Retirement Lessons: Rolled From A Rock.

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A version of this post appeared on MarketWatch.

“How much does your money weigh?”

If people want to engage me and discuss retirement planning, the request I have is for them to take time and think back to their first memories around money. I want them to re-engage with how their views formed in the past, shape their present actions and motivations.

We undertake journeys together – back to the genesis of financial and investment philosophies.

I maintain a passion for client stories. Money plays a significant role in each; it’s a larger-than-life character in the human chapters of life.

Many of the conversations are emotional fire starters; over time, the discussions, although relevant, share commonalities. There are the ones you never forget, too.

I had someone share how adult money attitudes were shaped by spending much of his childhood summers exploring a neighborhood historic cemetery.

So, when I encountered a retiree who learned about handling finances from a rock, well, I anxiously listened.

He said – “everything I learned financially for me began with a rock.”

rock

You see, this 69 year-old gentleman is the seventh and youngest child of a large family from Oklahoma. At 10, he discovered quiet and space and off a rural route. A wooded, gravelly patch cordoned off less than a mile from the homestead.

A perfect (and creative) location to secure his valuables from prying siblings. Over time it became a sanctuary from the vestiges of conflicts that erupt among large families.

From pre-teen to teen, an elaborate system was devised. A natural roadmap outlined on a napkin and changed often to throw off those who may become a bit curious. It was a plan which marked how valuables including baseball trading cards, cash and coins would be secured underneath a labyrinth of various-sized rocks. On a regular schedule, the hiding rocks were changed up, covered or replaced by holes under several dead trees. On numerous occasions, items were lost. Eaten.

Dug up and carried off by small animals.

He employed cigar boxes, plastic sandwich bags with yellow paper covered wire to secure them, empty Wonder Bread wrappers printed with the memorable red, yellow and blue balloons.

I couldn’t imagine what was learned from all this effort. Well, I had ideas, however, I never heard of anything like this before in over two decades helping others make financial decisions.

As we met a few times, I began to understand how weathered rocks forged this man’s money behavior. How he rolled along through retirement remembering back so many years. The cold weather, the dirty hands, the lost treasures formed invaluable habits.

So, what were the lessons learned?

Random Thoughts:

Dig deep into your financial foundation on a regular basis. Lift the rock, move earth, start digging. Get dirty, expose what’s been hidden. Before financial planning, it’s time to expose the deepest fears about retirement.  If frozen by fear, your outlook will suffer; you won’t take actions (even small ones) to get you to retirement; you’ll feel hopeless.

The mind has a tendency to head straight for worst-case scenarios which most of the time, are far from reality. I find when people begin exposing what makes them anxious about retirement and progressively talk openly with those they trust, practical habits are started and forged. Stress is reduced. Make a list of what you fear the most about saving for and living in retirement. Move one rock at a time. Work with a financial professional to create a goals-based, fear-minimizing game plan.

Focus on what weighs heavy on your retirement budget. For the majority of people I counsel, fixed expenses are like boulders which press hard on their abilities to enjoy retirement. I’m not going to make it sound easy to lighten up. It isn’t. It takes some tough decisions. It could mean selling a family homestead to downsize, taking inventory of material possessions to gift, sell or donate.

My greatest friend, mentor and best-selling author James Altucher and his wife Claudia recently dug through and discarded almost every physical item they own – family photos, furniture, clothing. Rows of green plastic garbage bags out to the curb for trash pickup (I saw the photos). Ok, I’m not advising to go to this extreme: I was shocked myself. However, the lesson here is to devise a strategy that works for you to minimize overhead expenses; a liquidation and downsizing mindset is empowering. It allows you to take great control over cash flow, relieves the pressure of big fixed costs throughout retirement.

Move mental rocks and check on things. Let’s face it: Many people think of their company retirement plans as dark, mysterious holes. They may salary defer the maximum contribution yet still have little knowledge about available investment choices, how money is currently allocated or they fail to rebalance holdings on a scheduled basis. In other words, to be an active saver is admirable however, once earnings are syphoned into retirement plans, many of us grow passive about digging into them and shifting the location of financial treasure. The money is buried so deep under the rock, it’s forgotten. It might as well be lost.

A company retirement account is most likely your greatest liquid asset, so it makes sense to check on its progress. Make a point to dig under the surface at least annually. Compare your current allocations to choices provided by your employer and examine how investments are divided. Sell down what’s done the best and reallocate proceeds into underperforming asset classes.

For example, in 2014 U.S. or domestic-based large-company stocks and bonds were outperformers. The majority of financial “pundits” were touting how in 2015, domestic-based stocks would continue a winning run. So far, it’s apparent that international stocks are improving due to favorable valuations and aggressive action by the European Central Bank to purchase bonds, much like our Federal Reserve has done in the past.

Get your hands dirty and expose yourself to uncomfortable conditions. I partner with several retirees who refuse to undertake actions that temporarily feel unpleasant. For a few, avoiding proper estate planning (who really wants to deal with their own mortality?), failing to embrace healthy lifestyle choices like annual health physicals, and transferring potential devastating financial risks though the use of insurance, has led to family stress and negative outcomes for retirement portfolios.

A roadmap based on maintenance of health, proper estate planning and use of insurance where it’s needed, can make a tremendous positive impact on the quality of retirement.

Through the years, this gentleman who learned so much from rocks and dirt as a child, started to understand how keeping the location of his buried treasure so secret, was not such a terrific idea. He began to comprehend how secrecy may lead to great loss. He has a trusted partner, his wife, who keeps him accountable for fitness goals, regular meetings with his financial advisor (me), his board-certified estate planner and a physician for annual head-to-toe checkups.

