Starting a Financial Group

Tonight I met with a couple friends to discuss how we could firm up our financial goals, get more focused, collaborate on ideas, and keep motivated. I gave them quite a bit of info as to some things I'm currently doing, along with reasons why I thought these were good "next steps", and after hearing about where they are financially, it seems like we're all about the same place.... currently out of (bad) debt, and have our income exceeding our expenses on a monthly basis. We should all be moving ahead to contact financial planners this next week. We have set up a plan to try and meet once a week to go over ideas, report progress, etc. I doubt anyone will be able to actually get to an interview with a planner before then, but hopefully we will have at least made some calls!

Some other things we discussed where stocks. I mentioned ClearStation.com as a nice (free) site that has some good tools for analysing stocks, as well as providing a kind of social network for stock traders. I have found it can be a nice learning experience to read why others are buying and selling certain stocks at certain times, and what they are looking at to make their decissions. Prophet.net also has some nice charts that allow you to draw on them, and save your markings between each visit to the site. It might be nice to increase our education on how to pick better stocks (long term and short term), but my personal feeling right now is that I'd rather find an analyst who's been showing good returns, and follow them. I am counting on the fact that a GOOD one will be spending a lot of their own time to research the stocks, and that frees up my own time to pursue other avenues.

We also talked some about real estate. Nothing too concrete at this time, but I do have my agent (Jessica Bruehl) sending me info on 4plex/8plex buildings. Another friend I'm talking to has made a comment about going in together on some larger real estate deal, and so that may be an option too. I don't think I want too large a slice of my pie tied up in one single investment. Since most of us are just starting out on this journey, maybe we ALL would feel better about being able to start by putting in less money, and accepting less return.

The first meeting went great!
I am eager for us all to get together again, talk about more ideas, and report the progress we will make over this next week.

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Preparing for the Financial Planner

For the past two weeks now, I've known my next step is talking to a financial planner, yet I keep putting this off. It IS something I want to do! -- so why am I putting it off?

I put some more thought in to that today and decided the main reason is probably because I don't think I am prepared. Managing paperwork, and details is just not something my personality type is good with, and so in many ways my life seems rather chaotic. (All the MORE reason for a financial planner to help get it organized, and draw out a PLAN.... I'm good at following step by step plans).

So, today I decided to do a little research and find out what I might need to interview a financial planner, and after reading a few pages (Prepare for the Financial Planner Interview, How To Choose a Financial Planner, 10 Questions To Ask) I decided to gather my best findings and present them here in this post.

Remember, a good financial planner will identify where you are at, find out where you want to be and then draw up a plan of action to get you there.

Financial Goals

The very first step you should take is to sit down and think about what your short-term and long-term financial goals are. A financial planner will have a hard time helping if they can't see where you are at now, and don't know where you want to be. You might come up with a few different ideas, and the financial planner can help determine which are good, and which can be worked in together, but you have to have SOME goal for them to work toward!

For myself, I have one fairly simple goal at the moment: Set up $1,500 in passive income by 2010. I already have about $500 or so set up, and that gives me 3 years to create the rest. I should be able to do much better than that, but once I achieve THAT goal, it's a downhill snowball!

Gather Financial Records

Next, you will need to gather your financial records. You (and the financial planner) will need to determine your current spending habits, assets, and liabilities. You should have a few things ready to take to the first meeting/interview:
*) Rough outline of your monthly budget
*) Estimate of monthly income (sources of present and future) and expenses
*) Recent tax returns
*) Social Security estimates
*) Recent account statements for retirement plans
*) Recent bank and brokerage statements for all accounts
*) List of major assets and estimated market value
*) Recent statement from all open credit card accounts
*) Copy of the latest declarations page from auto, home/renter’s, life, and disability insurance.

Gather a list of prospects

I would recommend asking family and friends if they are using any financial planners (or have in the past) and what they thought of the advice. These are the people who will probably give the most detailed account of their personal experience, although keep in mind they might have limited experience, and it will be highly bias toward their personal feelings as to how helpful they thought the advice was. The next group to ask for prospects would be other financial professionals such as accountants, your bank, etc. I have found that my real estate agent (also an investor) is a great source, since she does a LOT of networking in her position, knows a lot of people, and so should be picking the best of the crop for her personal "team" as well. I do not know if the phone book is a good place, but it is another option.

Preliminary Calls

After you have a few names/numbers, it's time to get a little more information and narrow things down.

Questions to ask:
1) What is your area of specialty? (some answers might be: cash flow, tax, investing, insurance and retirement planning)
2) Do you have any certifications?
Certified Financial Planner (CFP) -- about 55% pass the test on the first try
Personal Finance Specialist (CPA/PFS) -- Certified Public Accountant
Chartered Financial Analyst (CFA) -- investments and wealth management
3) How are you compensated for advice? (salary? fees? commissions? other?)
4) What are your income and investment requirements? (make sure they are in your price range!)
5) Do you have a packet of information you can send me? Does it include your Form ADV? (read about Form ADV here)

Interviews

It's recommended to have at least 3-4 half-hour interviews lined up. These will probably be free, but be sure to ask! Also, make sure you will be meeting the person who will be advising you. :)

Take a checklist of questions for the interview:
1) What investment experience do you have?
2) What is your professional background? Education?
3) What strategies or principals are used to develop your financial plans? (conservative/aggressive)
4) What services do you offer?
5) Will YOU be carrying out the recommendations? or referring me to other professionals?
6) Do you have a copy of a typical plan you might recommend?
7) (if you have not gotten their Form ADV yet.. ask for it)
8) What do you typically charge?
9) Could you give me a list of any possible conflicts of interest? (other people/companies that might pay planner extra money for pointing you in their direction)
10) Can I have it in writing? (get them to give you a written record of what is agreed on, and keep it in your files)
11) Do you have a few references of current and former clients with financial goals similar to mine?

