I WasThinking

As we move more and more into a cashless society, it dawned on me how much more effort we need to spend to make sure our transactions are correct and safe. There are many benefits to being cashless; I hate carrying change around in my pocket. I also don’t worry as much about losing money or leaving my wallet in a cab. Being cashless forces me to check my banking and credit cards balances more often too. One upside to checking my balances is that it is easier to monitor and budget my spending habits. Most bank and credit cards have tools to help you track your spending.

Clients ask all the time, “How can I teach my children better spending habits?” For starters they should be logging into the banking app and making sure all of their debits and credits are correct. Money is moving back and forth between Venmo and debit cards so quickly, they better be checking their balances. Let them know that if something isn’t right, they should contact their bank immediately. Same holds true for credit cards.

Recently I read two great articles that I want to share. You may have read about France’s new law allowing workers to disconnect from the internet when not working. Say what you want about the French, but this makes a lot of sense in a world that doesn’t let us take a deep breath and pause.

http://nyti.ms/2j2pBKx

Charles F. Feeney is a very wealthy man, and you probably have never heard of him. He has spent years giving away most of his money (billions) anonymously and without fanfare.

http://nyti.ms/2ikQrK0

If you haven’t seen the documentary Supermensch: The Legend of Shep Gordon on Netflix, watch it immediately. Shep’s story, of a life committed to paying it forward, is truly legendary.

Taking Care of Our Elders

Recently at my brokers/dealers national conference, I attended a seminar on protecting seniors from financial fraud. The elderly are victims of thousands of schemes each year, with billions of dollars being stolen from them.

The seminar started off with a gut-wrenching story from our general counsel, whose parents were scammed out of $4,500 from a late-night caller pretending to be a bond bailsman telling them that their grandson had been in an accident and to release him from custody they needed to wire money immediately. The caller even went on to tell this elderly couple not to call the boy’s parents because he didn’t want them to know. As crazy as this may sound, schemes like this, which prey on the elderly, are taking place every day. 

As we age or watch our parents and grandparents age, the threat of financial exploitation grows exponentially; at the same time, aging increases the possibility of cognitive decline.

AARP published a very good piece that addresses some red flags to watch out for. If you, a friend, or a trusted caregiver recognizes these signs, please proceed with heightened awareness and take action or seek help.

Social Red Flags

• Your loved one or friend informs you they have a new, particularly close friend or “sweetheart” and /or they move away from existing relationships toward new associates.
• The person is being isolated by family or a caregiver as a result of life changes. 
• He or she appears or sounds like they are being “coached” by another individual.
• The person has an overly trusting personality or a temperament susceptible to manipulation.

Physical Red Flags

• Your friend or loved one indicates that items are missing from their home.
• He or she demonstrates a lack of responsiveness or inability to follow through with a decision.
• He or she repeatedly calls seeking the same information.
• He or she requests frequent password/username resets.
• He or she has a disheveled appearance or poor hygiene.

Behavioral Red Flags

1. Your friend or loved one has become fearful, distrustful, and withdrawn.
2. He or she has memory lapses and confusion over accounts.
3. The person exhibits changes in their normal routine.
4. He or she has mood swings.

Proceed with caution, there may be abuse.

• Does this person have a family member or others who are financially dependent on him or her who are taking an excessive interest in their finances?
• Is the person reluctant to discuss personal financial matters that were previously a matter of standard practice?
• Has your friend or loved one been denied access to their account statements or funds by someone?
• Has he or she had an unexpected address change on their accounts?
• Are there atypical or unexplained withdrawals, wire transfers, debit transactions, or other changes in this person’s financial habits?
• Has your friend or loved one abruptly changed their will, trust, power of attorney, or beneficiaries of their accounts?

Having an open and fluid dialogue with your parents and/or grandparents about their finances will help you stay informed and hopefully pick up on things out of the norm. Keep a copy of their will, trusts, and power of attorney. Discuss with them scams that are going on, whether it is the lottery or a call from the IRS. The IRS does not call you. The best suggestion is for them to hang up on these calls and call you immediately.

Summer Brew

Well, Memorial Day has come and gone, meaning that summer is officially here. The U.S. stock market has inched up very modestly year to date, while interest rates on U.S. bonds have crept modestly lower. After January’s stock market sell-off, global markets have stabilized. And the U.S. Federal Reserve has signaled it will probably raise rates later this year. What’s an investor to do? Yawn, head to the beach, the mountains, the golf course, and enjoy the best of summer and its libations.

While warmer weather usually cries out for rosé wine, I have found myself gravitating toward fruit-infused beer. Yes, fruit-infused beer! Don’t get me wrong—I have been enjoying a nice dry rosé from California, Vin Gris de Cigare from Bonny Doon Vineyard, but to really quench your thirst, try one of these beers.

Many moons ago, Blue Moon, the not-so-crafty craft beer, owned by Coors Brewing, introduced us to Belgian-style wheat beer. Wheat beers can be brewed with herbs, spices, and fruit and tend to be lighter in alcohol content. Blue Moon gained popularity because it was served on tap with a slice of orange. The beer is brewed with Valencia oranges, and the orange slice on top really opens up the flavor and makes it easy to drink.

