How to Live Like Your Dreams Now

Many people view retirement as a 30-year vacation, full of leisure and travel. But new retirees often find that retirement isn’t the carefree life they expected. They miss having social interactions, a sense of achievement and daily structure — and as a result, some experience weight gain, marital discord, depression or substance abuse.

And many retirees, especially those who retire early, end up returning to the workforce.

Retirement often looks different today than it has in the past. And as you reconsider how you want to spend your golden years, it’s a good idea to contemplate big-picture life goals and current desires.

Maybe some of those dreams don’t have to wait until retirement.

Rethinking retirement

Rather than leave careers they enjoy, some baby boomers are working well beyond the traditional retirement age of 65 or phasing into retirement over time. Increasing longevity and improving health outcomes also relate to this decision.

But these boomers aren’t necessarily working 40-hour weeks. Companies are growing more receptive to employees’ desires for flexible schedules, including three- or four-day workweeks or remote work. These arrangements free pre-retirees to spend time on travel, hobbies and other goals — and lead to enhanced productivity and job satisfaction.

Work-life balance is the key ingredient to happiness. According to John Wasik’s New York Times article “Facing Retirement, but Easing Your Way Out the Door,” many workers enjoy their reduced schedules so much that they’re extending the arrangements for years longer than they planned.

Figuring out what you want now

In his book “The 4-Hour Workweek,” author Tim Ferriss argues that reduced workweeks are a growing trend for all workers, not just pre-retirees. Technology and the “Uberization” of the global economy allow workers to leverage overseas vendors and virtual assistants and focus on their “highest and best use” skills, in and out of the office. You don’t have to wait for that magical moment in time called retirement.

“Someday is a disease that will take your dreams to the grave with you,” Ferriss writes. “Lifestyle Design is not interested in creating an excess of idle time, which is poison, but the positive use of free time, defined simply as doing what you want as opposed to what you feel obligated to do.”

My favorite parts of the book are the exercises that help you identify what you want to have, be and do within the next six to 12 months. These are similar to the questions I pose to clients when I first meet them. Younger clients often have no problem identifying 10 or more things they want to achieve before they die, but clients who are in their late 50s and older tend to have a harder time completing these exercises and may even focus on their kids’ needs instead of their own.

Here’s a sample of the questions Ferriss uses to get people back in touch with the things that excite them and guide them through the goal identification process :

  • What are you good at?
  • What could you be best at?
  • What makes you happy?
  • What excites you?
  • What are you most proud of having accomplished in your life and how can you repeat this or develop it further?

Financial planners are life planners

Life planning creates the foundation for your financial plan. When I understand my clients’ goals, I can ensure that their money is allocated and prioritized to help them reach those goals. The financial plan then comes to life in a powerful way for clients. They can envision the future — whether it’s 12 months or 20 years from now.

Does your financial planner ask you questions like the ones above? Is he or she more interested in you or your money? Find a planner who provides holistic financial planning services and helps you start working through your bucket list. You don’t have to wait until retirement to start enjoying your time or your money.

Would you like to invest and learn more about it

As a financial planner and fiduciary investment advisor, I work with people with varying goals and vastly different levels of education, income, assets and comfort with technology. I’m often worried by similarities I see among investors of all stripes.

Many people simply have no plan when they start investing. Others follow the latest hot investment tips from a stranger online, on TV or in a magazine. I’m surprised by how many investors think they’ve done well, but don’t know how to measure their true rate of return for the risk they have taken. Few investors even know how much risk is in their portfolios.

These issues arise because investors generally don’t use a consistent methodology — a repeatable, rule-based process — to build or monitor their portfolios. That often leads to portfolios that aren’t well-diversified, don’t have the appropriate amount of risk for the investor and aren’t tax-efficient. What’s more, many investors don’t review their portfolios and haven’t thought much about how their investments fit into a bigger overall plan.

Are you ready to invest?

What can you do to make sure you aren’t in this camp? First, determine whether you’re really ready to invest on your own. Based on my experience, there are a number of essential tasks to complete and issues to understand before you start investing.

Completing the following investing assessment can help you determine how prepared you are and whether you’d be better served by obtaining professional assistance from an objective, fee-only advisor.

