Mark Zaifman's thoughts on Money, Global Economic Trends and Politics

Why Waiting for the Perfect Time to Develop a Financial Plan is Risky Business

Posted by Mark Zaifman on Thu, Jan 15, 2015 @ 03:37 PM


clocksHave you ever said to yourself, when X happens, I’ll do Y? In other words, you’re waiting for the stars to align in your favor and then you’ll decide to do what you’ve been putting off for a long time?

In terms of financial planning, my sense is that too many people are waiting for the ‘perfect’ time to develop a comprehensive financial plan instead of moving forward when life although not perfect, is pretty darn good. Yet I would suggest that waiting for the perfect time is not only a risky decision to make, it could also end up costing you big time over the long run.

Take for example the recent stock market crash in 2009. Lots and lots of investors were so spooked that they went 100% into cash. Many said to themselves, once things seem and feel better, I’ll get back into the market. Many investors, more than you can imagine, are still waiting for the ‘perfect’ time to get back into the market.

And what’s happened since the Dow hit a low of approximately 6600 in March of 2009? The stock market has nearly tripled in value since then. Was it considered risky to put your nest egg into cash back then? No way, that seemed like a smart and prudent move, right? But how much have you lost by keeping your money in cash and waiting for the perfect time to get back in? A lot!

Letting Perfect Be the Enemy of Good

Waiting for external circumstances to change before you do what’s needed is placing yourself in the weakest position possible. Why? Because in essence, you’re giving your power away to something you have zero control over.

Here are a few of the most common reasons people put off developing a financial plan. Some reasons you do have control over, others, not so much.

- I’m waiting for the stock market to dip to some magical number

- I’m waiting for the economy to get better

- I’m waiting until I have a new better paying job

- I’m waiting for the right person to come along

- I’m waiting until I have x amount saved up

- I’m waiting until my credit cards are paid off

- I’m waiting until I receive my inheritance

- I’m waiting until my kids are in college

- I’m waiting until my mortgage is paid off

-I’m waiting until my investments come back up in value

I could probably add another 10 reasons at least as to why you can convince yourself that waiting for something to happened, whether you can control the outcome or not, will stop you in your tracks in terms of moving forward on your to-do list, on something you already know is vital to your long-term financial wellness, not to mention your peace of mind.

Remember, whatever happens out in the world, you have the ability and capacity to control your destiny. You are in charge. We are given the gift of imagination, how wonderful is that? Now use that imagination, dare greatly and realize that you and you alone are the director of this movie called ‘Your Life”. Stop waiting for the perfect time and realize right now, right this moment, is the perfect time to take control of your life and get your financial house in order once and for all.

And always keep in mind, as the saying goes: You can’t control the wind, but you have the unique power to adjust your sails. Happy sailing…

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Photo credit Francisco Gonzalez


Tags: financial planning, stock market

Worst Performance for Stock Pickers in 10 Years?

Posted by Mark Zaifman on Tue, Dec 09, 2014 @ 09:34 AM


When it comes to choosing a financial advisor to manage your investments, your choice will usually boil down to A) an advisor that falls more on the passive end of the investment spectrum or B) an advisor that follows a more active approach and is considered a stock-picker or market timer.

Of course, there are other very important considerations as well when making this decision such as:

  • Does your advisor work on a fee-only basis?  (we do)
  • Does your advisor avoid any conflicts of interests by intentionally and proudly choosing to be an advocate for their clients best interests by working in a fiduciary capacity?  (we do)
  • Does your advisor provide full transparency around their management fee and send a quarterly investment performance report that is understandable and simple to read and figure out?  (we do)
  • Does your advisor focus on tax efficiency when constructing and managing your portfolio?  (we do)

When I read about the poor showing of active stock-pickers in the recent Wall Street Journal article,  was there some schadenfreude on my end? Yes indeed. Let me explain.

At institutional investor and financial planning association conferences held around the country, attendees will usually feel like you’re on one team or the other. There are the advisors that choose to use a passive approach to investing by utilizing index funds and ETF’s that replicate market indexes, like the S&P 500 Index Fund for example.

And then there’s the other team that usually has a bit of swagger as they strut their stuff around the conference. This team believes that they can beat the market and indexes by actively choosing which stocks to buy.

And in the small middle, are hybrid advisors that use a little of both styles.

The “actives” vs. the “passives”; deciding which is a better strategy to employ for your clients - that debate has been raging for decades and I assume will continue on for decades to come. The actives believe we passives are missing great opportunities to beat the market.

Many in the active camp think what we do and how we do it is about as much fun as watching paint dry. And many of us in the passive camp think attempting to beat the market by superior stock picking or market timing is a fool’s errand meant to enrich the advisor that works on commission at the expense of the client.

The actives hold the legendary Peter Lynch that ran the Magellan Fund at Fidelity from 1977-1990 and averaged a 29% return as their standard bearer. We passives hold up luminaries like John Bogle, the founder of Vanguard and Warren Buffet as our icons.

The Proof is in the Pudding

“According to Lipper, around 85% of active large cap stock funds have lagged their yardsticks this year and it's their worst showing in three decades. If professional stock pickers are collectively this bad during a good stock market, how bad are they during a bad market?”

