Saturday, July 17, 2010

Part I More vs Enough A Primer

More Versus ENOUGH

Rich is knowing you have enough.
Kruger, Emotional Business

The cost of a thing is the amount of life which must be exchanged for it.

It is time to start planning for the family vacation. What do you do? Do you consider options, weighing the merits and trade‑offs of each plan? Do you consider the opportunity your vacation will provide for you to enjoy favorite activities? Do you consider modes of transportation? The costs? What the vacation offers the kids? Do you attempt to align your budget with your vacation goals and then make revisions and consider the options again? Once you have decided on a vacation, do you marshall your personal finances, saving for the trip even if it means postponing buying that new set of golf clubs or programmable VCR to bring your vacation goal to realization? Do you ever consult a travel agent to determine costs and compare accommodations? If so, congratulations. You are an ENOUGH vacation planner. ENOUGH vacation planners begin with vacation goals, and then align those goals with their personal resources. Almost everyone, to some degree, is an ENOUGH vacation planner.

Are You Doing ENOUGH Financial Planning?

Most of us are good vacation planners because we determine clear objectives and then plan for them. What about our financial planning? How well have we identified our life goals and financial objectives and planned for them? In the following exercise, the Personal Financial Planning Audit, you will be able to assess how well you have attained specific financial goals. Mark N/A for those categories which do not apply to you. A rating of 1 might mean that you have made no provisions to protect your ability to earn an income in the event of disability. A 5 might mean that you have provided for about half of your income to be replaced, and a 10 could mean that you have protected your entire income in the event of total disability.

When you have completed the audit, circle the ten categories that are most important to you. Then add the score for these ten items. Score:

90‑100 points A
80‑89 points B
70‑79 points C
60‑69 points D
59 or fewer points oops

If you scored an A, congratulations! You are one of the few people I=ve ever met who does not need this book. Give it to a friend.

If you are still reading, you either need this book or you are ignoring my advice. If you want to ignore my advice, go ahead. You paid for the book and can read it if you want to. But I'm assuming that you need this book. In fact, as you work your way through these pages and activities, I am confident that you will discover how much you need it. One of the most interesting activities I do with my clients is to have them complete another Personal Financial Planning Audit after we have gone completely through the ENOUGH personal financial planning process. When you have completed this book, I invite you to repeat this audit. You may be in for a surprise!

Do You Want More?

If you want more, you need this book. I'm not going to tell you how to get more. Instead, I'm going to show you how you can define, in your own terms, what is enough. Once you understand the concept of ENOUGH, you won't have as much anxiety about more.
Case Study:
One November Morning

Note: I have included case studies throughout this book to illustrate a point or concept. If you are task‑oriented and want to move rapidly through the workbook, you may skip these stories, anecdotes and real‑life examples. However, these case studies add an extra dimension of depth and experience to the more expository text. I recommend that you find an appropriate time to read these case studies, a time when you have some moments to be introspective and thoughtful.

It is a leisurely November Sunday morning. We're alone, just my wife and I. The house is strangely quiet since the kids have gone off to college. It's misty and cold outside, barely above freezing, and a trace of snow remains on the ground. I've finished my third cup of coffee; Beth is looking out the window, sipping her Celestial Seasonings tea (Sleepy Time, I think). The window pane is misty with condensation and she draws a tic‑tac‑toe design in the mist.

I sense that something is troubling her. She has been quiet all morning. Is anything wrong? I ask.

No, nothing. Something in that nothing@ says something.

Was it something I did?

Silence. Then abruptly, Beth answers, No, it wasn't you.

Now I'm sure something is wrong. Have I forgotten a birthday? Worse? I scan my catalog of essential dates. Nothing. I badger Beth: Was it something I said? Tell me what is the matter, Beth.

Damnable silence again. But I=m almost afraid to hear what she might have to say.

It was nothing you did, she said quietly, resigned, turning from the tic‑tac‑toe on the window.
I . . . I just wanted . . . more.

What is More?

You will soon discover in this book that you will be defining important concepts like more and ENOUGH according to your own values and standards. In the following exercise, spend two or three minutes filling in the circles with words you associate with more. This activity is called clustering, and is your personal brainstorming session to establish some of your thoughts and attitudes. What do you think of when you think of more?

What is ENOUGH?

Now do the same clustering exercise for ENOUGH. What do you associate with the word enough?
You will have occasion to refer back to these clusters several times as you progress through this book. For now, compare the two clusters and make your own observations and conclusions.

Do You Want to Know How to Manage Your Assets?

If so, you really need this book. I'm not going to show you how to manage your assets. That's what the other guys do. Bookstores are filled with advice on managing money. I am going to show you how to manage your objectives. Once you have determined your objectives, and aligned them with your personal resources, you may want to direct a personal financial planner to provide technical advice to help you buy (but certainly not to be sold). It's okay if the personal financial planner helps to row the boat, but you have to steer.

Why Do We Need a Book on ENOUGH?

