Tag Archives: Behavioral economics

Your Average Joe Economics: Inflation will ruin your plans. Plan ahead for rising interest rates.

The Federal Reserve is about to raise interests rates in a very meaningful way. They are a bit late to the party, in my humble opinion. Finally, 2022 will be the year of fighting back on inflation by using a more aggressive monetary policy, that is, raising interest rates.

So what now? Don’t panic. Prepare.

  1. Tune up your financial plan to anticipate and prepare for all phases of the business cycle. Financial planning is an all weather process, and must include both short- and long-term solutions, including how to deal with eventual economic downturns, market volatility and federal monetary policy. You should always have a plan, but if you don’t, getting your plan together right now is the smart move.
  2. Reduce risk in your portfolio. No, you are not a market timer, so don’t dump everything. Look at your holdings and see where you can take some long-held profits and trim off some market risk. For instance, allocating away from growth stocks and toward defensive physical assets may be a relevant protective approach for you. Remember, you don’t go broke taking profits, so when markets are at or near historic highs, take some profits! And what if the market goes higher after you sell? Who cares? We aren’t fortune tellers. Take the profit, and live to reinvest another day.
  3. Be realistic about your return expectations. Interest rates are going to go up, but with inflation at a forty-year high, fixed rates will still put you underwater. If you earn a fixed 2%, but inflation is at 7.5%, then you have lost 5.5% of your principal.  Get it?
  4. Cash in the bank. Cash means covering emergencies. Cash means capitalizing on opportunities that will appear as the markets decline. Be in a good cash position. Sure, the rates will suck, but cash is queen as interest rates rise.
  5. Short term treasury bond rates will still suck, even after rate increases, but they are safe. Consider short maturities if you don’t need all that cash laying around.

    …inflation is literally stealing money from you with every transaction you make…

  6. Consider hard assets. Precious metals like gold and silver tend to do well in recessionary times. They can provide a good hedge to the rest of your financial assets in declining markets. Gold and silver coins, rounds and bars are easy to buy, easy to store, and easy to sell. And commodities, like timber, agriculture, copper, oil, and so forth, will prove good stores of value and offer profit potential.
  7. Count your pennies and cut dumb spending. You will live without Starbucks. As God as my witness, you will live! A better choice: McDonald’s, any size for a buck. Best choice: travel mug filled with home brew. Get it? Every dumb spend has a series of smart alternative solutions. Cut dumb spending habits in all phases of the business cycle, especially as prices jump and wages fall.
  8. Cut dumb debt. That means credit cards. Revolving credit is dumb. Khakis on credit is a dumb idea. Starbucks on a credit card is a super dumb idea (I admit it, I’ve done it, we’ve all done it :)).
  9. Reduce or eliminate leveraged debt like a mortgage which helps you finance an appreciating asset, like your home. Khakis don’t appreciate in value. Aggressively search for opportunities to refinance old leveraged debt (mortgages and credit lines) to historically low rates before they rise.
  10. Work more hours, save more money. Get some differential OT coming your way, or start a side hustle. Unless you are continually “employee of the month,” or playing squash with the boss, watch your backside. Trade your TV time for a side hustle, and be your own boss.

So, in summary, while it is always good to plan ahead with your money, it especially important when rates are rising and inflation is literally stealing money from you with every transaction you make. Start today and build solid habits that will prepare you for every phase of the business cycle.

-Another bite-sized economic lesson from Just Your Average Joe!

What can a Money Coach do for me?

Clients hire money coaches for a number of reasons, and, surprisingly, its not just about their coach’s skill with money!

Most people in the US need help with money, because or educational system failed to realize that “money skills” are something every student from K to 12, and in four years (or more) of higher education, should have a firm grasp on.

And while a professional money coach will bring hands-on experience and broad skills to the table, it is the less tangible skills that people often need to harness in order to make real headway with their personal finances.

Your reason to seek out a coach is unique to you, so to get you thinking beyond the dollars and cents of it all, here is an incomplete list of reasons that people hire a coach (listed alphabetically so as not to imply the relative importance of one reason over another).

