Episode 2: Hub

Episode 2: Hub

In this episode you will learn that what is most important to you is the Hub of your Financial Wheel. I’ll discuss the characteristic of a strong financial hub and help you get started creating your own, unique hub. You will find out why it is important to have these conversations with your financial advisor.

TRANSCRIPT:

Hi. I'm Thom, Allison. Welcome to the Financial Wheel podcast and the last podcast. I introduced the idea of the financial wheel that there are three types of conversations that you want to have. You want to have hub conversations, spoke conversations, and tire conversations. You can learn more about this by going to our Web site, financialwheel.net, where you can hear the first podcast. You can see a transcript. What you can see more information about what we talked about. But in that podcast, we focused on three types of conversations, hub conversations, spoke conversations, and tire conversations. Today, what I want to do is to go into hub conversations and explain what that is and why it's important to have these types of conversations in your financial hub is really the central idea that all your finances are organized by.

It informs all of your financial decisions and it holds your finances together. So you've got to think about this idea of a central organizing idea and it's really fairly simple. Let me think about organizing the books on your bookshelf. There's really a number of ways that you could do it. You can organize them alphabetical by author. You can organize them alphabetical by title. You can organize them by subject, sort of the Dewey decimal system. You can organize them by color, you can organize them by size. It really doesn't matter. But you just have to have one central idea and that becomes your central organizing idea. What's important is what do you care about? So if the books on your bookshelf are there so that you can go to your favorite author when you're ready, then you're probably going to want to have it organized by author. So when you get in the mood to read a Victor Hugo novel, you can go to the H's and you pull out Victor Hugo. If you're more interested in going to a specific subject than you're going to want to organize these according to subjects. So when you want to learn more about personal finances, you go to the piece for personal finances in there. Again, it doesn't really matter as long as that central organizing idea is reflective of what is important to you with your finances. What's important to you is the life that you want to create for yourself and for your family. It's your vision. So that becomes the central organizing idea for your finances. That becomes the hub of your finances. So what are the characteristics of a strong hub? First of all, a strong hub is going to be able to support all the spokes of your finances.

Again, the spokes are those things that you tend to think about when you think about personal finances, your cash flow management, debt management, savings plans, etc. What you want to do is have some central organizing idea for that.

That's really strong and that's a strong, clear vision. What is it that you want your life to look like? So in your hub conversations, you should be spending a lot of time going into detail, not just something that is superficial. When I first started in this business back in the 80s, we used to have fairly superficial hub conversations. Somebody would come in and say, for example, well, I want to retire when I'm age 60 or 62 or 65, whatever it was. And he always kind of felt like that number just kind of got picked out of thin air somewhere. But then one day it occurred to me to ask somebody, are you going to retire from something or are you going to retire to something? And it was that question of retiring to something that made me realize there needs to be more depth to this vision. What is it that you want to do when you retire? And in the meantime, what do you want to do between now and then? Most people have a lot of life that they want to live between now and the time they retire. So you want to get a real clear, solid, in depth vision to have a solid hub to support all the spokes of your finances. Second, it has to be strong enough to absorb the shocks that come to your financial picture. Now, shocks can be positive or they can be negative. Typically, we think of the negative ones. You lose your income because you lost your job or you're disabled or you have some sort of an unexpected expense.

In fact, unexpected expenses are the number one problem that people have with their finances. More specifically, unexpected medical expenses are the biggest reason why people end up filing bankruptcy. For that reason, the Financial Planning Association has created a pro bono service specifically aimed at helping families that are facing a. Council crisis as a result of a medical expense. So those are the negative shocks that you want to be able to be prepared for, but you can also have positive shocks. You can have a baby that's born into the family, planned or unplanned. That child is going to be a real positive, but a financial shock. You can have an unexpected inheritance that shows up some additional money that comes in. It turns out the company that you're working for, that you've got some stock options suddenly does really well. And there's tremendous value in those stock options. Interestingly enough, these positive shocks to people's finances can sometimes be as devastating to their welfare as a negative shock can be. You need to have a strong enough hub to absorb both the positive and the negative shocks. Third, a strong hub helps you cut out expenses that are not important to you. I was thinking about this when I was thinking about Herb Keller, who's the president of Southwest Airlines. He was talking to a reporter one time and he said, you know, it's really simple to manage Southwest Airlines.