“Never mind how the S&P 500 is about to record its fifth consecutive yearly gain and ninth gain out of the past 10 years. Even with the wind in their sails, professional stock pickers still can't beat market indexes or the ETFs tracking them.”

Both of these quoted paragraphs above came from another recent article published by Seeking Alpha, the very popular personal finance site for active stock pickers.

Does this mean that deploying a passive investment strategy will always beat an active approach?

No way.

But for example, when usually only 3-4 actively managed mutual funds out of 10 beat their passively managed counterparts, why take the risk of thinking you’ll know which 3-4 actively managed funds will be the winners?

Instead of Seeking Alpha, Seek Value

When we talk to clients about our value proposition, it’s in a few areas where we have a lot of control-risk, managing costs and taxes and disciplined rebalancing. For many of our clients, taxes may be their largest expense and the changes to the tax code that took effect in 2013 makes our focus on tax efficiency even more valuable.

We have a lot of control over the tax efficiency of the portfolio just by implementing relatively simple strategies such as asset location (putting the right assets in the right accounts), managing the turnover of the portfolio, tax-loss harvesting, planning the timing of capital gains recognition or distributions from tax deferred accounts and gifting appreciated securities.

In terms of managing portfolio costs, as the saying goes, markets are unpredictable but costs are forever. The lower your costs, the greater your share of an investment’s return. Minimizing costs is a core principle of our investment management process. That’s because with investing, there is no reason to assume that you get more if you pay more.

Instead, every dollar paid for fund management fees or trading commissions is simply a dollar less earning potential return. The key point is that-unlike the markets-costs are largely controllable.

Indexing Can Help Minimize Costs

If—all things being equal—low costs are associated with better performance, then costs should play a large role in the choice of investments. Index funds and indexed exchange-traded funds (ETFs) tend to have costs among the lowest in the mutual fund industry.

As a result, indexed investment strategies can actually give investors the opportunity to outperform higher-cost active managers—even though an index fund simply seeks to track a market benchmark, not to exceed it. Although some actively managed funds have low costs, as a group they tend to have higher expenses. This is because of the research required to select securities for purchase and the generally higher portfolio turnover associated with trying to beat a benchmark.

Still not convinced passive investing vs. active investing is the smart and winning way to go, then check out Vanguard's 5 Myths and Misconceptions About Indexing, and my guess, sooner rather than later, you’ll be on our team.


Click here to learn more about becoming a long-term investor  

Image credit - Amanda Atkin

Fifty Shades of Financial Independence

Posted by Mark Zaifman on Fri, Nov 21, 2014 @ 03:01 PM


When you think about financial independence (FI), what comes to mind? What do you imagine your life would look like if working for money was purely optional?

This is a question that many of my clients have pondered deeply and thoughtfully and continue to evaluate and review. Not needing to work for money and wondering what to do with your life once you’re FI is, as they say, a ‘gold plated’ problem we should all be fortunate enough to have.

But with so many possibilities, so many shades of financial independence to explore and discover, such a new dynamic and reality to accept and embrace - the choice of how you design your life plan truly matters. And it matters just as much whether you reach FI in your 40’s, 50’s, 60’s or 70’s.

Whether you earned, saved, lived within or below your means and invested well on the road to financial independence OR you received a windfall from real estate appreciation like many of my Bay Area clients are experiencing, especially those living in Berkeley or Silicon Valley OR you inherited your FI, the road ahead remains full of exciting possibilities. So which path do you choose? What now becomes your life purpose, your dharma?


Inspired Retirement Planning - Reimagined!

Throughout history, the word retirement has been synonymous with “not working”. Whether it’s the traditional view of retirement - a life of leisure, filled with golf and vacation and walks on the beach or the more actual historic context  - as a mechanism to “force” people out of work they were no longer capable of doing (typically manual labor), retirement has always been about the end of work.

A growing base of research is finding that stopping work completely and trying to live a life of leisure does not actually create the happiness that we might have expected. To some extent, this appears to be one of the downsides of our adaptability as human beings; leisure as an occasional break from work is appealing, but a full time life of leisure can become boring once the novelty wears off.

For others, the problem is not simply that the leisure life feels less rewarding over time, but because being productively engaged in work actually brings about the meaning and purpose in life that fuels our positive well-being (not to mention that for many, our work environment is also a source of interaction with others that fuels our social well-being, too).

For many retirees, this phenomenon is leading to the rise of part-time work in retirement – a confusing and implicitly self-contradictory concept for many– and for others it’s driving them to adopt an entirely new “encore career”. The primary distinction for most of these “post-retirement jobs”, though, is that the purpose of the work is not for money and income; the purpose of the work is for purpose in life, whether that’s about engaging in meaningful work, leaving a legacy, impacting the world, or simply maintaining social ties.

Yet the challenge is that for so many retirees, what started out as a phenomenon to get older workers out of the way and into what would be a relative short “retirement” transition has now become an entire phase of life unto itself. And because “retirement” (and its non-work connotations) has been put forth as the ultimate goal at the end of a working career, retirees often transition into a full non-working retirement and then find themselves unhappy and unfilled after a few months or years. Which means that perhaps it’s time to rename retirement?

What’s the alternative in this case? Consider re-characterizing “retirement” as “financial independence” instead. The point of FI is simply to recognize that, once sufficient assets are accumulated, the decision about whether, where, and how much to work, can be made independent of the financial aspects of the work itself.

