Kahler Financial
Welcome to Dollar Stretcher Community Sign in | Join | Help
in Search

Kahler Financial

  • Spenders, Savers, and Successful Savers

    by Rick Kahler

    Are you a spender or a saver?

    According to Scarborough, a market research firm, only 9% of adults in the U.S. label themselves as spenders. This is the percentage who "mostly agree" with the statement, "I am a spender rather than a saver." On the opposite side, 29% "mostly disagree" with the statement and are considered savers. Presumably, the 62% in between consider themselves to have well-balanced financial habits that include both spending and saving.

    Given these numbers, it would seem that most of the adults in this country ought to have healthy savings accounts. Unfortunately, that's not the case.

    According to a report released in March 2013 by the Employee Benefit Research Institute, 57% of U.S. workers have less than $25,000 in total household investments and savings, not including the value of their homes. The Social Security Administration's current figures show 34% of American workers have no savings set aside specifically for retirement.

    Something doesn't quite add up. Either a lot of Americans aren't willing to admit that they are spenders, a lot of Americans are so poor that they can't afford to save, or a lot of Americans are delusional.

    Or maybe a lot of us just have different definitions of "saving." Here are a few money habits that might encourage people to think of themselves as savers, but that don't necessarily add up to being successful savers:

    1. Buying things on sale. Waiting for discounts on items you need and want is a wise and standard practice for frugal shoppers. But you aren't a saver if you buy bargains that you don't need, might not even really want, or can't afford. Maybe that $150 pair of shoes is half price. Yet if they will just sit in your closet, you haven't saved $75. You've spent $75.

    2. Having money in the bank. Yes, putting money into a savings account is the first place to start saving and a great habit to teach your kids. But once you have accumulated an emergency fund, keeping your money in the bank isn't a good savings habit. Over time, savings accounts and CDs don't pay enough to keep pace with inflation. Money in the bank may be safe, but it isn't really an investment because it isn't growing. Mutual funds that include a well-diversified range of investments are far better places for your long-term retirement savings.

    3. Not spending anything. There are times when choosing not to spend money now will only cost you more money later. Failing to maintain your car or do home repairs are two common non-spending habits that may seem like saving but actually turn into spending.

    4. Saving for someone else. The time-tested advice to "pay yourself first" usually means taking money off the top for savings before you spend anything. Yet this has another application, as well. Make saving and investing for your own retirement your first priority. It needs to come ahead of saving for your kids' college educations, weddings, or first homes. This may seem selfish or greedy, but in fact it's the opposite. When you provide for your own financial well-being in retirement, your kids won't end up having to help pay your bills.

    When we're asked to label ourselves, it's normal to tend to choose answers that fit the way we would like to think of ourselves. I'm sure most of us would prefer to think of ourselves as savers rather than spenders. But if we really want to become successful savers, we can't settle for the money habits we wish we had. We need to look at the money habits we actually practice.

    Rick Kahler, Certified Financial Planner®, MS, ChFC, CCIM, founded Kahler Financial Group, and became South Dakota’s first fee-only financial planner in 1983. In 2009, Wealth Manager named Kahler Financial Group as the largest financial planning firm in a seven-state area. A pioneer in the evolution of integrating financial psychology with traditional financial planning profession, Rick is co-founder and co-facilitator of the five-day intensive Healing Money Issues Workshop offered by Onsite Workshops of Nashville, Tennessee. He is one of only a handful of planners nationwide who partner with professional coaches and financial therapists to deliver financial coaching and therapy to his clients. Visit KahlerFinancial.com today!

  • Finding the Right Path to Wealth

    by Rick Kahler

    After three decades as a financial planner, working with successful wealth-builders, you'd think I would have a clear idea of the right path for creating wealth.

    Instead, what I've learned is that there is no such thing. Here are just a few of the paths that aren't the sure routes to wealth they might seem to be:

    1. Education and career choices. Going into a field like law or medicine might seem to guarantee financial success. Not necessarily. I've seen many physicians, for example, who have accumulated significant wealth. I've seen just as many who live paycheck to paycheck.

    2. High earnings. Again, this isn't the reliable predictor of wealth it would seem to be. True, someone who spends decades in low-wage jobs is unlikely to be able to accumulate much financial security. But a person earning $1 million a year will not necessarily have a larger net worth than someone earning $75,000. I’ve seen people who worked as janitors, nurses, and mechanics become millionaires. I've worked with others, earning a hundred times more in careers like sales or entertainment, who reach retirement age with absolutely nothing.