This past weekend I did a lot of yard work, the type of backbreaking labor where you build up quite a thirst. A heavy beer like an IPA or ale won’t suffice when you are looking to put out the fire in your throat. You want something that is cold, bubbly, alcoholic, and a little bit fruity. My favorite of all the fruit beers is Shiner Ruby Redbird. Brewed by Shiner Brewery in Texas, this beer combines the tartness of ruby red grapefruit and a kick of ginger, perfect for a hot day or hot night sitting around the fire pit. This beer is easy to quaff, and the alcoholic content is a low 4%. I also really enjoyed IPA Citradelic from New Belgium Brewery in Colorado. This IPA is brewed with tangerine peels that cut down on the bitterness of the hops. While you can taste the tangerine, it is not sweet or overpowering.

Two other fruit beers that I have also enjoyed are Grapefruit Sculpin from Ballast Point Brewing in California and Magic Hat #9 from Magic Hat Brewing in Vermont. While hard (alcoholic) cider is not beer, I have been enjoying them as well recently. Prior to my life as an investment advisor, I imported wine and hard cider from France. I must have been ahead of my time because 17 years ago no one was interested in alcoholic cider; today it is one of the fastest-growing beverages in the country. My favorite, Nine Pin Cider, comes from Albany, NY. All of the apples are sourced from the Albany region and Hudson Valley. Nine Pin Cider Works’s signature cider, also available in cans, is well balanced between sweet and tart while still being dry. Cider is the perfect beverage with smoked ribs or grilled sausage. If you come across any other fruit beers or hard ciders you enjoy this summer, please pass along. I am always up to try something new!

Enjoy the summer, relax, and have some fun. With the presidential elections on the horizon this fall, it looks like we could be in for nasty weather!

Lacing Them Up Again

When I first started writing a blog several years ago, fellow bloggers warned me about burnout. As someone who has the attention span of a hummingbird, I am guilty of being susceptible to burnout. I felt repetitive in my message, and so blogging was moved to the back burner.

Well, I’m back and giving it the old college try once again. The fans have asked for more, so I am lacing up the Chuck Taylors and making my way back to the court à la Willis Reed.

My financial message has been clear from the get-go: keep it simple, ignore what Wall Street and the financial talking heads are saying, keep your costs down, diversify, save as much as you can, and live your life. That message ain’t changing!

I recently went to see the new George Clooney movie Money Monster and thought it was pretty good. Is Clooney ever not good? The movie was a little bit dated, post financial crisis, but still relevant. It's about an angry investor who shows up on the set of a financial news show and takes it over. I am still amazed when I go into a bar or restaurant and they have CNBC on in the back ground. I can’t remember the last time I heard someone say, “Did you hear what stock Cramer was talking about last night?” In that respect the world of investing has changed.

When I think back to my days at Smith Barney and Bear Stearns, it was a different era. Thousand-dollar suits, suspenders, Gucci loafers, and slicked-back hair. The message of an advisor wasn’t important. What was important was: can you sell, and what stock are you pitching today? At the Smith Barney training program we didn’t discuss retirement planning, social security, and tax strategies. It was, “Pitch me a stock, and convince me to buy Lucent in 60 seconds.” What a disservice to all of us.

There are still many dishonest salespeople out there who disguise themselves as advisors, but for the most part this industry has changed for the better. It is a rare occurrence when a client calls up to buy an individual stock. Technology has made investing better and easier. We can build diversified portfolios using ETF’s and index funds and rebalance with one click on the computer.

My concern after seeing Money Monster was that the general public would be concerned that the stock market was still rigged or fixed. It is, but for those who don’t trade often or pay no attention to the Cramers of the world, it doesn’t matter. The market gives you what the market gives, and as long as you still have faith in capitalism and free markets, you can safely assume that companies will be doing all they can to grow their earnings and move the price of their stock upward.

Hard to believe that Memorial Day is upon us. If you live here in the Northeast, it still feels like winter. Like the stock market, the weather can be unpredictable, but I sure hope it starts to warm up quickly!

On Being A Better Client

The relationship between investment advisor and client has changed tremendously since I rejoined the business in 1999. Back in the day, we were called “stockbrokers” or “financial consultants.” Today it’s “wealth manager” or “wealth advisor.” While sometimes I have a problem with the term wealth manager—it sounds so highbrow—this is in fact the direction the business has moved. Gone are the days of recommending stocks and bonds. The bigger picture today is about planning and advice, truly understanding your clients’ goals, dreams, and fears about money. Conversations revolve around questions like “How much will I be able to draw down on each year when I retire?” and “How much do I need to save for college?” Clients want to know what kind of insurance they need instead of whether it’s better to own stock in Coke versus Pepsi.

A few weeks ago I wanted to review my will—I couldn’t remember whom I had appointed as executor. I also couldn’t remember where I had filed a copy! After tearing about my file cabinet, I remembered that I had downloaded a copy of our will onto the online vault with Commonwealth, where I keep my investment accounts. After a few clicks, I was able to read a digital copy and have my question answered.

This got me thinking . . . what if all of my clients did this? What if I urged them to take advantage of the tools that are available when working with an advisor? How can you truly work with a wealth advisor if you don’t have your whole financial picture? Would you go to the doctor for a checkup and not tell the doctor that your chest hurts when you breathe or your hip is constantly sore?

