Ride Your Way To Wealth

Ride Demon (new name for my 11-year old son) recently bought a hoverboard. If you’re asking, ‘what’s a hoverboard’, well, know that you’re not alone. Because that was my immediate response when Ride Demon excitedly told me of his intended purchase. And my ignorance was cause for him to look at me as if I were from Mars. Or just really, really old and out of touch. I told him to go with the Mars theory.

Then Ride Demon proceeded to tell me all about hoverboards, starting with: they’re soooo much fun, move fast, and carving the streets on a board is awesome. It’s kind of like an electronic skateboard but wayyyyy more cool because they’re battery powered, come with Bluetooth speakers to play music while riding, and are controlled by body motion. Meaning, you lean slightly forward or backward to slow down or speed up, and steer right or left by placing more weight on one foot or the other.

After learning everything I always wanted to know about hoverboards, I asked Ride Demon about the cost (a few hundred dollars).

“I have it covered.”

“Oh?”

“I’m not asking you to pay.” (interpretation: it’s my money and I can do what I want).

“Okay.”

“I know it’s a lot but I’ve been saving my money for a long time and this is something I want.” (interpretation: I’d like to buy this without your opinions and analysis, Dad).

“Absolutely, your call.”

“And I’ve done all the research (the kid knows me; this would have been my next question), and this is the best board for the best price.”

“Totally trust you. Go for it.”

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Money Can’t Love Buy But It Can Buy Experience

So Ride Demon buys the board. And he’s having a blast. The added bonus is that a friend of his is into hoverboard riding as well. So the two boys venture out daily, doing their thing, no helicopter parents around to tell them to slow down or be careful.

Whether he’ll remain interested for a few days, weeks or months, who knows. And whether the expensive price tag was worth it, well, that’s a matter of judgment and perspective.

The way I see it, the kid is learning about money management. On his own, he reviews his bank balance, tally’s up the expense and consequent hit to his savings account, and makes the executive decision to forge onward with the purchase.

Sure, he gets a kick out of watching his balance grow. But, really, the three digit number only gives back so much in the excitement department. Ride Demon calculated that riding the board throughout the summer is worth a whole lot more than any squishy feeling he might get from hanging tight to money.

And I, the Dad in this equation, encourage the kid to jump through these mental hoops. To weigh the costs and benefits to any purchase. And when he makes a mistake, regrets a purchase, all the better. Because he’s learning, and what better time to learn than when you’re a kid, when life is generally free and easy (little does he know!), without financial responsibility, and no money mistake will end in any sort of enduring hardship.

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Self-Balancing

There’s another name for a hoverboard: self-balancing scooter. Yet, while the board does its best to facilitate balance, it won’t work unless you find your own center of gravity, bring your own balance to the board.

Ride Demon was a natural. He quickly learned how to stay upright and comfortably navigate. And as I watched him savoring one sweet ride after another, I’m thinking I’d like to try. So he lets me have a go at it. I step on, shake and wobble for a few seconds, then fall off. Again and again. It’s not as simple as it looks.

Neither is money management for many of us (you knew that, eventually, I was going to bring this around to more talk about money!). I mean, even when someone like Yours Truly passes on a wealth of knowledge (ahem), and you absorb that knowledge, decision making may nonetheless start from a place of discomfort (‘is this the right investment for me? Am I spending too much?) and end with a sense of uncertainty (‘I sure hope the investment works out because I really don’t want to lose money’; ‘it was fun going out for dinner four times this month but now I may not be able to pay off my credit card balance in full’).

So what do you do? Well, this is where I’m going to deliver one of those ‘sounds easy in theory but challenging to implement’ notions. You get comfortable with discomfort; you cozy up to uncertainty. You do your research, acquire information needed for wise decision-making, then make your call. And you do so with conviction knowing that the future is inherently uncertain. And if it works out, good! If not, that’s okay, you learn from it, adjust, and move forward. Not so different than life.

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Kid Rules

I love being around kids. We adults can learn so much from them. When Ride Demon falls down and scrapes his knee, bangs his elbow good, he doesn’t hesitate to get right back up, place himself in the proverbial saddle and get back to carving the streets. He seems to have an innate sense of balance, one that keeps it all in healthy perspective, one that doesn’t harshly self-judge, one that’s accepting, that exudes spirited enjoyment of life.

