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December 02, 2011
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Edwin Stephens Long-Term Investing & Financial Planning for LEOs
with Edwin Stephens

2011 in Review: Rethinking prosperity and improving personal budgets

As we approach a new year in 2012, it is important that a key to ones overall happiness is finding the correct balance in life

Question: Is it wise to live within one’s financial budget rather than over extend your life and live on credit? Answer: Yes, of course it is. As the year 2011 comes to a close, and we begin looking ahead to 2012, many of us in the role of financial advisor are finding that law enforcers — who are the core group of public safety professionals with whom I work — are among the many Americans who are reevaluating the role that money plays in their personal lives, and what it takes to live a happy and comfortable life.

During the Thanksgiving Holiday, Susan Johnston, a financial writer for U.S. News and World Report noted that Americans are finding reasons to be thankful at this time of year, despite lingering unemployment and a still sluggish economy.

Americans are becoming more centered in their personal values and as a result, for some, despite unexpected layoffs, and financial setbacks, they are regaining a sense of happiness by spending more time with their families. The Great Recession of 2007 and the turbulent and unpredictable United States economy has served as a reality check, or a wake-up call for all consumers to rethink their idea of wealth and prosperity.

Needs Versus Wants
Johnston noted that Americans are opting for more simple lifestyles. Ethan Willis, co-author of Prosper: Create the Life You Really Want stated that “people are focusing more on life satisfaction than satisfaction by consumption.” Willis further noted that one of the big shifts is that people are questioning that more money does not necessarily lead to greater happiness, and so consumers are looking for ways in which to realign with family and the values that matter to them.

Shelly Cone of Santa Monica, California and her husband were serial entrepreneurs who once owned a successful real estate business. However, when the housing market bust, it took the Cones’ business down with it. Fortunately, Shelly and her husband have made peace with the loss of their real estate business. Cone stated, “We’ve learned that money can come and go, but life’s experiences remain with you.” Shelly Cone has since started a public-relations business and she now chooses the clients that she wants to work with, rather than having to work for them.

Cone noted, “The focus isn’t necessarily about pursuing wealth, it’s about pursuing it in a way that gives me a wealth of experience.” The public-relations executive added that one of her clients is an owner of a luxury bed and breakfast inn. The client invited Cone and her husband for a weekend stay at the mini-resort so she would have firsthand experience for writing about how to promote the bed and breakfast inn. Americans are finding new and creative ways in which to achieve more currency out of life.

Smart Ways to Improve your Budget
Late last month, Kimberly Palmer, a financial writer for U.S. News and World Report, wrote an article entitled, “10 Smart Ways to Improve Your Budget.” The financial writer noted the following:

Decide on your priorities. Most people’s budget revolve around three costs: food, housing, and transportation. After you budget for those expenses, which probably account for between half and two-thirds of your take-home pay, and factor in any debt payments, decide how to prioritize savings, household expenses, professional expenses, and entertainment.

Harness the power of a Web tool. On Mint.com, one can upload his account information and get immediate insight into where your money is going. Then, you can use the web information to start saving more money.

Time yourself. Once you decide you need to buy a specific item—a new computer, or a back pack—give yourself a specific time limit to make the purchase, such as a half-hour. Since time is money, you want to focus your attention on the activities that will provide you with the best productive use of your time.

Consider the year, not just the month. Budgeting for the year is better largely because we feel less confident in our monthly estimates, so add more of a buffer for unexpected expenses.

Set money aside for leisure. Research shows that people get the most pleasure out of spending on leisure activities, such as vacations, movie theater tickets, and hobbies, partly because these things usually involve spending time with other people. Don’t forget to reserve some cash for such happiness-inducing pleasures.

Consider your high and low points. A quick review of where you went wrong — and right — over the past few months will help pinpoint your weaknesses. Don’t just beat yourself up. Consider the good decisions you made, too, whether it was comparing prices before buying a new television or cooking more homemade meals.

Take the spending diary challenge. Write down every single thing you spend money on for two weeks, along with notes on why and how it made you feel. Instead of lunches out and cab rides, you might be wasting money on coffee and happy hours. After the two weeks is up, review the list and see where you can adjust your spending priorities.

Avoid temptation. If you know that you do have a weakness to make purchases at stores like
Macy’s, Neiman-Marcus, Dillard’s, Nordstrom’s, Best Buy or other retailers, do not visit them
if you do not have a budget to make purchases.

Reward yourself. Denying ourselves every material pleasure turns money into a sad subject, instead of an empowering one. After all, you work hard for your money, so it should bring you some pleasure. Make smart but measured purchases.

Share your budgeting goals with others: Whether you want to stop wasting money on unnecessary shopping trips or pay off your credit card debt, share those goals with friends, relatives and even strangers.

Finding Balance in Life
As we approach a new year in 2012, it is important that a key to ones overall happiness is finding the correct balance in life. Americans are rethinking their values and finding happiness in simple pleasures. It is important to have money to live, but people are choosing to live a life that is not totally controlled by money.


About the author

Edwin K. Stephens is the Managing General Partner of The Stephens Group, an investment and asset management firm he founded in January 1993. The Stephens Group helps individuals, pension funds, public agencies, and private corporations with their financial planning needs. The firm’s objective is to provide good sound advice that is in keeping with its philosophy of maximizing profits through conservative fiscal management. Stephens is a licensed Series 6 Registered Representative. He is an Insurance Agent who is licensed in both California and Arizona. Stephens, who has previously authored articles on financial management and investment strategies for the San Francisco Police Officers Association Journal, counts among his clients many law enforcers and other public safety professionals in the San Francisco Bay. Stephens conducts financial planning seminars throughout the San Francisco Bay Area and Arizona. Stephens received a degree in English Literature from San Francisco State University in 1983. Securities transactions though McClurg Capital. Please go to www.CommodoreEds.com.

Contact Edwin Stephens.





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