    3. Owning your own business. Many hard-working, creative entrepreneurs build successful businesses that provide wealth, not just for themselves, but for their children and grandchildren. Others might see a business or even a series of businesses fail. Still others might work hard all their lives but never achieve more than the equivalent of an average salary in their field.

    4. Investment choices. Some people have had great success investing in various types of real estate, businesses, and commodities. Others have lost everything they ever owned investing in those same vehicles.

    So, sorry, I can't give you a simple list of the top ways to build wealth. There's little commonality in how my successful clients have made their money. What I can suggest are a few ways to help you find your own path to accumulating wealth.

    1. Define "wealth" in your own way. Maybe you're willing to live frugally in order to accumulate enough money to feel secure that your needs will be met even if you live to be 100. Maybe wealth to you is living a lavish lifestyle and being willing to work hard to pay for it. You might see wealth as the satisfaction and responsibility of having your own business. Maybe it means being able to give generously. Or perhaps you define wealth as the freedom of owning little and traveling around the world on a bicycle.

    2. Know what you are willing to sacrifice—and what you are not—in order to accumulate wealth. There's nothing wrong with earning a high salary doing work you hate for a time, as part of an overall strategy to get you to doing something you love. But doing so for a lifetime is hardly the road to either happiness or wealth.

    3. Think long term. The most reliable way to build lifetime wealth, with the lowest risk, is through a long-term commitment to diversified investing. Yet even those who are successful on riskier paths to wealth take the long view. Business owners may fail more than once before they succeed. And those who have made fortunes in high-risk investments have also lost fortunes. They understand that success is about taking calculated risks.

    4. Learn to make conscious financial decisions. I've seen many intelligent, capable people stuck in financial chaos and poverty because of emotional pain and dysfunction. Emotional health may not be essential for building financial wealth. It is, however, essential if you want to use that wealth to support a rich and satisfying life.

    Rick Kahler, Certified Financial Planner®, MS, ChFC, CCIM, founded Kahler Financial Group, and became South Dakota’s first fee-only financial planner in 1983. In 2009, Wealth Manager named Kahler Financial Group as the largest financial planning firm in a seven-state area. A pioneer in the evolution of integrating financial psychology with traditional financial planning profession, Rick is co-founder and co-facilitator of the five-day intensive Healing Money Issues Workshop offered by Onsite Workshops of Nashville, Tennessee. He is one of only a handful of planners nationwide who partner with professional coaches and financial therapists to deliver financial coaching and therapy to his clients. Visit KahlerFinancial.com today!

  • Leaving Money to Your Kids - Or Not

    by Rick Kahler

    "I've never seen money passed from one generation to another in a manner that actually benefited the recipient." When a psychologist said this to me several years ago, I was dumbfounded.

    Many parents scrimp, save, and sacrifice so they can "leave something to the kids" with the intention of doing them good. It's hard to accept that inheritances may actually do harm instead. Most of us have money scripts that don't support this idea.

    Typically, I used to hold several money scripts around inheritances. One was that leaving money to your children is a loving thing to do. Another was that parents should always leave their money to their children. A third was that anyone who received an inheritance would invest it wisely, using only the earnings to improve their lives.

    Today I know those money scripts were not universal truths. I have more understanding of the problems involved in giving money away in a manner that is beneficial to the receiver. It isn’t as easy as I once thought.

    Many parents envision inheritances for their kids as "seed money" that will be used for the health, education, and welfare of their offspring for many generations. Research shows that is rarely the case; instead, inherited wealth does not last long. Missy Sullivan summarizes some of the research in "Lost Inheritances," a Wall Street Journal article published online March 7, 2013. According to this article, 70 percent of those who receive an inheritance of any size spend it all in their lifetimes. For the 30 percent that do have something left to pass on, 70 percent of their kids also blow everything they get. That means by the end of the third generation, 90% of the money originally passed down is gone.

    While it’s easy to understand how an inheritance of $10,000 may evaporate, it’s difficult to understand that inheritances in the hundreds of millions evaporate just as quickly. How is that possible? Is the average American just incompetent at managing money?

