THINKING AHEAD: Borrowers, lenders wait for rules of engagement for HARP 2.0 refi product

February 1st, 2012

Rarely, if ever, does a loan refinance loan program make its way into American popular culture. However, the approved revisions to the Home Affordable Refinance Program, known to all as “HARP 2.0” has created a buzz for lenders, loan officers and even homeowners.

Even though it’s great to envision a wonderful program that allows responsible homeowners (less than 2 mortgage lates in the past year in most cases) the ability to take advantage of the current record low rates, we need to be on collective caution until the program rolls out to the mainstream sometime in the next 30-90 days.

The original version of the program, known today as HARP 1.0, started back in Spring of 2009. Under HARP 1.0, the high level details issued by Agencies Fannie Mae and Freddie Mac went as follows:

HARP 1.0 Guideline Highlights (but not adopted by all lenders, as many have found out)
• LTV to 125
• Unlimited CLTV
• No MI if you don’t currently have it, or if you have MI, the MI stays the exact same

Sounds great, right? Well, by the time the banks got this program, and applied their risk models, and offered it out to borrowers, they collectively made the program much less attractive to the masses than the bullet points indicate. Many banks provided guideline “overlays”. Overlay is an ugly word for “we’re not going there”. Some banks, if they participated in the program at all, had overlays for 95% LTV and CLTV. A far cry (although helpful for a great deal of borrowers) from the core Agency product.

Although, many bank and lender sources have gradually gotten more liberal on this product. Some are currently much closer to the actual product offering than they were when if first started.

So now that HARP 2.0 is ahead of us, we have heard of some wonderful things, including:

HARP 2.0 Guideline Enhancements
• Lower risk adjusters (which translates to better rates for borrowers!)
• Unlimited LTV/CLTV
• No appraisal required
• Discounted or eliminated underwriting fees

So again, we lending professionals are waiting for the “reality check” of what, exactly will lenders do with their guideline“overlays”.

Odds are, the program will be picked up by many lenders. The guidelines will probably not be as liberal as issued by Fannie and Freddie, but there is a good reason to be excited because the program changes are expected to provide a more borrower-friendly product than what is currently available. THIS IS THE GOOD NEWS!

——–

Stated simply: it’s not fair, but it’s the best thing going

Keep in mind, just because you have a mortgage doesn’t mean that help is on the way with this HARP program. There is a specific set of homeowners that fits the profile for the loans that are eligible. A loan must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009. This means that if you have a loan that is not currently owned by Fannie Mae or Freddie Mac, then, sorry, you are not able to join in on the party. In 2008, Fannie Mae and Freddie Mac combined serviced nearly 50 million loans. That is a ton of loans. But in reality, it is about 40% of the entire housing market. So, odds are, 4-out-of-10 of homeowners will have a chance at this product, minus those who have already refinanced under HARP because the rule is that you can utilize the HARP product 1 time per property.

So where does the other 60% of loans come from? The other types of loans out there are VA, FHA and non-conforming. FHA and VA have historically had a very good streamline product. Their attitudes are typically that, if their borrower keeps making their payments, and we know nothing else about them other than the fact that we can offer them a better payment on their loan, then we all win.” A wonderful concept. That said, guidelines have tightened up on both FHA and VA streamline products in recent years.

That other huge piece of the servicing pie is Non-conforming or “other” loans. Unfortunately, this population of borrowers is left out in the cold for any sort of government sponsored or endorsed refi. For this unfortunate set of borrowers, the only choice is typically to walk away if you can’t make your payment, or take the less-than-satisfying approach for negotiating a rate reduction or principal reduction. These loans are commonly issued as bonds and one single non-conforming loan may have 20 or 30 different major investors. Too many cooks in the kitchen. In reality, it is hard for 2 investors to agree on the fate of a loan modification, let alone dozens. Going back to FHA, VA and Fannie and Freddie Mac, their cleaner, singular, mortgage ownership has enabled them to be more dynamic in their offering of these refi programs, and this has been a huge benefit for responsible on-time mortgage paying homeowners who just want a shot at these current great rates.

As timing has it, in President Obama’s Jan. 24 State of the Union Address, he mentioned that he’d like to see a program created to help these Non-Conforming borrowers. Analysis: Dream on. The chances of this happening are low, but you have to hand it to a politician who knows how many millions loved to hear those words.

Christian Hackett
Loan Consultant – Drake Home Loans/Placer Mortgage Group
916.425.0508 Direct
866.710.4543 eFax

1700 Eureka Rd, Suite 155A
Roseville, CA 95661

Corporation
DRE 01421288
NMLS 572121
Originator
DRE 01403954
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Even Online, Keeping It Simple Brings The Clients

January 26th, 2012

Even Online, Keeping It Simple Brings The Clients.

10 Helpful Hints for Holiday Planning

December 12th, 2011

1. Planning for expenses should be an ongoing task….making an initial budget of expenses for the year, tracking them using a program like Quicken or Mint.Com and then reviewing to see if your actual spend matches that of your budgeted expenses. It is very easy to overlook and overspend if you’re not tracking it. If you’re already doing this, kudos to you! If not…we hope you appreciate the following tips for keeping holiday expenses under control.