In other words, being FI is about being independent from the need to work, which then opens the door to more productive conversations about whether we want to work, and what meaningful work might be. For many of my clients the conversation of “what would you do, work or otherwise, if money was no object?” can be a remarkably freeing conversation, and lead to entirely new and productive avenues to explore.

So maybe it’s time to rename the concept and goal of retirement altogether, and to recognize that “financial independence” from the need to work for money is the real goal of saving and investing. So instead of labeling it “retirement planning”, how about we rename it “financial independence planning”.


Here’s the bottom line. For the majority of us baby boomers, this is not going to be your father’s or mother’s retirement scenario. We’re disrupting the entire concept of ‘retirement’, finding new ways to repurpose our lives and inspiring others to reimagine what their lives could look like when achieving financial independence. If not now, when?

Discover Inspired Retirement Planning

Tags: life transitions, retirement planning, financial independence

5 Reasons Stock Market Volatility Makes You a Smart Long-Term Investor

Posted by Mark Zaifman on Mon, Oct 20, 2014 @ 05:57 PM

investment planning strategy ma

If recent stock market volatility has you wanting to hide under the covers, you’re not alone. The 2009 stock market crash was a traumatic experience for investors as many watched their life savings plummet dramatically in a relatively short period of time.

And now, with the recent volatility, memories of those scary days still haunt many an investor that rightfully so, remains traumatized from that roller coaster ride from hell back in 2009. The thought that runs through many a mind in times of high volatility and high anxiety like we’re currently experiencing; is this going to be a repeat of 2009?

Since no one truly knows what the future holds, allow me to take a contrarian view and present five reasons why the recent stock market gyrations are a good thing and why a registered investment adviser like myself embraces the volatility and sees it as a healthy sign for markets instead of doom and gloom.

1. Opportunity or Crisis?

Emotions play a crucial role in your investment success. Behavioral finance has become a very hot topic as scholars attempt to understand what drives investors to sabotage their success and often make financial decisions that cause serious damage to their financial security.

And what’s the most destructive emotion when it comes to being an investor: FEAR! Fear will activate the fight or flight portion of your brain and once that kicks in, rational decision making gets thrown out the window.

So instead of letting fear emotionally hijack you, use this current volatility as a learning opportunity and not a crisis. If you’ve made reactive financial decisions in the past out of fear, now’s the perfect time to look inside of yourself and say enough is enough. I will no longer let fear rule my life and especially my financial decisions. Use this teachable moment as a reason to do some inner work on yourself and I promise it will be one of the best investments you’ll ever make.

2. Dollar Cost Averaging

If you contribute to a 401k or 403b on a regular basis, you are essentially dollar-cost averaging throughout the year. Some months your contributions will be invested when the markets are high, some months when it’s low, and right now, when it’s really low. That’s the beauty and simplicity of this investment strategy.

So reason number two as to why you should love this recent volatility; thanks to the recent pullback, the stock market is having a 10% off sale and you’re invited. The same funds you have been contributing to all year long are now in many cases 10-15% off their ‘original’ price. And who doesn’t love a bargain?

3. Are You Taking Too Much Risk?

Three weeks of decline in the stock market have broken the almost unprecedented calm that had enveloped markets for most of 2014. It’s been three years since the S&P 500 has posted a decline exceeding 10 percent over any period of days. So it sounds odd, but this downturn, in my opinion, is just what the markets needed. Let some excess out now so markets can head back up later.

Now’s the perfect time to take a pulse of your risk tolerance as well as risk capacity. First, have you been able to weather the recent volatility without feeling the need to make any changes to your investment strategy? And if the market were to drop another 10%, do you have the capacity to withstand that drop or will it cause you to have to make any drastic lifestyle changes you weren’t anticipating?

Now’s the time for an honest self-evaluation of the risk you’re taking and adjusting your portfolio accordingly if needed.

4. Margin Calls

There’s a reason most hedge funds have taken it on the chin with the latest market downturn and are down around 16% for the year. Most hedge funds are highly leveraged, meaning they borrow large sums of money to wager in the markets.

The same is true recently for many investors as margin loans have been going through the roof this year. Why? Because when markets stay calm for too long, it seems like a piece of cake to make money. So why not borrow even more money and double down or maybe triple down on the market and you’ll look like a genius, right?

Well now the inevitable has happened to loads of investors and that’s the dreaded margin call. Either put more cash in your account by tomorrow, the broker says to his client, or we’ll need to liquidate your holdings Mr. Jones, and have a good day.

Draining some of the excess speculation that has grown way too high for my liking is reason number four to love this volatility.

5. Stress Test Your Investment Strategy and Your Financial Advisor

If you have taken the time to design and develop a comprehensive financial plan, the odds are high you have a well thought out, diversified investment strategy that performs as planned during volatile periods like we’re experiencing.

Now’s a great time to see how your strategy has held up. Is the value of your portfolio down relative to the market or are you an outlier with a much larger loss? Is your asset allocation in line with your risk tolerance and risk capacity or have you deviated from your strategy so much that you now own a highly aggressive portfolio?

Do you feel confident that your financial advisor knows what they’re doing and has a steady hand at the wheel or is he or she making erratic trades and seeming more stressed than you?