    According to Sullivan, a study done by the Williams Group found that poor investment decisions were not the culprit. About 60 percent of large inheritances disappeared because of a lack of trust and communication between family members. Another 25 percent of the time, money evaporated because the parents failed to prepare the next generation to handle their impending inheritance. Poor investment advice and high fees were the cause in less than 15% of cases.

    If more high net worth parents knew that only 10% of their hard-earned estates would be around at the end of their grandchildren's lives, I wonder if they might do a few things differently.

    One option would be to address the two biggest issues—lack of communication and preparation for heirs—head-on during their lives. Parents wanting their money to benefit their kids could engage the services of a financial therapist who could help the family address their communication and trust issues long before they pass on their wealth. Preparing their children to manage wealth and use it wisely would be the best way to increase the odds of making an inheritance a blessing rather than a burden.

    Another option would be to secure their own retirement, then forget all the scrimping and saving and just have fun blowing the money on themselves.

    Still another option would be to give their wealth to worthy causes during their lifetimes or upon their deaths. This would leave the kids to make their money by ingenuity, hard work, wise money management, frugality, and a little bit of luck. The same way, in fact, their parents did.

    Rick Kahler, Certified Financial Planner®, MS, ChFC, CCIM, founded Kahler Financial Group, and became South Dakota’s first fee-only financial planner in 1983. In 2009, Wealth Manager named Kahler Financial Group as the largest financial planning firm in a seven-state area. A pioneer in the evolution of integrating financial psychology with traditional financial planning profession, Rick is co-founder and co-facilitator of the five-day intensive Healing Money Issues Workshop offered by Onsite Workshops of Nashville, Tennessee. He is one of only a handful of planners nationwide who partner with professional coaches and financial therapists to deliver financial coaching and therapy to his clients. Visit KahlerFinancial.com today!

  • Swimming Safely in the Financial Sea

    by Rick Kahler

    On our recent vacation, my wife and I visited a nature preserve off the coast of Argentina where we had the chance to swim with sea lions.

    Even though they were half-grown pups, some of the sea lions were as big as I was. They were curious, friendly, and playful. Like many mammals, their play takes the form of gently nipping at each other. They seemed happy to include human visitors in their fun and games. We could reach out and touch them, and they would respond.

    One pup in particular kept nipping at my ankles, my swim fins, and even my snorkeling mask. Every time I touched him, he would reach around and bite at my hand. We played this game several times, and I kept touching different parts of him with no concern for my safety. Then, about the sixth time, he had my hand in his mouth, I took a closer look. It occurred to me that my hand was in the jaws of a predatory wild creature with very big teeth. It seemed like the right time to end the game.

    My wife, busy documenting my behavior with the camera, thought I was totally nuts to let the sea lion nip my hand a second time, much less a fifth and sixth. Ordinarily, I would have agreed with her. Just one bite at my texting fingers by a carnivorous critter nearly my own size, and I would have been swimming for the boat.

    The reason I didn't make a mad dash for safety was that I had been told what to expect. Before we got into the water, our tour guides explained what the sea lion pups were likely to do. They told us this was how the pups played. They reassured us that we wouldn't be in any danger.

    Since I trusted the guides and believed what they told me, I was able to relax and enjoy the experience. Without knowing what to expect, I may have been frightened out of the water at the first contact with the sea lions. Or I may have chosen to stay out of the water altogether, thereby missing out on a delightful opportunity.

    In case anyone is wondering, no, I haven't suddenly switched from writing a financial column to writing a nature column. This story has a clear application to investing.

    Diving into the cold waters of investing can be scary. If you don't know what to expect, you might be frightened off the first time you get a statement that shows your investment has lost value. Or you might make two of the worst possible investing mistakes, which are selling out when markets are plunging or being too intimidated to invest your money at all.

    When you're prepared and know what to expect, you understand that all markets—stocks, bonds, real estate, commodities, or any other asset classes—will have scary downturns. In the world of investing, ups and downs in the market are normal, just as playful nips are normal in the world of sea lions.

    With many financial websites offering basic information on investment terms and how to start investing, you can do a lot to educate yourself before you invest a penny. Before you place your trust in any advisor, ask questions. Insist on explanations of any terms you don't understand. Find out about commissions and fees, especially from anyone selling financial products.

    What you need before you jump into the financial sea is knowledge. Knowing what to expect helps you swim comfortably with the sea lions instead of fearing that you're being thrown to the sharks.