2. Make a list of who is included in your shopping list. Don’t forget the little expenses that add up…such as gifts for teachers, daycare providers, housekeepers, pool service tech, yard care person, hair stylist and neighbors. Create an Excel spreadsheet that you can begin to use year-after-year to plan for the expenses and keep track of what you have purchased and the amount spent. Also, consider whether every gift is really important or not. You may get invited to several holiday events that have a gift exchange or white elephant gift. If it’s not required, perhaps opt out of bringing a gift. Often times, you end up with a gift you really don’t want anyway, but you’ve lost the cash for your gift.

3. Consider lowering the amount you spend on each person on your list, or reducing the overall number of gifts. Sometimes we get in the habit of buying gifts for friends and family members “just because.” Often, if it’s suggested that a gift exchange doesn’t take place in order to save some expenses, the person on the receiving end can be relieved/excited to have less to purchase themselves!

4. Plan in advance…if you see a good deal during the year, get it! Save it for a birthday or gift item later in the year. Although some gift receipts will expire, consider it an option because you can often find great deals towards the end of each season that you can use for a future gift.

5. Do your research in advance! Be on the lookout for deals…in stores and online. This will help you know what you want to purchase and what the price range should be, rather than getting anxious or excited that “it might be the only one” or “it’s a Black Friday deal.” You may end up spending a lot more than you planned on because you hear the holiday music and it somehow influences our purchases!

6. Pay in cash. Plan for it all year…and save for it. Don’t use a credit card or layaway to pay for gifts at a “later” time. This can sneak up on you. If you don’t have the cash now, you can’t afford it and should look for some alternatives. Also, don’t be tempted by discounts offered for signing up for a credit card. Each time you apply for credit, it affects your credit score. It’s simply not worth it to receive 10% off a one-time purchase and it’s often difficult to stop using the store’s credit account in the future.

7. Ask the question: Is this a “need” or a “want”? This question is good for nearly every purchase, but especially helpful around the holidays. When you walk into stores and see all of the beautiful decorations, it’s hard to not want a new wreath for the door, garland for the mantle, stocking holders, etc. These “wants” add up very quickly.

8. Reduce, Reuse, Recycle. Great plan for holiday décor and accessories! Gift bags are great because they can be used over and over again…it’s better for the environment and your budget! Gift tags can be easily made from your computer or with a little creativity (some rubber stamps, colored markers, glitter, etc.). It can even be a fun family project to work on together or a great gift idea to give to someone else.

9. Be “armed” with your discounts and coupons before you hit the stores. A lot of times, you can visit a company’s website to download and print off a coupon (for example, 40% off at Michael’s) before you head out to shop. And, sometimes making multiple trips to use your coupons can work out to your advantage if you are getting larger ticket items. You may spend another $3 in gas running back to a store but if you’re saving $25…it’s worth it.

10. Consider giving your time or providing a service as a gift.
Angel Tree Donations/Deliveries
www.angeltree.org/
Bake for a homeless shelter
Make a meal basket for families in need
www.rosevillehomestart.org/
http://www.thegatheringinn.com/
www.salvationarmy.org/
St. Vincent De Paul (916) 781-3303
Decorate a Christmas wreath to take to an assisted living home
www.rosevilleseniorliving.com/Services
www.seniorhomes.com/Roseville
www.eldercareservices.com
www.eskaton.org/village-roseville.html
Volunteer at a local food bank
www.placerfoodbank.org

Ideas for Services you can give as gifts
(i.e. make a “gift certificate)
Car wash
Massage
House cleaning
Grocery shopping
Day of running errands

Ideas for Homemade gifts
(inexpensive and a special touch of love!)
Make homemade note cards
Cookies or other desserts
Make a dinner (can be frozen for later use)
Soup in a jar
Cookies in a jar
Resources:
www.christmas.organizedhome.com/gifts-crafts-gift-tags/gifts-in-a-jar
Cookie ingredients, holiday beverage mixes, baking mixes or bean soup fixings layered in a glass canning jar, or Mason jar. Mason jar recipes make easy homemade Christmas gifts. … We’ve got all you need to know to make gifts in a jar. …
www.allfreecrafts.com/giftinajar/index.shtm
Gift in a jar recipes, jar mixes and gifts in a jar from All Free Crafts. … “Free crafts, craft projects and patterns to make easy homemade gifts.” Free Patterns • Holiday … Layered soup in a jar, chili seasoning and rice recipes in a jar

If you have holiday saving tips not included above, we’d love to hear them! Or, if you have charitable organizations we could inform others about in a future newsletter, send those on as well!

If you like this blog and want to see the full newsletter published by Lynch Financial Advisors this month, click here: http://www.lynchfinancialadvisors.com/newsletter/nov-dec2011/ Or, to read our past newsletters, check out the newsletter archive on our website: http://www.lynchfinancialadvisors.com/research.html

Lynch Financial Advisors
www.lynchfinancialadvisors.com
916-772-3103

In the News Today

August 18th, 2011

Six months ago two sailboats left from San Francisco, one was captained by the boats owners, the other by a seasoned Captain (one that has been in out in the ocean for over a decade on a multitude of different boats).