My clients are all long-term investors, all of them. That doesn’t mean some don’t get spooked when the markets become so volatile, and I expect that. But what all of them have in common is the knowing and comfort that we have taken the time to develop and construct a customized investment strategy that aligns with their values and in this market most importantly, aligns with their capacity and tolerance for risk.

Bottom line - use this reason as well as reasons one through four and challenge yourself to become a smarter, more emotionally intelligent, long-term investor. It will be one of the best investments you’ll ever make.

Download the Benefits of Working with an RIA


Tags: investing, stock market, registered investment advisor

Save Money, Plan, Feel Powerful and Get Healthy?

Posted by Mark Zaifman on Wed, Sep 03, 2014 @ 03:43 PM

save money be healthy

What does saving money and planning for your future have to do with your physical health?

As it turns out, plenty.

A recent article in the New York Times titled, Your 401(k) is Healthy. So Maybe You Are, Too really caught my attention. According to the article, “a new study from the journal Psychological Science finds that people who are good at planning their financial future are more likely to improve their physical health-and then actually become healthier.”

“The research, scholars say, offers keen insight into the sorts of people who are likely to make short-term sacrifices in the name of a brighter future. It suggests that there is something very abstract and fundamental about caring for the future. The sort of person who invests in retirement is the sort of person who takes care of their health.”

“Employees who contributed regularly to their 401(k) plan were not only more likely to take steps to improve their health but also, in aggregate, had a 27% improvement in their blood scores. Non-contributors continued to suffer health declines. The 401(k) contributors also showed relative improvements in safety behaviors, like seatbelt use.” 

Saving and planning for today in order to have an abundant and financially secure tomorrow. Sounds simple, right? Well, ask any Spiritus client, and they’ll be the first to admit that this goal is much easier said than done. Yet, that does not stop them from doing what’s needed. They’re able to think from the end, visualize the future they desire, stay on track and course correct when needed.

In addition to the personal satisfaction you’ll receive when you know your financial house is in order, it turns out these smart money habits actually increase your overall wellness. There are many reasons why making the time for financial planning is a great investment, but hands down, nothing beats the benefit of optimizing your health by planning and designing your future.

Stanford School of Business Study

As if one study this month illustrating the health benefits of saving and planning weren’t enough to have you pat yourself on the back for doing the right thing with your money and your life, along comes another study conducted by the Stanford School of Business that will be published in October.

“According to the study, individuals who feel powerful are more motivated to save. The cycle consists of saving money, feeling powerful, and feeling more inclined to continue to save. Individuals who felt powerless, on the other hand, tended to save less money and engage in consumption to compensate for their lack of power.”

"A sense of power is different from other factors that influence saving behavior, such as education, upbringing, and income level. We show that very subtle shifts in feelings of power can have quite an impact on saving. This is very important because it’s something that’s easy to change.”

Make Peace with the Past, Increase Your Financial Intelligence & Feel Powerful

Anyone who has ever been in therapy, or read a single self-help book is familiar with the term 'baggage' in terms of a relationship. But have you ever considered the damage caused by your 'money baggage'?

When you schlep your old and toxic ‘money baggage’ around from relationship to relationship, or from childhood to adulthood, or from starving artist to international superstar, you name it, you’re choosing, whether consciously or unconsciously, to burden your present and your future with the past.

It could be the time you needed to file for bankruptcy because you were young, stupid and got in over your head. It could be the time you bet the farm on a long shot investment that you were sure would make you rich, only to later lose everything. Or it could be the realization that you neglected planning for the future and now at 55, you’re scared to death about how you’re going to be able to ever save enough to retire let alone get your two kids through college and graduate school.

The above are just a few examples of the many burdens we weigh ourselves down with when it comes to our relationship with money. Yet I truly believe that one of the major reasons the New York Times bestseller Your Money or Your Life, became such an international bestseller is because it was one of the first books to teach us how important and vital it is to make peace with the past.

Making peace with the past, is at its core, about forgiveness. And in this case, it’s you, forgiving yourself.  Many times, even when we unintentionally hurt people we love by doing something stupid or reckless with our money, our loved ones in time forgive us, but we never forgive ourselves. That’s very self-destructive behavior and that needs to change in order to change our dynamic with money.

Part of what hinders the healing and forgiving process is that underneath the anger you feel towards yourself often is shame. And again, one of the teachings from Your Money or Your Life is no-shame, no blame.

The road to financial wellness is full of obstacles whether you have very little or have enough for many lifetimes, whether you have a small carry-on of money baggage or a large trunk, it doesn’t matter. Money is a very powerful energy that can provide you much abundance as well as much scarcity.

So to feel powerful when it comes to money, I'm suggesting these five steps:

1) make peace with the past;

2) rid yourself of low energy feelings and thoughts of shame as they’ll only bring you down and keep you stuck in the past;

3) increase your financial intelligence by learning a little more each year about your money;

4) make the investment and develop a financial plan because research shows it boosts your health and finally;

5) feel powerful, because now that you took control of your money and your life and you tossed your old money baggage out the window, it’s a wide open road ahead!


