Navigate Your Way to Financial Freedom The road to financial well-being is complex. En route, you face an overwhelming variety of complicated choices—from deciding which job to take to determining how best to spend or save—that can impact your financial life in ways that are often difficult to predict. Author Paul Bennett knows there is no decision that is not connected to your financial well-being. With over twenty-five years of experience, as a CERTIFIED FINANCIAL PLANNER™ professional he also knows that navigating those decisions doesn’t have to be so hard. The Money Navigator examines: • Key insights into human economic behavior • Reasons why investors make poor decisions • Why financial and insurance products are so misunderstood • How a Money Navigator—a full-scale CFP®—can help you invest well and manage your financial life with ease. With fresh insights and real-life examples backed up by in-depth research, each chapter of The Money Navigator offers you practical takeaways for you particular situation, whether you find yourself on the cusp of retirement, are already retired, or are facing a life transition. Bennett’s expert navigation and advice propels you toward the life you always imagined and equips you with the tools to attain your goals.
|Publisher:||Greenleaf Book Group Press|
|Product dimensions:||6.10(w) x 9.10(h) x 0.90(d)|
|Age Range:||3 Months to 18 Years|
About the Author
Paul Bennett is a CERTIFIED FINANCIAL PLANNER™ professional (CFP®), Chartered Financial Consultant (ChFC®), and Managing Director of the United Capital regional office in Great Falls, Virginia. He holds a PhD in economics, with distinction, from SMC University, an MS in finance, with honors, from Indiana University, and a BA from the University of Florida. He is currently pursuing a postdoctoral MS in applied analytics from Columbia University. Paul is a three-time author, as he has written two previously published books: Financial Economics of Index Annuities: An Analysis of Investor Returns and Easy Essays on Economics. He is quoted often in the press and has contributed to various publications such as U.S. News and World Report, CNBC.com, Dow Jones News, Financial Advisor Magazine, Financial Planning Magazine, Investment News, Washingtonian magazine, and The Washington Post. He also has served as a subject matter expert for the Certified Financial Planner Board of Standards, contributing to the development of examination questions for the CFP® Certification Examination and analyzing the tasks of CFP® designees for the CFP® Job Analysis Work Group. Paul resides in Great Falls, Virginia, with his wife and twins.
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The Money Navigator and Your FinLife®
"If your actions inspire others to dream more, learn more, do more, and become more, you are a leader."
— Dolly Parton
he aim of this book is to bring more self-awareness to your financial life (FinLife®) and to show you the ways in which a CERTIFIED FINANCIAL PLANNER can help you achieve your goals. As you know from the preface, I like to call the CFP® professional your own personal Money Navigator. But before we can dive into the ways in which a Money Navigator can assist you in your FinLife®, we must first define the terms. What is a Money Navigator exactly? What is your FinLife®? This chapter answers those basic questions and sets you up to learn more about your own human behavior and decision making. Let's begin!
The Money Navigator usually has a specialty focus. For example, the Money Navigator may focus his practice on individuals who are nearing retirement or already retired. As you get closer and closer to retirement, you are going through a transition, similar to climbing up a mountain and then coming back down. The Money Navigator is a master storyteller. Storytelling has a way of making things resonate for most so that you can put yourself in the shoes of the individuals who are part of the narrative. Indulge me for a couple of minutes so you can see how this makes sense and helps the points the Money Navigator makes resonate.
Sir Edmund Hillary was the first person to climb Mount Everest and more specifically to reach the summit. He accomplished this amazing feat in the early '50s with the help of his Nepalese Sherpa, mountaineer Tenzing Norgay. Most people have never heard of George Mallory, who almost thirty years earlier took part in an expedition to climb Mount Everest. Mallory never made it back down the mountain that day, but the question remains as to whether or not he reached the summit. His body was found in 1999 during an expedition that was specifically organized to find Mallory's remains. Mallory's remains were found below the summit. However, he had rappelling gear on, which indicated that he was on his way down the mountain. Interestingly, he had previously told his daughter that if he should reach the summit he would leave a photograph of his wife there. When his body was discovered, all of his clothing was intact, as were documents in his wallet. However, the photograph was missing. This fact opens the possibility that he did, in fact, reach the summit. The problem was that Mallory didn't make it down the descent, which any mountaineer will tell you is the most critical part of the climb. In fact, most mountain climbing deaths occur during the descent phase. What ended up setting Sir Edmund Hillary apart from Mallory? It's not so much what, but whom: Tenzing Norgay, Hillary's Sherpa!