Today, the owners that are sailing by themselves are stuck in high seas, roughing it out because they believe that this is how everyone else is doing. Little do they know that a boat that left from the same harbor sailed far around the storm and is still on course for the boat owner’s destination.

For those of you that are my clients, you know which boat you are in.
For over a couple weeks now, advisors have been fielding clients’ calls, “How much more is it going to go down?” “Do I get out now?” I can hear that echos from far way. I tried to help a client transfer her clients’ money from Wells Fargo last week. I could not get anyone on the phone, instead I heard this message, “We are experiencing higher than usual call volume. Please do not leave a message as we will not be able to return it.”

For those that have been around a while, this is a classic market correction. One foretold by many of the managers we use (as evident by most of their lack of correlation to the market). So while it is nice to know that right now we have missed much of the storm that is affecting others, I am sure there are questions of whether we will end up running into this storm in the future.

While I would love to point to one piece of evidence to say what created the storm, it would be conjecture at best. For years now, I, along with most of my clients have been worried about the growing deficit, which has added undue weight onto our debt. For those that hated Econ 101 class. Remember the defecit is what you are short currently, e.g. if you don’t have enough money to pay your bills this month and you have been putting it on the credit card, the lack of funds is the deficit, the borrowing on your credit card is your debt.
For years, the average consumer had loaded on so much debt (housing, etc.), that they couldn’t afford to pay it and started to default. We can blame the banks, lenders, etc., but at the end of the day, the consumer made the decision to make the purchase(s). We all know how that story ended.

Over the last few years a similar story has been playing out in governments throughout the world. Governments have been borrowing money and loading up the debt. And similar to the consumer, they are living in hope that they can make enough money (tax revenues) in the future to pay the debt they have accumulated.
Now, as my clients know, debt itself is not always bad (home and education are allowed). The idea, though, is that they have to be able to afford it. In our country’s case, our debt load is increasing faster than our revenues. For you “home gamers” that simply means as we grow the economy (measured in GDP- Gross Domestic Product), the government hopes to collect more money. Think of it this way: If you get paid 5% for something you sell, every year the price of the product you sell goes up, but your commission stays at 5%. However, you would make more money each year. So to put this into government terms, taxes are the commission the government earns on the products/services its people produce. As long as those prices (food, wages, services etc) go up, the government makes more money (assuming taxes don’t go down).

Now take the above analogy and follow this country over the last few years; we lowered overall taxes (cut our commission), gave money away (stimulus program), and have increased the debt we have, e.g. increasing our overall expenses. All the while we have gone through a few years now of low to no domestic product growth. If you and I did this we would be in bad shape!

This is the simplest explanation I can give you for the market correction… but that really is just the tip. Because all of what I just mentioned should have been in the market… right? What they call “smart money”, that is people that buy and sell stocks and bonds for a living should have known all of this. If they did, then they should have discounted the prices of bonds and equities in relative terms to the information that they have, right? If they had been following what was apparent in the market, then we would have slowly grown out of the pull back of late 2008 and early 2009. This part is going to blow people, but I don’t think it needs to be changed.

The answer is that the market doesn’t get this stuff right (in the short term) often. The reality is that the market tends to move forward in a “heard” fashion. For nearly a decade I have argued that we need to not concern ourselves with the heard. Much of what is in a client’s portfolio has little to do with the heard. Actually, some of what is in clients’ portfolios is actually betting against the heard.

I am going to leave you wondering about this heard and why the “heard” approach is wrong. If you want to get into this deeper take look over my white paper on Risk Assessment vs. Absolute Return.

To move away from the heard, let’s talk about some things that you can do. Let’s talk about some areas you do have control over.
What should you do?

1. If you have a loan that is over 4.675% it is likely time to refinance. If you are one of these people, and I have not contacted you, please send me an email. As everyone knows, I don’t make money off of your refinance. My only incentive is to help you!

2. Get to know your household “income statement” What are you spending? Are you spending in areas that you value?

3. Be ready for rebalancing your portfolios in late October/early November. I will GUESS that we will be choppy for the next few weeks. Once summer is over we may pick up some traction as the government is likely to announce some measures to get the economy moving more. By late October/early November, we should have some vision of direction. While we don’t “time the market” we do believe in being aware of our surroundings.

4. Most important: Go out and have fun with your family and friends. Spend time learning something new about what you are passionate about. See how you can create more value in your work environment.

What’s Important to You?

August 18th, 2011

On my agenda this morning was to finish writing the content for the August issue of the Lynch Financial Advisors Newsletter. I started writing last week about the market crash. Pimco’s Bill Gross seems to be right again (see next blog on the “New Normal”). Explaining what had transpired the first part of the month, meant dealing with finance, economics, and most importantly behavioral science (much of which is still in its infancy.) Wrapping my own head around it sometimes takes a pint. But, this morning I woke up to an up day in the market. The previous pages of content I wrote seemed to be slowly slipping away as important and I am left with I am left with recreating 4 new pages of content…but I am happy about this.

