Should you pay for financial education?

Name me a skill or expertise you have acquired for free. Can you do it?

 

It is highly unlikely. Every skill we possess has cost us something -- either money, time, or more likely both.

 

Some people are reluctant to pay for financial education. I hate to be the one to break it to you. You are already paying.

 

Financial education has become critical in this country. Increasing choices and access to information makes our primary job as Family CFO, planning and funding 30 years of retirement, like navigating a baby carriage through a minefield. One wrong move and something very precious and fragile is going to go up in smoke.

 

 

When it comes to your money your choices are:

 

1. Hire someone to manage it for you - this is very costly in terms of money and poor performance -- you pay a lot and get very little in return.

 

2. Trial and error - also known as the school of hard knocks. This is very costly in terms of time and poor performance. Those lessons don't come cheap. I know. This is the way I did it.

 

3. Pay for education - pay someone to teach you the skills and knowledge they have acquired. This is, in my opinion, a nice balance. It should cost less money than paying someone else to do it for you and less time than the school of hard knocks. Your performance should be better too because you eliminate conflict of interest and many of the costly mistakes.

 

So how do you get through a minefield? Do you want to figure it out with trial and error or do you want to follow in the footsteps of someone who has already mapped the minefield and navigates it successfully day after day?

 

As always, I'd like to know what you think -- not only about the three choices above, but also about the future of financial education. Is it necessary? Where is it going to come from? Who is going to provide it? Leave your thoughts and comments below.

 

 

Kim Snider, Kim Snider Financial Communications, Chronim Investments and/or Snider Advisors make no representation that the information and opinions expressed are accurate, complete or current. The opinions expressed should not be construed as financial, legal, tax, or other advice and are provided for informational purposes only. Call 866-952-0100 to request the Snider Investment Method™ Owner's Manual, which includes a description of the Snider Investment Method, investment objectives, risks, suitability and other information. Please read and consider carefully before investing. All investments are subject to risk including possible loss of principal.

What's Your R-Score?

The PR firm for Nationwide sent me a note about a new tool they have developed called the RetirAbility Check^SM. It provides consumers a basic score – similar to a credit score - to illustrate how financially prepared they are for retirement using the National Retirement Risk Index from the Center for Retirement Research at Boston College (see previous post).

 

The following is from the email:

 

RetirAbility Check^SM requires no sign-up or membership. It is simple to use and can be completed in less than eight minutes:

 

1. Consumers visit nationwide.com to answer a series of questions on their current situation (household income, non-retirement savings, home value, debt)—no exact dollar amounts necessary. They are guided through the R-Check by a special “guide,” created to match each user’s demographic.

 

2. Users are entertained and cajoled by the guide who candidly makes comments on answers that the user inputs.

 

3. Users then receive their own personal retirement readiness score — their “R-Score,” a number from 1 to 100 that predicts what percentage of their ideal retirement income they’ll actually have at age 65.

 

4. Through the R-Check, users receive action-oriented tips on how to reach their “ideal” R-Score, all in a fun, engaging – and different – format.

 

I got my score last night. I scored 200+. What is your score? Take the test and see how you are doing at one of the most important jobs of the Family CFO -- preparing for retirement. Then let us know how you did and whether you think the score is an accurate measure of your retirement readiness.

 

Kim Snider, Kim Snider Financial Communications, Chronim Investments and/or Snider Advisors make no representation that the information and opinions expressed are accurate, complete or current. The opinions expressed should not be construed as financial, legal, tax, or other advice and are provided for informational purposes only. Call 866-952-0100 to request the Snider Investment Method™ Owner's Manual, which includes a description of the Snider Investment Method, investment objectives, risks, suitability and other information. Please read and consider carefully before investing. All investments are subject to risk including possible loss of principal.

Do You Need a Financial Planner?

When you have an investment talk show on the radio, you get emails like this one on a pretty regular basis:

 

Dear Ms. Snider-

 

I have heard your advertisements on KRLD for many months and FINALLY had a chance to look at your web site, briefly.

 

My husband and I are in our 50's. Neither one of us has a financial background and this is a second marriage for both of us. We have only been married for five years. It is PAST time for us to really start financial planning for retirement and thus the reason that your ads have intrigued me.

 

[...] I am not sure where to start. We desperately need to get a retirement plan going, and, we each have some investments (401K, husband & IRA, wife) with some money but we need to get much more aggressive in our plan, immediately.

 

I think we need a financial planner (or maybe not) to help us that we can trust and believe in, and where do we find such a person????