If I were a client of a wealth advisor, these are the things I would want to know and do.

1.       Store all important documents—wills, trust, insurance policies—in the company’s electronic vault. Then, when I need them, I know where they are and can read them easily. (Make sure you understand the company’s data security policy.)

2.       Make sure my advisor knows about my life insurance policies—the face value, carrier, and policy number.

3.       Store a copy of my power of attorney and health care proxy. (If you don’t have them, get them.)

4.       Share my life plan or goals. What am I saving and investing for—to retire early, arrange to leave money to charity, because I am concerned about how my kids will live?

5.       How much am I paying for services, and how am I paying? In some cases advisory fees are tax-deductible.

6.       Run a retirement income projection to see how much money I can live on after I stop working.

7.       Embrace technology by signing up for electronic delivery for all statements, confirmations, tax documents, and prospectuses. Aggregate all outside accounts, such as my 401(k), so I can see my financial picture in one place.

8.       Introduce my older children to my advisor. They can learn about savings and setting up retirement accounts and discuss how much to defer into their 401(k) at work. (If they have children, consult with your advisor about a 529 plan.)

Today’s advisor is more than an investment manager. It’s worth taking advantage of both the technology and, more important, the human touch in your relationship.

Making Lemonade from Lemons

January has not been very kind to global stock market investors. As of January 20, 2016, the S&P 500 is off nearly 10% for the year. By the same token, many had thought that U.S. bond yields would rise, but the yield on 10-year U.S. Treasury Bonds is lower than at the beginning of the year, less than 2%! Not a pretty picture. Which leads us to the question, what should I do?

Volatile markets lead us to look in the mirror and examine our asset allocation, our investments, and our tolerance for short-term pain. We can choose to do nothing, which may be the best thing to do, or take advantage of this sell-off and do something.

A few thoughts about what you can do:

• 1.       Review your asset allocation plan. Are you comfortable with your stock, bond, and cash allocation? How do you know what is the right asset allocation for you? Legendary investor and founder of Vanguard, John Bogle, says you should allocate the percentage of your portfolio to bonds that matches your age. For example, if you are 50, you should have 50% of your portfolio in bonds. With interest rates as low as they are and many Americans living much longer these days, I don’t think that is the best answer. Your money will have to last longer, and historically, stocks over time offer the best returns for growth, however they also come with risk
• 2.       If your allocation is not right or doesn’t fit your appetite for risk, REBALANCE. If your bond allocation has grown too large, consider selling some and reinvesting the proceeds in stocks. We have had a nice bounce from the stock market lows of 2008–9. Maybe consider selling some stocks and deploying that money in cash or bonds?
• 3.       With the stock market being lower, make your IRA contribution sooner. Instead of waiting until April or later in the year, invest your contribution now.
• 4.       If you have cash sitting on the sidelines, consider investing some now and bringing down the costs on some of your investments. The market rewards those with patience and a long-term perspective.
• 5.       Sell some of your losers and take the tax loss now versus waiting until later in the year. Capital losses can come in handy to offset capital gains.
• 6.       My biggest and best suggestion is to tune out the noise. Newspapers and television channels have to sell advertising. The best way to keep you glued to the TV is to scare you. The stock market doesn’t go up every year—it’s not a given. Over time it goes up more than it goes down, and those who ride out volatility are paid for that.

It is easy to panic and make rash, impulsive decisions. Better to empower yourself: consider the suggestions here and remember the wise words of Aristotle: “Patience is bitter, but its fruit is sweet.” 

Vive la France!

Time to kick it into overdrive—it’s “the holidays.” A lot has been going, and I apologize for the lapse in postings. My bad!

The horrible events in Paris last Friday have certainly upset me, as I’m sure they have disturbed all of us. As a New Yorker, memories of 9/11 flash before my eyes. Those were difficult days. I was so appreciative of the emails and calls from people checking in to see if my family, friends, and other loved ones were safe. It was comforting to know, and feel, how connected we were to each other. For the weeks and months that followed, there was a special bond among New Yorkers. We helped each other; we were kind and giving. We were not going to be defeated and let the evil of cowards change our lives and upset our sense of freedom.

I don’t know anyone who lives in Paris, but as soon as I got to work on Monday, I went into the office of French colleagues who import and distribute tea from France. I asked if their family and friends were safe. Thankfully, everyone was accounted for. They were hurting, but I could tell that checking in with them had brought some comfort.

Before I was an investment advisor, I imported wine, mostly from France. It was wonderful to travel there a few times a year. The wine that I imported was from the Jura region, which borders Switzerland. The company that owned the property was based in Alsace, but I would travel to Paris and Bordeaux and throughout the Burgundy region.

I never ate and drank so well in my life. The French are passionate about their food and wine, and I took it all in. Lunches always lasted at least an hour, usually accompanied by a bottle of wine. Dinners ended with an amazing array of cheeses that still permeate the inside of my nose.

Americans like to joke about the French, as the French like to joke about Americans. At the end of the day they are weak generalizations that don’t capture the essence about what we, as people and as cultures, are about. Paris is my favorite city in the world. Even this jaded New Yorker can say that Paris is the city that truly never sleeps. Paris is as beautiful as it is energetic and passionate.