Family is VERY important to me. I have four brothers. My oldest brother (Rick) spent 2 weeks at my house this summer helping me build a fence and renovate part of my backyard… he was my defacto foreman for that time. He worked hard out of love for me. My little brother Brennan, (whom I not sure if he has ever become accustomed to me calling him “my little brother”), shares my love of hot rods. He is largely responsible for stoking the flames. My brother Dominic is the one that all the brothers can talk with, but on different subjects. He spent three years abroad teaching in Korea and spent his off time traveling and reading some of the great Russian works.

I have three daughters, Megan (7), Ciara (5), and Tiana (2). They are all beautiful, smart and funny in their own way. They all have times where dad is their best friend and others when mom is. I just found out the other day that when Ciara grows up she is going to marry me.

Just thinking of those times that my daughters have fallen asleep in my arms, nearly moves me to tears. I can almost put myself back in the moment. Looking down at their little noses, seeing myself adjust their heads on my arm and feeling the dampness from the sweat on their back of their neck… a sure sign of child fast asleep; these little beings that I help create are completely trusting that their dad will keep them safe. I will protect them from harm. As I stand-up from my couch with a daughter draped across my arms, I know all to well that at one point I will not be able to protect them. And as I lay them down and pull the covers up just so that it covers their chin a little bit, my daughter lightly wakes up, turns and give me a kiss… and as her head turns back to the pillow I can hear your tender lips say, “I love you Daddy.” Quietly and from deep in my heart I say, “I love you too”.

There in the darkness of her room, I stand and look at her. Thoughts of her growing up run through my head. My biggest fear of her first date and the boys that she will date in the future start to enter into my thoughts and I feel as though I have little control and am unable to protect her. I have kisses for the bruises, Band-Aids for the scraped knees, but what do I have for the heart gets broken?
What can I do? As a father I am the dad that says, “you’re not bleeding, your fine”. To some I am sure I appear tough, however, I know what lies ahead for them. The road will not be easy, there will be times that they have to pick themselves up. While I would love nothing more than to feel the tight squeeze of their arms around me as they sink into my arms every time they are hurt, I know that this world is much too tough for me to take away their opportunities to grow. A mother bird may seem harsh when she kicks the birds out of the nest, but she knows that they are going to need to learn how to fly. My hope is that I raise strong enough kids that they can whether the storms of life, but I am tender enough so they know I am always here when they need shelter.

There are a myriad of analogies in the above writing that correlates to the premise of my blogs and my newsletter and it feels almost shameful to now take my deep love that I am expressing for my daughters, and turn that into how one can deal with the markets, their finances, and their life. So I won’t. I will only encourage you in three areas:
1. What is important to you?
2. How do you relate to the story?
3. Do you feel safe and secure? If not, why?

What is Money?

August 11th, 2011

There is belief in this country that the only way to get rich or to amass enough wealth to be truly happy is to have a large amount of monthly cash flow. A multitude of books on the shelves at Borders propel this horrible myth. The reality is…money itself doesn’t make anyone happy.
I can say this with a high degree of certainty because I know what money is. It is essentially paper with different numbers on it. The paper itself is value less. The value of the dollar is derived from everyone agreeing as to what that dollar represents. For example: a dollar bill, at your local 7/11 equals a candy bar. The store keeper will take that dollar bill and exchange it for something (an employee’s time, another candy bar, electricity etc.)
You see the dollar itself is really only a holding point. It is a note. It means someone owes you something. And you get to make the decision who owes you. The store keeper owes you a candy bar for your dollar.
Another myth is that having money makes someone a bad person… or an unhappy person. For the same reasons as above, this statement is not true. People become greedy because they are feeding a need (not necessarily a positive need). It could be the need for power, fame, attention, etc. The dollar bills themselves are meaningless to the individual, however, it is the value they represent that makes the greedy person feel powerful. The ability to buy someone’s time, the ability to exchange their bills for control over something else. It could be a car, a house, or a yacht. So money itself is not bad, rather the desires of the owner of the dollar can be bad or good.
Wealth and happiness are relative terms to each person. What makes me happy is spending time with family and friends. It could be just hanging out at their house having a couple beers and a burger. For some people hanging out is just not fun- it doesn’t excite them. They need to be off climbing a mountain or searching for lost treasury. A rich/happy life to them might be climbing every mountain in the western hemisphere.
The amount of money I may need to accumulate to live my lifestyle will be different than everyone else’s. The value I put on my dollars will also be different. I may not be willing to exchange my dollars for the same items. I may believe that a dollar is too much for a candy bar and I would rather save a couple dollars to buy a pound of meat to bring over to my friends house to BBQ.
The problem is most people don’t look at life (or money) this way. They tend to compare themselves to their friends, family or some other picture of what “the perfect life” is. Put another way, they judge themselves against their friends, family, movie stars, etc. Rather than identify what their core values are and judge their own lives at how close they are aligning what they spend their dollars on with the values they have. Most Americans, actually, most people in the world typically look at money and how much they have relative to others, rather than how well they are doing living a life that is congruent with their beliefs… a life that truly makes them happy. Most people get so focused on masking pain that they have through poor relationships with parents, family and friends with the desire for money. They believe that money is some miraculous invention that will somehow heal all wounds. That it will somehow make them a better person, a better husband, a better wife, a better friend. They say things like, “if I could have a million dollars I would buy every one of my friends a new car.” But for now they will skip their kids soccer game, they will miss anniversaries, they will not put near as much time or effort into their marriage as they did when they where courting their lover. All in the name of “in the future I will be better off because I have more money.”
We all know this is hogwash. It doesn’t pan out. The amount of divorces is our best evidence of this fallacy. Marriage wouldn’t be better if couples had more money. They would be better if they (a) understood the balance that it takes to live together, (b) that marriage takes a level of commitment, not just mentally and physically, but of time, (c) that raising a family is an honor, and (d) that being a Dad or a Mom should be a joyous gift.
I have single clients that believe that because they don’t have two incomes, they need to spend more money on their kids. From what I have witnessed, single parent homes spoil their kids with monetary things more than two parent homes. The answer to a single family home is not better and more toys, it is more quality time. That doesn’t mean better vacations, it means less television; more time with the kids on their homework; and making every game even if it means living in a smaller home.
If each of us used each other as a measuring stick, we would look back at ourselves and see a person losing the race. We cannot compare ourselves to anyone, our guidepost should be our belief structure and how we carry this out in our daily living. And how we spend our dollars should relate directly back to our core beliefs.