My point of telling you this story is your FinLife® prior to retirement is like climbing a mountain, but that is only half of the battle. You need to successfully make it down the descent. Liken the descent to the distribution phase when you need retirement income during your FinLife® journey. The descent is far too important to not have a Money Navigator serving as your personal Sherpa!
Going to see your CFP® professional should be fun, enlightening, and engaging. Unfortunately, for most individuals, it is more like going to the dentist to have a procedure performed. When you visit your financial advisor, does she whip out a legal pad and start taking notes as you confess your financial sins? Are you ready to take a nap as he tells you the latest advances in modern portfolio theory or interest rate trends? This type of approach no longer works in today's conceptual society.
In today's culture, the financial advisor who provides a bespoke experience that is engaging, experiential, and personal will rise to the top of the profession. It must be appealing to you to work with your financial advisor, and it should also be fun and interactive. Your experience should be one where you are not being preached to; rather it should be participative, as you should be able to dynamically "pull the levers and turn the dials" that drive your financial plan. If your advisor prints out a financial plan the size of a New York City phone book, run the other way, fast! The problem with this is that the second the ink hits the page, the plan is outdated. Instead, what-if scenario testing should come into play here, and this is all done interactively on your financial advisor's f lat screen or via an app on your phone! Gamification should also be included, which involves interactive exercises that help you get to the core of your money mind or philosophy about money, if you will.
The Money Navigator who brings a bionic experience to you (the melding of a robo-advisor, which is a DIY, or do-it-yourself method of financial planning via web-based tools and interfaces, married with a human being — see chapter 6 for more detail) is on the cutting edge of technology but not to the detriment of you losing the necessary human touch that machines simply cannot ever replicate.
The Money Navigator should be equipped with the right professional tools (see chapter 7) but should also bring humility, curiosity, and a human element into the equation in a way that helps you to understand why you feel the way you do about money. He helps you recognize that in life there are trade-offs and, as a result, ramifications. He can articulate specifically what the trade-offs mean to you and your ability to achieve your goals and objectives in the short and long term. The Money Navigator who is humble and curious and brings truth, discipline, and understanding to your experience is this advisor.
Thinking about Your FinLife®: Yesterday vs. Today
Before we dive any further into the Money Navigator himself, let's first outline his primary focus: your FinLife®. To understand how FinLife® works, my company hired a team of researchers to talk to our clients about money and what really matters to them. The findings were eye-opening and they made me better understand what it is you may be concerned about or striving for with respect to your FinLife®.
As a result of the research, I realized that your FinLife® isn't just about money — rather it encompasses your entire life experience. The researchers had our clients talk about the chapters of their financial lives. If you had been part of the research, perhaps chapter one in your FinLife® book may have been your first job mowing lawns, for example. Your second chapter may have entailed working as a waitress during college to help pay for tuition, and your third chapter was your first job out of college working for an accounting firm. Included in the chapters would be the things that money enabled you to do during those times. Maybe you bought albums and chewing gum with your lawn mowing money, paid for tuition and a beer here and there with your waitress money, and paid rent and bought a new car with your accounting salary. The takeaway from this part of the research was that working and spending were far more important to most people than saving and investing. The irony of this is that the financial industry bombards you with advertising and marketing all about saving and investing; no wonder this makes you turn a deaf ear. As our research confirmed, you are more concerned about your ability to work and spend than your ability to save and invest.
Another takeaway from the study is that your FinLife® is a series of trade-offs. You realize that if you want something for your family, like private school for the kids for example, something else has to give. Perhaps that "something else" is choosing to move into a smaller house so that private school is an option and you can still retire on time and on your terms. The stories of over 80% of those surveyed in the study involved trade-offs in one way, shape, or form.