Photo credit by Tax Credits -


Tags: save money, financial planning, Your Money or Your Life, goal setting

Think and Grow Rich for Women

Posted by Mark Zaifman on Thu, Jul 31, 2014 @ 04:44 PM

Think and Grow Rich for WomenWith so many books about money being published, how does one book set itself apart from another?

One way to perform that magic trick is to ask and receive permission from the Napoleon Hill Foundation to use the famous title Think and Grow Rich and add for Women to the end. Voila! You have now set yourself apart from the pack and in my opinion created a must-read for any women interested in achieving financial success.

Think and Grow Rich was originally published during the Great Depression as a self-help book. According to the Napoleon Hill Foundation, by 2011, over 70 million copies worldwide have been sold. While the title implies that this book deals with how to get ‘rich’, it’s so much more than that. If you enjoyed reading Deepak Chopra’s The Seven Spiritual Laws of Success, then you’re going to love the philosophy and spirituality illustrated in Think and Grow Rich as well as Think and Grow Rich for Women.

And although we’re in the 21st century, women still struggle with managing their personal finances as they navigate through what unfortunately still remains in many quarters an industry still not sure how to talk with women let alone empower them. That said, times, they are a changing quickly, as evidenced by the many women in our country that are finding ways to increase their financial intelligence as well as their financial security and prosperity. These women that have reached financial success are paying it forward by helping other women succeed as well.

Here are some excerpts from Think and Grow Rich for Women, written by Sharon Lechter, that I hope inspires you to want to read her book. And remember please, although it’s so easy to order this book from Amazon with one click, don’t forget that your local library will have plenty copies as well.

'In The Economy'

“These financial statistics prove, without a doubt, that women have tremendous power and influence globally. Can you imagine what would happen if women came together and used their economic power to create positive change?”

  • 60 percent of all personal wealth in the U.S. is held by women

  • 85% of all consumer purchases in the U.S. are made by women

  • Women over the age of 50 have a combined net-worth of $19 trillion

  • Two-thirds of consumer wealth in the U.S. will belong to women in the next decade

  • Globally, women stand to inherit 70 percent of the $41 trillion in intergenerational wealth transfer over the next 40 years

'In Education'

“The U.S. Dept. of Education estimated that in 2013 women earned:

  • 61.6% of all associate degrees
  • 56.7% of all bachelor’s degrees
  • 59.9% of all masters degrees
  • 51.6% of all doctorate degrees

“In summary, in 2013, 140 women graduated with a college degree at some level for every 100 men."

“What does success really mean? The reason more women ask is because the answer is likely more complex for them than it is for men. Gender intelligence expert Barbara Annis believes the definition of success for men is simple. It’s winning. Success might come in the form of more money or a better job or a better parking space or a hotter wife. But success is about besting the competition, in any number of contests, period."

“Women, of course, want to win, too. But Annis argues they also want to be valued. She relates that in her experience as a consultant to a range of Fortune 500 companies, the number one reason women leave their jobs is that they feel their work is undervalued and their strengths overlooked."

“This book has purposely followed the chapter outline of the original book, Think and Grow Rich, and addressed each of Napoleon Hill’s “13 proven steps to riches”, through the eyes of women for women. While I believe the specific steps to riches and success are the same for both men and women, I believe as women we fundamentally approach those principles with different beliefs, different attitudes, and different strengths and weaknesses."

“Think and Grow Rich for Women shares the 13 steps to success for women through the eyes and experiences of women who have created lives of success and significance. Now it’s your turn."


Photo credit Kevin Dooley 


Tags: book recommendation, financial success

How Fear, Shame or Guilt Can Sabotage Your Relationship with Money

Posted by Mark Zaifman on Thu, Jul 10, 2014 @ 03:03 PM


relationship with money

One of the most challenging and vital relationships in your life is the relationship you have with your money. Like any relationship in life - being able to honestly assess how it’s going, making time for it, investing in it, caring about it, nurturing it - these factors and many more help determine the quality of your relationships.

So in that context, and as you read this post, please indulge me by thinking about your relationship with money as if you were thinking about and or describing a relationship with a long-time friend. Hopefully, that should not be too difficult, because after all, you and money -  you go way back. And like any long-term relationship, your history plays a large role in the status of your current relationship.

Whatever word or phrase you would choose to describe your relationship with money today, should you treat it badly, whether consciously or unconsciously, this relationship will indeed find a way to express its displeasure.

If you play the dangerous and risky game of pretending you don’t see the warning signs that your relationship is in need of dire attention - eventually, and often in ways that are unimaginable, you’ll get the message, and believe me, it will not come gift wrapped.

How can you tell if your relationship with money is out of balance? Look no further than the three usual suspects: fear, guilt and shame. It’s these three negative and disempowering emotions that will indicate how healthy or unhealthy your relationship with money is currently. Let’s take each emotion one by one so you can see what I mean.


"We become what we think about all day long." ― Ralph Waldo Emerson

Of the three emotions listed above, fear is by far the most pervasive and toxic emotion to your overall financial well-being. It could be the fear of losing all your money and ending up bankrupt. It may be the fear of never having enough money saved up to retire. It might be the fear of success. Yes, many people fear success so much that even when they’re on the cusp of making it big-time, their inner money demons will find a way to sabotage that potential success.

Perhaps no aspect of your relationship with money is more important than your ability to effectively manage your own negative emotions so they don't overwhelm you and affect your judgment. In order to change the way you feel about a situation, you must first change the way you think about it.