A Jerry Maguire Moment

August 11th, 2011

What happens to a man when he wakes up one day and realizes that all the thoughts and values he held true are false? The movie Jerry Maguire was devoted to such a moment. If you recall, Jerry Maguire was very successful sports agent that had a “moment” of perceived clarity. Jerry went from seeing each player as a means of making money, to being a human being. He spent the night writing his memo on how a good agency and agent would operate in order to be better aligned with the client (the sports player). This meant less clients, more direct contact, etc. It was this document that changed his whole career…nearly ending it completely.

“Twenty-four hours ago, man, I was hot! Now, I’m a cautionary tale. You see this jacket I’m wearing? You like it? Because I don’t really need it. Because I’m cloaked in failure! I lost the number one draft pick the night before the draft! Why? Let’s recap: Because a hockey player’s kid made me feel like a superficial jerk. I ate two slices of bad pizza, went to bed and grew a conscience!” Jerry Maguire

After he had dropped off his “memo” to everyone in his office, and was subsequently let go.

His only remaining client which stayed with him was Rod Tidwell, an aging quarterback in need of a new “big” contract to support his family. While the famous line, “show me the money” came from Rod, the money that he was talking about wasn’t the same as the money that Jerry had been going after. No, Rod was more talking about his “Kwan”, which he further described as “love, respect, community… and money.”

I may be pushing things a bit far, but this “kwan” is really an ideal that people like Mother Teresa subscribed to. If you know about her life, she wasn’t just some frail looking female that helped women and kids in other countries. No, she was also a vigilant fighter for her cause and as such she would make a pilgrimages back to New Jersey to regularly call for support of her cause. Furthermore, when she started out NO ONE knew the magnitude of change that this tiny woman would be a catalyst for. When she asked for money she had to fight the “church” for it. And from stories I heard from firsthand accounts (a priest I knew back East), she was as tough as nails when it came to getting money for her cause. She wanted it… she needed it …for her cause.

Have you had a
Jerry Maguire moment?

My wife and I had one when we lived back East. It was after 9/11; we were working in New York and living in New Jersey. We had planned to work in the city (Manhattan) for another year while a house that we had designed was built. We had spent the previous year looking for property, selecting an architect and a contractor. It was all done. Our “dream” home was ready to be built, mortgage approved and everything… but as night after night went by and we continued to smell the burning of the World Trade Center (it smoldered for weeks after the terrorist attack), we felt pulled to come home. It was time for us to be back with friends and family… and for us to start a family of our own.

We bought a house that we saw only on the Internet while still living in New Jersey (my mother-in-law walked through it with the real estate agent) and moved back to California. We moved into the house and thought that we would build the house a year or two later. Our goal was to get things settled first, but over the next couple years our priorities in life changed. We were ready to start a family.
My wife wanted to leave her company and we decided the house we wanted to build just didn’t fit “us” (6500 square feet on 4.5 acres). While it was designed with family and friends in mind, a place that we could gather and enjoy each other’s company, it really didn’t fit our actual life and what we wanted to focus on (her consulting company, my practice, and raising our future children).

Erin at that point was working her butt off; traveling 30% of the time and putting in a minimum of 60 hours of work every week. The last software company I worked for had been purchased and for the last year I had been working with our financial advisor as an associate planner. Our goal was to set ourselves up for an easier 50 years… but when the tower fell, we realized how quickly life could change at the blink of eye. It was more important to find a better balance in life.