 

Many of you may be thinking about consulting with a financial planner. After all, this market is very confusing. The news tells you the Dow is hitting all-time highs. So, how come your portfolio is still down from its 2001 highs? Is this the top or is the market going higher? How do I provide for my family? How am I ever going to retire? Do I have enough saved to live on? Or maybe you are already working with a planner.

 

Do you really need a financial planner?

 

Do you really need a financial planner? For most people, I believe the answer is no! Very few people actually need a financial planner because most of you don't have enough money to make anything about your financial plan so complicated that it requires a planner.

 

What most people need instead are education and discipline - and a financial advisor can't and won't give you either one.

 

I have no problem with the financially educated person who goes to a planner as a partner in the process, who is educated enough to contribute to the process, express what he or she wants to achieve specifically, and already has a pretty good idea of how to get there but simply wants a different perspective in case he or she hasn't thought of something.

 

Are you substituting advice for education?

 

Where I think people are making a tragic mistake is in substituting an advisor for an education. The thinking goes, "I don't have to really understand this stuff. That is what I pay the advisor for."

 

Let me tell you how to know if there is a problem. If you just automatically rubber stamp what your advisor proposes, then you have a problem. If you can't have a meaningful conversation with him or her, on an equal footing, about the different investments, how they contribute to your objectives, their pros and cons, costs and implications, then you're not investing, you're betting - you're betting that your advisor knows what he or she is doing and that they will put your interests before their own. Now how good a bet do you think that is?

 

You are the only one that can fix your mess!

 

Here is the other thing I see. Half the people who write me asking for advice on a financial planner write because they are in trouble. They have credit card debt up to their eye balls and they want someone to figure out a way to get them out - preferably a painless way that they don't have to give up anything. Or they didn't save enough for retirement and now with ten years to go, they are looking for a professional, who surely through their infinite wisdom and knowledge can make up for the last twenty years by pulling a rabbit out of a hat.

 

Well, I have bad news for you. Knowledge alone won't do it. You also have to have discipline and it is a lack of discipline that got us all into these scrapes in the first place.

 

Believe me, I know. I have been in every financial mess known to man. When I was younger, (and I might add - dumber and more impulsive), I had debt up to my eyeballs. There were long periods in my life where I had zero savings even though I made a nice income. Retirement planning? Ha! Forget about it!

 

So I know of what I speak.

 

In fact, many years ago, I sought out a CPA in hopes that she could tell me how to bring my expenses in line with my income. When she told me I should start by selling my polo ponies, I fired her! That wasn't what I wanted to hear. I wanted magic - not sacrifice!

 

Wealth requires sound character

 

In the end, the only way I got out of debt, and cleaned up my credit report and began to put away money to invest, was I had to learn discipline. You can know more about investing than anyone else in the whole wide world but without discipline it is useless, because it takes discipline to resolve your former sins - not a financial advisor - and it takes discipline to save, and it takes savings to seed real wealth.

 

It is not an exaggeration to say that to build financial security requires you to look deep inside yourself and find the discipline of character to exercise sound judgment, moderation, and restraint. Without those character traits, you will never be financially secure.

 

It isn't just saving that takes discipline

 

By the way, discipline isn't just necessary for fixing past sins, or saving up enough so you can invest and live well happily ever after. Discipline is the single hardest part of the investing process.

 

It takes discipline to stay the course, to not get impatient, to not sell every time you get fearful and to not change horses in mid stream or buy something you shouldn't because you are feeling greed and avarice. Discipline is an integral part of investing and no financial planner can create that in you.

 

While I will concede there are some, (maybe even many), good and honest financial planners out there, I cringe when someone wants to go visit one, for three reasons:

 

1. As I have already discussed, people often seek out planners for the wrong reasons. Often we are looking for something that needs to be found within ourselves, not externally. 2. Most people don't have situations complex enough to require a financial advisor, in which case, you are just wasting money. With a little education, you should be able to figure out what you need and then go to individual providers such as an insurance broker or attorney to get the pieces you can't do yourself. 3. Most of them will sell you crap products you don't need.

 

Wolves in sheep's clothing

 

Most financial advisors cloak themselves in respectability by calling themselves financial planners or financial advisors when in fact, they are simply commissioned salespeople, who are paid to sell the mutual fund, stock, annuity, or insurance policy their company wants them to sell. If you go to an advisor with no prior knowledge or understanding, you are then unable to distinguish between a good investment and a good sales pitch - and let me tell you the good sales pitches outnumber the good investments about a hundred to one. Most of what gets sold is garbage, but you end up buying it because you don't know the difference.