1. I have a written list of my short-, intermediate- and long-term financial goals and know how much I need to save and the required rate of return to fund each of those goals.

Yes
No

2. I have completed a trusted risk assessment questionnaire tool (such as this one from FinaMetrica) and understand how my risk tolerance fits in with the required rate of return to fund my goals.

Yes
No

3. I have a written investment plan (investment policy statement) that spells out the asset allocation to be used in my portfolio along with the expected range of returns.

Yes
No

4. I understand the importance of asset allocation (the mix of stocks, bonds and other investments) and follow a methodology to identify and create a portfolio that is designed to provide the highest return for the level of risk that is appropriate for my situation.

Yes
No

5. I utilize a methodology to select the investments for each asset class.

Yes
No

6. I set aside time to regularly review my investments and make changes as necessary.

Yes
No

7. I utilize a methodology to monitor and periodically change the investments as needed.

Yes
No

8. I understand how tax inefficiencies will negatively impact my portfolio; which asset classes are best suited for tax-free accounts, taxable accounts and tax deferred accounts; and have structured my portfolio across these types of accounts to be tax-efficient.

Yes
No

The Power on Investing

Low-cost index investing has become a popular approach to achieve market returns and will continue to be used by more individual and institutional investors. On the other hand, sustainable investing is also a growing trend, as more investors recognize that an “all-of-the-above” index investing strategy conflicts with their worldview. Index investors are accepting the status quo by owning companies as they are. Sustainable investors are driving change by using fund managers who engage with companies to adopt positive changes or by simple divestment (i.e. avoid investment in the company or sector).

I envision three groups of individuals who would find plant power investing attractive – vegans, vegetarians and advocates of a healthy eating / living lifestyle (ironically, HE/LL for short). The majority of individuals in this category, however, are not in a position to take on an extraordinary amount of investment risk. Investing in “pure play” meat or egg substitute start-up companies is beyond their financial reach.

The growth in the number of mutual funds that divest from fossil fuels provides an example that plant-based investors might want to follow. Why not simply avoid companies that are in obvious conflict with your worldview? Truth is, there are sufficient large, established companies to choose from in order to develop an investment portfolio that may satisfy both financial and personal goals.

As I point out in my book, Low Fee Vegan Investing, there are currently no mutual funds targeted to plant-based investors. This is unfortunate since, without this option, most investors are not in a position to take on the effort or cost to implement a strategy that would otherwise meet their needs.

I believe there are two easy steps plant-centered investors can take to encourage the development of a suitable investment tool (e.g., mutual fund, plant-based index fund). The first step would be to contact their investment professional and state an interest in having a portfolio which reflects their worldview. If sufficient demand develops, this will be noticed by financial service providers (again, recall what happened with fossil fuel divestment – many mutual funds and ETFs options were developed in a fairly short amount of time). Second, participate in the short “Plant Power Survey” that I developed to start counting the number of plant-based investors interested in this concept and, equally importantly, develop a consumer preference data set that might help the community of portfolio managers generate a set of filters for use until investor demand warrants the expense of more rigorous research.

Average investors can, collectively, use the tools of sustainable investing to exercise their power and achieve the extraordinary.

Fiduciary Standard for Investment Advice

The typical answer: These issues both seem very complicated to me, I’m already concerned where you are going with this, so let’s change the subject.

My answer: They both have the potential to alleviate human suffering, grow the economy, increase employment, and compel us to choose leaders willing to support policies that are not partisan in nature.

It is no secret that, as the use of fossil fuels has increased, carbon dioxide levels have been increasing at a rate of about 0.5% per year for the past several decades. The economic benefit of converting carbon locked up in fossil fuels for millions of years into instant energy, of course, has provided prosperity to many for the last century (e.g., inexpensive travel, food choices, home/office heating and cooling). Unfortunately, the last several generations have passed the true costs forward to the next many generations. Carbon dioxide traps heat energy in the atmosphere. The resulting disruptive impacts of excess atmospheric heat contributes to increasing human suffering (e.g., droughts, floods, wind damage). It is increasingly apparent that the true cost of burning fossil fuels has not been reflected in its price. Economists consider it a market failure when the true cost of a product or service is not reflected in its price.

