Is It Time to Change Your Money Mindset?

Are you a dreamer, procrastinator, perfectionist or a wanderer?

What is your financial mindset?

The 2013 Household Financial Planning Survey and Index, recently released by the Certified Financial Planner Board of Standards and the Consumer Federation of America, divides American consumers into four categories when it comes to their financial behavior.

"90% of Wanderers have no plan in place for specific savings goals."
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Four Categories of Financial Behavior

The four categories are defined by specific financial behaviors: comprehensive financial planning, basic financial planning and credit card debt management. The four categories are:

1. Basic Planners—The Dreamers: 38% of Americans
2. Limited Planners—The Procrastinators: 33% of Americans
3. Comprehensive Planners—The Perfectionists: 19% of Americans
4. Non-Planners—The Wanderers: 10% of Americans

The Dreamers are the largest category. They have some clear goals, but they just haven't worked out all the details. Two-thirds have a household budget but less than half of them write down their budget or store it electronically.

The Procrastinators are the second largest category. They put forth the bare minimum of effort and might get to the rest of planning later. While 31% of them plan for retirement, only 7% save for emergencies. Just 7% save for other goals.

The Perfectionists know the exact route to their financial goals. Two-thirds work with a CERTIFIED FINANCIAL PLANNER™ professional or Registered Investment Advisor. More than half have a household income greater than $100,000.

The Wanderers basically float from bill to bill without any strategic approach to money management. The report reveals that 90% of people in this group have no plan in place for specific savings goals. About 40% have significant credit card debt, but half of them have no plan to pay down that debt.

Planners Save More

Most important, the report concluded that planners exhibit more confidence in financial decision-making and save more money. Their confidence comes from understanding their financial situation. Regardless of income, planners achieved better financial outcomes than non-planners.

What is your financial mindset? While there may be little hope if you are a Wanderer, if you are a Procrastinator or Dreamer, now would be a great time to step up to the next level.

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP^®, CERTIFIED FINANCIAL PLANNER™ and federally registered CFP (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.

Passive vs. Active Investing: The Battle Rages On

In the active vs. passive investing fight, we’re firmly
on the side of passive investors.

Active versus passive management is a long-raging battle among investment managers. On one side are the active managers, who believe that through careful research and individual stock picking they can beat a stock market index portfolio over time. On the other side are the passive advocates who argue that an investor is best served by buying a low-cost, broadly diversified portfolio that tracks a market index. In case we have to tell you, Berno Financial Management has been in the passive camp for years.

"It may sound un-American not to try to be the winner, but when investing, capitalism favors a passive approach."
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Gauging a Fund's Performance

Standard & Poor's, publishers of the popular Standard & Poor's 500 Index of U.S. large company stocks, conducts extensive research on fund versus index management performance. S&P recently released its June 30, 2013, report, which is summarized below:

Percentage of U.S. Equity Funds Outperformed by Benchmarks 06/30/13

Fund Category	Comparison Index	One Year %	Three Year %	Five Year %
All Large-Cap Funds	S&P 500	59.58%	85.95%	79.46%
All Mid-Cap Funds	S&P MidCap 400	68.88%	85.78%	81.98%
All Small-Cap Funds	S&P SmallCap 600	64.27%	80.19%	77.88%
All Multi-Cap Funds	S&P Composite 1500	63.41%	84.31%	82.57%

Over five years, roughly 80% of actively managed funds underperform their benchmark. An individual investor has a much higher probability of earning the market return in a passively managed index. They have a great risk (about 80%) of under-performing in an actively managed fund. Why take that risk? Add to this debate that past performance is not a guarantee of future returns (one of the top 20% of funds today has a low probability of staying in the top 20% over the next five years), and you have a very sound argument for passive management.

It's a free country, but don't argue with the facts. It may sound un-American not to try to be the winner, but when investing, capitalism favors a passive approach.