Here is a GREAT checklist you should print out and take with you:
Checklist For Interviewing a Financial Planner

Make a choice

After all the interviews, TAKE YOUR TIME with making a final decision. You will probably be paying several hundred dollars a year for a good financial plan, and it's worth the extra time up front to make sure you get started on the right foot, where the plan can more than make up for it's cost. Check references. Look up Form ADV information. Who are you most comfortable sharing your financial information with?

Take Action

Finally, remember... even the best financial plan is worthless if YOU do not take action!

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Rich Dad, Poor Dad

I've been getting a LOT of financial education over the last month or so, and I want to pass all this on to my readers!

I'm not a big reader and certainly prefer "How-To" manuals over fiction for my digest of print media. However, I'm also a big believer in repetition as a means of learning, as well as the power of our subconsciousness. This has lead me to prefer audio books which I can listen to again and again, even during sleep, and this is what I've been doing for the last month.

I started with Robert Kiyosaki's book "Rich Dad, Poor Dad", and found it a great inspiration, with some great general ideas for getting my finanical life more in order. It did lack some critical detail, but I was hungry for more, and so went searching for my next few financial lessions.

Over the next few weeks I was turned on to other audio books like Napoleon Hill's book "Think and Grow Rich", which gave more great nuggets of information and clarification, as well as a good dose more of "cheerleading". Some concepts in this book also helped reenforce by growing belief in the power of our thoughts determining our reality. I would highly recommend this book along with movies such as "The Secret" and "What the Bleep Do We Know", and other resources on Quantum Physics (for those truely interested).

I ended up listening to many more of Kiyosaki's audio books, such as "Cashflow Quadrant", "Rich Dad's Guide To Investing", "Rich Kid, Smart Kid", and "Retire Young, Retire Rich". During all this learning and researching, I came across a few websites presenting some negative Kiyosaki viewpoints. I suppose on some level there were a few valid points... perhaps Kiyosaki does more generalized cheerleading than giving solid next-steps to take, but in the end I HAD to come to the conclution that his audio books series has been MONUMENTAL in helping me change my attitude, get more focused, and has provided enough detail to get me started on the right foot.

Some other audio books I've been filling my ears with are "Why We Want You To Be Rich" (with Donald Trump). I thought a large part of it was quite boring and did not advance my financial education much, however, I do still feel it was worth the time spent. I did pick up on a couple nuggets.

And right now I'm a finishing up Steve Scott's "Mentored By a Millionaire", which does have lots of great information, and I will certainly be listening to it many more times to absorb as much as possible.

For you:
... and so you might be asking "How can this post help me?"
Well, here is a short list of things YOU can do to get started:
1) Realize you NEED more financial education. Determine how you are currently spending your time, and find a way to include 4-8 hours a week for your financial education.
2) With the time you find (or make) in step 1, you can start to fill it by reading some books, or listening to some audio books, that will help to increase your financial intelligence. The more you learn, the more you will see there is to be learned, and the importance of more education, as well as starting to learn the actual steps to take next.
3) Put your current financial sitution in to a spread sheet, where you can look at your monthly income and expenses for the last 1-2 year period (at least). You cannot make any specific plans on HOW to get to any destination if you don't know where your current starting place is!
4) Once you can SEE what your current financial sitution is, then you can take some action to adjust your spending (and/or income) so that you free up an extra $100-$200 per month. Put that money in to a SEPERATE account each month/week! If you have NO clue how to do this, then leave a comment to this post and I will reply.

At this point, you will be starting the baby steps of your journey of a thousand miles. No journey can be completed for sure until you take the FIRST step!

5) Now you should have a small amount "extra" and you might (strongly) consider using the first bit to take your financial spreadsheet to a Financial Planner who can draw up a much more professional guide for getting you to your financial goals.


Actually, this is the step I am at now. I have asked a few friends and business networking associates about who they recommend for a Financial Planner. I've got 3 names and will be interviewing each of them this next week.

Tune in again soon for an update !

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Financial stats for 2006-12

Here is the monthly activity for December

1) Google Adsense:
Again, not been doing anything more with Adsense lately. The income dropped another 16% back down to what it was in October, but still better than nothing, and has not been taking any more of my time.

2) PayPal Money Market:
The Account gained another 0.448% this month (5.03% annual).

3) Stocks (three portfolios):
Personal picks: +26.52%, -1.59% (gains THIS month)
TurnerTrends ETF-5: +11.08% (THIS month)

4) Second Life:
Gains: ?? (see below) - this month I added another $8,000 to the overall investment, and the normal gains have not been calculated separately, but at this point the gains should start looking really good.
The daily interest here is .1% compounded daily, which is about 3% gains per month (43% annual). Additional gains from other fairly passive in-world means.

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