Recently, one of his grandsons, knowing the well-told story of the rocks, began to do some digging at the same location near the homestead (still in the family). After months of work he unearthed a plastic bag. In it was a 1955 Topps Baseball Box made of tin with 10 trading cards inside including one of legendary player Ernie Banks.

There are lessons right in front of all of us. Some we can trip over (literally).

If we dig deep and often, potential dangers can be uncovered, avoided; treasures can be revealed.

The graveled road of retirement can be a blessing or a curse.

A lesson is to unearth early on what concerns you the most and expose them to bright lights from trusted professionals and loved ones.

Your retirement path will be a challenge, but like a rock, you can weather it and remain structurally intact for decades.

And keep rolling…

rolling rock

 

 

What I Learned From My Teen Daughter’s First Job.

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As featured in MarketWatch (well, not this “bluer” version). 

My daughter at 16 decided she wanted a part-time job. This isn’t a topic we discussed in the past so it made me curious as to her motivations.

A new adventure for daughter.

Self-reflection for dad.

Shit, I’m getting old.

There’s a comforting thought.

dad grave

I recalled my first job delivering “New York’s Picture Newspaper,” The Daily News, at 14 years-old. The route was one of the largest in my Brooklyn neighborhood. The lessons were indispensable and are still with me today.

Selling, customer service, handling complaints, the discipline to wake before 5am including weekends, to make sure papers were delivered before morning coffee, and the financial reward I earned sacrificing hours of my weekend to collect payment from subscribers. It was a challenge, yet I remember how the job fostered feelings of well-being through a rough childhood.

paper boy

I asked people face-to-face and through social media about their first jobs as teenagers.

The positive responses were overwhelming. People couldn’t wait to share. The exhilaration was contagious. Many were vocal about how the qualities they developed working as teens, were unequivocally linked to prosperity, financial and otherwise, as adults.

So, you have a teen child or grandchild who wants to work.

It’s a bittersweet moment. You’re proud; yet there’s something strangely sad about the milestone. Perhaps your teen is embracing maturity with gusto, motivated to take on new responsibilities and taking a big step to adulthood, to independence, which makes you feel vulnerable, uncomfortable.

Yea, old.

Ok, those were my issues.

As the dust settled it was down to a stack of employer paperwork; decisions needed to be made about take-home pay (you mean I can’t spend it all?). It was a chance to work closely together and set the foundation for financial strategies that would last a daughter’s lifetime.

What did we do?

What can you try?

Random Thoughts.

Celebrate the transition from payout to paycheck. Most likely, there’s been a long-standing allowance agreement at home. Sure, you taught the basics of save, share and spend early on, helping your child formulate a simple yet impressionable strategy of monetary discipline. It’s time to re-visit the discussion. The anticipation of sweat equity adds another dimension to save, share and spend.

We had a “big picture” talk, exploring options on how to allocate her take-home pay. I was there for the genesis of her financial philosophies. What an honor. My daughter’s respect for money she would soon earn was a welcomed surprise. I never was privy to this side of her. I wanted to celebrate this accomplishment; we selected an informal setting – it comfortable for her to share deeper thoughts around save, share and spend. I sought to guide the conversation, provide reinforcement for good ideas and create positive memories around how dad was proud of her transition from payout to paycheck.

Initiate the “Level 2, Triple S” protocol. My daughter thought I was referring to a new superhero (she knows what a big Marvel fan I am). No, it’s how save, share and spend grow super in proportion. It’s the “Triple S, Level 2” rite of passage. As a child, allocating an allowance or cash for chores, was important. With a job, parents and kids make allocation decisions with greater impact.

Oh, there’s another interested party looking to share in your child’s success: It’s the IRS and taxes are now a consideration. As an employee, your child will be asked to complete a W4 form to indicate the correct amount of tax to be withheld from each paycheck. For 2015, a dependent youth doesn’t require a tax return filed if earnings do not exceed $6,300, the standard deduction amount. In our case, we felt comfortable writing “EXEMPT” on line 7 of the W4; as a dependent she will most likely not exceed $6,000 in earnings for 2015. If you believe your teen will earn more than the standard deduction, then enter 1 on Line B of the form.

Begin a Custodial Roth IRA. Working leads to new investment vehicle opportunities. We plan to fund a Custodial Roth IRA and have decided on a savings allocation of 30% each pay period to be directed into the Roth as a contribution. For 2015, the maximum that can be placed in an IRA is $5,500. Even invested conservatively, the $1,500 we plan to deposit, compounded annually at 4%  has the potential to be worth over $11,000 tax-free when my teen reaches 67 years-old. Time is her greatest ally and part-time employment provides the opportunity to jumpstart her full-time retirement.

Start a cash-flow discovery exercise. As my girl has more money to spend, we plan to emphasize budgeting. It’s crucial she maximizes what’s left of her paycheck after taxes and savings. My daughter’s two biggest expenses – clothing and music downloads will be monitored using a free Smartphone budgeting application she selected.

Set aside 20 minutes each weekend to complete a “cash flow discovery” exercise to review expenditures. After all, having a pay check is exciting. Some kids get carried away and go through what I call an “independence splurge” where spending increases along with the first paychecks. Ironically, I’ve observed most of the spending is done at a teen’s place of employment as employer discounts are considered a “benefit.”

As a parent or grandparent, what have you lost and found again? At the celebration, I shared my early work memories good and bad. I opened up about the time I got fired from Stern’s Department Store. Not my proudest moment. My teen helps me re-live the best of my work habits and reminds me of why I’ve been motivated to succeed for so many years.