 

If you doubt me on this, you need only look at the companies involved in recent regulatory investigations, prosecutions and settlements. You would be hard-pressed to find a large financial services company that has not been implicated in the fleecing of investors. They include, but are not limited to: Merrill Lynch, Morgan Stanley, Bear Stearns, CS First Boston, Goldman Sachs, Lehman, JP Morgan, Citigroup, Solomon Smith Barney, UBS Warburg, Charles Schwab, TD Waterhouse, Edward Jones, Piper Jaffray, Putnam, Strong, Scudder, Janus, Alliance Federated, Franklin Templeton, INVESCO, PIMCO, Bank of America, Bank One, Waddell & Reed, Prudential, Wachovia, Prudential ... I could keep going because this is just a partial list. You get the point?

 

Fee only is the only way to go

 

If you really do think you need a planner, then by all means, make sure that you only work with fee-only financial planners. A fee only financial planner is one who gets paid by the hour, rather than by accepting commissions on the products they sell you. That is the only way you can know that there is no conflict of interest.

 

You may hear some people use the term fee-based. Don't be fooled. Fee based and fee only are not the same thing. Fee-based take your money and the commissions! Make sure your planner is fee only.

One way to find a fee only planner is through the National Association of Personal Financial Advisors (NAPFA). For a planner to be a member of NAPFA, they must be fee-only. They have a search tool on their site for locating fee only planners in your area. Their web site address is feeonly.org.

 

So if you are working with an advisor now, or thinking about working with one in the near future, my advice would be to stop for a minute and ask yourself, "Why?" What is your reason for seeking out help? If it is because you don't know enough or because you hope someone else will instill the discipline to get you out of a mess, you might want to re-think your situation.

 

Best-selling author and financial journalist Jane Bryant Quinn puts it this way in Making the Most of Your Money:

 

"Most of us don't need professional planners. We don't even need a full-scale plan. Conservative money management isn't hard. To be your own guru, you need only a list of objectives, a few simple financial products, realistic investment expectations, a time frame that gives your investments time to work out, and a well-tempered humbug detector, to keep you for falling for rascally sales pitches."

 

Kim Snider, Kim Snider Financial Communications, Chronim Investments and/or Snider Advisors make no representation that the information and opinions expressed are accurate, complete or current. The opinions expressed should not be construed as financial, legal, tax, or other advice and are provided for informational purposes only. Call 866-952-0100 to request the Snider Investment Method™ Owner's Manual, which includes a description of the Snider Investment Method, investment objectives, risks, suitability and other information. Please read and consider carefully before investing. All investments are subject to risk including possible loss of principal.

Boomers Aren't Getting Needed Advice

If you are like most Americans, you don't feel the financial services industry has the ability to meet even your most basic needs when it comes to retirement planning. Less than one-third of adults in a new survey by McKinsey & Co., said they had gotten even a bare minimum of advice about retirement from brokerage firms, financial planners and insurance companies. Most of us, including me, believe that advisors are only interested in pushing products and are putting their own financial interests ahead of their clients.

 

Baby boomers face a minefield of issues, unprecedented in the last eighty years. The employer sponsored pension system is on its last leg. Healthcare costs are rising four times the rate of other goods and services. And the federal government is effectively bankrupt given the future obligations it has under Medicare and Social Security.

 

In my view, there is only one answer. Americans must make financial education and financial accountability a priority. No one is going to take care of you. It is up to you to create your own financial plan. The highest priority within that plan must be a permanent and dependable source of income that will support a reasonable standard of living throughout thirty years of retirement.

 

So let's do our own informal survey. How many of you feel you have gotten good retirement planning advice from the mainstream financial services providers? What do you think motivates the advice you receive? Take the polls below. You will see the poll results when you click "Vote Now". Thanks for playing!

 

SOURCE:

 

1. "Boomers Doubtful About Retirement Advice"; Financial Advisor; August 2006; p 32

 

Kim Snider, Kim Snider Financial Communications, Chronim Investments and/or Snider Advisors make no representation that the information and opinions expressed are accurate, complete or current. The opinions expressed should not be construed as financial, legal, tax, or other advice and are provided for informational purposes only. Call 866-952-0100 to request the Snider Investment Method™ Owner's Manual, which includes a description of the Snider Investment Method, investment objectives, risks, suitability and other information. Please read and consider carefully before investing. All investments are subject to risk including possible loss of principal.

Crash Course in Investing

As the baby boom generation hurtles toward retirement, many investors face a crash course in investing. Baby boomers have gotten caught in a set of bad assumptions.

 

First, they assumed their retirement would take care of itself like it did for their parents and grandparents. Then they assumed that the financial experts they hired would guide them along the proper course. Now, come to find out, they are really on their own, with little time left.