All you have to do is remember that Southwest is the low cost airline. So now and this is the example he gave. He said so soon Sally from marketing comes in and says, our market research shows us that our customers would like to have a chicken Caesar salad served on the flight from Houston to Los Angeles. So what you do is you ask Sally, who is serving a chicken Caesar salad on the flight from Houston to Los Angeles. Help us become the low cost airline. And if the answer is no, you don't serve a salad. You do the exact same thing with your finances. What's really important to you? What's at the core of the life you want to envision? So let me give you a possible example. You walk into Costco and you see this big, crystal clear 60 inch TV on sale and you go, wow, I would love to have that. But then you think back about, OK, how do we want to interact as a family? What's core to us? Well, in the evenings we like to sit down with our kids and help them with their homework and with their homework stuff. We play games with the kids. We don't tend to watch television on weekends. We go out with our kids and we go hiking or we go swimming or we engage in outdoor activities. We spent very little time watching TV. Does it make sense to spend the money on a big, beautiful 60 inch TV if that's not part of the lifestyle for you and your family? Better use of that money would be to focus on the activities that you enjoy doing with your family.

So you can see we're having a solid vision. Where you want to go can help you eliminate expenses that really aren't important to you. The key component of a strong hub is that it is built around the nine major areas of your life. Those nine major areas are your family, your health, your leisure, learning, inner growth, community, home, work and finances. I realize that's a long list, so you may want to go to our Web site. financialwheel.net to review that list again. But here's the thing. When you look at each one of those, you want to think about what are the key components of each one of those? What are the elements of each one of those areas that are important to me? Think about it in terms of a wheel kind of by itself. And if you are going to kind of look at the spoke on that wheel, where would you put a dot as to how satisfied you are? In each one of those areas, how satisfied are you with your family, with your health, with your leisure, with your learning, etc.? And if you're not satisfied with it or if it's not 100 percent, say, a perfect 10, what would be the elements that would help make it a perfect 10? So let's think about health for a moment.

A lot of people will say kind of general things like, well, I want a be healthier, I want to eat healthier. I want to get some exercise. Okay, that's good generalities. But you want to get more specific. For example, you might sit down and say a perfect 10 would mean that I go to the gym four days a week for at least an hour. A perfect 10 means that I go out for a five mile hike at least twice a week. A perfect 10 might mean that I eat a fish meal twice a week. A perfect 10 might mean that I avoid red meat except for once a month. A perfect 10 might mean that I only drink wine on weekends. I'm making those up. Those might be important to you. They may not be important to you, but the idea is that you want to be fairly specific about that. Think about learning, for example. So people will sit down and say, yeah, I want to learn more about whatever, I want to learn a new language or something like that. But you really want to be more specific about this. If that language is what it is, then you want to sit down and say, I'm going to take a class at the local community college on that language. It might be I'm going to set aside one hour a day to practice and memorize what I need to in order to learn that language.

You need to be very specific about that. So at this point, you should be getting the idea. There are these nine major areas of your life and you want to just write down what are specific elements of it. Don't write down what it's going to look like at this point. Just write down what are the specific elements of each one of these. When you get that done for all nine of them, then you're going to want to start to look at how they interact, how they intersect. Are you actually doing these things? And frankly, you have to realize that there's some of these that are going to be more important to you today than they're going to be the next day. So you may not want to focus on doing all nine of these things at the same time. Take the ones that are important to you, build that thing out. That's part of what a strong hub is all about. Now, I realize, too, that you might be on the machine working out right now. We're stuck in traffic somewhere and cursing the person who is driving around you. But just focus on this for a moment instead of them. It'll make you feel better and you can go to financialwheel.net to get more information about this, to see what all nine of these are. You're not going to remember them? I hardly remember them myself.

