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The Free Financial Advisor

You are here: Home / Archives for Goal

Summer Money Activities for Kids

May 21, 2013 by Average Joe 20 Comments

Shannon Ryan joined us to kick off the new Stacking Benjamins podcast yesterday, and we received a ton of great feedback and requests to “get this in writing.” So, we owe a big thank you to Shannon, who sent over her tips for us. If you missed the podcast, here are some great tips to help kids learn about money. Enjoy!

Summer is the perfect time to start talking to your kids about money as life is less structured, and you have more time to slow down and have these important conversations. And don’t worry–money conversations do not have to be boring! Position them correctly and you can have fun while teaching your kids good, life-long money habits.

1. Set Clear Goals and Make It Fun

Over a favorite family meal, we discuss how we’re going to use our family money in three areas – what will Save our money for; what will Spend our money on; and who will we Share our money with? If your children are older than 6, have them create their own summertime money goals. For example; Save–for a new bike; Spend–during a trip to the ice cream store; Share–with a local charity, such as the humane society where you can deliver your donation in person. Once your kids have their goals, help them find fun ways to earn money. For example, post jobs in the house, a lemonade stand, etc.

Fun Activity: Make goal-setting a fun event and your kids will no longer dread the word “goals”. Celebrate achievements and create friendly, sibling competitions on who can reach their goals first.

2. Slow Down and Have Regular Money Conversations

Some of my best money conversations with the girls happen during our normal activities. For example, take your kids shopping. Have them help you prepare the shopping list to create a clear understanding on what the family “needs” are and where “wants” fit in. At the store, be sure to talk through your purchases with your kids instead of making internal comparisons. For example, why you buy a name

brand vs a store brand for one item and not another.

Activity Idea: See how much money you can save on groceries for the summer. Make a list of needed items and search for coupons and specials. Use the money saved for something fun.

3. Make Your Goals Visual

Post family and individual goals where everyone can see them. You can cut out pictures from magazines or print pictures from the internet to create a vision board for your goals. Set up jars or envelopes for their Save, Spend and Share goals. When they earn money, discuss with them how they want to allocate their money towards their goals.

Activity Idea: Have you kids decorate their jars or envelopes with images of the things they plan to save, spend and share their money on or with.

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4. Post Jobs so the Kids Learn How to Earn Money

I am not a believer in allowance, but I do believe you need to find a way to put money in your kids hands, so they can learn to make decisions around it. Each week create a job posting that consists of various chores that are important to running the house, but outside the children’s expected responsibilities (in our house, this includes–making beds, cleaning dishes and cleaning up after themselves).

Fun Activity: Weekly job postings allow kids to pick and choose which jobs they want to do. Plus, they can choose whether to do a lot (and earn a lot) or do little (and earn little). We treat this like a real job and on pay day, if they haven’t done their work to my satisfaction, they may not get paid. Or if they have gone above what the job entailed, they could earn bonus.

5. Let Them Flex Their Decision-Making Muscles!

We all have a finite amount of money, so the earlier you can teach your children to make wise choices with their money–the better! One of the best ways to teach them is to involve them in the decision-making process. You want them to figure out what makes them truly happy, rather

than listening to what others tell them they need. Once they master this, they will spend their money on the things they want and learn to create joy with any amount of money.

Fun Activity: Create an entertainment budget. Give your kids multiple options, some expensive and some not, then let them figure out how to use the money.

Photo: Mosieur J.

 

Shannon Ryan, CFP® is a Mom on a mission to help busy parents teach their kids simple, value-based principles that guide their money decisions and support their long-term financial well-being. Shannon wrote The Heavy Purse to help parents start money conversations with their children through a fun, bedtime story and developed companion workbooks to help deepen those conversations. Visit www.TheHeavyPurse.com to learn more on how to raise Money Smart Kids.

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Filed Under: kids and money Tagged With: Education, Goal, kids, Money, money decisions, money management, Shannon Ryan, summer activities, teaching kids

Goal Setting and Pretty Retirement Charts – Our Cuppa Joe Discussion

March 22, 2012 by Average Joe 10 Comments

Every Thursday we grab a cup o’ Joe and talk opinions on financial matters…..today we’ll chat about goal setting and workplace retirement plans.