 

Boomers - and their advisors - are stuck in the past. The majority are still operating on assumptions from the 1950s. The well-documented result is that investors are unprepared for a reality that is very different from the one they imagined.

 

An article on Financial-Planning.com summarizes a presentation to this effect, by Ron O'Hanley, vice chairman of Mellon Financial Corp. and president of Mellon Asset Management:

 

Closing that gap means understanding and investing in the products that will help employees bolster what they have squirreled away in 401(k) and IRA accounts, and it may mean going beyond index funds or hoping to make a million by picking smart stocks, he said. Mellon advocates actively managed products.

 

"Traditional weighting is not going to get it there. Relying on beta is not going to get it there, and relying on alpha is not going to get it done, either," he said.

 

Not only are individual investors woefully unprepared to choose from the types of products to protect against a cash shortfall in retirement, but many advisers are ill-suited to serve them, said Tom Eggers, president and chief operating officer of The Dreyfus Corp., the retail arm through which Mellon channels its investment products.

 

"Most [advisers] are trained to help people accumulate wealth, to put together a nest egg of their own," Eggers said. But many are still learning how to manage the next phase: distribution. "The focus must be to help the customer make the transition," he said.

 

"You've got to take the shackles off the investment manager," said Charlie Jacklin, chief executive officer of Mellon Capital Management. Jacklin advocates a model-first approach, whereby portfolio managers devise products through fundamental quantitative analysis before looking at past performance. Prohibiting short sales or demanding that portfolios maintain a specific mix can also hamstring a fund, he said.

 

The problem of self-funding thirty years of retirement is unprecedented in the history of modern financial markets. It is clear the old tools and the old way of thinking are not suited for this sort of challenge. New ideas and new tools will be needed and investors themselves will play a central role in their development.

 

We know products and ideas progress through what is known as an innovation adoption curve. Innovators and early adopters have started to wake up to the need for change. The majority are still oblivious.

 

My fear is that many will need to see the vanguard of their generation crash and burn on the rocks of retirement before they really get serious about seeking out solutions and, by then, it will be too late for them.

 

What do you think? Leave your thoughts and comments below.

 

SOURCE:

 

1. Hannah Glover, "Mellon: Institutional, Individual Investors on a Crash Course"; Financial-Planning.com; 7 Jul 2006

http://www.financial-planning.com/pubs/fpi/20060707102.html

 

Kim Snider, Kim Snider Financial Communications, Chronim Investments and/or Snider Advisors make no representation that the information and opinions expressed are accurate, complete or current. The opinions expressed should not be construed as financial, legal, tax, or other advice and are provided for informational purposes only. Call 866-952-0100 to request the Snider Investment Method™ Owner's Manual, which includes a description of the Snider Investment Method, investment objectives, risks, suitability and other information. Please read and consider carefully before investing. All investments are subject to risk including possible loss of principal.

 

You Can't Invest What You Don't Save

I often talk about the four legs of financial success and the six basic tenets, or principles of the Snider Investment Method™. Hopefully, people don't get them confused.

 

I define financial success as having sufficient financial resources that work becomes a personal choice instead of a financial necessity. I believe financial success is built on a foundation made up of:

 

1) a long-term, conservative approach to money

2) prodigious saving

3) prudent and purposeful investing

4) entrepreneurialism

 

The six principles of the Snider Method are:

 

1) you alone are accountable for whatever financial condition you find yourself in

2) emotions are an investor’s worst enemy - our herd instinct causes us to buy when we should be selling and selling when we should buying

3) most investments are designed to make Wall Street rich, not you, and the more people selling them the less likely they are to be a good investment

4) stock picking and market timing do not work -the empirical evidence is overwhelming that stock prices are random and cannot be predicted consistently over time

5) minimizing risk is as important as returns

6) the key to building wealth is making your money work consistently every single day, regardless of market conditions, economic conditions or geo-political events

 

Let's talk about saving - not an area I typically focus a lot of attention on. My primary focus is on #3 - prudent and purposeful investing. But I often get emails like this one:

 

I have very little money and I don't mean a couple of thousands either. I am lost in where to put it to make it grow and work for me. I tried to grow it but that doesn't seem to work, I don't have a greet thumb either. How much do I save to even begin making my money work for me? I know I'm probably helpless but I thought I would give it a shot. Thanks!

 

Most of us get the cart before the horse. The biggest mistakes I see people male are:

 

1) try to invest before they save

2) try to invest without really knowing what they are doing

3) try to turn almost nothing into a little something by taking too much risk, thereby almost guaranteeing their nothing will always be nothing

 

When you have no savings, your focus can't be on investing. The first thing you have to do is put at least six months of expenses in a money market fund. This is not negotiable. You should not be investing to try to create your emergency fund. You save that first!