It is a sad state of affairs that the world finds itself in, but I am strengthened by, and feel connected with, our brothers and sisters in Paris. In the long run good will triumph over evil, and we will never surrender to terrorists, whose only goal is to provoke fear and angst in us.

This is a terrible transition, but maybe that’s fitting: in support of the greatest wines in the world, I offer up the following French suggestions to accompany your Thanksgiving turkey.

Whites:

From the Alsace region both the Hugel et Fils Riesling Classic and Pinot Gris Classic. Both are flavorful with fruit but not sugary sweet. The Pinot Gris will be drier, but both are a perfect pair for your bird and sides.

Red:

While many wine lovers prefer pinot noir with their turkey, I am stepping it up a bit and recommending a Côte du Rhône. I have been drinking the Clos du Mont Olivet Côtes du Rhône Vielles Vignes of late. It is packed with jammy flavors with a bouquet of mint and fresh earth. (I hate wine descriptions but went with it.)

Please enjoy your holiday with friends and family and appreciate how lucky we are. All the best for a wonderful, safe, and happy holiday season.

  

To Give and Not Accumulate

I resolved to stop accumulating and begin the infinitely more serious

and difficult task of wise distribution.

—Andrew Carnegie

As we move closer to year’s end, my thoughts as a financial advisor tend to drift toward taxes and how I can save clients money on their tax bills come next April. There are two significant ways to save on taxes. The first is to sell the securities that are negative in your portfolio and realize the loss. The second is to make charitable contributions for a tax deduction. There are several factors that dictate how much you can deduct in a given year, but I am not going to get into those specifics here.

What I would like to discuss is giving and charitable consciousness. Chances are if you are reading this blog, you are in a better place than many others. You have a warm place to sleep, food in your refrigerator, and clean clothes to wear. Hopefully, there are not gunshots being fired nearby, and you are free to practice your faith, politics, or sexual preference as you wish.

This presidential election will probably be the ugliest and meanest one in U.S. history. Buckle in, or tune out now! Our country is divided between those who want to protect the wealth and privilege of a few and those who believe in a fair and decent country in which everyone has the chance to be happy and successful. Let’s all take the high road here and agree that if we all succeed, we are stronger as a nation.

Money can be great. It’s fun to buy new clothes, eat a great meal, or take a fantastic vacation. Money can buy freedom, but it doesn’t buy happiness.

So, as we head into the holiday season and begin assembling lists of gifts for Christmas or Chanukah, let’s check that list twice. While giving is great and watching a smile erupt on a child’s face is priceless, why not consider checking your privilege this year and pledge to stop accumulating more stuff.

Personally, doing this won’t be easy, but I am going to try. Whatever the net savings, what we would have bought versus what we did buy, I will give to charity. Are you with me? 

401(k) for the Youth

This week I had the pleasure of doing a 401(k) educational meeting for a client. Once a year I like to meet with the company’s employees, go through the plan, discuss the funds, and answer questions about savings and retirement.

If you read my blog with any regularity, you know the idea or the concept of retirement is a pet peeve of mine.  The media markets retirement as if it were Fantasy Island. Retirement is just another word for not working and how am I going to fund my life at that point. But it’s not a game.

The company that I visited has a lot of young and enthusiastic employees. Most of them are enrolled in the 401(k) plan. Unfortunately, not everyone is deferring a portion of income into the plan; most are not deferring enough.

Here is my list of to-dos for your 401(k) plan. Parents, feel free to share it with your working children.

·         Participate, participate, and participate.

·         Try to defer at least 10% of your salary, with a goal of reaching 15%.

·         Defer enough to max out on a company match if it is available. It’s FREE money!

·         Sign up for auto-escalate so you are automatically increasing the amount you are contributing to your savings. If you get a raise, give yourself a raise in how much more you will save.

·         If your plan doesn’t offer target date funds, demand that it does.

·         If your plan doesn’t offer low-cost index funds, demand that it does.

·         Diversify between stocks and bonds. If you are young, you can defer more to stocks than bonds. If you are risk adverse, talk to the advisor for your plan about an appropriate asset allocation.

·         The world is a big place, and half of the world’s companies are outside of the United States. Have some international exposure to your portfolio.

·         If you are concerned about how your money is invested and what kind of companies you are invested in, ask your employer about socially responsible funds.

·         Your 401(k) is portable: if you leave your company, you can roll your account into your new employer’s 401(k) or into an IRA account. You can also leave it in your employers 401(k). I would discuss with an advisor the benefit or drawback of doing so.

·         If you are older than 50, you can put up to $24,000 annually into your 401(k) account.

·         It’s important to check your account balance at least twice a year. Make sure you have your log-in credentials.

·         Don’t look at your account every day; focus on the long term, not the day to day.

·         Pick a day to rebalance your account once a year; your birthday is a good reminder.

Guess Who's Back

Volatility in the stock market is back. You could hang your hat on a number of reasons why: the slowing Chinese economy, interest rates potentially rising in the United States, Volkswagen lying about its emissions testing, or an “overvalued” stock market. There will always—I repeat, always—be risk in investing in the stock market.