    Rick Kahler, Certified Financial Planner®, MS, ChFC, CCIM, founded Kahler Financial Group, and became South Dakota’s first fee-only financial planner in 1983. In 2009, Wealth Manager named Kahler Financial Group as the largest financial planning firm in a seven-state area. A pioneer in the evolution of integrating financial psychology with traditional financial planning profession, Rick is co-founder and co-facilitator of the five-day intensive Healing Money Issues Workshop offered by Onsite Workshops of Nashville, Tennessee. He is one of only a handful of planners nationwide who partner with professional coaches and financial therapists to deliver financial coaching and therapy to his clients. Visit KahlerFinancial.com today!

  • The Ultimate Stealth Tax: Inflation

    by Rick Kahler

    With all the talk about tax rates and the fiscal cliff, hardly anyone has mentioned what is probably the most effective and least understood tax in the federal arsenal: inflation.

    Wait a minute. Isn't it confusing to call inflation a tax?

    It is. That confusion is exactly why inflation is the ultimate stealth tax.

    One of the few deficit-reducing measures that has the support of both parties and President Obama is a change in the way the government measures inflation. Our lawmakers have agreed on another in a series of adjustments to the way they calculate the consumer price index (CPI). The proposed changes will understate the future CPI even more than the current formula already does.

    This maneuver is a brilliant way for deficit-reducing lawmakers to both cut spending and increase taxes, without calling their action either a spending cut or a tax increase.

    How is this possible? First, here's a brief explanation of the proposed change, which is called the chained Consumer Price Index. According to an AP article published in the Rapid City Journal on December 5, 2012, “the chained CPI assumes that as prices rise, consumers turn to lower-cost alternatives, reducing the amount of inflation they experience.”

    The assumption is that, if the price of pork rises while chicken doesn’t, people will buy more chicken. Yet they're still buying protein. Therefore, no inflation has happened. This argument is like saying if the price of gasoline goes up and the cost of walking doesn’t, people will just walk more, so there's no problem.

    The chained CPI is a spending cut because many entitlement programs are indexed to the CPI. These include Social Security, government pensions, veterans benefits, and the interest on some of the national debt. The lower the increase in the CPI, the less benefits will rise.

    The AP estimates that once the new CPI is fully phased in, a 65-year old on Social Security will receive $136 a year less. At age 75, the reduction will be $560 annually, and at 85, it will be $984 less.

    In addition, as wages increase at the real inflation rate, entitlement programs won’t keep pace. Gradually, fewer people will be eligible for programs like food stamps, Medicaid, heating allowances, and Head Start.

    The chained CPI is a tax increase for much the same reason. Many income tax brackets and deductions are indexed to inflation. Smaller annual adjustments to the brackets because of the lower CPI will push more people into higher tax brackets.

    Tweaking the CPI is nothing new. Politicians from both parties have done so for years to give the illusion of a lower CPI than that calculated by previous methods.

    ShadowStats.com, run by John Williams, calculates the current unemployment and inflation rates using the formulas from the 1980s. According to that methodology, the unemployment rate (U-6) is 15% and the CPI is 9%. Yet the government has tweaked the CPI so much that today the official CPI is 2.5%. Under this newest proposal, inflation would be 2.2%.

    You may think understating the current CPI by 0.3% isn’t any big deal, but it is. The decrease represents a 12% drop in the inflation rate, which understates the increase in our cost of living. If your employer reduced your wages by 12%, you'd probably see it as a big deal.

    Proponents figure the newest CPI adjustment will save $200 billion in spending increases and raise $65 billion in new taxes over ten years. It doesn't matter whether you call it inflation, chained CPI, or plain old gimmickry. A tax increase by any other name is still a tax increase.

    Rick Kahler, Certified Financial Planner®, MS, ChFC, CCIM, founded Kahler Financial Group, and became South Dakota’s first fee-only financial planner in 1983. In 2009, Wealth Manager named Kahler Financial Group as the largest financial planning firm in a seven-state area. A pioneer in the evolution of integrating financial psychology with traditional financial planning profession, Rick is co-founder and co-facilitator of the five-day intensive Healing Money Issues Workshop offered by Onsite Workshops of Nashville, Tennessee. He is one of only a handful of planners nationwide who partner with professional coaches and financial therapists to deliver financial coaching and therapy to his clients. Visit KahlerFinancial.com today!