Now, all that said, the kid doesn’t have money issues and adult responsibilities. Okay, fair enough. But since you and I do, it’s even more important to find and embrace a healthy balanced perspective on money, and all other facets of life. Because it’s when we’re in balance that we’re healthy, wealthy, and just plain old feeling groovy about this gift of life.

 

 

 

 

 

Hot Stocks Burn!

A little bit of knowledge can be dangerous, so its been said. And in the stock market, oh man, ain’t it the truth! Especially in a boom market like the technology heavy NASDAQ.

During the past nine years, ever since the financial world began healing from the Great Recession, the return on a NASDAQ index fund has been relentlessly positive.

Sure, temporarily, price dips into the dreaded valley of bears but give it a day or two or thirty, and charging bulls wrestle momentum forward as price resumes its heady ascent. Currently, the NASDAQ stands above 6110. A mere one year ago, it was at 4800. That’s a 27% gain in one year! Such a gain is outrageously potent when considering that equities historically return an average closer to 8%.

‘Ya, well, that was then, this is now. Get on board the gravy train or stand there with your hands in your pockets, money in a savings account and earn your 1%. Good luck with that!’

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Derailments Happen

More or less, that’s what Jake said to me the other day. Jake is in his late 70s. His wife, Nancy, passed away several years ago. Until bidding farewell, Nancy held the title of family investing guru. Despite having next to no knowledge nor experience with investing, Jake figured, how hard can it be?

And since he’s taken over the portfolio reins, Jake has done well. As have others who have invested in American based index funds.

But here’s the thing: Jake attributes success to his investing prowess. Fact is, Jake has no knack for investing, no know-how, no prowess. I don’t say this as a knock against Jake. Not at all. He’s a fine person with a warm disposition and a kind heart. It’s just that I know Jake well enough to understand that he’s been following the crowd.

And the investing crowd has been riding a tsunami sized wave of good fortune since late 2009. And for anyone whose investment days only just started after the last recession ended, it’s quite possible that all they’ve known are good times.

Cool. Good. Excellent for all who have seen their portfolio grind and bump higher and higher as the NASDAQ, S&P 500, Dow Jones continue to break records. And should Stock Market Gods continue to stoke global economies and shine light upon corporate profits then, hey, whose to say that, far from nearing its end, this party isn’t just getting started?

Hmmmm … hope for the best, nothing wrong with that. But choose to remain blind to the fact that the longest period of sustained economic growth in the USA was 10 years (1991-2001), that from the 20th century onward, recessions typically occur every three to six years, that we are currently in year nine of the economic expansion cycle … and you may be in for a nasty turn of your portfolio.

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This Is Not Chicken Little Calling

Jake talking:

‘Australia is experiencing its 26th consecutive year of economic growth; old age doesn’t derail economies, something has to kill them; consumers are spending; banks are lending; full employment; property prices rising … tell me: where’s the dark, foreboding cloud indicating recession and stock market collapse? Huh? Where?’

Absolutely, Jake. All signs look positively stellar. I mean, who can argue with what you just said or the zooming stock prices of Amazon, Apple, Google and Facebook this year? Wowzers!

But you know what? The stock market, and life, is about looking forward, not backward. Sure, we check out history to learn from others, to learn what worked and what didn’t. Still, as far as my limited knowledge reveals, we humans don’t know what’s coming in the next minute nevermind the next year or two or ten and beyond.

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What’s This Game All About

I’ll give Jake this: economies of the developed world are healthy and look to be getting stronger. And in year five and six and seven and eight, and now nine of the US expansion, pundits have been tripping over themselves to call the next recession and stock market downturn. Yet all they’ve done is fall flat on their face as growth continues and stock markets chug along.

But does this mean you shouldn’t be careful? (yes, yes, be careful!) Re-assess your portfolio? (again, yes!) Consider selling winners and taking profit (oh, yes!) rather than staying fully invested and letting all the chips ride? (yikes, don’t do that!).

Why? Because managing your portfolio is about managing risk. There is ALWAYS risk in your investment portfolio with some assets inherently riskier than others. And you can best manage risk by coming up with a plan that allocates fixed percentages of your portfolio to different asset classes.

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Laws Of Gravity Still In Play

Okay, real world example instead of blathering on: let’s say Jake’s plan involved allocating 20% of his investment portfolio to equities in the technology space, either through buying individual stocks or index funds. And with the gains Jake has made in the tech sector during the past few years, tech’s share of Jake’s total portfolio has ballooned to 45%.