And teens?

Your family finds your initiative admirable; also, they’re observing how you handle multiple responsibilities outside of home and school.

Your work efforts are forging their confidence in you to handle future fiscal responsibilities.

The disciplines that begin as a working teen will sharpen and live on in you for many generations.

The financial seeds planted today have the potential to grow large.

And you just may need to take care of dad’s adult diaper bill.

Be prepared.

guy in diaper

 

 

Living Lessons From Dead Kittens.

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Kittens were flying.

flying Kittens

Not in the joyful verse of a storybook tale read aloud to wind down the kids before sleep.

Distant from a place of precious fluff balls, gossamer wings; where white feathers lullaby children.

Just the opposite.

This memory jumps right from the pages of a magazine I loved almost as much as Mad.

Terror Tales.

terror tales

Bone-chilling cries.

A skyscraper wall of piercing sound – decibels of feline sirens carried three city-blocks deep, two buildings high.

I remember. Straight up at 2:10am, my nightmares, which are frequent due to a three-year horrific fight with a former employer, increasingly begin with flying, howling kittens. Fur matted in life fluids. The more kittens, the stronger the images, the stronger I cold-sweat the bed.

1975 – Drowned out pop melodies of summer booming from open windows; 70’s tunes played from Panasonic hand held radios from behind shadows, dingy shades that framed pre-WW2 tenement pane glass.

“Brandy, you’re a fine girl…”

City traffic fumes rise high and hang heavy in humidity. Inhaling them is a compromise. A choice to swelter through a New York August behind closed windows, or fool yourself into believing a blast furnace of urban air is a refreshing alternative.

I enjoyed the confluence of odors; after years they smelled like home – auto exhaust, hot tar, ethnic cooking; easier on eyes and nostrils compared to the rank of cigarettes and beer that destroyed oxygen within our small apartment.

I swear the lead-based wall paint would emit a strange odor when the worst of summer heat arrived. The walls were coated in poison. I was doomed. At night, I’d dream how the shiny white lead chips that always pooled at the baseboards, would come alive, enter my bed and eat my skin. I didn’t sleep much as a kid.

“What a good wife you would be…”

The strong signal from Music Radio 77 WABC-AM drowned out. Harry Harrison’s legendary airwave trademark phrases fade to black; overwhelmed by shrill feline vocal daggers which ricocheted off concrete, found its human auditory target, and penetrated my skull.

Urban dwellers fortunate enough to enjoy white noise and chilled air of window air-conditioning units were spared of the sounds of people living and dying in a restless city.

window AC

I hated them; all comfortable in their icy luxury.

And there was the laughter.

It was out of place. Insane.

No way in hell should giggling immediately shadow the screams. Horror squares in happy round holes just don’t fit. In psycho movies – sure, but not real life.

I approached the red brick and banged-up aluminum doors of single-car garages in rows that bordered the Brooklyn apartment complex I called home. The panic noises I’ll never forget, grew louder. It sounded like babies being tortured. And that disturbing chuckling.

insane laughter

I needed to understand what was happening. My mind screamed “run.” My legs moved ahead. Faster than the upper part of my body. Labored but steadily onward.

I was close enough to observe three pre-teen boys on a garage roof. A kitten in each hand; six small lives gripped by the mid-section, writhing desperately to break free.

The ringleader of the demon trio, I recognized immediately. That ruddy complexion, dark eyes closer to his ears than the middle of his face, the unkempt hair. No surprise it was the neighborhood terrorist, a bully to all: V. He made so much of an impression on me that today all bullies I encounter lose their identities and take on bloated, blotchy Vinny face.

He and two other soulless boys in unison were raising helpless animals above their heads and like taking jump shots with basketballs, were propelling tiny bodies into the air. I took solace in the fact that cats land on their paws. I imagined them a bit shaken, possibly injured, but still able to flee from the scene quicker than these pudgy kids could catch them.

Wishful thinking.

It was a cowardly method for a frightened brain to work through the disgusting activity unfolding before my eyes. I despised the fear that gripped me more than I hated the thugs.

Deep breaths.

I felt my speeding heart squeeze through the veins inside my ears; t temporarily blocked all other input. I needed to see the kittens. In my head, I was already cycling through save-and-escape plans; my goal was to grab as many of the injured I could carry and then run like the wind. Anywhere. Just away. How can I get this done without getting my ass kicked?

I couldn’t move faster. I tried.  I was disappointed by sludgy footfalls. As I turned the corner, as I came upon the asphalt alley between long rows of garage doors, there stood a fourth culprit.

I was shocked to see a thug at ground level. Right below where the three other boys were up and into the driveway.

I didn’t recognize number four; I thought I knew all the assholes in my Brooklyn neighborhood.

Tall, sinewy. I remember the definition in his biceps that popped his veins.

A devil in red Ked sneakers.

Kitten three released – fly in the sky.

Damn the fate of gravity.

Tiny legs, paws flailing.

I was far enough from the action remain noticed but close enough to take in the fiendish plan unfolding.

Red Ked gripped a wooden bat.

In a pro-baseball player stance, he swung with full force at kittens “pitched” to him from 8 feet above.

bloddy bat

The home run kitten-head balls were the worst.

There was living sound one second, deadly silence the next. Mid scream. Then nothing.

And again – laughter. The serious side-splitting kind.

The swing-and-miss felines dazed by a rough asphalt landing, failed to hit pavement and flee. They sort of dragged themselves off, walking with an unsteady gait. Definitely not fast enough. Much different than I imagined.