So that's OK. Just go to financialwheel.net and you can get more information about them, how they work together as well. So kind of pulling this whole idea of a hub together. As you can imagine, a hub has got to be critical. It's got to be strong because it's bearing all the weight of all of your finances. So in order to make it strong, it's got to be based on a clear vision that will support all the spokes in your finances. It has to be strong enough to absorb the shocks, the positive shocks and the negative shocks that come to your finances. It has to be able to inform your buying decisions in a way that allows you to cut out expenses that might seem like they're fun. They're kind of shiny bubbles that are out there that are great for the moment, but they're going to lose their interest because they don't fit in with your vision and you can avoid making those types of spending mistakes and instead focused your money over to the areas that are important to you. And the hub should be based on the nine major areas of your life, your family, your health, your leisure, your learning, your inner growth, your community, your home, your work and your finances. Again, to learn more about these, go to financialwheel.net. In the meantime, keep your conversations positive and constructive. And thanks for listening.

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Financial Satisfaction Survey

 


Directions: The statements below will help you to think about and assess how satisfied you are with many aspects of your financial life. Indicate your level of satisfaction for each statement with stars.
(1 star = "Not Satisfied", 3 stars = "Moderately Satisfied", 5 stars = "Very Satisfied")

I am satisfied with...

1. ...with my ability to meet my financial obligations

2. ...with the income my current job or career provides me.

3. ...with my spending habits.

4. ...with the level of debt I carry.

5. ...with the “extras” that I am able to buy for myself and/or loved ones.

6. ...with the level and quality of insurance protection I currently have.

7. ...with the amount of money that I save and invest on a regular basis.

8. ...with my current investment choices.

9. ...that I am on track to build a sufficient retirement nest egg.

10. ...with the level of employee benefits I receive.

11. ...with my style of personal bookkeeping and financial record management.

12. ...with my ability to provide financial help to family members.

13. ...with my estate plan.

14. ...with my level of charitable giving.

15. ...with the level of financial education I have attained.

16. ...with how I respond emotionally to my personal finance issues.

17. ...with my ability to communicate about my financial matters.

18. ...with the feelings I have about my money life.

19. ...that financial issues do not cause stress or strain in the relationships that are important to me.

20. ...with the working relationships I have with my financial service providers (i.e., insurance agent, banker, broker, financial planner, accountant).


© 2002 - 2018 Money Quotient, Inc. All Rights Reserved. This document is available via licensing arrangements with Money Quotient and is protected by federal copyright law. No unauthorized copying, adaptation, distribution, or display is permitted - moneyquotient.org.

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Life Transition Survey

 


Directions: In each section, select the transitions that you are currently experiencing and those you are likely to experience in the future. In addition, check transitions in the short to mid-term and long-term columns that you either hope to experience or anticipate with concern.

Work Life Transitions

1. Change in career path:

2. New Job:

3. Promotion

4. Job loss

5. Job restructure

6. Education / retraining

7. Sell or close business

8. Transfer family business

9. Gain a business partner:

10. Lose a business partner:

11. Downshift / simplify work life

12. Sabbatical / leave of absence

13. Start or purchase a business

14. Retire:

15. Phase into retirement

16. Other


Financial Life Transitions

1. Purchase a home:

2. Sell a home:

3. Relocate:

4. Purchase a vacation home / timeshare:

5. Re-evaluate investment philosophy:

6. Experience investment gain:

7. Experience investment loss:

8. Debt concerns:

9. Consider investment opportunity:

10. Receive inheritance or financial windfall:

11. Sell assets:

12. Other:


Family Life Transitions

1. Change in marital status (marriage):

2. Change in marital status (divorce):

3. Change in marital status (widowhood):

4. Expecting or adopting a child:

5. Hire child care:

6. Child entering adolescence:

7. Child with special needs:

8. Child w/pre-college expenses:

9. Child going to college:

10. Child getting married:

11. Empty nest:

12. Family special event (Bat/Bar Mitzvah, anniversary party, trip):

13. Helping and/or gifting grandchildren

14. Concern about aging parent

15. Concern about health of spouse/partner or child:


Legacy Life Transitions

1. Increase charitable giving:

2. Give special financial gifts to children/grandchildren:

3. Give parental pension (monthly stipend):


© 2002 - 2018 Money Quotient, Inc. All Rights Reserved. This document is available via licensing arrangements with Money Quotient and is protected by federal copyright law. No unauthorized copying, adaptation, distribution, or display is permitted - moneyquotient.org.

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