Having too much exposure to tech, i.e., too much risk, makes for a portfolio out of balance. Because when (not if, but when) there’s a market fall, you can be sure that those tech related gains will wither if not evaporate entirely.

Now, since Jake wants to maintain technology exposure at 20%, assuming he accepts sage guidance from BuddhaMoney, he’ll happily sell 25% of his tech assets, pocket the profit, and reinvest elsewhere.

For example, maybe Jake will bump up his fixed income allocation (currently at 20%) and buy a Bond index or individual bonds because he wants to reduce portfolio volatility. Or maybe with interest rates seemingly, finally, on the rise, he’ll put his money to work in financial companies, banks and insurance, since their bottom lines tend to benefit from rising rates. Or increase his cash holdings (nothing wrong with cash; best to be patient and wait for opportunity rather than rushing into investment action).

Whatever Jake decides, the most sensible course of action is to maintain a balanced portfolio, diversified across asset classes (i.e., stocks, bonds, real estate), industries, and geographically. Because booms don’t last forever, crystal balls are the stuff of dreams, and the laws of gravity will not be repealed any time soon.

 

 

 

Boost Your Energy Account

A student approaches his meditation teacher and says, “My meditation is horrible! My mind is bouncing from one thought to the next, my back hurts, and I’m straining just to stay awake.”

“It will pass,” the teacher responds calmly.

One week later, the student returns to his teacher. “I can’t believe the change! My meditation practice is wonderful! I feel so aware, peaceful, and focused!”

“It will pass,” the teacher responds calmly.


Little Story, Big Message

I love this little story with the big message: throughout our life, we experience all sorts of feelings and thoughts that constantly change, sometimes from moment to moment.

And once moments pass, they cannot be recaptured or experienced again the same way. Sure, that may be obvious to you now as you’re reading this post. But sometimes, when our self-awareness is, um, let’s say compromised, we forget. Sometimes we try to hold on to good times, wanting to extend our experience indefinitely into the future. But in a world where change is the only constant, life doesn’t work that way.

Instead, events and circumstances go our way … until they don’t. And when they don’t, we might feel frustrated, irritable, confused or disappointed. Then we might start struggling for solutions because we want these feelings to go away. And we think that the only way for these feelings to recede is to adjust the external world, have it conform to our wishes. But a funny thing happens on the way to struggling for solutions: the more we ‘want’, the more entrenched becomes the struggle.

Consider it this way: you know when you’re trying to think of a particular word, and you’re certain that the word is there but for whatever reason it remains hidden, teasing you, resting on the proverbial tip of your tongue? And the more you try to coax out the word, the deeper it goes into hiding and the more aggravated you become?

Eventually, you give up. Your mind stops searching. You forget about the word. You let it go. Then, other thoughts drift through your mind. And soon, without trying one itty bit, the word suddenly appears. And you smile, say the word out loud, repeat it more than once, and with great self-satisfaction say to your self, ‘yes, I knew it was in there!’

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Relax, Come To It

Energy is our natural currency. When we squander our energy reserves through stress, worry, envy, judgment, and greed, we’re less able to think clearly. And cloudy thinking leads to poor decision-making, leads to undesirable outcomes, leads to stress and compounding negative energy.

It’s not like we actively, consciously, search for negativity or want to waste our energy. Still, darkness comes and goes. Largely because we want to control external circumstances and have not learned to accept that which we cannot change.

So … how do we experience inner contentment, happiness, blue skies, for extended periods of time regardless of which way our external world is turning?

Ahhh, well now, I suppose this is the $64 question. This is where my duty to you is one of introducing the magic elixir, revealing to you ingredients guaranteed to swell your energy account with positive ions, leading to feelings of ease and satisfaction, feelings conducive to excellent decision-making, decisions that benefit your spiritual, psychological and financial well-being.

And the answer is … Yoga.

No, wait. Let me back up. It’s not that easy. It never is because it’s not supposed to be. The thing is, there’s nothing at all magical about yoga. Rather, what I’m getting at, what the practice of yoga allows you to get at if you’re open to it, is a healthy, serene, sense of balance.

How so? Well, um, really, I don’t exactly know. I mean, I could blather on about studies detailing the many beneficial physiological effects of yoga practice, or I could tell you about my personal experiences, tell you how amazing I feel after every single yoga class and how I wish I could bottle up those good and scrumptious feelings to use at my whim. Still, the only way to truly understand the benefits of yoga is to practice yoga.