  1. Accountability. The one thing that separates coaching from any other financial relationship is the two way street of accountability. In order for any coaching engagement to be a success, coaches must follow through. And so must clients.
  2. Biases. We all have inherent biases that can manifest in potentially damaging behaviors. Many clients have been been unable to overcome the biases and behaviors that have held them back from financial success. An experienced coach can plug that drain so their client can make smarter, informed decisions about their overall financial wellness. Money Coaching is on the cutting edge of changing investor behavior and establishing life-long money skills.
  3. Celebration. A win for the client is a win for the coach, and you will celebrate your victories as a team!
  4. Challenge. Changing any habit is hard, and a good coach will challenge their client to face their hardest problems, and partner with them until the correct solution reveals itself.
  5. Change. An experienced and informed coach’s support will help clients initiate critical change.
  6. Confidentiality. Unless you are attending a group coaching experience, your business is your business. Nobody has the right to know what you discuss with your coach. Private clients are just that! 
  7. Discovery. Coaches help clients discover intelligent alternatives and approaches that they had not considered or didn’t even know were available.
  8. Effectiveness. Clients can’t be effective as an investor or money steward if they don’t have a personal paradigm or a detailed plan built around their personal goals.
  9. Focus. The money coach will help clients tune into the problems that must be solved, and tune out the rest of the noise. A laser focus on only the issues that matter means turning away the million and one bits of financial pornography that assault our senses daily. 
  10. Goals will never be realized unless and until they are visualized. One of the most important roles a coach plays is helping their clients visualize and define realistic goals and then craft a plan to attain them.
  11. Honesty. Your friends and family may be reluctant to help you because they don’t know how. Also, they don’t want to put in their two cents and put the relationship on the line. An honest assessment from an unaffiliated, unrelated and trusted third party is what clients demand from a coach.Truth without baggage!
  12. Logic. A coach can help clients replace emotion with logic, the secret to effective long-term wealth creation.                 
  13. Mistakes. You want a coach to help you avoid costly mistakes, and most experienced financial coaches have made those same mistakes. It’s called “earning your stripes the hard way,” and hard knocks are the best teachers of all. If you work with an adviser, coach or planner that hasn’t made mistakes, fire them!
  14. Objectivity. You will benefit from unvarnished, non-judgmental and objective discussions with an outside observer. 
  15. Observation. Through close observation, active listening, and asking powerful questions, financial coaches can help clients craft an intelligent plan, complete with detailed action steps.
  16. Obstacles. All goals face obstacles. Spotting potential obstacles and barriers before they appear, and crafting a plan to overcome them by anticipating changes or shifts in your life and the world in which we live.
  17. Partnership. Coaches are not dictators. Rather, they are collaborators, partnering with clients to find answers and create positive change. 
  18. Potential. An experienced coach will know how to help their clients uncover their hidden potential, which will lead to fulfilling their dreams. 
  19. Perspective. Coaches learn to look at everything from a broader perspective and in longer time frames.
  20. Resources. Clients are able to benefit from the network of allied resources that their coach has developed over decades in the field. 
  21. Simplicity. One of the goals that seems to surface often is the client’s desire to take complexity out of the financial picture. Complexity causes stress; simplicity invites peace.
  22. Success. Success comes in many forms. Making more money, feeling peace of mind regarding your future, finding more time to do the things you want to do because you have the resources. You defines your own success; the engaged money coach helps you achieve it. 
  23. Strategy. Without a strategic foundation, it’s unlikely anyone will build the wealth or the life they want.  
  24. Tactics. Experienced coaches carry a full “bag of tricks” with them to share with clients. You will learn proven techniques for solving problems as varied as fixing a broken portfolio to creating meaningful lifetime financial wellness.

The reasons clients hire a money coach may be virtually unlimited, and may often can be quite surprising. For instance, a self-sufficient, hard-driving executive may actually need someone else to steer the personal finance ship, based on his or her own inherent biases or behaviors. Sounds odd, but it happens every day.

Most money coaches like helping people and they like solving problems. That’s a really winning combo of motivations, and the varied nature of the engagements and the diversity of the problems to be solved are two of the main drivers that lure many coaches into the field. 

Money coaching. A new and unusual concept to many people, but don’t you owe it to yourself to take the next step?

Advanced Wealth Protection.

What is a Money Coach?

Money coaches are not investment brokers, but they could be!

Money coaches are not financial planners, but they could be!

Money coaches are not necessarily already in the financial services business, but they could be!

So what the heck is a money coach?

Before we seek a definition, let’s first contemplate the human condition for a moment, and consider what people really want in terms of a happy life.  

We know that money doesn’t equal happiness, but when we think about money, we generally want to know a few things: how can I make more, how can I keep from losing it, how can I be a better investor, and how can I best manage my life, financial and otherwise, so that my family and I can live a healthy, worry-free life.

Face it, living life means learning how to deal with risk. Catastrophes and mistakes have a price tag. Everybody’s price tag is different. Most of us don’t sit around worrying about things like stock picking and market volatility. We think about what hazards might come our way that could make our lives more volatile. The health and safety of our spouses and children, losing our jobs, getting a serious illness, dying too soon, and yes, even living too long, all of it, costs money.

On top of all those things, add in the need to plan for a secure retirement, a plan to send the kids to college, a plan to insure the risks of getting sick, dying too soon and living too long, bulging credit card debt, not having enough cash to deal with an emergency, living within a budget…whew! Now that’s a pretty full plate.

And if that were not enough to make us cry uncle, we’re often fighting a war. With ourselves. That’s right, we all have the potential to be our own worst enemy. Low financial literacy, bad habits and wonky behavior will kill even the best laid plans. 

So, most people aren’t looking for a better stockbroker; they’re looking for help and guidance to better deal with both the risks and opportunities ahead, which means getting a better handle on their emotions, their behaviors, their money biases, their knowledge and their skill.

A money coach is less a teacher and mentor, and more a guide, helping his or her client find the answers within, and helping them move toward reaching their most significant goals in life, and then holding them accountable to achieving them.

That’s what a money coach is.

Never. Lose. Money.