 

Work on your financial education while you are saving so when you are ready to invest, you know what you are doing. I believe the most important job you will ever hold is that of Family CFO. Make sure you are qualified to do the job.

 

Finally, once you have a little money to invest, don't go out and take a flyer on stocks. Build slowly and focus on managing risk. The biggest fallacy most people fall prey to is that taking a lot of risk guarantees a bigger return. It does not. It guarantees that, if you play long enough, the losses will be bigger and more frequent. Mathematically, a lot of risk guarantees a lower return, not a higher one.

 

Of course, the next thing out of most people's mouth will be, "I can't save. I am living paycheck to paycheck." I know it is hard but it can be done. I've been there and I've done it. So can you.

 

If you are in a position where you have not started socking away money, the best resource I can recommend is David Bach's books, "Automatic Millionaire" and "Start Late - Finish Rich."

 

Warning: I do not agree with David's approach to investing. That is probably no surprise given his former life as a senior vice-president of Morgan Stanley. I'd rather stick pins in my eyes than invest in a mutual fund. But … his advice for saving money, while it seems simplistic, is very doable. You can find the "Automatic Millionaire" on my reading list in Kim's Korner.

 

So I am curious. How many of you have six months of expenses in liquid assets like a savings account or money market? Take the poll below. Also, what constructive advice can you give the person who wrote the email above? Leave your comments below.

 

Kim Snider, Kim Snider Financial Communications, Chronim Investments and/or Snider Advisors make no representation that the information and opinions expressed are accurate, complete or current. The opinions expressed should not be construed as financial, legal, tax, or other advice and are provided for informational purposes only. Call 866-952-0100 to request the Snider Investment Method™ Owner's Manual, which includes a description of the Snider Investment Method, investment objectives, risks, suitability and other information. Please read and consider carefully before investing. All investments are subject to risk including possible loss of principal.

 

Think For Yourself

As the Chief Financial Officer of a company, if year after year, your company was losing money, would you just continue to do the same thing each month and hope that things got better. I doubt it, or you wouldn’t remain CFO very long. The board would fire you.

 

You all know the old saying – the definition of insanity is doing the same thing over and over and expecting a different result. Would you keep going back for advice, to the same people that told you to do what was losing your company money? I don’t think so!

 

You would look for new ways to market your product, maybe introduce new products, or start looking for different customers, something! You might even shake up the ranks in search of fresh new ideas. Why? It’s so clear when we are running a business. You have to. The future of your company depends on it.

 

But isn’t it interesting that when the family investment business loses money, or the quality of its earnings are at risk, most of us do nothing? We bury our heads in the sand. We hope a bear market doesn't bite us in the butt. We don’t look for fresh ideas. We just keep doing what we’ve been doing, hoping that things will all work out. Think about it! Is that any way to run the family business?

 

Most people treat the process of building wealth as a passive activity. They turn over their hard earned money to a financial planner or mutual fund manager and hope that he or she makes the right decisions. They are, for the most part, a rubber stamp.

 

Dick Cavett once said, "People tend to treat their finances like their dentistry. They assume the man handling it knows what he is doing." They also make the faulty assumption that no matter how well he does, it is better than they could have done on their own. That is absolutely false. The fact is, investing is much more rewarding, and profitable, when you take an active role.

 

The book The Millionaire Next Door, studied the characteristics of Americans with a net worth of over $1 million. They found that most do not earn a large income and that very few inherited their money. What set them apart from non-millionaires were their saving and investment habits. They generally invest 20% of their annual household income and make all of their own investment decisions. The authors also found that the average millionaire spent twice as much time planning his or her savings and investment decisions than the average non-millionaire earning the same income.

 

If you are one of the many people who do not save and invest, or take a passive role in your investment decisions, the most important thing you can do to start creating wealth and financial independence is to get started. You know the old saying ... "Better Late Than Never!"

 

Kim Snider, Kim Snider Financial Communications, Chronim Investments and/or Snider Advisors make no representation that the information and opinions expressed are accurate, complete or current. The opinions expressed should not be construed as financial, legal, tax, or other advice and are provided for informational purposes only. Call 866-952-0100 to request the Snider Investment Method™ Owner's Manual, which includes a description of the Snider Investment Method, investment objectives, risks, suitability and other information. Please read and consider carefully before investing. All investments are subject to risk including possible loss of principal.