  • Capitalism, Weeds, and Brotherly Business Deals

    by Rick Kahler

    What is capitalism? How does it work? For some time now, I've been meaning to write a column on that topic, but it has seemed to be a daunting task more fit for an economist than a financial planner. Then I remembered this story from my childhood.

    One summer, we were visiting my grandparents. I was about ten and my brother was seven. Our grandfather hired us to weed his garden, paying us a dime apiece.

    That seems like a paltry sum, but it wasn't such a bad wage for a couple of kids at the time. After all, a bottle of soda only cost a nickel.

    We started off to work. The day was hot. The garden seemed huge. I kept thinking about getting a bottle of soda and sitting in the shade. Pulling all those weeds seemed like a huge price to pay for that reward.

    Then I had a brilliant idea. "Dave," I said, "How would you like to earn an extra nickel?"

    My brother was interested. I offered him the opportunity to weed my half of the garden for half of my dime. It seemed like a good idea to him, and we made a deal.

    David weeded the entire garden. I bought a bottle of Coke with my nickel, sat in the shade, and watched him work. When the weeding was finished, he was tired and hot but had fifteen cents to show for his labors. I was broke, but I had enjoyed relaxing with my soda instead of having to work in the hot sun.

    It seemed like a win-win situation to me. My grandfather didn't see it the same way. In his view, I had taken advantage of my innocent younger brother by coercing or manipulating him into doing my work for me. I'm not sure Granddad ever forgave me for what I did that day.

    I suppose there may have been a tiny grain of truth in his perspective. After all, I was three years older than my brother. However, I don't remember any bullying or manipulation being involved. I simply offered him a deal, and he took it. The transaction involved a willing seller and a willing buyer. One thing of value (his work) was exchanged for another thing of value (my nickel). He benefitted from receiving more money, and I benefitted from not having to perform manual labor.

    Thinking about it all these years later, it occurred to me that what I did was exactly the same thing my grandfather did. Each of us paid someone else to do a task we didn't want to do. And each of us got the job done at the lowest cost to ourselves.

    For Granddad to accuse me of using my position as the oldest to take advantage of my brother wasn't quite fair. After all, one could say he used his position as a grandfather to get cheap labor out of a couple of little kids. I suppose one of his aims was to teach us about the value of hard work and the satisfaction of being paid for our efforts. The lesson I learned wasn't exactly the one he had intended to teach.

    The whole process, though, was a small example of capitalism at work. It was a lesson I took to heart.

    My brother must have done the same. He's still a hard worker, and he's certainly been a very successful capitalist. And when his son was a teenager and I hired him to do my yard work, I had to pay him a lot more than a nickel.

    Rick Kahler, Certified Financial Planner®, MS, ChFC, CCIM, founded Kahler Financial Group, and became South Dakota’s first fee-only financial planner in 1983. In 2009, Wealth Manager named Kahler Financial Group as the largest financial planning firm in a seven-state area. A pioneer in the evolution of integrating financial psychology with traditional financial planning profession, Rick is co-founder and co-facilitator of the five-day intensive Healing Money Issues Workshop offered by Onsite Workshops of Nashville, Tennessee. He is one of only a handful of planners nationwide who partner with professional coaches and financial therapists to deliver financial coaching and therapy to his clients. Visit KahlerFinancial.com today!

  • Do You Know the Difference Between Millionaires and Billionaires?

    by Rick Kahler

    The difference is three zeroes and a comma. No, this isn't a bad joke. It takes one thousand millions to make one billion. That's a huge difference.

    Over the past couple of years, especially during the presidential election, one of the hot-button issues has been whether the wealthy are paying "their fair share" in taxes. A great deal of the media coverage and political rhetoric, from President Obama on down, has lumped "millionaires and billionaires" together.

    That makes as much sense as putting a housecat and a tiger into the same cage and saying they're just the same.

    The first issue to clarify is the definition of "millionaire" and "billionaire." Is it someone with a net worth of $1 million or $1billion, or is it someone earning a million or a billion in a year?

    According to wild.answers.com, only 80,000 Americans make $1 million or more a year. I couldn't find a source listing how many people make over $1 billion a year, but I can guess. If you earned 6% on your investments, you would need a net worth of about $16 billion to provide an annual income of $1 billion. According to Forbes (March 2012), only 40 people in the entire world have a net worth of over $16 billion. Obviously, all those references we keep hearing to billionaires must refer to net worth, not income.