If fossil fuels were now priced at their true cost, the fossil fuel age would be brought to a close and allow for a new era of sustainable energy to be established. Technology to make this happen is already in place. Improved policy making is needed to move us forward toward. A good example is the policy offered by the nonpartisan Citizens’ Climate Lobby (CCL). CCL’s carbon fee and dividend proposal was studied by an independent entity, Regional Economics Models, Inc. (REMI). The results of the analysis showed that a gradually increasing fee on fossil fuels at the source, where the collected fees are distributed as dividends to households, would transition society from an unsustainable dependence upon fossil fuels and grow the economy by generating 2,800,000 new jobs and avert 230,000 premature deaths over a 20-year period. Members of congress are aware of the CCL bipartisan proposal and are looking for signs of support from their constituents (surveys show 68% favorability of a fee and dividend approach to carbon pricing) in order to overcome the actions of the fossil fuel industry to delay the needed transition to clean energy.

Prior to 1980, most members of the middle class did not need an investment advisor – you paid off the mortgage, saved some extra cash and relied on a pension and your Social Security benefit to fund retirement. With the advent of 401k plans and the demise of pension plans, the financial services industry grew to a scale comparable to the fossil fuel industry in economic size. It took a relatively long time for policy makers to identify that excess investment management fees are a cause of significant avoidable financial loss to savers. For instance, a retired couple without pensions and a savings of $1,000,000 may expect to draw down $40,000 per year to supplement their Social Security benefits. If their investment advisor charges a fee of 1% or 2% per year over the true (i.e., competitive) cost of the service provided, the couple is getting by with $10,000 or $20,000 less per year –as little as half the amount they expected! Is this suffering? Let’s consider a single retiree who has $300,000 in savings and no pension. This retiree is sold an annuity with a 10% upfront commission ($30,000) and locked into an investment management contract he did not fully understand with an annual fee of greater than 2% per year for 10 years. Excessive, non-transparent, fees benefit few at the expense of many.

The Department of Labor recently published a rule that would require more investment advisors to act in their clients’ best interests (i.e., act as a fiduciary), which involves disclosure of fees and conflicts of interest. Many financial service providers have already shifted their practices and service models in anticipation of this ruling (e.g. one firm stopped selling nontraded Real Estate Investment Trusts with a 12% commission). A June 11th article in The Economist pointed out how informed investors are moving to lower fee investments. Keeping more wealth back in the hands of middle class investors allows for more economic activity and, by economic inference, more employment. A fiduciary standard provides for more informed investors. At the current time, however, a partisan effort is underway to overturn the fiduciary rule.

In a post-Citizen’s United world, it has become easier for established financial interests, such as the fossil fuel and financial services industries, to fund actions that promote their own narrow short-term interest and influence policy-making. The influence of large contributions to political campaigns has made otherwise solvable problems difficult to tackle by fabricating a partisan dimension to them. Without sufficient citizen involvement, progress that leads to benefits for the many can be too easily stifled.

Best on Financial Planner Tips

As a financial planner, my job is to help people make smart financial decisions. That means planning ahead for big purchases, making rational spend vs. save decisions, and generally being purposeful and thoughtful with your money.


It’s a noble endeavor, but the truth is that we’re all human and we all make less-than-optimal decisions from time to time. Myself included. Here are three examples where I made decisions that were frowned upon by my financial planning alter-ego.

#1: The Big Indulgence


My brother got married. It was a beautiful wedding, lots of fun with friends and family, and he and his wife had a great time. It was also a little awkward for me. As the older, single sister at the time, I honestly felt a little self-conscious.


So what did I do? I spent a LOT of money on makeup: brushes, blushes, two types of foundation, extra eye shadows. I went nuts! It was an emotional decision through and through. It was way more than I “should” have spent, and certainly more than I had planned. But I wanted to look good and the makeup helped me feel comfortable. It may not have been the most rational decision, but it was certainly a human one.

#2: The Overextension


A few years ago I decided to start my business. And while I was excited about the possibilities for how it could grow, there was also a lot about it that I couldn’t really plan for. I didn’t know how long it would take to be profitable, how much of my time it would consume, or really anything else about what the experience would truly be like.