 

Get a financial education

Only 19% of Americans in a recent EBRI study could correctly identify the age at which they become eligible for Social Security benefits. Only 37%, in a Washington State survey, knew that bond prices fall as interest rates go up. And most surprisingly, only 61% knew that stocks returned more than bonds over a 40 year period.

 

The simple fact is Americans are basically clueless when it comes to money. There should be a big incentive for each of us to get educated - money sticks to people who know what to do with it. It flees from those that don't. The cost of ignorance is very real. Yet that doesn't seem to have sunk in for most people.

 

Bankrate.com gave people a test to see what level of financial sophistication they had. Then it looked at differences between the financially literate and the financially dense. It found high scorers had mortgages with an average interest rate of 5.95 percent. Those who received an "F" in financial literacy ended up with loans averaging 6.80 percent. It may not sound like much, but Bankrate.com tallies up the savings and the results may surprise you:

 

If you get a $150,000 30-year fixed-rate mortgage at 5.95, you end up paying $322,024. But with a 6.80 percent loan, the final total is $352,040 for the same home. The difference: a tidy $30,016. And who wouldn't want that money earning interest in a 401(k)?

 

You know the phrase work hard, play hard, right? In a former life, I worked at a company that was the poster child for the work hard play hard mentality. We were all very young, unmarried mostly and very, very ambitious. We had our little rituals that we used to torture new employees. They were part of our culture, part of our lore. Those in the know were on the inside. For those that were the victims of our innocent pranks, it marked their passage from outsider to a member of the club.

 

One of those rituals was called spoon fighting, which only occurred after too many drinks, up at Fridays after work. The uninformed newcomer would be spun this great tale, usually by a senior executive about our long tradition of spoon fighting brought over from England. He would then be told that one of us, who by the way, knew all about spoon fighting – we were informed! – was the reigning spoon fighting champ and that all new employees had to face the champ in a spoon fight. That was the tradition.

 

Well, no one could resist, what with all of us chanting spoon fight, spoon fight! And of course, being a relative newcomer there was a lot of pressure to impress your peers and to fit in so of course I’ll spoon fight! Bring on the champ.

 

The rules of the game were explained to each warrior. You had to hold a regular teaspoon between your teeth and then you had whack your opponent on the head as hard as you can. Each person got five tries. Oh yeah, and there was a catch, both were blind folded.

 

A napkin was used to blind fold each participant and the new guy always went first. He would put the spoon in his teeth and try mightily to hit his opponent as hard as he could on the top of the head with the spoon. You can imagine us roaring at his clumsy efforts. “Keep going”, everyone would shout in encouragement. “You’ll get the hang of it.”

 

When it was the champs turn, he would have his blind fold off and he would act as if he had the spoon in his mouth but at the same time, the “referee” would have a spoon in his hand and would rare back and thwack the poor blind folded newbie as hard as he could. "Oww", he would cry. "Dang that hurt!" The bystanders would all cheer for the champ. "Yea! Well done!"

 

This would go on for some time until one of two things would happen. The unaware newcomer would get bashed in the head all the way to the end of the game vowing to practice his spoon fighting skills and come back another day to meet his tormentor, or it finally dawned on him that the game was rigged and everyone else was in on it except him.

 

Now I freely admit this was a juvenile ritual performed by a bunch of drunks and you may find it appalling. But if you do, so much the better.

 

Are you starting to feel that lump yet? This is the game most of us play. The difference is, in the spoon fight, the victim almost always figured it out. In the financial markets most of us never do. We remain on the outside getting thwacked, paying the penalty that the uninformed must pay until they understand the game as well.

 

Here is the good news. Learning the rules to spoon fighting is quite simple. You just have to be let in on the secret and you will never be taken advantage of again - at least not in a spoon fight.

 

Same is true when it comes to the investment game, the rules are a little more complicated, but still, all it takes is someone who is willing to learn and someone who is willing to teach.

 

The most important thing you can do, in my opinion, is to find someone who is achieving the results you want, glom onto them, make them your mentor, seek out their advice, and learn as much from that person as you can. Take them out to dinner, put them on your personal board of directors – whatever it takes to get the benefit of their wisdom.

 

On the other hand, if someone is not getting the results you want, their advice isn’t worth very much is it? Discard it. It’s worthless.

