All Things Financial Planning Blog


Should I Play The Lottery?

“That’s Too Much!” A lot has been written recently about the lottery. There’s a direct correlation between articles written about the lottery and the size of the payouts and with recent ticket price increases, Powerball and Mega Millions jackpots are more often growing to levels that would make even Jay-Z blush. The news hits, the billboards go up and suddenly, there are lines outside of every gas station and convenience store in the country.

I’m not here to bash the lottery. I can even admit, as personal finance expert and blogger Jean Chatzky did in a recent newsletter that when one of the major lotteries reach these fevered pitches, I’ve been known to buy a ticket. But doing a little more digging into our country’s lottery habit has me a little stunned.

For example, a WebMath study reported than one-third of Americans believe the lottery is the only way to become financially stable. One-third. One hundred or so million people who believe that lottery ticket is their only path to financial success.

We know the lottery is a game. We know it is a long shot. In fact, we probably aren’t capable of grasping just how truly big of a long shot it is. Tara Siegel Bernard of the New York Times did a great job in an article earlier this month trying to define the exact odds. Needless to say, they’re staggering.

There’s even a new website,, that will help calculate whether or not the actual payouts and odds of a given lottery are worth the cost.

The point to all this is, the lottery is often most appealing to those who can afford it the least. The pull of potentially solving all of life’s problems with just 5 or 6 lucky numbers overwhelms the facts, which are simple. We’re not going to win.

I hate to be the wet blanket, but as a financial planner, I’m used to the role. If you play the lottery once in a blue moon or as a social activity in a group when the jackpots really get big and know it’s harmless fun, similar to an occasional latte at Starbucks, proceed. We all spend our entertainment money in our own, unique ways. If that few minutes of fun are worth a dollar or two to you, there are worse things you could be doing.

But, if your lottery behavior is much more frequent; if you’re playing both major lotteries, the scratch offs, the nightly state games, etc. in the hopes of winning big. Stop. Take that money and save it. I know you’ve heard this before, but let this be the time you listen.

Save that money. Look at the rest of your spending and where you can cut back there as well. Pick something that you’ve had your heart set on, something that you’d buy without a care with those lotto winnings. Slowly, but surely, watch your money grow. Reward yourself and buy that item, then pick the next savings target. Consider it your own little jackpot. It’s not winning the lottery, but the entertainment value will last much longer and you’ll be well on your way to being a true winner in the long run.

Chip Workman, CFP®, MBA
Lead Advisor
The Asset Advisory Group
Cincinnati, OH

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Wayne, Burt, Willie and U Can’t Touch This

Have you challenged yourself lately? Did you take on the 7-day Cash Challenge? What were your results? The feedback I have received is that most ran out of spending cash by day 4 or 5. If you started the Challenge on a Monday, the upcoming weekend looked pretty bleak. That is the point behind the exercise. You want to become better acquainted with your money and where you consciously spend it. It’s not what you spend, it’s where you spend it.

I recently gave a public presentation titled “Budgeting 101.” By now you know my visceral reaction to the word budget and was told not to make any changes to the PowerPoint slides. I cringed. The slide to end all slides read the following: The secret to financial success is to save more and spend less. Really, that’s all I have to do to become financially secure is to follow the “secret” formula? You know the “secret” to losing weight? You guessed it, develop a sensible eating plan and exercise more. Wow, now that our miracle secret of weight loss is out millions of our overindulgent society will soon transform themselves and become a fit and trim. Right.

It all comes down to choices. It’s the moment-to-moment choices and decisions that ultimately define our lives. Choices on how much we spend, where we spend it and whether or not we decide to modify our behavior.

What do the following people all have in common: Francis Ford Coppola, Wayne Newton, Burt Reynolds, Donald Trump, Willie Nelson and M.C. Hammer. They are from a wide variety of backgrounds and at one time or another, icons in the entertainment and business worlds. Give up? They all declared bankruptcy! At one point they carried more debt than they were worth. So how does someone like the 90’s megastar M.C. Hammer end up with nothing after raking in tens of millions of dollars? In his case it’s simple. He chose to spend far more than he was making and it eventually caught up to him. The headlines ring of high profile sports figures, movie stars and business tycoons who find themselves in the position of spending more than they make with the public at large unable to comprehend how it possibly happened.