    This is in line with the Merriam Webster dictionary, which defines millionaire (or billionaire) as "a person whose wealth is estimated at a million (or billion) or more."

    What kind of lifestyle can you have with a net worth of a million as opposed to a billion dollars? Experts tell us the most reasonable sustainable withdrawal rate is 3%. That means your $1 million will provide $30,000 a year. Adding in Social Security of $18,000 a year means a millionaire can retire on an income of $48,000 a year. If you need assisted living, in-home care, or nursing home care in your later years, which at today's rates cost a minimum of around $84,000 a year, you'll be spending down your principal.

    Three percent of $1 billion, on the other hand, will give you a retirement income of $30 million a year. At that rate, you could probably get by without bothering to file for Social Security.

    Accumulating $1 million over a lifetime is certainly possible for middle-class earners who are willing to live on less than they make. If you started saving about $1750 a month at age 25, you'd have your million by age 65. That's about the same as a married couple each maximizing their 401(k) contributions.

    To accumulate $1 billion by age 65, on the other hand, if you started at age 25, you'd need to save a mere $21 million a year.

    Equating a millionaire with a billionaire is the same as equating the population of Rapid City, South Dakota (70,000) to the combined populations of California, Texas, and Virginia (70,000,000). There is simply no comparison.

    The point here is that in today's world, a millionaire, especially one who is retired, isn’t "rich." Accumulating a net worth of $1 million dollars by age 65 is a completely reasonable and achievable goal for anyone wanting a comfortable and secure retirement.

    Lumping “millionaires and billionaires” together might roll off the tongue with a rhythm that makes a nice sound bite. That doesn't mean it makes sense. For anyone willing to do the math, the comparison is ludicrous. There's a world of difference in earnings, wealth, and potential lifestyle in those extra three zeroes.

    Rick Kahler, Certified Financial Planner®, MS, ChFC, CCIM, founded Kahler Financial Group, and became South Dakota’s first fee-only financial planner in 1983. In 2009, Wealth Manager named Kahler Financial Group as the largest financial planning firm in a seven-state area. A pioneer in the evolution of integrating financial psychology with traditional financial planning profession, Rick is co-founder and co-facilitator of the five-day intensive Healing Money Issues Workshop offered by Onsite Workshops of Nashville, Tennessee. He is one of only a handful of planners nationwide who partner with professional coaches and financial therapists to deliver financial coaching and therapy to his clients. Visit KahlerFinancial.com today!

  • The Financial Case for Good Health

    by Rick Kahler

    Does $40 a month for a fitness center membership seem beyond your budget? Do you cringe at the cost of fresh fruits and vegetables? Is your wallet too lean to let you buy lean protein? And the cost of a medical checkup is something you don't even want to think about.

    At first glance, the cost of staying healthy might seem way too high.

    Certainly, maintaining good health comes at a cost. Yet in the long run, maintaining poor health will cost far more. Let's look at some of the ways it pays financially to take care of your health.

    1. Exercise. Before you decide you can't afford a $40 gym membership, consider this: What do you do with the time you don't spend exercising? Shop? Watch movies? If you're like most people, you spend some of that time spending money. Maybe even enough money to cover the gym membership. There are also plenty of free ways to exercise, like running, biking, or walking. In Rapid City, all our hills provide a great workout at no extra charge.

    2. Diet. Eating a healthy diet doesn't have to mean adding expensive organic produce to your grocery bill. You can buy plenty of real food that's canned or frozen. At the same time, subtract highly processed foods and junk. You may even end up saving money. You'll save even more if you eliminate health-destroying habits like smoking or excessive drinking. This is a two-for-one: you improve your health and save money at the same time.

    3. Preventive checkups. Check your insurance coverage. Under current health care laws, some preventive care is fully covered. And if you think a routine visit to the dentist is too expensive, check out the cost of a root canal or getting a tooth pulled.

    Every penny you may save by not exercising or eating right, you'll eventually spend in additional medications, doctor visits, medical co-pays, medical equipment, transportation, and housing costs.

    Poor health will directly affect your health insurance premiums. It will indirectly raise your taxes. Even if you're healthy, you'll help pay for those with poor health through Medicaid and Medicare taxes.

