• LinkedIn Social Icon
  • Facebook Social Icon

© 2017 by Logbook FP

68 Main St., Rockport, ME 04856 

Please reload

Recent Posts

Taking the Plunge: Finding the Right Financial Advice

November 24, 2018

1/2
Please reload

Featured Posts

The Dumb Things Smart People Do With Their Money: 13 Ways To Right Your Financial Wrongs

July 10, 2019

CBS News Analyst Jill Schlesinger’s book, The Dumb Things Smart People Do With Their Money: 13 Ways To Right Your Financial Wrongs is an excellent guide to prevent and correct common financial mistakes made by even the wisest among us. Before becoming a journalist, Jill was a Wall Street trader and Certified Financial Planner® professional so she definitely has some street cred.  Let’s take a look at the 13 mistakes and some of her recommendations.

 

#1 You Buy Financial Products That You Don’t Understand


Jill points the finger at gold, reverse mortgages and hedge funds.  I think an even bigger culprit are indexed annuities, variable annuities and variable and universal life insurance.  Jill recommends that you ask these questions when someone is pitching a financial product to you:

 

·     How much with this financial product cost me?  

·     What are the alternatives to this financial product? 

·     How easy is it to get my money out of this investment?  

·     And if I have to do so, what fees or penalties would I pay? 

·     What tax consequences will this financial product carry for me? 

·     What is the worst-case scenario I face with this financial product?

 

#2 You Take Financial Advice From The Wrong People


The gold standard for financial advice is the Certified Financial Planner™ certification due to the ethic, education and experience requirements. Only Registered Investment Adviser (RIA) firms operate on the fiduciary standard which requires advisors to legally to put your interests first.  Isn’t it telling that only 12% of advisers operate under this standard at ALL times?  Here are Jill’s recommended questions:

 

·     What professional certifications does your prospective adviser have?  

·     Has your prospective adviser ever been sanctioned for unethical conduct and is he or she properly licensed and registered?  

·     Would others stand to gain from any financial advice your prospective adviser would dispense?

 

#3 You Make Money More Important Than It Is


Everyone is guiltily of this at some point, right? Here are some warning signs:

 

·     You keep secrets around money from your spouse

·     You’re losing sleep on a regular basis because of money issues (once a week or more)

·     You adopt a perfectionist stance in regard to your financial affairs

·     You are constantly and unhelpfully comparing your financial affairs with those of others

·     Other people you respect tell you time and again you have issues around money 

·     You check your accounts on a daily or weekly basis

·     You find yourself ruminating about your financial life at work

·     You overthink your budget, even when your financial position is just fine

·     You are incapable of spending money on fun stuff, even when you had planned to do so

·     You keep moving your financial goalposts

 

Jill says the best kind of money to have is "enough". We agree!

 

#4 You Take On Too Much College Debt (#4a You Fund College Before Retirement)


Jill makes a pitch to ignore the social pressure to send your son or daughter to a private school that you really can’t afford.  Also, don’t even think about saving for college without funding your retirement first.

 

#5 You Buy A House When You Should Rent


Jill says that "being a landlord is fun" is a lie.  Real estate takes time and effort.  Real estate does not always appreciate and “you are not “throwing money out the window by renting. Rather you’re buying flexibility.” I’m going to start using this line!

 

#6 You Take On Too Much Risk


Jill highlights the risks of concentrated positions, lack of diversification and how her father lost his entire fortune ($800,000 in today’s dollars) on a single stock market trade.  She also discusses our hardwired cognitive biases that lead to fear, greed and bad investment decisions.

 

#7 You Fail To Protect Your Identity


Optimism bias means you think identity theft can’t happen to you.  Jill has a host of recommendations as she writes “guard your personal information like your life depended on it.”

 

#8 You Indulge Yourself Too Much During Your Early Retirement Years


Check your spending, Jill uses a 3% or 3.5% withdrawal from your portfolio, not the much more common 4%.  She thinks you should rethink your retirement age (work longer), dream about retirement more (don’t let your career be your only interest and actively plan for the next stage), embrace the gray (find creative solutions that flirt with the boundaries of retirement) and finally, if you never have before, it's time to hire a financial planner to check the numbers.

 

#9 You Saddle Your Kids With Your Own Money Issues


Jill points out that many of her clients imbue money with too much emotion.  Her recommendations: 

 

·     Communicate transparently 

·     Keep your money problems to yourself 

·     Make the kids get jobs

·     Be careful when helping out your adult kids

·     Cultivate financial literacy

·     Nurture a feeling of appreciation for what you and your family already have

 

#10 You Don’t Plan For The Care Of Your Aging Parents


In addition to not having discussed this issue with your parents and siblings years in advance, here are some foibles: 

 

·     Your parents put their house in your name 

·     Your parents don’t have enough liquid assets 

·     Your parents give you too much money 

·     Your parents retire too early

 

#11 You Buy The Wrong Kind Of Insurance Or None At All


Jill’s danger zones:

 

·     Underestimating your life insurance needs

·     Buying permanent insurance 

·     Your needs have changed but not your insurance 

·     Failing to take full advantage of your employee benefits 

·     Surrendering your policy too soon (long-term care)

 

#12 You Don’t Have A Will


·     “Any day is a good day to think about death.”

·     “Any day is a good day for an estate plan.”

 

Just do it, please.

 

#13 You Try To “Time” The Market


I think smart people do this more than anything else.  Many people just can’t believe that it is impossible to consistently, over your lifetime, time the market correctly.

 

·     “The market timer’s Hall of Fame is an empty room.” - Jane Bryant Quinn

·     Jason Zweig’s definition of market timing, “The attempt to avoid losing money in bear markets. The most common result, however, is to avoid making money in bull markets.”

Wrapping-Up
Finally, Jill says you don’t need professional advice yet if:

·     You have consumer debt, including credit card debt, student loans and auto loans 

·     You aren’t maxing out your retirement contributions 

·     You don’t have an emergency account with enough money in it to cover six to twelve months of expenses

 

With the caveat that these folks still may need a financial adviser: you get a significant tax refund every year, you’re obsessing about money, you and your spouse fight constantly about money, you don’t know how much you pay for investments, you’re scared to run your retirement numbers, you are not tracking your cash flow, you know you have financial problems, but you can’t seem to discipline your spending.

 

As you can see, these money issues last from childhood (money scripts you learn from your parents) to death (no will or estate planning). In our own lives and during Logbook’s three years of business, we have seen these same 13 mistakes—despite the fact that everyone one of our clients are smart.  I guess that is why financial planning is a great career and why EVERYONE needs help at some point.  

 

If you like some of these ideas, pick up a copy of Jill Schlesinger, The Dumb Things Smart People Do With Their Money—you won’t regret it.

 

As a former Foreign Service Officer and Air Force pilot, I’m passionate about continuing to serve those in government and the military. Our services and publications are designed for individuals and families in these communities.  Follow me -Chris Cortese- on LinkedIn  or like our page on Facebook so you can continue to benefit from our daily commentary and content.

 Chris Cortese, CFP®

Founder

Logbook Financial Planning, LLC

www.logbookfp.com

 

 “Investment advisory services are offered through Logbook Financial Planning, LLC, a Licensed Investment Adviser in the state of Maine and Registered Investment Adviser in the state of Virginia” “All written content is for information purposes only. It is not intended to provide any tax or legal advice or provide the basis for any financial decisions.” Logbook Financial Planning, LLC is not affiliated with or endorsed by the Social Security Administration or any government agency.

Share on Facebook
Share on Twitter
Please reload

Aloft in the  Blogosphere