The final piece of insight I gleaned from the study of our clients' financial lives is that your financial decisions need to be in line with your ideal self. If not, a disconnect automatically occurs, which causes internal conflict, which results in you moving away from financial happiness. We will discuss why happiness is so important later in the book. If your financial decisions are in sync with your personal values, then you are happier than when you simply have more money. Money is not the "end all," but money-value alignment is truly ideal.
How your innate human biases impact your decision making is of paramount importance. Further in the book, I will review the many decision traps you may face and how to avoid or minimize their impact. I'll also review how you make sure that, given your biases, your money serves your life's goals. This helps you answer the question of "what is it that you want your money to do for you?"
The type of financial support people require has changed with the times. If we take a closer look at yesterday's thinking, we see the information age, where left-brain thinking paid a significant amount of attention to text, or books that were studied. Again, information was critical — "what does this mean?" In today's conceptual age, we look more toward context, which provides us with the answer to "what does this mean to me?" Yesterday, we craved functional, whereas in today's right-brain, conceptual-driven culture, we look more toward the aesthetic, as functionality is a given. For instance, think of how Steve Jobs demanded that the first iPhone not only function superbly, but also look amazing as well. Logical thought is yesterday-driven, whereas empathetic thought is valued in today's society. It's not only about the numbers! Compassion or "empathy in action" is desired today. Step by step, sequential thinking dominated yesterday's culture, and now we crave simultaneous interaction and collaboration. What this means is that when facing decisions in the past, we often utilized a chronological progression in a silo-like fashion, whereas today we hunger for our information silos to interact and talk to each other. An example of this in practice is how the Money Navigator quarterbacks your Ideal FinLife® — he interacts and exchanges information with your other advisors, such as your CPA, attorney, and insurance agent. This collaboration results in better outcomes for you, as everyone can get on the same page. Similarly, a linear structure was valued in the past, but now a view of the big picture or macro is in demand. Finally, and in my opinion most importantly, professional was yesterday's requirement, but today's culture is yearning for authenticity. No more starch-shirted advice; it's time to bring on the backyard barbeque advisor. Someone who can tell you like it is while you are flipping burgers, drinking a beer, and watching the kids play. That someone has a gentle, authentic swagger. That someone is the Money Navigator!
Leadership Styles: Yesterday vs. Today
Individuals of every era have needs that differ greatly from years past in terms of what is necessary for success. To address these needs, different leadership styles emerge and evolve according to societal attitudes and the general economics of the time. The most successful leaders of any era are the ones that adapt quickly and coherently to the needs of the time. The Money Navigator is one such leader of our contemporary age. I am going to briefly summarize the evolution of leadership styles to provide some context in order to gain a better understanding of why the leadership style of Money Navigator is needed today.
Over the past couple of centuries, our culture in the United States has evolved from an agrarian-based economy to an industrial economy and then to a service economy. We are now on the tail end of the information age and rapidly growing into the conceptual age. In order to better understand why and how the leadership style exemplified by the Money Navigator emerged, let's briefly review where we have been as a nation with respect to the attitude of society, the economics of the time, and subsequently the type of leadership that was desired. This exercise will help you realize the type of leadership that is desired today, which I posit is the Money Navigator.
The 1950s were clearly a time of industrial advancement and economic expansion. Most people believe this tremendous growth stage, which spanned several decades, was due to the post–World War II economic boom. Why wouldn't this be the case? After all, the United States had significantly increased its industrial capacity due to the assembly lines, manufacturing processes, and production facilities we had built to feed the war machine. Additionally, financing became more popular and accessible, which enabled families to have new appliances in their homes and buy automobiles, resulting in the middle class becoming a force to be reckoned with economically.