    Probably the greatest cost of poor health, however, is one most of us never consider. This is the decrease in one’s earning power. For most people, their greatest asset is their capacity to earn. Poor health may hold people back from reaching their potential, or even make them unable to continue to earn any income. A survey of pre-retirees found that 80% of them planned on working after 65. Yet only 19% of people over 65 are actually working. Why? Over 40% are unable to work because of poor health.

    There is one financial advantage to poor health: it reduces your life expectancy so you run less risk of outliving your money. However, don’t think that dying younger means you can live more lavishly. A recent study shows the number of unhealthy years—with their related health-care costs—are the same regardless of life expectancy.

    There are many ways to define wellness, most of which include a combination of financial, emotional, and physical health. If a person isn’t healthy, money alone isn’t of much value. But take money out of the picture, and good health is almost impossible to sustain. Our health and our money have a direct impact on each other.

    Since good health is such a vital asset, it makes sense to use some of your financial resources to support it. Part of good financial planning and money management is doing what you can to stay healthy enough to enjoy your financial independence.

    Rick Kahler, Certified Financial Planner®, MS, ChFC, CCIM, founded Kahler Financial Group, and became South Dakota’s first fee-only financial planner in 1983. In 2009, Wealth Manager named Kahler Financial Group as the largest financial planning firm in a seven-state area. A pioneer in the evolution of integrating financial psychology with traditional financial planning profession, Rick is co-founder and co-facilitator of the five-day intensive Healing Money Issues Workshop offered by Onsite Workshops of Nashville, Tennessee. He is one of only a handful of planners nationwide who partner with professional coaches and financial therapists to deliver financial coaching and therapy to his clients. Visit KahlerFinancial.com today!

  • Staying on the Road to Financial Independence

    by Rick Kahler

    Congratulations! You’ve made the courageous decision to commit to financial sobriety. You’ve committed yourself to creating a spending plan, paying off your debt, creating an emergency fund, and fully funding your financial independence.

    This probably means you’ve made a conscious choice to downsize your lifestyle. You may be driving a cheaper car, eating out less, shopping less, and traveling less. You may have moved to a smaller house or even a more affordable city. You may have gone back to school to improve your future income.

    Whatever you’ve done, it took a lot of courage, focus, and hard work to put yourself on the road to financial sobriety. Here are some reminders to help you stay on that road:

    1. This lifestyle downgrade isn’t forever, especially if you are paying off debt. Someday the debt will be paid. You'll have the joy of using some of those funds to expand your lifestyle and investing some in your financial independence, paying toward the future instead of the past.

    2. Relapse is certain and necessary. No one follows a spending plan to perfection, especially in the first few months. Remember, your plan is an estimate of the future and a work in progress. You don’t need to get everything right or do it perfectly. You will certainly miss an expense here and there, underestimate, and overestimate. You will probably need to refigure and readjust for the first year before you really hit your stride.

    3. Difficult emotions are to be expected. You may feel a host of emotions like fear, sadness, embarrassment, shame. You may have times of feeling hopeless and overwhelmed. Honor your emotions—they are real—but let go of the negative self-talk that often accompanies them. The land of financial sobriety is unfamiliar territory. It’s going to take you awhile to become accustomed to this new way of being. Don’t berate or "should" on yourself. Let your dreams become bigger than your fear.

    4. Keep your eyes on the prize. No matter how poor your past financial decisions have been, tomorrow is a clean slate, a new day. The past does not define your future. Keep your focus on what you want your future to become and what you want to create with your life. Visualize that life of being debt-free and financially independent. Doing so will help reprogram your brain to gain more emotional impact from imagining future gains rather than present fulfillment. You can learn to gain more pleasure from paying an extra $100 on an outstanding loan and imagining a life free of debt than from buying a new pair of shoes.

    5. Progress comes in small steps. Remind yourself you are not where you were. Progress can seem painfully slow in the early days of reducing debt, building an emergency fund, or growing your 401(k). In my 20's, I started an IRA with $50 a month. I remember looking at a statement that represented two years of investing and thinking I would never get anywhere at that rate. As the years went by, I was able to save more and more. It wasn’t until my 50’s that the compounding growth of my meager initial savings started snowballing. By then I had a sum that could support me with a modest lifestyle if I chose to quit working.

    This journey of financial sobriety is not easy. Like most things of value in life, it takes determination and persistence. Set your sights on creating a life worth living, then align your financial behaviors to support that vision. You'll achieve success, and you'll also enjoy the journey.