Since 1970, the S&P 500 has returned about 10% a year on an annualized basis. This doesn’t happen every day—if it did, everyone would put their money in the S&P 500 index fund and go to the beach. Some years the market is up 20% or 7%, and some years it’s down 10% or even worse, 30%. That is the nature of the stock market. It goes up, and it goes down. Fortunately, it has gone up in more years than it has gone down. We have had some very bad markets over the last 15 years; there was the tech bubble in 2000, the financial crisis in 2008, the “flash crash” in 2010, and a war of words that almost shut down the U.S. government in 2013.

Despite all of these events, the Russell 1000 index (the index of the 1000 largest market cap stocks in the United States) as of September 23, 2015, is up 12.62% over the past 3 years, 14.07% over the last 5 years, and 7.22% over the last 10 years.*

There is no guarantee that these results will continue in the future, but if you believe in capitalism and that companies will grow their earnings and develop new products and that there is the next Google, Apple, Facebook, GE, or even Chipotle out there, stocks may offer you, over time, some of the best investment returns to help grow your money.

Remember, we invest to fund certain goals—retirement, college, a wedding, or a trip to a place we have dreamed of visiting. Keep all of this in perspective and, as I like to say all of the time, control what you can control. You cannot control the stock market. You can control how much you allocate to stocks, how much you need to save, how to cut down your expenses, and even how often you look at your account balances.

This volatility will pass. It may be next month or next year or in two years, but it will pass. Keep your eye and emotions on your goals and, most importantly, on the things that matter most in your life.

I am attaching an article on long-term investing that was written by David Goetsch for Dimensional Funds, a fund company that I use in many of the portfolios we manage.

I hope you enjoy the article. And remember: control what you can control, and enjoy this beautiful fall weekend.

*Source: Russell Investments 2015. Return and value data utilized in this calculation tool comes from sources believed to be reliable but is neither guaranteed nor warranted and is subject to revision without notice. This tool is being provided for analysis purpose only and should not be used to make investment decisions. Tool and data is to be used at your own risk

The Art Of Budgeting And Back To School

Around the Cohen household one of our favorite movies is Billy Madison—not exactly heady stuff but good for a few really good deep belly laughs. I bring this up only because one of the many great songs in the movie is “Back to School,” which I sing over in my head as Labor Day approaches, the days get shorter, and the new school year is right around the corner.

As we get closer to school starting, parents who are sending their children off to college for the first time ask, “Do you put your kid on a budget at school?” The quick answer is yes. If you happen to be asking this question for the first time as your child heads off to school, it could be a tough transition for both of you. Setting up guidelines about spending or establishing a weekly or monthly allowance early in a child’s life is an excellent practice.

As I often tell new parents when saving for college, save as much as you can and then save some more. Start early teaching your child about money, specifically how much things cost specific to how much income you or you and your spouse make. If you don’t establish a context for the value of money, it will be hard for a child to understand.

When establishing a college budget with your child, I would suggest the following.

·         Let them know what costs you are covering: tuition, books, rent, meal plan, health care costs, cell phone, etc. . . .

·         Outside of those fixed costs, you will (or will not) give an allowance on a weekly or monthly basis. It is easy to transfer money from your personal account to your child’s personal account online. You can, for example, set up automatic transfers with most banks, moving $100 from your account to his or her account on the 1^st of each month.

·         Don’t dump and run! Do not dump a lump sum of money in your child’s account at the beginning of the semester. This will lead to frivolous spending during the first month(s) of college. A good idea might be to ask your child to keep a journal of his or her spending habits for the first month and then review it together in order to get a better understanding of finances going forward.

·         WORK is a four-letter word, but it’s not a bad word. Yes, your child is in school to learn, but having a job teaches many valuable lessons, including the value of financial freedom. It also teaches real-life skills that will be important after graduation, like showing up on time, working hard, and the value of earning a paycheck. This income can supplement expenses you are covering, providing money to for a few good meals out during the month, going to a concert, or buying a new pair of jeans.

Like most guidelines, these are really suggestions, and in the real world life doesn’t happen as well as in a written blog post. I try to adhere to these guidelines, but I’m human, and we humans stray. So, for the true reveal, here is how things go in my life.

I do establish with my children up front what costs I am covering and what I am not covering. I do cover all of the basics mentioned, plus airfare when they fly home, social dues for a sorority, and groceries for their apartments. They pay out of their own pockets when they go out to a restaurant, bar, or convenience store. My children do not have cars and are responsible for their Uber fares (modern world problem). My children do have credit cards for which I cover the bill, but when they purchase items that are out of the terms of our agreement, I debit their checking accounts.

I have begun to share with my children how much their parents earn mostly because we have had to cosign on their leases. Anytime I can share with my children how much something costs relative to what we earn, it is a good lesson in curbing frivolous spending.

Another lesson I try to implement with my children, as well as with myself, is the concept of wants versus needs. When you are in a store, pause before you buy something; ask yourself, “Is this a want or a need? Do I really need another pair of running shoes? Do I need to buy 8 pieces of chicken when we probably only need 4?”

We never did the dump-and-run thing, and I never asked my children to write down and record their spending habits. Truthfully, my children are pretty good about watching their spending, so it has not been an issue.

My son worked his junior and senior year in college at one of the museums on campus, giving tours and working in the gift shop. My daughters do a fair amount of babysitting and have worked during the summers to earn money for the school year. A quick shout out to my daughter Laura, who had a fantastic paid internship this summer and brought her lunch to work every day, saving herself at least $50 a week. Best part is she banked a few thousand dollars this summer, learned some great saving habits, and will be paying for all of her spin classes herself.