I guess you could say that we wrote a memo to ourselves on what we wanted our life to look like. It was this “blue print” that helped us to put our life back into balance.

Have you had a Jerry Maguire moment? What was it? Email me two sentences and we will include it (anonymously) in the next blog. If you haven’t thought about your current relationship with money, how do you see it? What is it used for in your life? Do you envy others? Do you want more of it? What are you willing to give up for it?

Money Making Opportunity
What is money? I am giving out a $5 gift card to everyone that sends me back a response of what they believe money is. If you have a friend that likes Starbucks, send them the blog and have them email me.

Want more? Describe the difference between money and kwan. If I get 5 people to respond to it, we will vote on the best definition of kwan and the winner will receive a $100 gift card.

This is blog #1 of a few on money and balance
Next month… What is money?

Inspired for Change: Take Control of Your Life

August 11th, 2011

Have you seen the CNBC documentary on Sears? As a member of the last generation of “catalog kids,” the show grabbed my attention immediately. My memories of being 8 years old and looking through the Sears and Montgomery Ward’s catalogs to find out which company had the best go-cart flew back into my head. Being the son of a mechanic…and a boy, I must have looked through the pages hundreds of times. Whenever I would grab the fat catalog it would magically open to that precious page…go-carts. The dilemma was, do I try to buy the blue two-seater (it had a Briggs and Stratton engine) or would I try to get the red one with the racing cowl on the front?

It wasn’t the memories of the catalogs that kept me entranced to the documentary on Sears though. No, it was listening to the entrepreneurs that were involved in the company and realizing that it wasn’t just Mr. Sears that built the company. Arguably, it was in spite of him that it grew to the size it did. What inspired me was the way that they solved everyday problems. Sears started with selling inexpensive watches, but moved on to selling everything under the sun. Right down to your typical “snake oil” of the day. It wasn’t until the third partner, Julius Rosenwald, said that they had to have some controls over what they sold that the snake oil went out of the catalog.

What triggered me to want to blog on this topic is that back in the day – Sears was a mortgage lender. Back in 1908, Sears started selling kits to build a home. Catalog readers could order plans for $1. The application for buying the home had one question on there, “What is your vocation?” There were no credit checks and no Fico scores, just a simple question that helped to qualify the buyer. This ultimately became the demise of the prepackaged house for Sears. Non-the-less, this idea that somehow one question could dictate the character, integrity,

and fiscal well-being of people all over the country (homes were shipped almost anywhere the railroads went) caused me to think deeply about our own moral compass. I thought so deeply about this that half of a night of sleep was dedicated to this one point (read: I couldn’t sleep). Has this country changed? Are we derelicts? Pompous jerks? Cheats? Are we as vile as the media portrays the world? These are all questions that ran through my head as I tossed and turned trying to find a corner of the pillow that would allow my head to rest comfortably.

What happens if we are destined to continue the same cycle over and over? An economist back in the 1800’s surmised that we are destined for this cycle of excess and famine; for this swing between great times and depression. The theory being that this is the way that “civilized” cultures are and this goes back thousands of years. It is different than the way a nomadic culture, Indians, indigenous people, etc. are. One thinks in terms of conquering, the other in terms of “living with the land.” One sees shoes on our feet and a car to get around as progress; the other might see it as destruction. This raises a question to me, not of where I should be living, but how? There is something to be said about the kid that was flipping the Sears catalog and searching for the “right” go-cart. He wasn’t looking to buy it so that he could run around the neighborhood and say look at my cart, no he just wanted to go fast and drive like his daddy.

Today, though, after the decline that we have had, maybe it is time to take an account of what our lives are about. Maybe we should celebrate these times of famine to realize the many things that we really do have. To assess how we have let our lives become distracted and out of touch with whom we are. Who caused the financial collapse? I did, you did… we all did. There is no one that is not to blame that lives in this culture. Not the Republican, not the Independent, not the Democrat, not even the person that has lived well within their means is free of some blame.

The shear fact that we have traded living in a society of progress as opposed to in a community in the jungle, dictates that we have all contributed to one level or another.

It has often been said that if we don’t understand the past, we are destined to repeat it. Well, maybe we are just destined to repeat it and the best we can do is go into it with our eyes opened a little more. How? Today I encourage you to do two things: 1. Take an account of your life currently. Spend 30 minutes in a coffee shop and write down what you like and don’t like about your life… more importantly about yourself (who you are and what you have become). Make sure you look at both sides, for example: do you make excuses or try to find solutions? Think through how you could change to align yourself closer to your beliefs (whether it is your spending or your time). If you are passionate about the poor, what are you doing monetarily AND with your time? How much are you really giving…1 hour a month? 2. Start counting your blessings. As we dig out the bad we need to make sure that we replant ourselves with things that are positive. I mean truly go through the day, and picture the day as a day of thanks. I know I am going to take a rash of crap from my male friends on this, but I challenge YOU guys too! Change your view of your day to what you are thankful for (in that one day)….your spouse, your kids, your house, car, job, boss, etc. Find out what you like and be thankful.