That=s a very good question. Answering that question is what this book is all about. You will have a pretty good answer to the question when you have finished this chapter. By the time you have finished your personal prospectus in chapter four, you will have developed your own definition of enough, with thorough empirical knowledge of your personal goals. If you want an answer right now, consider five points:

1. We need a book on ENOUGH because:

The world is too much with us . . .
Getting and spending, we lay waste our powers.
Little we see in Nature that is ours.

2. We need a book on ENOUGH because we have been hypnotised by the allure of more and because we think that more is, by definition, better. Ironically, as you will soon discover, more is often less.

3. We need a book on ENOUGH because it helps us to examine our life, and as Socrates said, The unexamined life is not worth living. The examined life can be re‑aligned.

4. We need a book on ENOUGH to reduce anxiety. In a 1986 survey, research firm D'Arcy Masius Benton Bowes reported that the number one cause of stress for Americans is financial concerns.

5. We need a book on ENOUGH because we work 2,000 hours or more every year earning money and devote almost no time to keeping it.

Try this exercise:
How old are you? _____

How many years have you worked full‑time? _____

How many hours have you worked? _____
(2080 hours is the standard American work year.)

Now, how many hours have you spent keeping what you have worked so hard to earn (keeping defined as determining your financial objectives and then formulating plans to meet them)?

Now, the important question, which only you can answer B Do you need this book?

What is Misdirected About More?

Let=s imagine that five events are about to occur in your life. By each one, mark a A+ if the event gives you more.

1. 50 percent increase in salary. more? _____

2. Job promotion. more? _____

3. Free vacation. more? _____

4. Offer of partnership in a company. more? _____

5. A cup of tea (favorite drink). more? _____

Did you put a plus sign by all of the above? Maybe the cup of tea wasn't such a great event, but the others were pretty good, weren't they? Let's look at them a little more closely. What if your 50‑percent increase in salary meant that you had to change from a job you really enjoyed and found worthwhile to one that you detested, or where the cost of living was much higher? What if the job promotion meant moving where your child will suffer from her asthma? What if accepting the free vacation would burden you with tax liabilities, or force you to listen to four hours of a time‑sharing sales pitch? What if the partnership risks your personal assets in the event of a lawsuit where the plaintiff prevails? What if you already have a full cup of tea and more will only cause the excess to spill onto your lap?

The point? Accumulating more for more=s sake can be foolish at best and destructive at worst. In the words of Edward Abbey, Growth for growth's sake is the ideology of the cancer cell. Assets have value only as they enable us to achieve our goals. The increase in salary may not offset our deeply‑held belief in the purpose of our work. The benefits of the job promotion and vacation must be weighed against our personal values and our resources. Are we willing to put our home at risk to accept a partnership that might make us rich (or poor)? Even the cup of tea offer has to be weighed against what we have; and in this example, a full cup is enough. More only gets us burned and wet.

By definition, more means addition. Let's consider some examples of more addition.

1. There once was a boy who asked his Zen master how he could learn more. The master handed the boy a cup and began pouring tea. The cup filled and began to overflow, but he continued pouring, as the tea spilled onto the boy's lap. Finally the boy exclaimed, Master, you cannot pour any more tea into the cup! The Zen master smiled and replied, AYou must then empty your cup.

2. What about the doctor who has so over‑financed his retirement, at the expense of other goals, that he has to work a full schedule through age 59 1/2 just because he didn=t know what was enough for retirement?

3. Two people enter a supermarket and win a 10‑minute shopping spree. Shopping carts are lined up for them to use and the manager starts the clock. The first person races up and down the aisles, grabbing everything in sight, enjoying the frantic orgy of greed. The other person spends two minutes writing down favorite foods, some steak and lobster (won't Dad be happy!), Sara Lee cherry cheese cake and Häagen Daz chocolate chocolate chip ice cream. Fresh corn on the cob and let=s not forget the Macadamia nuts. When 10 minutes are up, the first woman has four shopping carts spilling over, one entirely filled with steaks (she will now have to rent a freezer), another with expensive stuff from the delicatessen section. (Too bad nobody in the family likes caviar, pate or smoked sturgeon.) The second woman still has room in the first cart. But she is already planning a dream meal for the family. Which person is most likely to regret that she didn't get more? Which woman most likely perceived that she got enough?

4. What about the woman who gets a 15‑percent pay raise, but has to work every Saturday in addition to her 40‑hour week? True, she gets more, but it cost 20 percent more time for 15 percent more money.
5. What about the man who risks his achieved financial objectives on the chance to get more, by putting up his personal guarantee for his college friend's venture? The investment might double his money, or he could lose it all, sacrificing what he needed for what he didn't.

Yes, more can be a kind of fatal addition. The result is that the roulette wheel of more may become less; it may even cause us to lose everything. Or, the desire for more without our even understanding what more is, may lead us to the sadness of Beth, who just wanted more.

The more we have the less we are.
C Eckhart

more means nothing without a context. That context should be our personal goals and values. Most of us are accomplished vacation planners because we start with goals and work our way through a process of evaluation to aligning our vacation goal with our personal resources. That is exactly what we should do in our personal financial planning: align our personal goals with our personal resources. Yet we use a very different model for financial planning than for vacation planning.

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