a deposit check anyway when I met her this morning to take her application.

When I called to tell her they'd been accepted she exploded with delight and said I was like her own little angel (a description she later repeated when meeting my other tenants). When I met her just now to sign the lease and hand over the keys he gave me another huge hug and kept gushing about how wonderful and "compassionate" I am.

I was a bit bemused, but I couldn't help being flattered. I'm just really glad they love it and are happy to call it home. And that they seem very willing and able to pay me RENT.

Why I Should Pass the CFP Exam

In my last post I discussed some of the frantic warnings I'm beginning to hear about how difficult the CFP Exam is, how low the pass rates are (53-56%), and how much preparation is required (300 hours recommended).

To cheer myself up, I decided to come up with a list of reasons why I should pass the exam - keeping in mind that I have yet to begin to prepare for it in earnest.

1. I am taking the educational courses in one year leading up to my exam. Most CFP hopefuls take two or more years to complete the educational component, putting them at a disadvantage as concepts fade from memory. In addition, many facts and figures change from year to year (particularly with regard to tax and estate planning), so what was learned 2 years ago may no longer be relevant.

2. I will take an Exam Preparation course (probably from Kaplan). Those who take review courses have a much better pass rate on the exam (companies admit there is no unbiased way to calculate their pass rates, but averages exceeding 80% have been reported). These prep courses teach specific strategies for taking the exam, in addition to providing a study plan for pointedly reviewing the actual information to be tested.

3. I'm taking the required educational courses at a well renowned university. The University Program at which I am completing the educational component boasts that over 85% of their graduates have passed the exam on the first try (although they don't have very many years worth of data yet, and most of their graduates take a review course as well). Many exam takers do their review courses online or at institutions which don't offer great professors or a strong guided curriculum.

4. I am a good test taker. I have no excuses along the lines of "I have ADD" or "I have dyslexia" or "I'm just not good at taking tests." I have always been a good test taker, the kind who was irritated to have her concentration broken with the mandatory short break during the SAT exam. I can sit and focus and read quickly and analyze swiftly and generally score higher on standardized tests than my general academic performance would otherwise warrant.

5. I have plenty of time to prepare. I have always been prone to cramming for tests and procrastinating, but I have 4.5 months before the CFP exam. If I start now I have more than enough time to establish a thorough study plan and execute it.

CFP Exam Looms as Courses Near Completion

I will be taking the CFP Exam in November, and I'm starting to dread the preparations I'll need to make between now and then.

In order to sit for the 2 day long CFP exam, you first have to complete 7 required courses. Some universities offer a 2 year program, but I enrolled for an accelerated track so I could have all the courses done in one year. It's been quite a time commitment, but the months have flown by. I can't believe it's already been nearly 10 months since I began my CFP program.

Last fall I enrolled in my first two classes - Fundamentals of Financial Planning and Investments. In the first quarter of this year I completed two more - Principles of Risk and Insurance and Retirement Planning and Employee Benefits. In the first part of the summer I completed Tax Planning.

Now I've begun my last two 11 week courses - Estate Planning and Financial Planning Strategies & Case Study, in which I assume we'll learn to put together all that we've allegedly learned.

The time commitment has been a drag (and I still can't figure out when/how to eat dinner when I have class from 6pm to 9pm after work), but the classes haven't been that difficult. I quit doing all of the required readings during my first quarter and barely commit any time to studying outside the 6 hours a week of class time.

I have managed to make an A or B in each course so far, and I'm sure these last two will be no exception. But that doesn't mean I'm prepared for the CFP exam.

As we near the end of our courses, the professors and other students have begun spreading horror stories and warnings and tips and rumors about how hard the exam is, how low the pass rate, how many hours must be committed to exam prep outside of course study (300 is the going recommendation), and so on.

"Have NO LIFE outside the CFP!" seems to be the mantra. Forget your social life, forget your family, put everything on hold, you will have no life for the next four months. One professor kindly assured us that with the proper preparation we could all pass it the first time just like he did - then he told us that he completed over 4,000 practice problems in preparation.

I am wearily concerned in the face of all this. I am certainly not ready yet for the exam, and I hadn't really planned to start the intense study part until the month or so before the exam. Now I'm thinking I might need to reconsider my strategy...