Now do you want to know what actually acted as the catalyst for the growth boom in the '50s and '60s? The United States had just won the war. This means someone lost the war. That someone was Japan and Germany, the other two top economic superpowers in the world at that time. In winning World War II, the United States had literally just decimated the physical infrastructure and thereby the economies of these two powerful nations. We were the only game in town, so to speak, and as a result we flourished and our economy grew. As this phenomenon occurred, a certain type of leadership evolved, which was considered a command and control style. This was a direct result of the military style of leadership used in fighting the war. Whoever was at the top was the authority and figurehead of what to do and not to do. This leadership style had staying power and overlapped into the '60s and '70s.
In the 1970s, we saw an attitudinal shift toward self-help and self-motivation. Narcissistic behavior wove its way through the cultural phenomena of the time, such as the self-indulgent disco music scene — think Saturday Night Fever. It was the "I'm okay, you're okay" time, but economically the '70s didn't deliver in a few areas: We had a recession, rampant inflation, and gasoline lines. I remember vividly as a kid the alternating odd and even gas days that enabled you to fill up your tank based upon your license plate number. The stock market produced negative growth, and we were saddled with record-high interest rates during the Carter administration. Mortgages averaged over 11% toward the tail end of the '70s and averaged as high as 17% in the early '80s.
The 1980s brought us into the age of money, which was everyone's scorecard. Movies like Wall Street were all the rage, and "greed was good," at least according to Michael Douglas's character, Gordon Gekko. "He who dies with the most toys wins" was a common axiom during the hey-day of the '80s. The economic phase that began during this time period was a transition out of the industrial economy and into the service economy. It was less about manufacturing the next widget and more about intellectual capital and what value the space between your ears brought to the table.
As a general comment, it is important to note that as society goes from one economic cycle to the next, the attitude changes from appreciation to expectation. In other words, a business gets no points for doing what is expected, as those are considered table stakes — rather, they only lose points for not meeting expectations. The leadership style during this time quickly migrated away from command and control and into the management as a science mindset. The management consulting guru Peter Drucker dominated thought leadership on business management during this time. Drucker analyzed how humans organize across organizations and consulted with Japanese business leaders with regard to the rebuilding of their war-torn nation. Leaders in the '80s wove Drucker's ideas throughout the tapestry of their leadership styles.
The '90s brought about an era of cynicism as people realized that maybe they couldn't have it all. Due to rapid advances in technology, we were forced to do more in less time, making time itself the decade's primary commodity. Moving away from the '80s mindset of materialism, the '90s placed a greater emphasis on the experiential. Even though Starbucks was founded in the early '70s, its surging popularity in the '90s validated the advent of the experience economy. The experience economy recognized that mass customization was the way to increase market share and customer loyalty. Why else would you go out of the way to pay $5 for a cup of coffee at Starbucks when you could get it for $1.50 or less at 7-Eleven on your way to work? It's about how going to Starbucks makes you feel. You may feel hip, invigorated, accomplished, or part of something bigger than yourself by going to Starbucks for your cup of joe. Bottom line is Starbucks epitomized the experience economy. The type of leadership desired in the '90s was something termed the un-leader. Companies started instituting casual Fridays, and un-leaders organized and encouraged experiential outdoor bonding adventures between colleagues, such as rope courses, paintball games, and walking on hot coals. These things were designed to connote a more laid-back attitude from above in an effort to be hip and cool during the experience economy.
Excerpted from "The Money Navigator"
Copyright © 2017 Paul Bennett.
Excerpted by permission of Greenleaf Book Group Press.
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Table of Contents
The Age of the Money Navigator, 1,
The Money Navigator and Your FinLife, 3,
Traditional vs. Behavioral Finance, 21,
Navigating Your Decision Traps, 29,
How Humans Make Decisions, 31,
The Decision Traps, 45,
Not Enough Time and Too Many Decisions, 61,
The Financial Services Industry Landscape, 71,
Product Proliferation and Marketing, 73,
Tools and Methods for Money-Value Alignment, 81,
Not Just Another Financial Advisor, 101,
The Money Navigator in Depth, 115,
Talking With Your Money Navigator, 117,
The Money Navigator: You Can't Afford to Live Without One!, 133,
Real Life FinLife, 149,
More Tools for Your Toolbox, 173,