I observed the keen sweat beads on Vinny’s face as he maintained visual contact on the shaky cat balls.

Close to ripe for another pitch.

I prayed for a strike-out afternoon.

I stood unnoticed. In front of a garage – door open. Empty, dark. I sauntered into the black to gather my wits. I needed to think fast. I glanced upon an abandoned tire iron in a back corner. Upright against a cinder block wall, begging me for my attention. Not sure how I noticed it in the darkness but there it was. Calling me.

I grabbed for it hard. I held on to it like it was a lifeguard and I was about to go under for a third time.

As I accepted what I needed to do.

From dark to light.

Firm stride onward.

Closer now to red Keds, I’m able to observe how his sneakers were white at one time. Sick to my stomach. He looked at me then.

I was the next fat pitch.

No matter what I was in a strikeout zone.

No matter what.

Secure in a place where dead kittens don’t interrupt the summer, my life and ultimately my dreams (nightmares).

Looking Glass pop stuck in my head. An endless musical loop that refused to stop.

“He came on a summer’s day. Bringin’ gifts from far away.”

Surprise. Your turn to be the ball, red Keds.

Here’s your gift.

red ked

Random Thoughts.

At one time, any time, you’re at risk of becoming a dead kitten. Something bigger and menacing will swing at you, long to crush your skull, ruin what’s left of your existence.

For three years I’ve been hit repeatedly by a large corporate red Ked, a former employer spinning outright lies, bashing my reputation, attempting to take me out and away from the profession I love.

Oh, I’m staggering, my gait a bit shaky, but I won’t be tossed in front of high-paid legal bullies for another chance at a feeding frenzy. They took much from me, already. Money, family, physical and mental health. But I’m still here. And I have found my weapons.

Ready to strike. My turn to swing.

It’s these incidents, the events that position me next in line behind the next dead kitten, that ultimately define how quickly I escape and survive (thrive). Unfortunately, I know Louisville Sluggers continue to lurk; bullies are like that. Life is good. Then they come out of nowhere just to fuck with you. Dryer lint can catch on fire and take the house down with it. I heard that.

Whatever swings with murder in its eyes, will eventually tire and move on because it can’t kill me. What stays after the hit sharpens my resolve, clarifies me and steels my purpose. And I’m not sure what energy stays exactly, but I’m glad for it. Like a warm, comforting shadow. Bullies and dead kittens show up right before defining moments.

It’s all about tire irons. The strongest arsenal, the most effective weapons I possess reveal themselves deep in black corners. Just when I think I’m a sitting duck, an obliterated feline, I accept and allow what’s about to happen as if I chose it. At that point, I am a clear thinker. A fighter.

Many people look for hope in light. Not sure I get it. I’ve learned that you must venture and stumble through darkness to discover what’s good. The universe reveals itself and nurtures me when I accept my fate and understand deeply that what I’m experiencing, as painful as it may be, needed to occur.

It couldn’t have happened any other way.

Looking back, those challenging episodes have formed a perspective I’ve used to help others make their way through red Ked moments.

Death is only the beginning. A music legend once told me that death is only the beginning. Near death, too. And before he passed, he told me again. I’m thinking in life we face several deaths. Illness, divorce, loss of inner circle relationships. And the beat goes on. Then stops. Then continues. The beating is the same, the sound is different.

Before nightfall I sit in the backyard, my dog Rosie next to me. I ponder who and what I lost up to then. I sort of feel like Michael Corleone at the end of Godfather III. Alone. Thinking in my last scene I should fall out of my chair. Dead. Rosie’s hot breath yapping in my cold face.

What an embarrassing way to go for Michael.

dead michael

Except I don’t drop. I’m fortunate to remember that with each liability, every loss, I gain a greater asset.

And I’m at peace. Finally.

Dead kittens are also dead presidents. How many times have I bloodied my net worth with a bat? Oh, many. I’ve loaned money to relatives who didn’t care if my credit went bust (never again), I worked for one of the worst penny stock chop shops and had my father purchase stock I knew would go bust (sorry dad), just to collect a commission, I have over-purchased shit I didn’t need, spent extravagantly at restaurants, too much wine. All dead money that taught me valuable living lessons.

“Hey asshole, what do you think you’re going to do with that thing?”

And as kittens were falling, I kicked red Ked in the shin. Before another word, he went down. I remember one furball jump in panic over his face, her back paws scratching deep into red Ked forehead (score).

I then slammed the iron down hard on his right shoulder.

RK lost his grip on the bat.

I wanted to hit him again.

I wanted him dead.

For all the kittens.

Past, present and future.

I grabbed his weapon and ran.

Directly to my Cousin Louis’ apartment 9 blocks away. He was NYPD. Built like Sly Stallone.

When I’m asleep and I see dead kittens, I know something big and life-changing is clawing at me.

Another lesson up at bat.

From the blood.

The music plays in my head.

And they disappear.

At least for now.

I hit the snooze.

“I know what you look like and I’ll see you before long.”

Ben Nichols.

This Old Death.

kittens with angel wings

An Extended Warranty: Do You Really Need One?

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As featured in USA Today for NerdWallet. 

It seems you can’t buy anything without escaping that awkward encounter just when you think your transaction is concluded.

“You can buy an extended warranty for an additional ____ dollars. Wouldn’t you like to protect your purchase?”

It feels like a wallet violation.

At least buy me dinner first.

It’s enough to keep me out of brick & mortar stores forever.

cash register

I’m not sure why I consistently feel bad saying no, and I teach financial discipline for a living. I want to feel good about what I spend money on, not guilty. It feels wrong to leave my purchase exposed to who knows what. Most of the time I politely say no and quickly move on.