As I write this, I have to admit we sound very privileged. My kids have it really easy compared to most. Their sacrifices and what they are paying for are minimal. Budgeting is hard work for grown-ups. It is harder for young adults. If they are going to be successful in life, learning to live within their means, understanding what things cost, having a realistic sense of expenses versus income, and appreciating the value of working are life lessons they probably won’t get in school but will serve them forever.

Learning To Let Go

When you are a young parent, meaning a parent with young children, there is no shortage of books with tips on parenting. How to Breastfeed, How to Get Your Child to Sleep, What to Feed Your Picky Eater, etc. Friends, colleagues, and parents are chock full of advice on what to do when your child won’t nap, what doctor is best, or which homeroom teacher is the nicest. Why is it, though, no one gives advice to parents as their children grow up and get older?

I can tell you this: when you drop off your child at college for the first time and, as it was for us, leave him alone in his dorm room, that is a really tough day. You have raised him under your roof, and now he’s on his own. You leave him like a deer in the headlights, and you’re supposed to suck it up and walk away. 

Today my oldest left for Chicago, seeking his fame and fortune in the Windy City. As you know from a previous post, he graduated a few months ago and spent a good part of the summer living at home. It was like old times—weekends together, watching a movie or baseball game on television or just enjoying a beer by the barbeque. It felt awkward at times leading up to today, knowing that this chapter was about to end.

As I walked out of our apartment this morning, I put on a happy face, gave my son a big hug, and told him to text me when he landed. As I closed the front door and started to walk down the stairs, tears were rolling down my face. I was uncontrollably sobbing.

No one told me there would be days like this. Be warned, they happen, and it’s hard. What is getting me through it is the excitement I feel for him as he starts a new chapter of his life. Your twenties are an amazing time—difficult but also exciting. You’re figuring out who you are, what you stand for, what you want to do, and how and where you want to plant your flag.

Letting go is the most difficult thing for a parent—letting children go and figure stuff out on their own, experience both the pain and joy of life without you. I am a control freak; I like to help map out plans, create ideas and businesses, but in this instance I can’t. I have to let go and hope that whatever advice or influence I’ve given (good or bad) will resonate and help shape a strong and confident child, ready to take on the world on his own two (immeasurably capable) feet.

Financial Planning versus Financial Preparedness

This past year I began incorporating financial planning into my practice. For years I had been more of an investment manager and financial advisor but never a planner. To clear up the jargon, an investment manager evaluates and selects securities to construct a portfolio for clients. A financial advisor gives advice on an array of investments and coaches clients through good and bad markets. A financial planner helps individuals set objectives and create a plan to achieve their goals.

In day-to-day life I am not much of a planner. I kind of like to fly by the seat of my pants. When my family travels to a new city, I never map out where we are going or what we are going to visit. I prefer to wander and see where we end up, which usually leads to a fight and the five of us lost in some obscure part of town. Don’t believe me—ask my wife about our trip to Montreal a few years ago.

When it comes to college or “retirement” planning, you can’t really afford to fly by the seat of your pants. You have to save, and you need a plan to manage your assets accordingly. Hoping that you’ll have the funds to pay for Junior’s first year at Michigan is not a good plan. Maybe your daughter surprises you with news that she’s getting married. It can be extremely challenging to fly blind.

My problem with financial planning is the assumptions it makes. We run numbers and scenarios through computer models, and they spit out a plan. Fortunately or unfortunately, life is not like this. Markets don’t go up 5% a year, interest rates go down, you lose your job, Junior decides he wants to go to medical school after he gets his MBA, and the inheritance you think you may receive doesn’t pan out. Mike Tyson said it best, “Everyone has a plan until they get punched in the face.”

Another wise person once said, “He who fails to plan, plans to fail.” The statement easily applies to financial planning, but instead of calling it that, can we call it “financial preparedness”? Planning assumes static inputs with a predictable outcome, but things are never that neat and tidy. I like my new phrase, financial preparedness. Being prepared is being ready for what might occur down the road, nimble enough to turn on a dime, but also honest enough to admit we never know what’s around the corner.

Golden Road

Away from the hamster wheel of noise about Greece and the falling Chinese stock market, I find myself thinking about the Grateful Dead. In case you were away or checked out, the Grateful Dead performed 3 shows last weekend in Chicago commemorating the 50^th anniversary of the band. I was never a Dead Head and never even appreciated their music growing up. I probably was anti-Dead, favoring the music of Rod Stewart, Elton John, and Kiss. Dead Heads were “hippies,” and for some reason that had a bad connotation for me.