Meditation, mindfulness training, playing the observer to your thoughts - these tools and many more are needed to counter the fear-demon around money. Secondly and probably most importantly, fear lives and grows stronger in your mind the more uncertain you are about your personal finances.

If fear is or has been shadowing your relationship with money as far back as you can remember, now’s the time to slay that demon once and for all by engaging with a fee-only, independent financial planner that can provide you with an objective and independent assessment of your current financial picture.

Even if the news isn’t great, just knowing where you stand financially and developing an action plan to get your financial house in order will ease your mind greatly and limit the ability of fear to zap your energy and sabotage your success.


“When we played softball, I'd steal second base, feel guilty and go back.” ― Woody Allen

Having grown up with a Jewish mother born in Hungary, I earned my Ph.D in the philosophy and application of guilt at an early age, so this is an emotion I’m quite familiar with. How it relates to your relationship with money is fascinating.

I’ve seen guilt manifest around money in three major ways.

1) Guilt that you have too much compared to your friends or other people in your social circle.

2) Guilt about ignoring/neglecting your personal finances.

3) Guilt about secrets you’re keeping about money from your significant other.

Regardless of what’s causing you to feel guilty, those feelings of guilt are impacting your financial decisions in many negative ways. As a result, you often do really stupid things with your money and make decisions that are not in your best interest. The guilty money-demon has an insatiable appetite and will not easily go away.

If you did something wrong, made some stupid decisions, or are still keeping secrets, accept that you cannot change the past. Forgive yourself and if you need to confess, ask for forgiveness once everything is out in the open and then move on. If you suddenly hit it rich or inherited a ton of money and you feel guilty about it, then learn ways you could put your newfound wealth to good use by dabbling in philanthropy.

And the next time you begin feeling guilty about something you did, remember this saying: guilt is like paying interest on a debt that will never come due.


“Shame corrodes the very part of us that believes we are capable of change.” ― Brene Brown

Shame needs no introduction. It’s one of the most disempowering emotions you can feel when it comes to you and your money. Shame will keep you from making progress financially and it will keep you frozen and unable to make smart decisions.

If you’re a fan of the best-seller Your Money or Your Life, then you know our mantra - no shame, no blame.

Shame is one of the most challenging emotions to overcome. It can haunt you and shadow your relationship with money for your entire life. Left untended, you may unconsciously pass this destructive emotion on to your children.

If shame is your money-demon, I urge you to read or re-read Your Money or Your Life and see if the action steps and exercises help you deal with and overcome these feelings. If not, you owe it to yourself, your significant other and your family to seek counseling. In that regard, I highly recommend Spiritus Financial's favorite financial coach Pat Chambers, Ph.D.  Liberating yourself from shame and blame will be the greatest gift to you and your relationship with money that you could ever give to yourself. The benefits of that are as they say, priceless!


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Tags: relationship with money, Your Money or Your Life

Is the U.S. Stock Market Rigged?

Posted by Mark Zaifman on Fri, Jun 27, 2014 @ 03:46 PM

stock market rigged

I just finished reading Flash Boys, A Wall Street Revolt, written by bestselling author Michael Lewis. The revelations in the book about how the stock market is being manipulated and rigged by high-frequency traders that have the advantage of speed, measured in milliseconds (a millisecond is a thousandth of a second) reads like one of your favorite mystery novels, only in this case, it’s not fiction but reality.

Like any good mystery novel, you become captivated by the story as well as the leading characters almost instantly. You may be hesitant to read the book because you think it’s just another book about numbers, investing and Wall Street corruption and although that’s part of the story, the larger narrative is about how speed and proximity to servers that run the exchanges came about and how this was and is legal and allowed to continue. And that's the part of the book that will keep you very intrigued right until the last page.

“Rigged Stock Market is “Bigger than A Scam”

“How Ordinary Investors Are Getting Screwed”

“Investors, Big and Small, Are Prey”

The provocative titles above are short video segments from Lewis’s recent appearance on 60 Minutes as he explains his new book Flash Boys.  What he reveals is that investors, large and small, are in essence paying a tariff to high-speed trading firms like IEX that are ‘front-running’ trade orders and in essence making hundreds of millions of dollars annually simply by seeing ahead of time what trades, buy or sell, were in the pipeline. Call it the mother of all skimming operations, and it’s all perfectly legal, at least for now.

High-frequency traders do this by placing their data centers as close as possible to the electronic exchanges in New Jersey, sometimes in the same building the exchange is located in, as well as utilizing the speed that comes from their strategically placed fiber optic lines.

So is the stock market rigged? I guess it all depends on your definition of rigged, but after reading Flash Boys, I subscribe to Lewis’s contention, that yes, it is rigged, no doubt in my mind one bit. So with that said, what’s an investor to do?

First, step back and take a big picture view of investing overall and the options and choices you have available. Next, understand that the vision you may still hold near and dear of “Wall Street” as this loud and raucous place where traders scream orders to market makers, and where the bulk of trades are made - those days are long gone.

The New York Stock exchange, Nasdaq, Bats, private dark pools as well as many other electronic stock exchanges are now actually huge secretive and very well secured data centers. The outdated concept of Wall Street has been replaced by super powerful servers that match buy and sell orders in the suburbs of New Jersey.