    Rick Kahler, Certified Financial Planner®, MS, ChFC, CCIM, founded Kahler Financial Group, and became South Dakota’s first fee-only financial planner in 1983. In 2009, Wealth Manager named Kahler Financial Group as the largest financial planning firm in a seven-state area. A pioneer in the evolution of integrating financial psychology with traditional financial planning profession, Rick is co-founder and co-facilitator of the five-day intensive Healing Money Issues Workshop offered by Onsite Workshops of Nashville, Tennessee. He is one of only a handful of planners nationwide who partner with professional coaches and financial therapists to deliver financial coaching and therapy to his clients. Visit KahlerFinancial.com today!

  • Gold in That There IRA

    by Rick Kahler

    Here in the Black Hills, home of the historic Homestake Mine, we know a gold rush when we see one. The last few years have tempted investors to take part in a modern gold rush. The precious metal is thought of as a safe harbor for investment capital during times of economic and political unrest and chaos.

    There are many ways to own gold, including holding an interest in it via a financial medium like a mutual fund or an Exchange Traded Fund (ETF). Those who want gold as protection against political or economic turmoil, though, probably are thinking of owning physical gold.

    Since Americans' savings and investing rates are so low, most folks don’t have any extra funds to put into gold. Their only investment vehicle may be an IRA. Yet IRAs are specifically excluded from owning collectibles, metals, and coins.

    There are exceptions, however: U.S. gold coins minted by the U.S. Treasury, or bullion bars or coins of a fineness of 995 parts per 1,000. Several non-U.S. minted gold coins meet that standard. The key here is that the coins or bars must be in the physical possession of a qualified trustee. That means gold you stash in a safe or bury in the back yard does not qualify.

    Most banks, brokerage firms, or mutual fund companies are not interested in holding physical gold, so finding a qualified trustee can be difficult. You must do a reasonable amount of due diligence to be sure the trustee you find is really trustworthy.

    A trustee needs to arrange for the shipping, handling, and storage of your gold. For this reason, you will certainly pay much higher fees than you would for normal stock, bond, and cash investments. The fees can amount to hundreds or thousands of dollars annually.

    Even if you are willing to pay the high fees, first ask yourself, "What’s the point?" The reason most folks want to own physical gold or silver is to have "real" money available in case of an economic crisis or political uprising. How does owning physical gold in an unknown location that may be thousands of miles from you fulfill that requirement? Wouldn't owning an ETF like GLD actually accomplish the same thing, only without the high costs? Yes, it would.

    If you want to own gold, my strong suggestion is to own the GLD ETF and avoid all the high fees. The total cost of purchasing GLD is probably about $10.

    Other options are mutual funds that purchase gold mining stocks, which is probably a better way to participate in the gold market. This is because of the leverage factor. In a rising market, the cost of mining gold is much lower relative to the market value of the gold. So if a mining company pays $1,000 to mine an ounce of gold and can sell it for $1,500, the company—and you, as an owner of its stock—make $500 per ounce. Gold could stay at that same price for a year and your company would continue to make a 33% gross profit.

    However, if you owned the physical gold and it stayed at the same price for a year, your profit would be 0%. You would only make that same $500 profit if the gold appreciated from $1,500 to $2,000 an ounce.

    Of course, the reverse is also true. If gold turns downward, you will stand to lose much more owning the mining company than the physical gold. That's why I recommend owning gold, like any other asset, only as part of a diversified portfolio of investments.

    Rick Kahler, Certified Financial Planner®, MS, ChFC, CCIM, founded Kahler Financial Group, and became South Dakota’s first fee-only financial planner in 1983. In 2009, Wealth Manager named Kahler Financial Group as the largest financial planning firm in a seven-state area. A pioneer in the evolution of integrating financial psychology with traditional financial planning profession, Rick is co-founder and co-facilitator of the five-day intensive Healing Money Issues Workshop offered by Onsite Workshops of Nashville, Tennessee. He is one of only a handful of planners nationwide who partner with professional coaches and financial therapists to deliver financial coaching and therapy to his clients. Visit KahlerFinancial.com today!

More Posts « Previous page - Next page »
About Us    Privacy Policy    Writers' Guidelines     Sponsorship     Media    Contact Us



Powered by Community Server (Commercial Edition), by Telligent Systems