As I have grown older and wiser, I have a newfound appreciation for hippies and what they stand for. Believe it or not, having the hippie aura has actually made me a better advisor, and here are some of the reasons why:

• If you think the news and papers were overloaded with stories about Greece, you should have been in my seat. The amount of whitepapers and webinars that hit my inbox was staggering, every money manager espousing the same analysis. Every firm had the same reaction to the action. My inner hippie advised me to tune out and turn on to continuing to live my life the way I have been doing. A pebble on the road is not going to derail me from my own personal financial goals
• When thinking about your financial goals, be a free thinker. Don’t worry about what your neighbor or office mate is doing. Live your life, reject the mainstream, and stay focused on what is important to you and your family.
• Don’t trust the man, the man being conventional Wall Street “wisdom.” Wall Street is not interested in your well-being; Wall Street is interested in its own well-being and how much it can extract from your pocket. Proprietary products, hedge funds, and structured notes are chocked full of hidden costs and fees you would never know about even if you read the myriad of disclosure pages. Keep it organic and simple.
• Caring about investing with companies that make a difference in the environment and workplace is a good thing. Being kind and generous always help. In your financial plan, think about philanthropy. There are great benefits not just in the feeling that giving produces but also possibly tax wise.
• When it comes to financial planning, and I have written about this numerous times, the easiest way to ensure more successful outcomes in the future is to keep your overhead down. Of course it makes sense to save and invest, but if you spend less, be less of a consumer, the better your chances of achieving financial freedom.

I’ll finish by quoting the poet Robert Frost, who I don’t think was a hippie or financial advisor but thought independently:

Two roads diverged in a wood, and I—

I took the one less traveled by,

And that has made all the difference.

Good Morning America

Good morning America how are you, don’t you know I’m your native son . . .

It’s the 4^th of July weekend, the real start to summer. Lazy days, grilling, vacations, catching up on the books you wanted to read over the winter. Soak it up and enjoy. These are the days to remember . . .

I wanted to get a quick post out before the long weekend in celebration of summer and taking time off. According to a survey conducted by Staples Advantage, the business-to-business division of the office supplier Staples, 53% of American workers are burned-out and overworked. What is even more disturbing, according to the same survey, 86% of workers are happy and willing to work for a promotion within their organization despite being burned-out and overworked!

While I don’t dismiss the value of hard work and the importance of putting food on the table for your family, there has to be a balance between work and life and also greater emphasis on valuing what is truly important.

We all probably have different values and thoughts on what we want out of life. I won’t judge and say that one is better than another. But I do know that if you can’t go to work and have fun and find purpose in what you are doing every day, it’s time to rethink what you are doing with your time.

One of my mentors, Ari Weinzweig, has written and lectured extensively about the “energy crisis” in the American workplace. If you are working in an environment that does not provide a financially sound, supportive, sustainable way to be, you either need to foster change or find a workplace that does create positive energy. In order to have the power to create positive outcomes, we must have a stake in the outcomes.

This weekend tune out what doesn’t thrill you, fire up the grill, crack open a few cold ones (whatever your choice), and enjoy the time off with friends and family. Recharge your battery and ponder your own energy crisis at work and how you are going to fix it on Monday morning. (Need a little extra nudge getting to that vacation state of mind? Check out the latest post at Harvard Business Review’s “Work-Life Balance” blog: https://hbr.org/2015/06/get-in-the-right-state-of-mind-for-vacation.)

Have a safe and enjoyable 4^th!

Put Me In Coach

Last weekend I was listening to an interview with the famous golfer Gary Player on local sports talk radio. Player has a new book out, but what caught my attention was that he said he never worked with a coach when he was on the pro circuit. He went on to say that he doesn’t understand why today’s pros have a swing coach, a strength coach, and a nutritionist all on staff. Player feels that if a pro cannot fix his own swing or get in shape, he or she isn’t a top professional.

I couldn’t disagree more. There are very few people who can actually motivate themselves consistently to get better. On top of that, very few of us have the discipline to push ourselves to make that change. To take this even further, I have yet to meet someone who can objectively look at a situation and remove his or her own bias in making a decision or undertaking change. This is why we all need help and why we need coaching.

Take working out or training. You can join a gym, but gyms make their money betting you aren’t going to show up. You sign up after Christmas or before the summer when you need to get back in shape. You go for a week or two, but after that your credit card is billed every month and you are lucky if you show up once a week.

When do you actually show up on a regular basis? When you have hired a trainer/coach. A trainer holds you accountable to show up and do your work out. A trainer pushes you when you don’t want to do that extra burpee or sprint the last 100 feet. Despite what Gary Player thinks, most great athletes have a coach or multiple coaches to push them to be better!

The same could be said for investing and financial planning. Most of it is not rocket science. It’s common sense. The problem is that most of us don’t have the time or discipline to do it. More importantly, we as human beings can’t be objective in looking at our own financial lives. When was the last time you and your partner had an honest conversation about money, values, or retirement?  It’s not the type of conversation that we generally want to have. Americans spend more time planning a one-week vacation each year than looking over their finances—scary!

Last year Vanguard did a study outlining a financial advisor’s value. The company concluded that a good advisor could add 3% net value to returns, half of that coming from behavioral coaching. Investors by nature don’t like to sit still and let their investments work for them. There is a psychological need to move from one investment to another, chasing yesterday’s winner, which inevitably will be tomorrow’s loser. A good advisor/coach keeps his or her clients invested in a properly allocated portfolio according to their individual risk tolerance. Sometimes there is greater value in what you don’t do versus what you do. To quote financier George Soros, “If investing is entertaining, if you’re having fun, you’re probably not making any money. Good investing is boring.”

We are human beings, which is to say that in much of what we do, we could benefit from a second opinion. If you want to see better results in your golf game, health, or portfolio, it pays to work with a coach.