The S.E.C vs. M.I.P

Money + Influence = Power. This formula has been around since the days of the Roman Empire. It’s as much in vogue in the 21st century as it was back in the day. Yes, we have the Securities and Exchange Commission that ought to be the fair referee in a tug of war between regular investors and the rich, influential and powerful Wall Street interests that will until the end of time attempt to rig the markets to their advantage. But let’s face it, the S.E.C is as political an organization as there is, and thus influenced heavily in their decisions on what to regulate and investigate by M.I.P.

As a result of the huge publicity and attention Flash Boys is garnering, the S.E.C chairwoman, Mary Jo White “unveiled on Thursday a sweeping package of recommendations for new rules and other changes aimed at strengthening the structure of the market and improving disclosure for investors. The proposed changes would touch virtually every corner of the market, including exchanges, private trading venues, brokerage firms and high-frequency traders”, this according to the recent article in the New York Times titled S.E.C Chief Offers Rules to Govern Fast Trading.

That all sounds good, right? Until you get to the end of the article: “Critics of high-speed trading found fuel in “Flash Boys”, a recent book by Michael Lewis, who contended on a book tour that the stock market was “rigged” against slower investors. Ms. White appeared to dismiss that claim in her speech. “The current market structure is not fundamentally broken, let alone rigged”, she said, with a sardonic chuckle”.

Next came the NYT’s editorial board speaking up in a recent op-ed piece titled ‘The Hidden Cost of Trading Stocks’.

Reading this op-ed you’ll discover how some brokerage firms, like TD Ameritrade, made $80 million last year from maker-taker rebates. “A study from 2012 estimated that rebates cost individual investors, mutual funds and pension funds as much as $5 billion a year.”

Bottom Line

Before there were high-frequency traders gaming the financial system, there was and continues to be rampant insider trading. Before that there were other clever people discovering new ways to rig the markets to their advantage.

Let’s say that the S.E.C, does everything needed to somewhat level the playing field. As will inevitably happen, another loophole will be discovered and exploited, then that loophole will eventually get closed only to have yet another loophole found and exploited, and on and on it goes. It’s whack-a-mole Wall Street style.

So does this mean you stop investing in the stock market? No, not a chance. At the end of the day, say you invest $1,000 in the stock market and receive a 7% annual return-$70. Out of your $70 annual return, you’re getting whacked possibly with a HFT “tax” of say $1, so pre-tax I’m netting say $69. Do I like paying the unfair yet perfectly legal $1 HFT tax? No way. But does that mean I do not invest in the stock market for the-long-term? Again, no way.

The good news is that by being a smart long-term investor, using low-cost, high quality and well diversified index funds from high integrity firms like Vanguard, you can win the investing game handily. And if you’re not sure about the benefits of using index funds for your investment strategy then check out Vanguards 5 Myths and Misconceptions about Indexing, from there, follow the golden rules of investing by maintaining a well-diversified, low-cost, long-term investment strategy, make sure your investment strategy aligns with your financial plan and that your plan is in alignment with your core values.  Keep your eye on the prize and after that, like the song goes, don’t worry, be happy!

Tags: book recommendation, stock market

The Road to Retirement - 3 Tips for Taming Your Inner Hedonist

Posted by Mark Zaifman on Mon, May 19, 2014 @ 10:05 AM

on the road to retirement


the belief that pleasure or happiness is the most important goal in life. noun-Merriam-Webster

If you live in the San Francisco Bay area and you’re into cars, and spending $80-100K on a new car is not in the budget, than there’s a real good chance you might be suffering from Tesla envy. Yes, Tesla, that sexy new electric sports car that captures the imagination as well as the heart. For yours truly, it was love at first sight.

But I digress. Last week, I spoke with a potential new client who sells Tesla's in Silicon Valley. She was on the hunt for an independent fee-only financial planner and found me through a client referral.

Selling Tesla’s in the Valley is a very good place to be right now, especially if you’re someone that’s money motivated. So that said, before we ended our call, we spoke briefly about her experience and observations selling Tesla’s as I was curious as could be.

Here’s what I discovered.  While the vast majority of her Tesla sales last year were made to buyers paying cash, what surprised her most were how many cars she sold to folks in the middle to upper-middle income brackets that put 20% down and borrowed the rest.

Assume the final price tag on your new Model S Tesla comes out to $90K, you put $18K down (money you had stashed away in your emergency fund) and borrow $72K over 5 years. Assuming a 3% interest rate on your loan, you’re looking at a payment of nearly $1,300/month. How do you make this work cash flow wise if you’re in the middle or upper-middle income range? Simple. You stop making your 401k/403b and IRA retirement contributions. So there you have it - cash flow problem solved, future retirement problem created.

With that example in mind, below are 3 tips for taming your inner hedonist on the road to retirement.

Avoid Playing the Comparison Game

It’s human nature to compare what we have with in terms of material possessions with what other people have. And if you’re the highly competitive type, this long-time habit of comparing yours to mine can, and often does. become very self-destructive.

The next time you find yourself comparing your car, home, clothes, electronic gadgets, furniture, etc. with someone else's, step back and observe your thoughts. Say to yourself, there I go again, playing the comparison game. From there, shift your focus of attention to what you do have and what you’re grateful for in your life instead of what’s missing in your life.