So of course I also decided to start remodeling my house at exactly the same time. Another project with a lot of moving parts, a lot of uncertainty, and a big investment of time and money. Tackling two big goals at the same time caused a lot of stress. I was worried about money, stretched for time, and initially couldn’t give either one the attention they deserved.


My financial planner alter-ego should have told me to take one thing at a time. But in this case my impatience got the best of me.

#3: The Impulse Buy


In early January I got a call from a friend. She was heading for the Australian Open in a few weeks and she had an extra ticket. She was calling to see if I wanted to go. Heck yeah I wanted to go! This was the Australian Open! So without giving it too much thought, I said yes.


Of course, I hadn’t planned for this trip. At all. I hadn’t saved for it. I hadn’t carved the time out of my schedule. And it was only a few weeks away. This was a last-second, impulse decision to the extreme.


Now, I had an amazing time and don’t regret a single thing. But money was tighter in the months surrounding the trip and everything was just a little more stressful. In an ideal world I would have planned for this kind of trip months ahead of time. Sometimes life happens and the planning happens in hindsight.

The Moral of the Story


There’s this perception around personal finance that you’re supposed to plan for everything ahead of time and make perfectly rational decisions in every situation. And to some extent that
is the goal. But it’s unreasonable to think that you’ll be able to do that 100% of the time.


We’re all human and we all do things imperfectly. When that happens, cut yourself some slack and move on to the next decision so that you are reasonably on track.

Estimated Tax Payments Online

Did you know it is possible to schedule your estimated tax payments online?  This is a very handy service for people who have to make Form 1040-ES estimated tax payments in April, June, September and January each year.  To make your payments, use the Electronic Federal Tax Payment System (EFTPS®).  The EFTPS® enables individuals and businesses to send their tax payments to the IRS by electronic transfer rather than writing a check and mailing it, or sending an expensive wire.

With the Electronic Federal Tax Payment System (EFTPS®), a free service of the U.S. Department of the Treasury, you schedule payments whenever you want, 24 hours a day, 7 days a week. You can enter payment instructions up to 365 days in advance.  This way when your tax preparer completes your taxes and calculates next year’s estimated payments, you can login online and schedule those payments.  Then you’re done.  The nuisance of mailing in those payments by check every few months has been removed.

Reasons to use the service include:

  • It’s fast. You can make a tax payment in minutes.
  • It’s accurate. You review your information before it is sent.
  • It’s convenient. You can make a payment from anywhere there’s an Internet or phone connection 24 hours a day, 7 days a week.
  • It’s easy to use. A step-by-step process guides you through scheduling payments.
  • It’s secure. Online payments require three unique pieces of information for authentication: an employer identification number (EIN) or social security number (SSN); a personal identification number (PIN); and an Internet password. Phone payments require your PIN as well as your EIN/SSN.

One thing to be aware of is that you can’t wait until the due date to make your first payment!  Payments must be scheduled at least one calendar day before the tax due date by 8 p.m. ET to reach the Internal Revenue Service (IRS) on time.  On the date you select, the funds will be moved to Treasury from your banking account, and your records will be updated at the IRS.

There are a couple of other items to consider.  Obviously it is important you have the funds in the checking account you are transferring from.  The first time you use the system, you will have to enroll.  Also remember that the EFTPS® is a tax payment service.  You’ll need to already know the amount, tax form, and date when you schedule a payment.  This system doesn’t help you calculate your tax due.  If you want to cancel a payment, you must do so by 8 p.m. local time two business days before the scheduled date.

Tips for Prepare for Emergencies

images-33Last week Kristen and Julia, our rising high-school senior, visited McGill University in Montreal, Canada.  By all accounts it was a hugely successful trip. Julia is thrilled at the prospect of furthering her education and expanding her horizons. She will be 18-years old soon and “on her own” as a freshman, hopefully, at a college of her choice.

Students may be worried about making new friends, studying, and adjusting to college life. Parents or guardians may share these concerns too, but they should not neglect legal and financial matters. Our 18 year-olds are now adults who can enter into contracts, make their own health care decisions, and are afforded levels of privacy to which we may not be accustomed. Who will make medical decisions on behalf of your child if he or she is unable to do so? What will you do if you need to get medical information in a time of an emergency? Will you be able to have access or make decisions on financial/tuition matters with the bursar’s office? Is it important to have access to your child’s academic record? Consider these items allowing parents/guardians to assist their adult children before they leave for college:


Health care proxy
: This document allows your child to name someone they know and trust to make medical decisions on their behalf, if for any reason, they are unable to make the decision or communicate their wishes. While standard forms may be available on-line through state medical societies, your estate planning attorney can draft this document.