 

SOURCES:

 

1. "Do You Know When You Qualify for Full Social Security Benefits?" Fast Facts from EBRI 25 May 2006

http://www.ebri.com/pdf/publications/facts/fastfacts/fastfact052506.pdf

 

2. "Survey of Financial Literacy in Washington State: Knowledge, Behavior, Attitudes, and Experiences" Washington State Department of Financial Institutions; December 2003

http://www.dfi.wa.gov/news/finlitsurvey.pdf

 

3. Dana Dratch; "Financial literacy pays off in many ways " Bankrate.com 6 April 2004

http://www.bankrate.com/brm/news/financial-literacy2004/pay-off-home.asp

 

Kim Snider, Kim Snider Financial Communications, Chronim Investments and/or Snider Advisors make no representation that the information and opinions expressed are accurate, complete or current. The opinions expressed should not be construed as financial, legal, tax, or other advice and are provided for informational purposes only. Call 866-952-0100 to request the Snider Investment Method™ Owner's Manual, which includes a description of the Snider Investment Method, investment objectives, risks, suitability and other information. Please read and consider carefully before investing. All investments are subject to risk including possible loss of principal.

 

Top Ten Tips for Financial Success

Success, in any endeavor, is guaranteed by simply doing the right things every day. In other words, discipline ensures success. On the other hand, success without discipline is just dumb luck.

 

You can't depend on dumb luck. I had it once. It was fleeting. Now whatever success I have, I own, because it comes from inside. I worked for it.

 

There are no shortcuts either. No one wants to work or wait for success. We all want it now. But it doesn't work that way. Look inside any success story and at its core, you'll find a laser-like focus. Look at anyone who tried to take a shortcut to success and you will find it ultimately blows up in their face.

 

Discipline ensures success. Wow! Just saying those words out loud fill me with energy.

 

This is such a powerful concept because it puts accountability where it rightfully belongs - with the individual. If my life is a mess, I have no one to blame but myself. I wasn't disciplined enough to do what it took to make my life right. If my relationships are bad, shame on me. I obviously didn't make them a priority.

 

But the flipside is, and I truly believe this, that whatever success I want I can have - so long as I am willing to do the work required. How cool is that?

 

So how does this apply to financial success? Simple. I think you have to have the discipline to do the following ten things:

 

 

1. Make your money a priority.
2. Get a financial education.
3. Think for yourself.
4. Focus on outcomes - not numbers.
5. Spend less than you earn.
6. Manage  risk.
7. Manage costs.
8. Buy when others are selling and sell when others are buying.
9. Stay away from trying to time the market or pick stocks.
10. Create a plan and stick with it - there is no such thing as get rich quick!

 

I will expand on each of these in future posts. In the meantime, tell me what you think.

 

Would you add anything to this list? Which of these do you find the hardest and why? What actions do you need to take right away to achieve the financial success you want? Leave your thoughts and comments below.

 

Kim Snider, Kim Snider Financial Communications, Chronim Investments and/or Snider Advisors make no representation that the information and opinions expressed are accurate, complete or current. The opinions expressed should not be construed as financial, legal, tax, or other advice and are provided for informational purposes only. Call 866-952-0100 to request the Snider Investment Method™ Owner's Manual, which includes a description of the Snider Investment Method, investment objectives, risks, suitability and other information. Please read and consider carefully before investing. All investments are subject to risk including possible loss of principal.

PBS Program Creates Controversy

The documentary, entitled "Can You Afford to Retire?", was broadcast on the PBS show Frontline May 16. The program examines the looming retirement crisis and, like many of us, concludes that Americans are in for a rude shock.

 

The entire program, along with FAQs, polls, discussion groups, additional analysis and articles, interviews with industry insiders and retirement experts, and case studies of employees featured in the story are all included on the PBS web site.

 

Here is the introduction from the Frontline web site:

 

"I think this is a crisis in the making," says Alicia Munnell, director of the Boston College Center for Retirement Research. "I think 10 or 15 years from now, people who approach their early 60s are simply not going to have enough money to retire on."

 

"I would say, unless you're fortunate to be in the upper-income quartiles, that you're probably going to be in for a very rough ride," adds Jack VanDerhei of the Employee Benefit Research Institute (EBRI). "You're not going to have sufficient monies to pay the predictable expenses -- your housing, your utilities, your food -- plus the potential catastrophic medical care costs."

 

Half of America's private sector workforce has no employer-sponsored retirement plan; among the half that does, twice as many workers have contribution plans like 401(k)s than have lifetime pensions, a complete reversal from 25 years ago. The move from lifetime pensions to 401(k) plans has meant that employees now bear much more of the cost -- and risk -- for saving for retirement. According to the U.S. Department of Labor, in 1978 workers put in only 11 percent of total contributions to retirement plans, while corporations put in 89 percent; by 2000, the employee share had leapt to 51 percent and the company share had fallen to 49 percent.