Playing the comparing game is your ego’s best friend. It keeps you in a perpetual state of striving yet never quite arriving. Just when you think you’ve ‘won’, your best friend goes and buys a Tesla for his wife in addition to the one he just purchased for himself, so now you’re one Tesla short.

The remedy for this condition is gratitude, full stop. Nothing cures this ailment like being grateful you’re alive and going from there. If you need a gratitude refresher, please check out this superb video produced by Louie Schwartzberg during a TED talk he gave:

Know Your Enough Point

Have you ever reflected on how much money is enough?  Do you have an 'enough' number in your head that’s been well thought out or are you operating from a more hedonistic frame of reference where you could never have enough money just like you could never have enough pleasure?

If you feel like your life up until this point has been an endless pursuit of more, more and more of everything, and as a result you’re putting your health, financial security and perhaps your marriage at risk, now is a good time to call a time out and check in with yourself. I’ve witnessed more people crash and burn on their endless pursuit of more, way past the point they had enough money for two lifetimes, than you can imagine.

To tame this burning desire for more, start with discovering what’s causing you to feel this never ending need for more stuff. Are you chasing your father’s or mother’s dream? Are you seeking status? Have you linked your self-worth to your net-worth?

Once you’ve uncovered what’s behind this insatiable appetite for more, especially when you already have more than enough, it’s at that point you become aware/conscious of the choices you are making and how you are spending your life energy. For many clients I’ve worked with over the years, this is a break through moment. The light bulb goes off. And before you know it, you’ve discovered the true secret to money harmony, which is finally knowing your enough point. What follows is what we all seek in life, peace of mind.

Keep Your Eye on the Prize

The vast majority of my clients are laser focused on one thing - reaching their FI (financial independence) number. Sure, some are tempted to divert from their financial plan when a shiny new and very expensive object grabs their attention. But keeping your eye on the prize, on the big picture, is one of the best ways to tame your inner hedonist and shut down the noise from your ego demanding more.

As you save your way to eventual retirement, there will be numerous opportunities to take detours from your well designed game plan. These detours could come in the form of Tesla’s, second homes, super risky investments, you name it.

The key is knowing where you’re headed and how you’re going to get there while having the self-discipline to stay on track and follow your financial plan. Keeping your eye on the prize is not easy to do.  But reaching retirement with much less than you needed to save is a painful reality you have the power to prevent.


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Tags: retirement planning, financial independence, relationship with money

Vanguard Shows How Investment Advisors Can Add Up to 3% in Returns

Posted by Mark Zaifman on Tue, Apr 15, 2014 @ 11:49 AM

 Vanguard say advisors can add up to 3% return for ClientsHow much of a boost in net returns can financial advisors add to client portfolios? Well according to Vanguard, maybe as much as 3%.

In a recent research paper published last month, Vanguard, the largest mutual fund company in the world and in my opinion, the highest integrity firm out there, believes advisors can generate returns through a framework focused on five wealth management principles.

Below are the five principles Vanguard outlines:

1) Being an effective behavioral coach. Helping clients maintain a long-term perspective and a disciplined approach is arguably one of the most important elements of financial advice. (Potential value add: up to 1.50%.)

2) Applying an asset location strategy. The allocation of assets between taxable and tax-advantaged accounts is one tool an advisor can employ that can add value each year. (Potential value add: from 0% to 0.75%.)

3) Employing cost-effective investments. This critical component of every advisor’s tool kit is based on simple math: Gross return less costs equals net return. (Potential value add: up to 0.45%.)

4) Maintaining the proper allocation through rebalancing. Over time, as its investments produce various returns, a portfolio will likely drift from its target allocation. An advisor can add value by ensuring the portfolio’s risk/return characteristics stay consistent with a client’s preferences. (Potential value add: up to 0.35%.)

5) Implementing a spending strategy. As the retiree population grows, an advisor can help clients make important decisions about how to spend from their portfolios. (Potential value add: up to 0.70%.)

More from Vanguard:

How an investment advisor approaches two additional principles, asset allocation and total return versus income investing, can also add value, but are too unique to each investor to quantify.

Vanguard’s Advisor’s Alpha framework incorporates all of these principles, making it possible for advisors to add up to about 3% in net returns for their clients. This figure should not be viewed as an annual add, however. Vanguard’s research emphasizes that it is more likely to be intermittent, as some of the most significant opportunities to add value occur during periods of market duress or euphoria that tempt clients to abandon their well-thought-out investment plans.

In such circumstances, the advisor may have the opportunity to add tens of percentage points, rather than merely basis points. Although this wealth creation will not show up on any client statement, it is real and represents the difference in clients’ performance if they stay invested according to their plan as opposed to abandoning it.


As a self-described frugal person and a do-it-yourselfer, I’m aware it’s not always easy to justify paying a financial advisor to manage your investments. Why should I pay someone for this when I can do it myself?

So to have Vanguard, one of the most highly respected mutual fund firms in the world, and a definite hub for the do-it-yourself kind of investor, research and quantify the potential value a client could receive when a financial advisor follows their five step framework (which we do) while managing their investments, all I can say is thank you and as usual - job well done.

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Tags: investing, registered investment advisor, Vanguard