HIPPA release:
 The Health Insurance Portability and Accountability Act (HIPPA), a federal law, protects your child’s privacy even from parents. The act prohibits a health care provider from releasing any health care information unless your child provides the health care provider with a HIPPA release form naming you as an authorized recipient.


Durable power of attorney:
 This document allows your child to appoint an agent in order to manage his/ her financial matters. While parents may be paying the tuition bills, this does not grant authority to discuss or resolve their child’s financial issues with the college’s student accounts office or bursar’s office.


FERPA waiver:
 The Family Educational Rights and Privacy Act (FERPA) governs privacy of educational records and prohibits an institution from discussing a student’s record with anyone unless the student has granted authorization. Colleges may allow students to grant access to one or more individuals via an on-line wavier form. However, remember your children are gaining independence and responsibility. Simply engaging your student may prove an equally, if not a more effective means of communication about how they are doing in school.

It is important to keep signed forms available as you may need them if your child is traveling, and remember that authorizations can be modified or updated as their circumstances change.

This is not legal advice so please be sure to contact your estate planning attorney to address these important issues.  If you don’t have an estate attorney ask your family, friends or financial advisor for recommendations.

How be Mindful About Costs

download-13I’m in the middle of wedding planning right now, and it has opened my eyes to just how incredibly expensive this whole thing can be!

 

I’m a frugal person at heart so the idea of spending a ton of money on one day seems a little silly to me. But it’s hard not to get caught up in all of it, and I’m finding that the costs are adding up quickly.

 

So, how do you have a wedding you love without spending more than you can afford? I’ve been thinking about this as I plan my own wedding. I’m fortunate that my parents have been very generous, and here are a few things I’ve learned along the way.

 

Plan Ahead

 

Yeah, I know. Big surprise that the financial planner is encouraging you to plan ahead. But there are two reasons why it’s helpful to make a plan before making any final decisions.

 

First, it’s amazing how quickly even the little costs add up. There are so many different pieces to a wedding that you can make a lot of seemingly reasonable choices and still end up with a big total bill. By planning ahead, you can see that happen before you’ve actually committed to anything and make decisions accordingly.

 

Second, it’s easier to get good deals when you’re on top of things early. Venues get booked, DJs aren’t available, and prices go up. The longer you wait, the less likely it is you’ll get your first choice and the more likely it is you’ll have to pay extra.

 

The Knot has a fantastic wedding budget calculator that can help you allocate funds across all wedding expense categories.

 

Get Creative

 

Your wedding doesn’t have to be like every other wedding. It can not only be cheaper to do things your way, but it can make for a fun and unique experience.

 

A friend of mine had a fall wedding and served pies instead of a wedding cake. This option was delicious and at least half as expensive; with pie at $2 per slice and wedding cake at $4 or more. Another one enlisted the help of her friends to make their own floral arrangements. I’m making small ornaments for wedding favors, out of paper (not expensive) and supplies I already had on hand.

 

Music, in particular a live band, is another expense that can be reduced, involve friends who have musical talents or crowd source a playlist from all your guests. There are an infinite number of ways you can get creative, save money, and make the wedding yours in the process.

 

Consider Your Guests’ Budgets Too

 

Your friends and family want to come celebrate with you, but for many of them it’s a big financial commitment. Doing what you can to make it easier for them will be much appreciated.

 

I have a friend who had a camping option, as one of the accommodations for her wedding. Not only was the price right, but it was a memorable experience. Suggesting accommodation options to guests with a range of prices is always appreciated.

 

For our wedding, we’re trying to make sure that people know how to enjoy themselves during the weekend without having to spend a ton of extra money, so we’re giving them a map of our favorite hiking trails in the area. Little things like that won’t make all the costs go away, but every little bit helps.

How to Predict the Next Stock Market Crash

Since 2009, the stock market has pretty much gone straight up.