Extended warranties have become a profit center for businesses, especially retailers. The peace of mind can be costly. For example, on average, an extended warranty can add an additional 10% to 25% to the purchase price of an item. There’s no doubt they’re considered a formidable driver of revenue.

When you think of the most common extended warranty, you may think of those for cars. However, they’re now offered on almost every consumer durable you buy. Recently, a good friend was offered an extended warranty for $14 on a $75 football from a national sporting goods chain. Of course he was wise enough to turn it down.

So, how do you determine when it’s smart to consider an extended warranty?

1. If replacing the item would lead to financial strain, transfer the risk.

Regardless of the cost of the product or service, an extended warranty should be considered if repairs or replacement could drain emergency cash reserves or increase your credit card debt. You don’t need to decide on an extended warranty right away. You’ll have a period of time, usually 30 days from the date of the transaction, to add coverage. Review what is covered under the standard warranty; for example, most services and goods will carry some form of protection or replacement for at least a year. If a major repair or replacement has the potential to place your household balance sheet in jeopardy, then it makes sense to transfer the risk to the manufacturer and pay for protection.

2. The bigger the purchase, the greater the consideration.

Durable goods like refrigerators, televisions, dishwashers, washers and dryers all come with standard warranties. Extended protection may not be required, as these items don’t break down frequently. However, before you say no, it’s best to investigate objective sources for repair histories for brands you’re seeking to purchase. Examine ratings on a website like www.consumerreports.org. Rarely do durables break down during the warranty period, according to Consumer Reports.

3. Forget the warranty; remember your savings account.

Instead of a warranty, consider directing money you would have spent into your emergency savings or money market account. Think of it as a cash bolster to handle repairs. In the case of a $250 warranty, add $21 a month to your budget.

4. Don’t get caught in the moment.

You may think that spending an additional 10% to 25% is no big deal after spending hundreds of dollars on something you want. Your brain will consider the purchase of an extended warranty small when compared to the greater cost of the item. As consumers we have a difficult time maintaining a rational head when it comes to additional expenditures for big purchases. Take time to step back and weigh the pros and cons. Examine the extended coverage as a stand-alone expense and the odds of using it.

5. Buy with your weaknesses in mind.

I purchase extended warranties for all portable electronics including laptops and smartphones if they cover accidental damage. I know my weaknesses; I tend to be clumsy with computers and cellphones. Make sure to examine how many instances are covered (plans will have limits) and the specifics for accident coverage. Understand your faults and use extended warranties when it protects your purchases against them.

6. How much is that item used?

Extended warranties can be useful for durable used items like automobiles and appliances. To cover your automobile, compare the costs of a dealer warranty to an independent organization like www.carchex.com, which offers several tiers of coverage (Titanium being the most inclusive). Home warranties that cover aging heating and air-conditioning systems can be worth the cost. It’s important to understand that standard maintenance is not included nor is full replacement. However, to keep appliances in operation longer and avoid the potential of frequent costly repairs, the expense of an extended warranty should be investigated.

7. Sometimes, extended warranties just don’t make sense.

Like my friend who was offered an extended warranty to protect against a flattened football, there are occasions when you’ll wonder how retailers have the nerve to sell coverage. If the purchase is $100 or less, take the chance with the manufacturer’s warranty and don’t worry about paying for an extended agreement.

In the frenzy of shopping, it’s easy to relent and say yes to aggressive salespeople.

When it comes to extended warranty purchases, don’t rush. Make the decision after reviewing the facts in the comfort of home, not in a pressured situation like checking out at a register with a line of shoppers behind you.

Many believe that extended warranties provide peace of mind.

How much is peace of mind truly costing you?

 

Three Money & Life Lessons From “The Interview.”

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Before I continue, please note I refuse to (can’t) compare Franco & Rogen to Abbott & Costello.

Somebody I know just did that.

I can’t go there.

Readers are going: “Who is Abbott & Costello?”

SMH.

abbott and costello

I’m a firm believer there’s a lesson in everything. If my focus on the present is effective and I practice stillness in the manner of a Tolle master, i can learn from staring at a rock. No, seriously.

The movie  “The Interview,” which doesn’t star the beloved comedy duo of the 1940’s of course, has been a tremendous center of attention due to a hacking of Sony Pictures (allegedly, I’m still not buying it,) by get this – NORTH KOREA.

Wait: A country where blind hair stylists can make a “living” is smart enough to hack SONY Pictures and threaten us?

Tell me another one.

north kprea Who gets a haircut like this?

Now everybody needs to see this film. Even people who insisted they wouldn’t sit through this mindless nonsense are doing it “for freedom,” as it now represents our “God-given” right. They’re drawing a line in the sand. Don’t get me wrong,  I’m sure the flick is funny, however, it’s not like taking up arms at The Alamo.

C’mon, people.

davy crockett I shall die for Rogen & Franco,” Davy Crockett.

I give up.

I’m jumping on the bandwagon.

I love you guys!!

rogen and franco

I’m getting messages in my head (about money) from the hacking incident. Perhaps the stylist at SuperCuts was trying to do a North Korean Coiffure mind meld on me. Hmm.

Random Thoughts:

1). Decisions about money aren’t easy. Don’t kid yourself and don’t have financial pros make it sound easy (most of them are in debt like you). Money decisions are tougher than deciding to release a dopey movie after a hack and a threat of global annihilation. Money emotions flow deeper than the ink in your paper currency. Selling stocks to take profits, saving money is a big chore (especially since your wages rival a North Korean Palace toilet scrubber since 2009,) identifying your money weaknesses and working to change them, taking losses for the stock “dogs” you’ve held for a decade.

