I’m beginning a series (I started to write “short blog posts” but realized that “short” is somewhat relative) to review financial and economic topics and highlight choices and possible action plans. Admittedly, it is disturbing to see some changes and decisions that have occured within our US and global markets and current US economic philosophies and strategies. But as a Comprehensive Fee-Only Financial Planner and student of economics, I tenaciously look for silver linings (vs. hype).
To maintain CFP®, Enrolled Agent and NAPFA requirements, there are significant continuing education requirements. I recently completed 3 days of education focusing on personal finances and taxes. One thing is clear: our world is changing, and tax and financial changes are part of the fallout. I’ll be attending a conference this fall that includes top economic and financial planning commentators/practitioners. But I don’t have to wait for that: facts are surfacing that allow for planning strategies. I’ll take requests – meaning if you would like a topic covered, ask me. I’ll touch on Economic Theories and how to identify what is being applied with certain government proposals. More importantly what does this means for families and individuals? I will aim towards the practical steps and decisions after understanding the larger picture.
I begin with this truth, which should not be glossed over: Most wise financial decisions are static regardless of our world changes. As the founder of the Alliance of Cambridge Advisors, Bert Whitehead says, know the difference between “endogenous” versus “exogenous” factors. This means: what can you most control about your personal finances (endogenous) versus what may be happening out there that alarms you but that really you cannot do much to control or change, financially speaking (exogenous).
Knowing the difference helps clear the clutter from our minds – as I don’t know about you, but sometimes the amount of information coming in via media and internet, is overwhelming. Some information is relevant to individuals, and some is not. And of course, since media often speaks with “biased tongue”, we also need to decipher truth from persuasion and agendas. So it is good to put into practice the ability to segregate out the Endogenous factors – those that we can control either immediately or in the future from those that may alarm us, but leave us dumfounded as to what actions to take. The endogenous issues are things I would put on the “A” list. They most affect how to improve our financial health.
Exogenous issues (issues outside of our personal control) may or may not provide opportunities or defensive action. If you are financially prepared and ready become the operative words. It’s interesting that most “get rich quick” methodologies are rooted in exogenous factors, meaning since such and such is going to happen, we need to do this – in a hurry. I encourage clients and when speaking or teaching to first understand the root of an idea or prospect and whether it is feasible, ethical, practical, and personally applicable before jumping into any new venture. Included in the analysis of exogenous “opportunities” are: What are my PERSONAL risks? What do I stand to lose either in money, time (which has a monetary value), other opportunities, friendships, reputation, momentum, ethical lifestyle and peace of mind? Is this something that fits you and your family?
Stay tuned. I’ll email and post update information on twitter and facebook. I look forward to your input as well.