 

A major driver behind this shift is a corporate bankruptcy strategy that enables companies to terminate lifetime pension plans through Chapter 11 bankruptcy. "Chapter 11 has become an effective tool for reorganizing a business," says Elizabeth Warren, a Harvard Law School professor and specialist in bankruptcy law. "It's like a knife on the surgeon's table. Bankruptcy is the official, federal, formal way to take legal promises and just slice them off."

 

FRONTLINE takes viewers inside the Chapter 11 bankruptcy of United Airlines. United dumped its pension plans, which were underfunded by nearly $10 billion, on the Pension Benefit Guaranty Corporation (PBGC), the federal agency insuring pensions that is running a $23 billion deficit. Because the PBGC only insures pensions up to a certain amount, many United employees and retirees saw their pensions slashed dramatically.

 

Robin Gilinger, a 42 year-old United flight attendant, has seen her pension drop by nearly 30 percent and her other benefits cut. Gilinger says she now expects to have to work five to 10 years longer than she originally planned. "I feel very uneasy about where I'm going to be in 20 years," Gilinger says, "And I'm afraid that I'm going to end up having to work my golden years doing things that I didn't necessarily want to be doing."

 

With their lifetime pensions gone, the current workers of United have joined the millions of Americans trying to save for retirement in 401(k) plans. "Most people we interviewed have no idea what it costs to replace a lifetime pension," says Hedrick Smith. "And they don't realize that as they're living longer, there is an impact on their nest egg."

 

To maintain their standard of living, experts say Americans will need to save ten times their annual pay in their 401(k)s by the time they retire. That means saving 15-18 percent of their salaries, every year, over an entire career.

 

By this standard, most Americans are simply not saving enough. According to VanDerhei of the EBRI, the typical baby boomer is approaching retirement with only three times annual salary -- enough to last seven or eight years. But with life expectancies after age 65 approaching 18 years, many retirees may be living on nothing but Social Security for a decade or more.

 

"The nightmare I have," says pension expert Brooks Hamilton, "is the vision of people … outliving their retirement income and being down to Social Security." And the shock waves may reverberate through the entire economy. "What holds up our economy," says Hamilton, "is consumer spending. When retirees are 20 percent of the population and run out of money, then 'poof,' there goes the economy."

 

The change is already happening, as retirees find they are having to go back to work to make ends meet. Pat O'Neill, a retired United Airlines mechanic, is now driving a truck after his pension and benefits were cut. Winson Crabb and Gil Thibeau, two National Semiconductor retirees with widely different financial results from their company's 401(k) plan, are both still working in retirement.

 

"What is the meaning of retirement if the only way you can live is to work?" asks Notre Dame professor Teresa Ghilarducci "The answer is there is no meaning to retirement anymore. We are now shifting from lifetime pensions to lifetime work. It's the end of retirement."

 

On Tuesday, the Profit Sharing/401(k) Council of America (PSCA) issued a statement calling on workers to disregard the program, which was critical of the employers and retirement plans represented by PSCA, saying it "objects to the conclusion reached by the PBS Frontline program".

 

On Wednesday, Dallas Salisbury, President of the Employee Benefit Research Institute (EBRI) issued a statement suggesting that PBS re-air the program over and over and that he hoped the program would make its way into schools and be distributed by employers. Salisbury's statement says, in part:

 

While the Frontline special stressed points that I would not have chosen in some cases, and did not include others that I would have, it was a strong message to individuals to pay attention, have a retirement plan, watch fees, save a lot, beware of salesmen offering the next sure thing, and be cautious of anyone who says, ‘Trust me—I will take care of everything for you’. The end message—‘the end of retirement’—might have been a bit strong; but the Retirement Confidence Survey® and other EBRI research makes it clear that millions of baby boomers and younger generations are living in a dream world thinking they can retire on what they now have, or on what they will have based upon the savings they are now doing.  Years of our surveys and simulation work document that workers have a high level of false confidence and that most need to dramatically increase their rate of savings to just be in a position to meet basic expenses, let alone have adequate retirement income to maintain their pre-retirement lifestyle.

 

I hope you will watch the program yourself and then let me know your thoughts. Is retirement, as we know it, a thing of the past? Was FRONTLINE overly sensational or do you think they are right on target? Let us know what you think. Post your thoughts and comments below.

 

Kim Snider, Kim Snider Financial Communications, Chronim Investments and/or Snider Advisors make no representation that the information and opinions expressed are accurate, complete or current. The opinions expressed should not be construed as financial, legal, tax, or other advice and are provided for informational purposes only. Call 866-952-0100 to request the Snider Investment Method™ Owner's Manual, which includes a description of the Snider Investment Method, investment objectives, risks, suitability and other information. Please read and consider carefully before investing. All investments are subject to risk including possible loss of principal.