However, to be successful, you need to buy the ticket to greater wealth whatever that means to you. It could be $10,000 or $10,000,000, or being debt-free outside of the mortgage. Take a stand for more money in your pocket. A small step is still a step and it should be celebrated. Even more so than some dumbass movie.

Can you imagine the conversation between Sony pictures CEO Michael Lynton and Obama?

“I tried calling you.”

“No you didn’t.”

“I would have heard the phone.”

“Well, I tried.”

“I don’t believe you.”

“I don’t believe you didn’t hear the phone.”

“Michelle was talking to me.”

“Oh, now you’re blaming your wife?”

“No, it’s just a fact.”

“And how do you not know James Franco, you live in a hole?”

“I’m busy doing president stuff.”

“Like messing up names on TV?”

“That’s not nice.”

“I’m surprised you didn’t call Sony, Sunni.”

“That’s crossing the line, movie boy.”

“We make good movies. Things blow up and shit.”

“That’s not real.”

“I just want to get this damn movie in the theatres, can I do it?”

“Which one?”

“The Interview. GOD.”

“Just for that I’m going to tell you I think Ben Aflac would be a better James Bond.”

“It’s Ben AFFLECK and NO!…Are we good here? Megan Fox wants to re-make The Sugarland Express and she’s eating all the donuts in the commissary.”

“I wouldn’t want your job.”

“No shit.”

“Merry Christmas.”

“Happy holidays.”

“Oh, now we’re going to have this fight, huh??”

No, really. The NSA has all this.

2). Prepare for surprises. So, the car broke down, you got hit on the interstate, broke a leg. Died. Your farce film got the attention of a dictator. Whatever. A key to wealth is to anticipate the unanticipated. Make sure you have 3-6 months of living expenses in an emergency cash reserve, have enough life insurance to cover the family; you signed up for long-term disability coverage at work, the beneficiaries on retirement accounts are updated, you maintain expensive durables so they last longer (when was your last oil change?). You get the picture. Can you think of other surprises, outliers, “black swans” that can devastate your finances?

3). Know your enemies. Know your financial enemies. They’re all around you. Look in the mirror. Can they become your greatest allies? For Sony, overwhelming public attention will probably generate 1,000x the ticket sales for “The Interview.”

For example, I no longer hang out with people who skip out on financial obligations. Why be around those with horrible money habits? You know them. Stay away. Can you learn from the money mistakes you’ve made, others have made? My parents were the worst with money and both died in debt with the IRS knocking on my door. I’m the opposite. I learned that disrespecting money was not part of the egg and sperm union. Bad enough I have drug and alcohol abuse, depression and lunacy in my family. I didn’t need to inherit an insane money imprint, too.

So, today’s the Friday after Christmas.

I think I’ll head to the movies.

“Unbroken” sounds good.

unbroken

 

Five Money Lessons Straight from the Frown of Grumpy Cat.

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Oh c’mon – You know Grumpy Cat.

You live in a hole? GOOD. Stay there.

That’s just something Grumpy would lament.

grumpy cat - floating

The “lovably hate-able” feline with the permanent scowl on her face due to a physical shortcoming, an underbite, has been an internet smash and much, much more.

Grumpy aka “Tardar Sauce” became a meme a couple of years ago and gained worldwide popularity by well, being grumpy and commenting  a straightforward “NO” to everything (and I mean everything), in sight.

Grumpy Cat isn’t just famous worldwide; she’s also a money maker.

Grumpy Cat Saving Money

 

Grumpy has brought in an astounding $100 million in revenue from merchandise (Grumpy has her own coffee – Grumppuccino), appearances, television shows.

Why is she so popular?

Perhaps Grumpy says no to all the things we wish we could. We like her spirit – she’s got spunk!

Yes, she’s cute too.

grumpy cat - so cute disgusting

I began to think about how Grumpy can help us improve our finances.

Can we learn from this irascible cat?

I think so.

Random Thoughts (Oh, this crap again?)

1). Understand your true money personality. Grumpy is finest when telling it “like it is.” The people who are good with money work with professionals to understand and minimize their money weaknesses and expand on their strengths. If you’re an over spender, admit it.  Make small changes that can lead to big results.

2). Debt can be irritating. If total monthly debt (including mortgage) exceeds 32% of your monthly gross income, then 2015 is a good time to knock 2% off. One improvement you can make right away is to cut your holiday gift budget by 10%. The last week of December total how much you spent for gifts this year and work to come in 10% less next year. Less debt means less grumpy. Use your debit card and cash more than credit, next year.

3). Saying “no” more often can lead to wealth. We all know Grumpy’s favorite answer to everything is always a resounding “NO.” Identify the ways saying “YES” hurt you, financially. For example, say “NO” to lending money to friends and family. As the economy improves, 2015 is the year to say “YES” to a new job. How do you know what your skills command in an improving marketplace? Get your resume together; keep your eyes open for opportunities to expand your paycheck.

4). Get unimpressed with things that can separate you from your cash. It takes quite a bit to impress Grumpy Cat. She’s always seeking to be unimpressed with well, everything. Do you really need to spend on the latest technology or smartphone or can it wait? If you’re looking to make a large purchase don’t be swayed by savvy sales pitches. Wait two weeks before you buy any item that costs more than $50. See if you can live without it. You may be surprised to discover that you’re unimpressed too and don’t need to spend the cash.