From a low of 676 on March 9, 2009, the S&P 500 stands at 2,090 as of June 21, 2016. That’s a 209% increase over a period of just over 7 years.

And yet, things have been a little rocky so far this year.

The stock market dropped 9% from 1/1 to 1/20. It dropped another 6% from 2/1 to 2/11. And it fell 2% from 6/9 to 6/15.

We’re still near all-time highs, but is it possible that we’re at the top? Am I ready to predict the next stock market crash?

Of Course Not

I’m guessing you saw this coming, but no I’m not predicting the next big stock market crash.

The truth is that I have no idea what the stock market is going to do over the coming months, and neither does anyone else, no matter how loud they yell at you from the TV.

While the stock market is an incredibly powerful place to grow your money over the long term, it can be a roller coaster ride in the short term. Big upswings are followed by big downswings, leaving you to watch somewhat helplessly as your account values rise and fall.

And there’s just no way to know what’s going to happen next. We may very well be in for a big crash in the near future. Or we may not. But there are a few things to keep in mind no matter what.

Focus on the Long Term

Short-term drops on the stock market like we’ve experienced this year are the norm. 5% and even 10% drops are not uncommon.

Big crashes are also the norm. We experienced them in 2008, 2000, and many other times throughout history.

And through all of that, two things have held up:

  1. No one has been able to consistently predict these crashes ahead of time. And remember, if you want to profit, you not only have to get OUT at the right time, but get back IN at the right time as well. Otherwise you’ll miss the recovery.
  2. Over the long-term, the stock market has always gone up. Not every day, every month, or every year. But you have always been rewarded for keeping your money in the market over the long term.

What to Expect Going Forward

I can’t predict what the stock market is going to do, but I can give you two more things to keep in mind.

First, no matter what happens there will be plenty of ups and downs along the way. Expect that going in.

Second, investment advisor Rick Ferri, a man I admire greatly, foresees long-term stock market returns in the 7-8% range and bond returns in the 4-5% range. The exact outcome will almost certainly be different, but the point is that well-informed, reasoned experts still expect returns to be positive going forward.

By the Way…

Despite those scary stats at the beginning of this article, did you know that the US stock market has returned just over 3% for the year as of the time I’m writing this?

Traditional Financial Advice

Traditional financial planning advice might look something like this:

  1. Establish an emergency fund
  2. Pay off debt
  3. Get yourself on track for retirement

That’s all nice and prudent, but is prudent always the right move?

I say no. Sometimes it pays to buck the traditional advice and be a little daring.

What Do You WANT?

No one lies on their deathbed feeling fulfilled because they made all the “right” decisions. No one is ever truly satisfied by checking off all the boxes someone else laid out for them.

True happiness comes from doing the things that matter to YOU. The things that scare you a little bit, excite you a lot, and just feel downright important.

Going back to the example above, assuming you suddenly and unexpectedly had a large amount of money, what if you asked yourself the following questions before making any decisions about what to do with it:

  • When you’re 80, what will you regret not having done?
  • When are you happiest in your life right now?
  • Is there anything you’ve been wanting to try but felt like it was too big a financial risk?

Maybe you’ve been wanting to quit your job so you could go back to school. Or maybe you’d like to take some time off to volunteer in another country while you learn a new language.

Those things don’t fit into the traditional financial planning paradigm but they’re the things that make your life worth living

And isn’t that the entire point?

Finding a Balance

Of course, traditional financial planning advice exists for a reason. Building an emergency fund, paying off debt, and investing give you the security and the freedom to enjoy yourself both today and in the future.

They just shouldn’t be the only things you consider. You should absolutely make room for the things that excite you too, and you don’t need to receive a big inheritance to do it.

Here are some thoughts on how you can balance the practical with the aspirational today, no matter what your financial situation looks like:

  1. Make a list of all the practical financial goals you know you should be working towards.
  2. Make a list of all the life goals you’d like to experience.
  3. Pick one from each list and put a dollar amount and timeline on each. How much will each cost and when would you like to achieve it?
  4. Divide the dollar amount for each by the number of months between now and your target completion date.
  5. Automate that monthly savings into separate accounts dedicated to those specific goals.
  6. If you can’t meet the full savings target now, save what you can and make it your mission to get to that full savings target over time.