My opinion: Do you know those 401k asset allocation charts in the front/back/middle of your workplace retirement plan booklet? They’re color coded circles of slick graphics, and are often found at the conclusion of a survey about the amount of risk you should take in your investments.

Those pie charts are nearly irrelevant when it comes to financial success.

Each day in a workplace somewhere in America you’ll find a fast-talking 401k-hocking yahoo teaching a group of people how to use these silly charts to determine how much risk they “want” to take.

How much risk you “want” to take?

“Want” and “financial success” rarely coexist when talking about money management. Most people want zero risk and huge returns. They also want Santa Claus to be a little more kind next year than last.

Is “how much risk do you want” really the question you should be asking with your 401k plan?

 

I have a better question.

 

Try this one on: How much risk do you need to take to reach your goal?

Isn’t that the question these surveys should be asking?

I know this doesn’t sound like rocket science, yet you’d think so if you’ve ever read workplace retirement plan guides. In many cases, risk tolerance charts and savings guidelines are presented as two entirely different discussions.

Huh?

Let’s be clear about what I’m discussing here. If you’re going to achieve financial success:

Find out how much you need to save.

Then learn what return you need on that savings.

 

If I had control of these workplace pie charts, here’s what I’d do

 

I’d gather everyone in the conference room and show the group how to determine the amount they need to save to reach financial success. I know that’ll differ for everyone, so it’ll be important to focus on goal calculators. With the boss’s permission, we’d follow this up with generous portions of alcohol. We’ll call it “Some of You Will Be Happy” Hour.

Second, I’d help everyone determine what return they need on that savings to achieve the retirement goal.

Sounds like I’m repeating myself, doesn’t it? I’m not.

 

Here’s where we finally insert the silly quiz

 

Third, the employees would be presented with the risk tolerance quiz. Everyone could see if the asset mix they (historically) would have needed to reach financial success matches their risk tolerance.

If so, more Happy Hour.

If it doesn’t: Houston, we have a problem.

 

The real problem

 

If you aren’t going to reach your goal, you have a choice to make: either save more money or raise your risk tolerance. One requires sweat, the other education.

Which path would you follow?

I believe that once we begin presenting 401k plans this way, instead of with some inane chart about your “risk tolerance” (lots of people very comfortably missing their goals out there), we’ll finally begin to realize that every goal can be met through a simple equation:

 

Savings x Return = Goal

 

How you approach one side will affect the other.

 

Okay, discussers, let’s go:  Do you have a workplace retirement plan? Did it come with a silly risk tolerance chart…or did they present retirement in the brilliant manner I have above?

Enhanced by Zemanta(photo credits: Nutty pie chart: Sebastien Paquet, Flickr;                 Teeter-totter: Rambergmedialigmages, Flickr

Filed Under: Cuppa Joe, Planning Tagged With: 401(k), Goal, Retirement, Risk aversion, Saving

A Goal Setting Plan that Actually (Gasp!) Works

January 3, 2012 by Average Joe 10 Comments

When I was a kid, I’d tell my mom proudly that my room was clean. After a quick glance, she’d send me back in, saying something about “my version of clean” and “her version.” While I’m still not sure what she was talking about, many people set New Year’s Resolutions with good intentions, thinking they’re pretty good.

Then they’re disappointed when a few weeks later they’ve failed.

Do you want to be a failure when you practice goal setting?

Of course not.

Let’s find a better way. Today let’s try setting goals the way that financial advisors do with their clients. I can’t speak for everyone, but this method I’m going to describe worked well for me.

Never been in a financial advisor’s office? That’s why we call this site the Free Financial Advisor (irony, huh?). Here’s what I did with my clients in early meetings.

We set goals that stick. Here’s how:

…after we chained people up and made them swear off credit cards, we’d…

…of course I’m joking.

I’d begin a meeting by asking my client “what do you want for yourself?”

Although this is the same question people ask themselves when they make New Years resolutions, I received a much different answer. People would give me the goals they thought I’d want to hear, not what they really wanted.

Most often, they’d say:

1) I want college for my kids

2) I want retirement for myself

After I gasped in feigned surprise from hearing the same answer yet again, we’d dig deeper. gauri_gasp

But let’s discuss these two goals (education and retirement) for a moment before moving on. These two goals aren’t at all the same ones that you give to yourself OUTSIDE of a financial planners office. Outside, goals are exciting. You want a new boat. You want to write a book. You want to quit your dead end job and go work for yourself.