Lastly, how are you going to take this and make 2011 your best year ever? Be kind to someone that you have held a grudge against. There is no reason to be fake, but you can let the dirty water wash down the stream. Call someone up that you haven’t talked to in a while (no email doesn’t count- let’s get a little more personal!). While the world has washed out its sins of too much debt, maybe it’s time you did the same? Many companies have gone through bankruptcy and have started with a new slate. Is it time that you started new in a couple areas of your life? What 10 people do you know that would be inspired for change by reading this blog?

Share this newsletter by email or through your favorite social network to see if you can’t help them make a positive change in 2011.

Passion & Bell Curve

August 11th, 2011

Have you ever had one of those friends that you were tight with, but later you started to wonder if you really knew each other?

It was five years ago when Damon, my old college roommate, went with me to a golf tournament in Graeagle, Calif. It’s about 50 miles as the crow flies from Lake Tahoe. The countryside is as majestic as Tahoe: The roads are carved into the pine forest and often follow the rivers that flow down the mountain. With every passing tree and every glance at the water rushing down the river, you can feel the weight of the world start to fall off your shoulders and tumble back to the valley floor.

The tournament is a man’s man tournament. It is held in October when the cold has just started to settle in. There is always a 30% chance of precipitation. The tournament went well and was capped off with an evening barbecue. But it wasn’t the tournament that brought me to an “aha” moment. It was the long ride back home that provided inspiration.

Back in college Damon was not only my roommate but my teammate in whatever sport we were playing. It didn’t matter if it was a field sport – softball, basketball, etc. – or a rehydration sport – anchorman, beer pong, etc. You would be hard pressed to find two more competitive guys. There was no doubt in our minds we would win, every time. We worked well together. We didn’t have to look up to see where each other was on the basketball court, we just knew. His athleticism didn’t die when he left college. He was still dunking at age 38. His passion for basketball drove him to work as a teacher, so he could pursue his love for basketball through coaching. While I enjoyed playing the game, I never really understood his fascination with coaching. To me there was only a family-supporting career in it if you coached for a big college team or for the pros. But then you would likely have to give up a lot of family time to get there.

On our trip back, the two of us began to talk about his coaching choice and my career choice. It wasn’t long into the drive, when I found out that Damon had a similar feeling with my choice as a financial advisor as I did for him being a coach. It was as if we didn’t know each other anymore.

Damon was wrestling with the thought of “How did my beer drinking buddy turn into some guy that wants to work with finances all of his life?” And maybe more to the point, “Has he gone off the deep end and forgotten our roots? Was he now some money grubbing guy?!”

The conversation started simply enough. He mentioned he was moving to a new school to become vice principal and I asked if he would miss coaching. With a sad look in his eyes and one hand on the steering wheel, he turned to me and simply said, “Yeah.” As we drove down the mountain, we began to ask each other deeper questions about our careers, coaching, and what is important to us. About an hour into the drive, it dawned on me that we still were the same two people as in college.

The two-hour ride seemed to take 20 minutes as we talked and realized the depth in each other’s life. For Damon it wasn’t about being a coach for the sake of living out some unfulfilled basketball dreams, it was about passion; passion for a game that he loves and the enjoyment of passing that passion onto others. Watching a young athlete develop is exciting to him.

Damon learned that it wasn’t much different for me. When I’m working with someone, whether a couple or an individual, I follow the same process that he does. First I take an assessment of the client. Not just their financial picture, but also their skill set (career), financial aptitude, etc. If they are going to “win” in the game of life – I mean really win – where they feel like they have run a great race and broken through the finish tape with their hands up – they need to find passion.

I have noticed that the more passions my clients have, the happier they are. Passion in work, friends, family, spouse, etc., all get bundled in to help them get the best out of life. It is just as true in sports. You can have all of the skills you want, but if you don’t have the passion, it will be an uphill battle and likely one that will finish short of what could have been realized.

Finding passion is often tough for people. They have built their life much like a city that didn’t start with any design. They grab a career based on the job they can get, buy a house, start the family, etc. Then, not long into it, they turn around and wonder where they are and how they got there. Lost, confused, tired, out of control (or feeling like they don’t have the control they want), they continue to push themselves to make a life out of what they have in front of them. Like many basketball players that haven’t properly developed their shot, they miss shots they should make. If only they would take a little more time to practice – or plan out their life.

The similarities don’t stop there. Of course many people have passion for things. The next “aha” came when Damon and I both realized that we weren’t just good at what we do – we are respected by our peers as some of the best. Oddly enough, this revelation brought me back to my finance classes and the picture of the simple Bell Curve. Yes, that picture that looks like a kid’s drawing of a little mountain.

For those that aren’t as passionate about math as I am, the bell curve represents a data set. It is the linear distribution of that data set. Let’s put it this way: people that can’t dribble a ball are on the left, the average basketball player is in the middle, and those that are great go to the right of the bell curve. Damon is on the right side of the curve when it comes to playing basketball. He is also on the right side when you look at high school coaches. His teams have done very well and he has be recognized by his peers as a superior coach. If you graphed this it might look like a mountain.