That said, here’s what I do know: start your day with a bit of yoga, a sprinkling of laughter, a dose of fun … and that in itself is magic. Call it magical reality. Call it an amazing form of medicine, one that acts as a powerful antidote to stress, pain, conflict and any other form of negativity.

Want to feel physically stronger, mentally alert, emotionally balanced? Get your self to yoga class. Want to bring more light in? Laugh! Want to keep the light around permanently? Laugh more! Play! Have fun!

Yes, yes, we have responsibilities, we have bills to pay, investments to make, debts to repay, budgets to draft, research to undertake, retirement to prepare for, BuddhaMoney blog posts to read … of course we do. Still, when we lighten our duties, responsibilities and burdens with a hearty guffaw, a gut busting chortle, a relaxed smile, playtime, then we’re healthier. And our good health leads to a calm perspective, a broader outlook, a sense of grounding, focus and alertness. All of which doesn’t just smooth out your time on planet Earth, it also leads to you becoming a better investor, and a wealthier person.

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If You Want It, Here It Is, Come And Get It

I know, yoga is trendy, it’s all the rage. But don’t let this turn you off. Look past the trivial, superficial, North American marketed aspect of yoga, the Lululemon (NASDAQ:LULU) tight tops, check-out-my-butt pants and hotty hot (actual name) shorts, and you’ll find a more than 5,000 year old practice that offers participants the opportunity to grow their positive energy reserves partly through learning to be self-aware and responsible for our feelings and happiness.

You want a buff body? Sure, yoga will take you there. But that’s not what yoga is all about. Not at all. Rather, yoga practitioners seek awareness of their deepest nature. Because through self-awareness, through learning to be present for every sensation in every moment, we learn to be responsible for who and what we are.

And we learn to understand that, to a large degree, we have the power to make our self. When this is understood, then we know that happiness is a choice; that we are responsible for our own happiness. Because our happiness, our contentment, is unrelated to external circumstances. Happiness, you see, is an inside job.

And it’s kinda, sort of, really excellent when you’ve done the inner work, and bring peace to your daily life, including money matters. Because money management, saving and investing can be fraught with emotion and confusion. So if you’re coming at it from a peaceful place, with a clear mind, where you’re able to tune out noise then, sure as Buddha is sitting cross-legged, smiling by the Bodhi tree, you increase your likelihood of finding balance, wealth and success.

 

Teaching Kids About Money

When my daughter (let’s call her Sunshine because, hey, she brings the light in every day) was 6, I started her on the path to savvy money management. Her first step was to accompany me to a bank where we opened a savings account. The account was in her name but connected to my personal account so I would be able to monitor all transactions.

Next, she was given an allowance because, as Sunshine so astutely pointed out to me, what’s the point of having a bank account if you do not put money in the account. Owing to her tender age, and the fact that the Bank of Dad would be bankrolling her for some time to come given sky-high unemployment numbers among five to ten year olds, we agreed upon $2 / week.

At this stage of life, how much money I gave to her was not hugely important (that said, I kicked around the numbers, vacillated between $1 and $2, and eventually settled at the upper end, knowing the exorbitant cost of candy these days).

The purpose of the allowance was to teach her, little by little, about handling money. I figured that she knows how to floss her teeth, tie her shoes, and count beyond 100 … so its time to start learning another practical skill that will benefit her throughout life: saving and spending money.

And I wanted Sunshine to learn with her own money, exercising her judgment, taking responsibility for decision-making, learning from her mistakes. Sure, I was there to help out as needed but she needed to “do” for her self. Because that’s how we learn best: by doing for our self. And when we take care of our self we empower our self. Not only does personal empowerment make us feel good and competent and strong, it sure helps with navigating the corners, straightaways, and ups and downs of life.


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Enter Buddha

Empowerment means not simply gaining power, but continually orienting one’s life in the most positive direction.

A self-motivated positive change in one’s inner life creates a change in one’s destiny. This in turn beneficially impacts the destiny of one’s family and, ultimately, one’s community.


Rolling in Dough

So once a month Sunshine and I trekked to the bank to deposit her allowance money. Most often, she hadn’t spent a cent. Turns out she was, and still is, a natural saver. Of course, Sunshine was also wily enough to know that she didn’t have to dip into her pocket because Dad is a sucker for buying her candy and toys.