Your Value Proposition

Some of us hit the wall at different times in life. There is the proverbial wall that one hits during a running race or long bike ride, where you just run out of gas and can’t take another step or push the pedal one more time. Some of us hit the wall when we can’t take doing the same activity or job any longer. I hit the wall hard while working at JPMorgan. Going into work at 277 Park Avenue every morning zapped the life out of me, and I knew I had to make a change. A few weeks ago a good friend and client hit the wall in terms of how he wants his money invested. He no longer wants to invest in companies that negatively impact our environment and/or are involved with the manufacturing of guns or ammunition. A very noble and impactful decision.  

A few years ago it might have been a tall order to fill unless you had a multimillion-dollar portfolio and could hire several money managers to assemble it. According to the Forum for Sustainable Investing, nearly $7 trillion dollars are being invested today in responsible and sustainable investment strategies. The same study also states that nearly $1 out of every $6 is being invested in sustainable or socially responsible securities. Today there are several hundred investment options focused on environmental, social, and corporate governance (ESG) strategies.

The question for investors for many years had been “What do I have to give up in terms of performance to invest in ESG strategies?” There was a time when these investments’ performance lagged, but over the last few years, according to a Calvert Investments study, ESG strategies/securities/investments/portfolios have slightly outperformed the general global stock market. The stronger performance over the past few years may be attributable to energy stocks severely underperforming the general market because of falling oil prices, or could it be attributable to better security selection? Your guess is as good as mine. It is my opinion that today one does not have to sacrifice performance to invest in socially responsible, or “impact,” securities that are more aligned with his or her personal values.

While performance is certainly important and we want our money to grow, investing in ESG strategies has other benefits. Your money can have an impact on how companies act or invest. Your money can help bring about change! Two weeks ago, for example, Norway’s $890 billion government pension fund elected to divest itself from investments related to coal. The New York Times said it was “the biggest institution yet to join a growing international movement to abandon at least some fossil fuel stocks.” The issue of climate change will in the foreseeable future have a very big impact on companies that use or produce large amounts of fossil fuels and potentially on their stocks as well.

If you don’t think that investing in strategies that align with socially responsible values can cause changes in policy, you need not look further than the divestment efforts in the 1980s that eventually led to the end of apartheid in South Africa. Institutions and endowments can have a strong say in the way governments and businesses operate.

I hit the wall in terms of my own investment style 15 years ago. I realized that trying to outsmart the stock market was a loser’s game. If you have never read Burton Malkiel’s book, A Random Walk Down Wall Street, read it now—it is a great starting point to understand the fruitless exercise of picking stocks and trying to beat the market on a consistent basis. Whatever your values are, don’t be afraid to express them in terms of how you want your money invested. After all, it is your money.

Investing in the stock market involves gains and losses and may not be suitable for all investors. The investment’s socially responsible focus may limit the investment options available to the investment and may result in returns lower than those from investments not subject to such investment considerations

The Joy of Playing Small Ball

I am not what you would call an avid baseball fan. I cheer for the New York Mets and Detroit Tigers for sentimental reasons, not because I love the game. I do miss the summer nights, driving around Michigan listening to Ernie Harwell on the radio and enjoying the best ballpark hot dogs ever at the original Tiger Stadium. Even though it was a dump, part of me misses Shea Stadium where the Mets played until they moved to Citi Field a few years ago. 

Talking baseball
 

There is a term in baseball called “small ball” that I appreciate. Small ball essentially is playing to manufacture runs. The idea is to get runners on base, advance them and get them home to score. In small ball you don’t rely on walks or home runs, it’s about taking control of the game, getting runners in position to be successful.

When I speak with clients, most of them are overwhelmed with all the stuff we have to do and remember. There are forms, login usernames and passwords, emails upon emails, bills to pay, and investment accounts to review. It seems that if you throw one more thing on the proverbial plate to do, you will explode.

This is the time to play small ball. Take control of the situation, simplify your activities and hand off what you can hand off. There are only so many waking hours in the day and you don’t want to spend it on the phone with a help desk in Manila.

I am not an organization expert but I find short cuts that work for me. Start with unsubscribing from all of those email distribution lists. That should cut the clutter in your inbox in half. Create folders and rules so that certain emails go into folders that you can review at your convenience.  Set up bills to be paid from auto debit. Put as many bills as possible to be paid on your credit card. Warning: only do this if you are paying off your credit card bill each month. You don’t want to ring up additional interest charges.

When it comes to investing, there are do-it-yourselfers and delegators. If you have the time, expertise, and ability to remove yourself from making emotionally charged decisions, by all means do it yourself. Most of us don’t have the time, expertise, or temperament. A good advisor more than pays for themselves by being tax efficient, harvesting tax losses each year, rebalancing, and keeping you invested when markets get ugly. Fees may be less if you do it yourself, but when you measure what your time and good advice is worth, I think you’ll find delegating to an advisor is a smart choice. 

Returning to baseball for a moment, the sacrifice fly ball is a great example of small ball. A sacrifice fly ball is when the batter will hit the ball into the outfield to allow a runner to tag up and advance the base he is on. The batter in essence is giving up his chance of getting a hit for the sake of advancing the runner. Giving up something, or simplifying a process for your greater good, is playing small ball.  The next time you are feeling overwhelmed with all that you have to do, take control of it, and play small ball.