5). It’s ok not to care about what your neighbor is buying. I can picture Grumpy Cat staring out the front window of her home, saying no to new cars, new furniture and other stuff she doesn’t need because one thing we know about Grumpy: She just doesn’t care. Perhaps you care too much about impressing others and it’s costing you in the form of excessive credit card interest rate fees by spending more than you earn.

So, we all can’t be worth millions like Grumpy Cat.

That’s fine.

However, the characteristics that make her appealing are contagious.

Having a little Grumpy Cat inside can make us smarter with money decisions.

And that’s a “YES,” any day.

Aren’t you glad?

Grumpy Cat - happy I don't care

 

 

Five Financial Sanctuaries that Place your Retirement in Jeopardy.

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Originally appeared in MarketWatch’s Retirement Weekly.

In the AMC smash-hit television drama “The Walking Dead,” a group of road-hardened survivors of a zombie apocalypse seek protection from the undead (and the living who pose greater dangers than cannibalistic walking corpses.)

The fifth-season opener finds the weary characters fighting for their lives against a community of cannibals who lured them to a so-called safe zone called “Terminus.”

terminus

Handwritten signs and maps along roads and rails of rural Georgia guided the crew to a final destination, sanctuary was promised for all who arrived.

Sanctuary

On the surface, it appeared to be a dream come true. Warm smiles, comforting words, hot food.

Underneath, Terminus was nothing as promised or perceived. Victims were lured in to be placed in rail cars like cattle and eventually slaughtered.

rail car

As there is a fine line between fact and fiction, this harrowing situation got me thinking about portfolios in retirement.

 Stay with me.

Think sanctuary and think safety. A false tranquility can disarm and open the gates to great risks without your awareness. What lurks underneath your financial safe havens may eventually place your money and retirement lifestyle in jeopardy.

When making financial decisions and monitoring progress based on those decisions, you need to accept when the environment changes; make a move when safe havens turn to Terminus.

Here are five financial sanctuaries that can place a secure retirement at risk right now.

 Random Thoughts:

1). Stocks. Market sanctuaries can turn unrecognizable and hostile very fast. As the stock market reaches new highs there’s an ominous feeling of complacency among investors. It’s been over three years since the S&P 500 hit an official correction or greater than a 10% drop from a previous closing high.

Consider October’s volatility a wake-up call as early in the month, the S&P 500 was rapidly moving into correction, small-company stocks and international stocks were officially there and bond yields moved lower (100% of economists predicted that bond yields would be higher by fourth quarter 2014). October concluded much different than it started – with domestic markets headed to new highs.

Underneath the surface of stocks it looks nothing like a sanctuary – Large and mega-cap indexes have outperformed, a sign of a late-stage bull market phase, small-company stocks are recovering but underperforming, which points to risk abatement. It shouldn’t be ignored how cyclical stocks like energy, or those considered beneficiaries of economic expansion, are lagging defensive stocks (think utilities, consumer staples), currently. The outperformance in defensive sectors is usually indicative of market tops and economic peaks.

The Federal Reserve’s conclusion of quantitative easing  (bond purchase) program in October signifies a reduction of central bank liquidity that can increase volatility as investors and traders seek to figure out what the next tailwind for stocks is going to be.

The S&P 500 is 24.5% above its three-year moving average (36 months) -one of the widest dispersions from the moving average since fourth quarter 2007. Like a rubber band, over time market returns will stretch far above and below long-term moving averages. Although it’s impossible to know when the band will snap back to the moving average, historical downside going back to 2000 shows when the market does contract, the process is damaging. The worst contractions were 38% and 40% in 2002 and 2009, respectively.

Stocks are protection against inflation until they’re not and you’ve lost 5 years making back what you lost and inflation becomes the least of your problems. By then, you’ll feel trapped and look to re-pave the path of retirement. Whether it’s returning to work, reducing household expenses, cutting how much you withdraw from investment accounts – you’ll be prepared to do whatever’s necessary to preserve capital and slow the bleeding of investment assets.

Create an allocation to stocks that won’t cause you to panic when the bear market arrives (and it will). Don’t be overconfident. Remain vigilant and make sure to follow rules-based rebalancing where you trim gains on a periodic basis. The fourth quarter of the year is a good time to tax harvest – sell positions with capital losses in brokerage accounts to offset capital gains.

2). Index funds. It appears that index fund enthusiasts will stand strong and proudly absorb the blow as their stock sanctuary turns against them. Indexers believe that losses are temporary because in the long-term, stock markets always recover; paper losses aren’t real, they’re perceived as a bump along the path, par for the course. Like the befallen travelers who arrive at Terminus, they are not in touch with the reality of the situation they’re up against.

behead

A sequence of anemic returns or losses in the face of periodic withdrawals can dramatically decrease the longevity of a retirement portfolio. In other words, index funds are no protection against increased drawdown and market risks. At least fees make the losses less painful (or do they?).

The battle among “passive” indexers and “active” fund advocates is growing more heated as the fourth longest bull market in history continues.  I consider most of the discussion noise; the headlines are a distraction from the real perspective investors in retirement should maintain:

No matter what you hear out of most financial professionals, stock index funds are not passive. Every investment should be treated as active as soon as it is added to a portfolio.

Look beyond the attributes of stock index funds (and there are quite a few) like low fees, wide industry and company representation, tax efficiencies, and face the traps that will eventually put you in a position to fight or perish.

For example, index funds will experience the full brunt of a bear market attack (because generally they represent the market) which means you as the manager must decide the degree of loss you’re willing to accept. Staying invested is an action; reducing exposure to a losing index investment is an active decision. You are always in control, you always have a choice.

