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Posts from the ‘Financial Literacy’ Category

12
Jun

“Simple Ways to Stop Doing Dumb Things with Money”

Carl Richards spoke at a conference I attended this year.  I decided to read his book, “The Behavior Gap – Simple Ways to Stop Doing Dumb Things with Money”.

 The book does not attempt to provide a simple way for people to achieve their financial goals.  It provides observations to show how to avoid doing dumb financial things.  Start by taking “… a deep breath and reflect on past decisions.”  Identify actions you took or did not take that did not turn out as you expected.  Identify how you can make better decisions in the future.

You need to recognize that not every decision will be perfect.  Recognize where you are and where you want to be.  Stay “…in tune with reality, with your goals, and with your values.”  You will need to move forward and recognize what changes are needed to reach your goals.

 Following is a small sampling of key points he makes in the book:

“We can stop chasing fantasies.  We are not going to get what we want by beating the market or picking the perfect investment or designing the perfect bulletproof financial plan.”

 ‘Our assumptions about the future are almost always wrong.”  “…we can take sensible steps to protect ourselves from life’s inevitable surprises.”

 “Your financial decisions should align with what you know about yourself and the world”.

“The process of financial planning is vital” not the financial plan.

“Our objective is “…to do the best we can and move forward. “

 The author does not claim that his ideas are original.  His goals are to clarify or simplify to give the reader the confidence to improve their financial decisions.
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8
Aug

Most under 45 underestimate their life expectancy.

This was the finding of a survey by the Society of Actuaries, as reported the Financial Advisor Magazine August 1, 2012.

Many people forget that the average represents the middle.  That is half will live longer and half will not live that long.  The life expectancy for newborn American males increased from 66.6 years to 75.7 years between 1960 and 2010.  During the same period the life expectancy for newborn American females increased from 73.1 to 80.8.

A majority say they would be very or somewhat likely to make significant reductions in their living expenses if they thought they would live 5 years longer than they expected.  “More than half of per-retirees would also use money they otherwise would have left to heirs or downsize their housing.”

The survey also found many underestimate their planning time-line when making major financial decisions.  Retires generally look 5 years into the future and per-retirees look 10 years into the future.

The report concludes this can result in underfunding for retirement.   Understanding the increased life expectancy, the current state of the economy and the volatility of the stock market require people to do a better job of managing their finances and planning for retirement.

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