In a similar fashion, I sit on the right side of the curve when it comes to financial advisors. When measured against my peers, my asset growth is higher, retention is higher, and those in my industry seek out my advice. While it is nice to know that your peers admire you, it is MUCH more important to see the growth of my players (my clients). The true “wins” I get are from them. Seeing how many positive changes my clients make in their lives, such as spending more time with their family, changing their career, or even taking time off of their career to find their passion, is what gets me motivated every day to work with my clients. If Damon gets joy out of watching his team work together to win a game, I get similar joy out of watching couples (and individuals) work hard to achieve their goals.

You see Damon and I have similarities: passion and ability. You have to have both of these to succeed at what you want to do.

Do you know what your passions are? Do you know what you are best at? What you are really skilled at doing? If your skill set was developed, would you be on the right side of the curve when your peers evaluate you? Take some time today to think about your passions, your skills and how you can move your life to encompass more of both. Write them down and put simple actionable steps to them. You will feel more in control of your life by doing this. I promise! Who inspires you? Who do you know that is looking for their passion? Send this blog on to them to help them find their passion.

Conquering Your Own Mountains

March 17th, 2011

Life can be like a walk through the mountains. At times we are able to see the beauty of where we are at; other times we seem lost or even scared. There are those times though that you realize why you are here and that you are so glad to be alive.

Recently I had an experience that was like finding a beautiful waterfall. The family and I went out for a walk to the park. No sooner had my older daughter, Megan, grabbed her bike, than my (at the time) 4 year old, Ciara, asked, “Daddy, can I ride my bike?”

Now she didn’t know how to ride her bike yet, but we have this handle on the back that comes up about 18 inches from behind her seat. Imagine the old days of the banana seat with the back seat bracket that connected to the rear hub (back tire) extending up another 18 inches.

As I was looking for a little more exercise than just walking to the park, I agreed to jog along and stabilize the bike as she rode. As she rode I started to take my hand off the bike lightly and let her “feel” the bike a little more. By the time we had gone a half mile she was able to ride the bike about 20 feet without me holding on. By the time we got to the park she had gone from not being able to ride a bike to riding it 20-40 yards without me having to keep her from crashing.
My wife and I sat on the park bench and talked as our kids played tag at the playground with the other kids. I was anxious the whole time to get heading back, because I wanted to see how far Ciara could make it back without my help. When it finally was time to go, she put on her helmet, grabbed her bike and looked for me to grab the back handle. I got her set straight then just took my hands off. Baring a couple near crashes with a few posts that seemed to jump out in front of her, she rode all the way back to our house (a little over a mile) without much help at all. As I jogged next to her, she kept turning to me say, “Daddy, I am riding my bike and you aren’t helping. Daddy I am riding!”

Waterfalls are powerful, and so are moments like that. They refresh and remind us to be glad to be alive. Isn’t this the truth for these “Daddy” (Mommy, Grandma, Grandpa, Uncle, Auntie, etc.) moments?

That night the family and I went down to our local “Tuesday Night” street fair. They have vendors, food, hot rods, and music. I picked up a hot dog for Ciara and a grabbed a chicken sandwich for myself. We sat ourselves down on the curb next to my wife and other daughters to listen to the music. As a preview to one of the songs the singer was about to sing she told the crowd, “you can have all of the great materialistic things, but just remember that you can’t take it with you. You should live for today.”

Likely I am one of the few people that gets this funny feeling up my spine when I hear that. Maybe it is because I am a financial advisor and I listen to people come into my office and tell me how they can’t afford to retire or they aren’t making enough money, etc. It typically isn’t because they don’t have money; it is because they spend it. And statements like this are at the basis of a lot of poor financial decisions. There are plenty of things we can do that are a great way of living, for example, spending time with your kids and watching them conquer challenges in their life will bring you more joy than a new car will ever. Going to visit your grandkids can lift spirits more than a great meal at a fine restaurant.

There is a balance to life. We can’t take any money with us, but we will leave a mark on the world. Be it with our families, friends, or colleagues. What will your mark be? How will you be remembered? Are you willing to live today like there won’t be a tomorrow, BUT save like it will? Can you, today, plant your feet firmly in the days work, but cast your eyes on tomorrow’s mountains?

Building your life in this fashion will give you more joy than you can imagine. For when you walk into your next valley you will be more prepared for what is there. Are you balancing today’s living, while being aware of tomorrow’s reality? Are you spending money like you will die, or are you living with purpose working on those relationships that will leave a positive mark on the world? Are you challenging yourself to conquer your own mountains as Ciara conquered riding her bike? Today think like a child and realize that if you keep your mind set on something long enough, you too can ride… be prepared to retire, be prepared for college expenses, spend quality time with you family or change your job.

Mike Lynch, Principal
Lynch Financial Advisors
916.772.3103
mike.lynch@lynchfinancialadvisors.com
www.lynchfinancialadvisors.com