 I find it very difficult to believe that there is a large percentage of the population that does not understand the basics of money. I hear stories of individuals who didn’t realize that when issued a credit card they were responsible to pay the balance owed or the couple who bought their “dream” home with no down payment and an interest only loan not realizing that they may be in way over their heads from the start. My favorites are the stories of households who are barely making ends meet and ponder if it’s time to upgrade to the new iPhone  or if they have enough HD channels to go with their recently purchased flat screen. Most people fully understand what they’re getting themselves into; they just happen to weigh today’s pleasure more than the future potential pain.

The secret to the 7-Day Cash Challenge is not if you “won” by having extra cash at the end of the week, but by being made aware of where your hard earned money is spent. If you complete a spending plan or the Cash Challenge, you will discover what nefarious elements are at work that keeps you from achieving your financial goals. You won’t magically discover that $500 check you forgot you write every month, it’s the little things that matter most. We as a society are being financially bled to death. Slowly, quietly we are being removed from our money.

Let’s review some “basic” necessities. Over 60 million households have cable television. 43.8 million have access to high-speed internet1. There are over 270 million cell phone subscribers in the United States2. Let’s combine the last three: We are now being sold on that fact that high speed video feeds over your cell phone are the wave of the future. Speaking of convenience, Starbucks sales exceeds $10 billion per year3. These are expenditures that either didn’t exist or were of no material measure 30 years ago, but are viewed as necessities today. We are being nickeled and dimed or better yet fived and tenned (to adjust the expression for inflation) to our detriment. The line between need and want are blurred. 

Why is it that most are so eager to fall for stock tips or are lured by other ways of getting rich quick? It’s simple. We need our incomes to catch up with our spending. That hot tip may give us a couple thousand extra in our pocket which will enable us to spend even more beyond our means. Spending is the key to financial success. The more you understand and become consciously aware of where you spend, the more chance you have to reach your financial goals. Just ask Wayne, Burt, Willie and M.C. – it’s not what you make, it’s what you spend.

1 National Cable and Telecommunications Association
2 Federal Trade Commission Chairman Julius Genachowsk

Ed GjertsenEdward Gjertsen II, CFP®
Mack Investment Securities, Inc.
Glenview, IL


How to Create Your Financial Policy

In working with clients we spend hours discussing and setting goals for their personal and financial lives. Part of our work as planners entails delivering recommendations to help those who hire us achieve those goals. The difficulty for some in implementing the plan of action is finding the necessary time, commitment or dedication to “do the work”. With all of the competing priorities each of us juggles daily, monthly, and yearly this isn’t really that surprising. While there is no magic one size fits all solution, one helpful tool that can be employed is the use of personal policies.

A policy is defined by Wikipedia as a principle or rule to guide decisions and reach rational outcomes. We use policies at an organizational level all the time. From corporations to governments, policies often drive daily activity and eliminate subjectivity and emotion out of the success equation.

All organizations face challenges in how to allocate resources, and those challenges have been more difficult in recent years. The Financial Planning Association lives by a financial philosophy that outlines the principles and rules that guide its financial decision making. Far from perfect, FPA’s policies are continuously reviewed to ensure they meet the needs of the organization and keep us on a path to financial success.

Policies are not a tool unique to, or reserved for, organizational planning. The benefits of objective guiding principles can benefit families, couples, and individuals as they work to achieve their own goals. We often use policies with clients, which can allow them, with practice, a defined path to implementing key aspects of their financial plan. Developing policies in your own life can lead to long-term financial success.

For policies to work, and for you to have the dedication necessary to stick with them, they should be:

  • Simple- A policy will work best when it is simple, easily understood and easily implemented. We often work with self-employed clients to determine how much of their income should be set aside for taxes and retirement savings. For example, we might tell them that with every dollar of revenue collected 40% should be put away for Federal Income and self-employment taxes, 6% should be saved for State taxes, and 10% should be diverted to retirement savings. The less complicated the calculation the more likely the client is to understand and follow the policy. We know that the final outcome may not exactly predict their tax liability for the year, but we will be close enough to avoid large refunds or liabilities at year’s end. More importantly, it will take the client minutes to determine with each check how dollars should be allocated.
  • Objective- Ideally the policy setting exercise will be completed with a clear mind, and without duress. Knowing that life doesn’t always allow for the ideal, it is important to craft policies that rely on objective criteria with an eye towards your personal goals. The shining example of this lies in the development of investment policies. Having policies that guide you on when to rebalance and what your allocation targets are can be essential when the emotions of investing seek to drive investment decisions- whether markets are at their peak or at a historic low point.
  • Practical- Your policies have to be implementable. It is OK to start small and work your way up, but to be overly-ambitious early on can derail the process altogether. Having said that, policies should push the limits of comfort and be aggressive enough to lead you down a path to your goals. If you are setting policies on saving levels from monthly income you have to balance the possible with the amount necessary to achieve your goals. Working in percentages can help to quantify amounts as income rises or falls.
  • Agreeable- I struggled a bit with language here, but this is intended for couples or families that are developing policies together. It is nearly impossible for one spouse to develop policies that aren’t mutually acceptable to others they may affect. Make sure to get buy-in from those around you. If you cannot, take the time to reassess your policies and alter as needed. For example, if you are setting policies related to your education planning don’t be afraid to involve your kids at an appropriate age. You might be surprised how the knowledge that your son/daughter is responsible for x% of their college funding will work its way into their educational decision making or their own personal savings plan.

I suspect many of you use personal policies already, whether or not you officially call them by the same name. There is no right or wrong way to construct or adopt them, but using policies in your personal financial planning can be an effective way to reach your financial goals. You may even choose to put your own “financial philosophy” in writing as a tool you can reflect on when making tough choices as life gets hectic. The key is to keep them simple, objective, practical and to get buy-in from those who share your journey.

Mike BranhamMike Branham, CFP®
Financial Planner
Cornerstone Wealth Advisors, Inc
Edina, MN


Make Money a Servant to Your Life

It has been often said that money is a wonderful servant, but a horrible master. While each individual boasts a different definition of financial success, people that treat money as a servant to their life tend to enjoy a much higher degree of happiness and satisfaction. As mentioned in a previous post (Peaks and Valleys), the inherent value of money simply lies in what it allows you to experience.

In his book, Your Money and Your Brain, Jason Zweig explores the time-honored phrase that money cannot buy you happiness in reverse: can happiness buy money? He writes that “happen and happiness come from the same Old English root word, and happy people seem to make good things happen more often.” Because money is so intertwined in everything we do and experience in our lives, it is imperative that we make an effort to position our financial lives in a manner that increases the likelihood of good things happening.

Before seeking out any particular financial strategies, we must first recognize that there is an interior and exterior element to our financial lives. The exterior component deals with what is traditionally thought of as financial planning. It involves raw data, facts, analysis, calculations, projections, tactics and strategies. The exterior component is easy to see because it is quantifiable and visible.

 The interior component is very qualitative in nature and often resides in the subconscious. People often struggle with or ignore this element when discussing money because it is far more complex, you cannot see it nor calculate it, and it can get very messy, particularly when differing forces collide. The interior component involves everything that impacts our sense of happiness: our morals and values, religious and political beliefs, our communities, family life, cultural norms, work life, health, education, etc. The interior forms the essence of who we are and who we want to be. If we can consciously deploy our financial resources in a manner that aligns with our interior self, we will derive a much greater sense of balance and happiness in our lives.

The problem is that both sides of the equation are very complex. Often times the best financial decision (in this case, defined as best = more) is not the right financial decision for you. Furthermore, if you have unresolved inner conflict about money yourself or as a couple, a fancy product or strategy is not going to resolve the issue. As an esteemed planner, Roy Diliberto, states, “you can’t solve interior issues with exterior solutions.”

There has been a great deal of research and development over the last several years centered on the interior side of this equation. Much of this research helps you understand your unique money personalities and where they came from throughout your life, how they manifest through your financial  habits and behavior, and how to consciously decide to adjust those habits to experience greater satisfaction in your financial life. Over the next several postings, I will share some of my personal life experiences that have led to both good and bad decisions throughout my lifetime. Additionally, I will also share some of my favorite exercises designed to help you attain mastery over your money.

Joe Pitzl, CFP®
Financial Planner
Mindful Asset Planning
Apple Valley, MN