When she had accumulated more than $50 (her balance buffed up by cash birthday gifts from relatives), I said to her,

“Now what?”

“What do you mean?” answered Sunshine.

“You’ve got all this money, right? Well, what are you going to do with it?”


Parental Guidance

As a parent, my role is not to dictate. I’m not here to tell Sunshine what to do with her money. But I do try to give guidance. Because my goal is for her to be comfortable with managing all aspects of money, meaning saving, spending, investing and sharing. And the only way she’s going to become comfortable is by taking responsibility for her decisions.


Buckets

In the guidance department, my rule of thumb works like this: money is apportioned among three imaginary buckets (for adults, a fourth bucket, investing, is added):

  • Saving
  • Spending
  • Sharing

When money is received, it’s placed into each of the three buckets, ideally in equal parts. This is a simple way to provide money management parameters.

That said, the amount to be deposited in each bucket may be a conversation waiting to happen. For example, if Sunshine were saving up to buy a scooter, then we would talk about her savings goal, how best to get there, and how contributing more to the savings bucket would impact available spending and sharing.

The benefit of setting savings goals is huge. It helps kids ‘buy in’ to the value of savings, and has the positive effect of limiting spending and reinforcing the notion of becoming a conscious consumer (i.e., thinking about each purchase and the effect spending money will have on savings, sharing, the environment, etc). If kids start thinking this way about money at a young age, they will most likely carry this perspective forward into adulthood.


Money Lessons

#1. When To Start Teaching

The sooner the better. Kids are more receptive to your ‘lessons’ before adolescence strikes, a time when growing brains tend to go wonky and haywire, and those lessons you used to teach are now perceived as nagging, boring lectures. Still, regardless the age, it’s never too late to start.

#2. Saving

The little ones should learn that money is a tool. It’s used to satisfy needs and wants. And distinguishing between ‘wants’ and ‘needs’ is essential if you want to achieve financial freedom one day. (http://buddhamoney.com/money-and-happiness/day-two-enter-the-buddha/)

#3. Spending

Thinking in terms of wants and needs when deciding whether or not to make a purchase sets the stage for minimizing impulse buys and, at the same time, encouraging delayed gratification (http://buddhamoney.com/money-and-happiness/willpower-leads-to-wealth/).

The fewer impulse buys, the more you stick to spending on ‘needs’, the more money you have to put toward savings. Kids who learn this sort of self-discipline morph into adults who realize that freedom comes from living within your means.

#4. Sharing

My daughter absolutely adores animals so she’s been making charitable contributions to local animal shelters. Knowing that her gift helps to provide food, shelter and care for animals makes her feel amazing. And she’s learning not only the value to others that comes from giving, but also the intrinsic reward she receives through the act of giving.

#5. Mistakes

Let your kids fall down. And teach them to get back up. Because there are no mistakes, only experiences from which we may learn. And when we’re talking about money, it’s best that mistakes be made when kids are young, still under parental care, when damage will be minimal. They will learn from their mistakes and become better money managers as adults.

#6. Credit Cards May Be Dangerous

When young, say under 10, most kids don’t immediately grasp how credit cards work. They don’t get that three or four weeks after your purchase is made, you have to pay the lender. And they certainly do not know anything about exorbitant interest charges so kindly added to your account when payments are overdue.

Kids should be taught about the perils of credit cards, of spending money you do not have, of the price you will pay for buying what you cannot afford in terms of debt, stress and, owing to interest payments, stopping your self cold on the road to financial freedom.

#7. Pay To Play

When Sunshine was six, her $2/week allowance was tied to making her bed on the weekend and clearing her dishes from the dinner table. Because I didn’t want her to grow up with a sense of entitlement. And I wanted her to experience the reward that comes from giving back, of being a good citizen of the BuddhaMoney family.


Teenage Balance

Today, my daughter is fifteen and remains a conscious saver. I’m guessing that part of this is a result of what I’ve been teaching her over the years and part owing to who she is, i.e., someone who appreciates what she has and doesn’t crave ‘stuff’.

Still, she spends money on clothes, movies and music … typical teenage things. She does so knowing how much is in her bank account (she has access to her account online), how much she wants to retain in savings, and what is a reasonable amount of spending.

Sure, she’s still young but she’s on track to becoming an adult who will not dig debt holes for her self; who will manage money responsibly and enjoy the peace of mind that comes from maximizing savings, limiting spending, and giving back.