Coffee to Car Payments

Financial Authors: Make Sure You're Reading What's Relevant to You.

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A few days ago, Drew McLellan shared in this post how social media has changed his world.  I thought I'd take a minute here to share how it's changed mine.  What I find most interesting is how, when I syndicate my blog content onto Twitter and Facebook, the conversations go in seemingly divergent directions and then end up on a topic that I'd been wanting to get to but didn't know how.

A recent Facebook conversation started somewhere else and came around to the topic of financial authors and their target audience.  For example, high income households already living comfortably within their means probably should ignore Suze Orman and Dave Ramsey lest they end up squandering their youth. 

One the other hand, if you're waiting on your income tax refund to have the money to take a class on real estate investing based on the writings of Robert Kiyosaki, you may want to consider waiting until you've got a little more of a cushion.  Don't run 'til you've learned to walk.

The one exception I will make is Spend 'Til the End: Raising Your Living Standard in Today's Economy and When You Retire by Laurence J. Kotlikoff and Scott Burns.  This book is a must read for everyone.  It is an economics-based method of financial planning that is based on finding and maintaining you highest possible standard of living. 

Using their proprietary software, you will be able to determine if your are over-saving or under-saving, over-insured or under-insured, and how much or how little impact life and financial decisions will have on your standard of living.

There are only a handful of planners using this software.  You can find a list by clicking here.  There is also a stripped-down free version that you can try here to get a feel for the process.

Online Calculators: Are They Useful Tools or Financial Malpractice?

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The truth is that for the most part, they are designed to sell you something under the guise of giving you peace of mind.  The truth is that you should have peace of mind if you followed the recommendations because you are most likely over-saving or over-insured.  Think about it for a minute.  Life insurance needs calculators are created by insurance companies and retirement savings calculators are created by companies who offer some form of investment or savings plan.

Life insurance: What is it that you are actually trying to protect?  It is your family's living standard in the event of your premature death.  If you over-insure, I guess it's technically not a bad thing for your survivors but, what could you have enjoyed while you were alive with the money you could have saved?

Retirement: The problem with over-saving is that you squander your youth pinching pennies and keeping your nose to the grindstone and then after you retire, you've got more money than you know what to do with and you've got 65 years of penny-pinching habits that you can't let go.

The bigger problem is what these calculators do for those who can't afford to save or insure at that level is that they simply do nothing to plan for the future.   The cost is prohibitive, they feel helpless, so they opt to do nothing when in reality, their living standard could have been protected possibly at a fraction of what the little 4 or 5 question calculator suggested for them.  (I'll save that for another post but, would you follow the advice of a professional who only asked 4 or 5 questions?)

Online retirement-planning tools can be useful, but only if you're careful