You want to be a masked man in tights, fighting common financial planning mistakes.

Oh, wait. That’s mine.

So here’s step one: Write out your true goals. If you give yourself the goal you think “you’re supposed to have,” do what I did with clients. Ask yourself “what else” until they’re exciting. Then keep searching until you can’t dream up any more.

Goal setting sessions should include both short term and long term goals. I’d make clients outline all their goals. Here’s why:

Every goal affects the other ones. How you plan for college is going to have a dramatic impact on your retirement plan. Whether you join the country club will be affected by how quickly you get your new business off the ground.

By this time, clients think we’re done. This is the end for people who complete a New Year’s resolutions list. We’ve outlined the goals.

We’ve gotten a good start, but we ain’t anywhere near done, sister.

Next, step two: we prioritize your goals. Here’s the question I’d ask to help someone prioritize their dreams during our goal setting session. I’d ask,

“On a scale of one to ten, how important is it that you reach this goal, the way you’ve described it to me?”

Here’s what people would answer…

– Oh, I really really want all of these.

Then, I’d ask: “If you can have goal 1, but not goal 2, which would you pursue?” Using the retirement and college example above, I’d ask, “If you could give your children the best college possible, but it meant retiring later, would you retire late or find other education options for the children?”

Everyone thought I had an agenda and that I knew what they were going to say. The answer was obvious. This was the cool part for me. The answer was obvious, but not to me. It was obvious to them.

At this point, people would give a nice sigh of relief. In their mind, goal setting was over.

But it wasn’t. Although your average New Year’s Resolution was way over, we were now halfway.

My next job? If I’m a professional asking about goal setting, I still don’t know the goal. Sure, for you it’s retirement or your kids’ college. For me, the goal is an amount of money.

We’ve done a ton of work, but still haven’t actually set the goal.

How do you know how much to save for a goal if you don’t know the target? I’m often amazed when I see people saving five or eight percent into their 401k plan at work.

I’d ask, “Why are you saving that amount?” I’d usually hear answers like:

– It’s what I can afford.

– It’s the amount my company match.

– It’s the cap in my retirement plan.

I can’t remember a time someone answered, “Because that’s the amount it will take to reach my objective.”

But isn’t that what you’re really trying to do with a New Year’s Resolution? Aren’t you trying to reach a goal?

Here’s what we’d do next: in step three, I’d ask my client how much they’re saving toward each goal. My goal wasn’t to embarrass them, but it was to make them understand that there’s a lot more to goal setting than just throwing out a list of dreams and prioritizing them.

Quickly, we’d proceed to step four, finding out what each goal costs. Every goal has a simple equation to reach:math joke

Money x Return = Goal

Money can be expressed as either savings or new contributions, and return depends on the amount of risk you want to take. Both factors affect each other. As an example:

If you need to save $10 (yeah, right….but let’s run with it) and achieve an 8 percent return to reach the goal, you now have some numbers to play with.

If you save $11, you could reduce the risk you take on investment.

If you achieve a high return, you can spend money on other things, speed up the goal, or Super Size it!

Once we know these numbers, then we can proceed with step five: create the plan to reach the goal. It doesn’t take long and we’re able to

Here’s my question: how do you know which you’d do until you’ve followed these steps:

1) Write out your true goals. Both long and short term.

2) Prioritize the goals.

3) Write out how much you’re currently saving toward the goal.

4) Find out the cost of the goal.

5) Create a written plan to reach the goal.

And there you have it! You’ve successfully completed New Year’s resolutions that are sticky.

Here’s the funny part: I didn’t do this process for my clients.

I did it for me. Because as their financial advisor, I knew they were going to hold me accountable to the goal, and I needed a clear picture of the goal and what it was going to cost before I recommended a plan of attack.

If the hired help does it this way for your goals, why don’t you?

Okay, now it’s your turn: What’s your #1 priority in 2012?

Mine? Lose 10 pounds. Cost: Weight Watcher’s membership. I work better on a team. Timeframe: 1 lb. per week/10 weeks till finished, then maintain.

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Filed Under: Planning, successful investing Tagged With: financial advisor meeting, free financial advice, free financial advisor, Goal, goal setting, New year resolution, Self-Help

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