The preachers of passive seem willing to stand by and hope for the best. After all, you can’t control or predict the direction markets. That’s true. However, the amount of capital destruction you’re willing to absorb, is in your control. Consider the potential damage and recovery rate. Your back is against the wall. Are you ready to fight? If your portfolio suffers a 20% drawdown you’ll require 33.33% to break even.

Specific purchase and sell rules must be attached to each investment under consideration. Risk management never ensures against all portfolio losses, it minimizes the damage so you can come back and fight another day. It’s all about survival when it comes to the end of world (and your money).

Also, when you invest, depending on stock market valuations, is extremely relevant to future returns.

According to market historian and writer Doug Short, $1,000 invested at the peak of the market in the S&P 500 on March 24, 2000 would be worth $1,248 (adjusted for inflation) as of November 2, 2014, which equates to a 1.53% annualized real return.

Despite the mainstream marketing message (especially among indexers) designed to convince you that “time in the market” is a sanctuary, there have been many periods in history where you simply “ran out of time.” When adjusted for inflation, there are several 20-year periods in history where market returns have resulted in either low or negative outcomes.

Index funds have most likely outperformed your managed investments on the upside during this bull market; that doesn’t mean they’ll hold up better through market declines. And when you buy, based on market price/earnings, has a significant impact on future returns. At nearly 26 times earnings based on the cyclically-adjusted P/E ratio, “time in the market” may not be as beneficial over the next 20-years. It just may be a Terminus for your portfolio.

3). Retirement account withdrawals. The 4% withdrawal strategy is too generic to be effective yet it’s treated like a universal rule and preached in mass to new retirees seeking comfort after a long journey of employment. It’s as worn as the warped, wooden signs guiding The Walking Dead survivors to a place they perceive as refuge, but really is a trap.

Based on work by Sam Pittman Ph.D. and Rod Greenshields, CFA of Russell Investments, the first step to creating a retirement withdrawal that protects against longevity risk, is to calculate the ratio of current assets to the present value of forecasted retirement spending. This is called your current funded ratio. It’s a popular method pension administrators use to determine the fiscal health of their expected payouts for participants. Few advisers will consider this method and go straight to a withdrawal rate calculation that doesn’t account for an individual’s overall financial situation or household balance sheet.

The current-funded ratio method requires matching assets to liabilities to determine whether there’s adequate coverage over living expenses and inflation throughout retirement. A ratio of 100% or greater, especially during the first decade of retirement, is indicative of a greater chance of avoiding outliving a nest egg. If the present-value funded ratio is estimated to be less than 100% in ten years, adjustments to withdrawal rates or living expenses can be made before withdrawals occur. The ratio should be calculated every three years or after a sequence of below-average portfolio returns.

The strategy is called adaptive investing. Ask your financial partner about it to see if makes sense as part of your retirement planning process.

4). Company stock concentration at the beginning of retirement. Many retirees are hesitant to manage their net worth tied up in company stock, especially in the early years of retirement. Their human capital may have left the company and enjoyed the retirement party but the emotional attachment to the stock continues strong, and is possibly dangerous.

More than 25% of liquid net worth in company stock, leaves a retiree either “the butcher or the cattle,” a philosophy the tenured residents of Terminus believe. It’s a great tailwind to net worth and retiree psychology when an overconcentration to company stock is performing well hence the butcher. When the investment is performing poorly, a vulnerability to the retirement plan arises which becomes an emotional and financial drain to the retiree and others in the household.

A formal plan should include an exit strategy for company stock within 5 years of retirement. Work down to a 10% allocation which will satisfy your attachment need but won’t derail the early years of retirement. In addition, it can allow you greater diversification potential and liquidity to meet living expenses.

5). Your broker. Someone asked me once – “Are you a broker?” I replied – “No. I’m not here to break anything, I’m here to help.” Joking aside, you may be very comfortable with your current financial relationship; consider if you have an understanding of the motives behind your adviser’s employer. Perhaps you never gave it a thought.

 Ask this question: “What is your sales goal and how do I fit in?”

Yes, most in the financial services business are salespeople. Nothing wrong with it as long as your needs are met and full disclosures are made. However, maybe you’re looking for something more. I believe this question gets to the heart of a financial firm’s true motivation. Then ask: “How do you feel about your sales goals?” Are they perceived as fair by your financial partner? Ask another: “How much time will you spend with me, my planning needs and investment accounts?”

Get specifics. Ponder the answers, then consider: Are you a one-time sale or an ongoing relationship, or a bit of both?

In a recent podcast interview with self-help author and investor James Altucher, success coach Anthony Robbins shared candid insights from the experiences writing his new book, “MONEY Master the Game: 7 Simple Steps to Financial Freedom.” He explains how the financial system is designed to prosper the needs of shareholders, not investors.  My take: A key is to know what questions to ask and seek answers that are simple and transparent.

“There are 312 names for brokers, today,” Tony mentions. “I’m so supportive of people that are fiduciaries, people that are trained and who are legally required to look out for you. I’m looking for people who are fiduciaries and sophisticated.”

I believe disclosure of sales goals is important. Understanding if your adviser is a fiduciary and focuses on your interests first, or a broker that has his or her employer’s objectives as a primary focus, will help you find the right long-term partner or clarify a relationship you currently enjoy (or question).

The investing climate for retirees can be scarier than fleeing from flesh-eating zombies.

Even worse are times you believe you’re safe; conditions change, you fail to acknowledge the shifting environment or realize that a financial sanctuary has turned hostile.

 It’s always better to be the butcher than the cattle.

butcher or cattle

Perhaps that fiendish Terminus crew were on to something after all.