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

Sticking with Your Financial Plan When the Going Gets Tough

Posted by Mark Zaifman on Wed, Sep 30, 2015 @ 02:38 PM


Next week, your monthly investment statements will arrive via mail or email. And unless your portfolio has been invested 100% in Treasury Bonds, you’re going to see unrealized losses on your statement, as it’s been a terrible month/quarter in the stock market.

First thing to remember, those losses are paper losses, also called unrealized losses. When do they go from being unrealized losses to actual losses? Answer: When you actually sell the fund or stock that’s underwater.

With the resurgent popularity of tax loss harvesting, where your aim is to strategically sell securities at a loss to offset the capital gains in your portfolio, you welcome the opportunity to lower your tax bill at the end of the year by booking losses. With the recent correction in the markets still going on, there should be opportunities galore to harvest losses to offset gains.

Yet, while the benefit of reducing your overall tax bill by tax loss harvesting is a net positive, the challenge for many investors still remains sticking to their overall financial plan. Easy for most to do when the stock market is performing well, not so easy during very volatile times like we’re experiencing currently.

Stick with your plan….even when the market gets scary

Making changes to your investment strategy while global markets are going through a much needed correction is highly risky, potentially harmful to your financial future and could very easily backfire. Yet over and over and over again, statistics show that the biggest mistake investors make year in and year out is attempting to time the market, in other words, the proverbial mistake of selling low and buying high.

During emotionally charged times like we’re currently experiencing, it seems there’s always a person you know or work with that hears about someone they know, or someone that knows someone that has the true scoop about the markets and that someone has moved all their investments into cash or gold.

That’s right, this someone special with exclusive insider knowledge has sold everything and moved all their money into cash or gold because why? Well who knows why really? And has that someone really moved all their money into cash or gold? And if they did, what’s the point and more importantly, what’s the strategy post cash/gold?

So what to do during market volatility? Perhaps nothing.

If you're watching the recent market correction and wondering what to do, consider learning how to cope with volatility instead of changing your financial plan.

Often, the wisest thing to do during periods of extreme market volatility is to stick with the investment plan that you've already developed. Equity markets have reaped sizable gains over the past six years. Such setbacks, while unnerving, are inevitable.

A 'do nothing' prescription might be tough to swallow if you've been caught off-guard by recent volatility. But no action is an active decision, and can be the right decision for reaching long-term financial goals.

Here are a few simple tips to help you through the current market volatility.

#1: Recognize that volatility and periodic corrections are common in equity markets.

The key to getting through unexpected turbulence is to understand that swings in the financial market are normal—and relatively insignificant over the long haul. The best approach to protect portfolios is to diversify among a broad mix of global stocks and high-quality bonds so that you are better poised to buffer the declines in the equity market.

#2: Tune out the noise, and remove emotion from investing.

Seeing the same story at the top of every news site you visit, as well as seeing related portfolio fluctuations, is likely to worry you more than it should.

If you're a long-term investor, resist the urge to make drastic changes to your investment plans in reaction to market moves. You may find what's driving the overreaction in markets is nothing more than speculation.

Making shifts to your portfolio in hopes of avoiding a loss or finding a gain rarely works long-term. Investors who panicked and dumped stock holdings in 2008 and 2009, believing they could get back in when 'the coast was clear', likely suffered equity losses without the benefit of fully participating in the recovery. Vanguard research finds that a buy-and-hold approach outperformed a performance-chasing strategy by 2.8% per year on average during the 10-year period analyzed.

Also, try not to look at your accounts every day. It's unnecessary and may do more harm than good. Remember that portfolio changes, aside from routine rebalancing, can result in significant capital gains. And don't forget you need to know when to jump out of the market and then get back in—decisions few investors can and should tackle.

Rule #3: Make volatility work for you.

Save more, and continue to invest regularly. Boosting savings is important to your long-term financial goals. If you invest regularly through payroll deduction, an automatic investment plan, or a target-date fund, you're putting the market's natural volatility to work for you. Continue making contributions to take advantage of dollar-cost averaging. Buying a fixed dollar amount on a regular schedule offers opportunities to buy low during market dips. Over time, regular contributions can help reduce the average price you pay for your fund shares.

The Inaction Plan

If your portfolio is broadly diversified and has the appropriate balance for your financial goals, time horizon, and risk comfort level, sticking with it is a wise move.

Because no one knows what the future holds, a globally diversified strategy can be more advantageous than shifting too much in any direction. You can resist the temptation and save yourself the stress by tuning out the noise. It's okay to ignore volatility—that's part of the plan.

Bottom line: Emotions and investing can be a losing combination. Don’t abandon your investment strategy because the market is uncertain. Instead, practice being fearless.


Photo credit FrankieLeon

Tags: investing, stock market

Keeping Stock Market Volatility in Perspective

Posted by Mark Zaifman on Thu, Sep 03, 2015 @ 10:02 AM


It’s often impossible to explain stock market volatility until long after the dust has settled. And these past couple weeks of volatility are no different.

That’s why it’s a good idea to take day-to-day market events in stride and stay focused on your long-term objectives.

If you read the business section of a newspaper or watch CNBC or other financial shows, you’ll hear the talking heads discuss bull and bear markets, market corrections, and the like. As an investor, you should be aware of what these terms mean, but you should also know that it usually never makes sense to think about changing your investment approach based on today’s headlines.

The Markets are Unpredictable

From December 31, 1986, through December 31, 2013, the monthly performance of the Standard & Poor’s 500 Index ranged from a high of 13.47% (in January 1987) to a low of –21.54% (in October 1987).

However, despite the stock market’s ups and downs over that 25-year period (including bull and bear markets), the S&P 500 Index averaged a 10.30% annual return, a solid performance for investors focused on the long term.

4 Tips for Dealing with Stock Market Volatility

One of the most common mistakes investors make during bull markets is to move money into their “winning” investments in hopes of hitting it big.

Conversely, during bear markets, investors sometimes lose patience and sell the investments that are declining in value. Unfortunately, investors seldom get this timing right and react too late to be able to capitalize on gains or avoid major losses.

1) Maintain Your Balance Hold on to the mix of stocks, bonds, and cash investments that are tailored to your objectives, time horizon, risk tolerance, and personal financial situation.

2) Continue Investing Regularly Keep making regular contributions to your employer-sponsored retirement plan, IRA, and other investments so as to take advantage of dollar-cost averaging.

3) Make Change Gradually If you need to make adjustments to your portfolio, make the changes gradually and with clear purpose and intention. Do your best to not let your emotions override your long-term investment strategy.

4) Tune Out the Noise These days, investors are bombarded by an amazing amount of financial news and information. Try to ignore all the noise and keep your focus on your long-term goals.

The month of September, traditionally speaking, is usually a pretty volatile month in the markets. On top of that, the Federal Reserve will decide this month if it’s the right time to begin raising interest rates. So buckle-up, as this month could very well be a repeat of August, but with even higher volatility.

Then again, it could turn out to be a smooth ride through the month. It’s the uncertainty, the unpredictability of gauging where the markets are headed that will definitely make for an interesting September. Stay tuned…..

Photo credit Dave Herholz

Tags: risk management, investing, stock market

Bond Funds and the Prospect of Rising Interest Rates

Posted by Mark Zaifman on Wed, Jul 29, 2015 @ 01:21 PM


Since the stock market crash of 2008-2009, interest rates, especially the 10-year Treasury, have stayed historically low. Last quarter, the 10-year Treasury saw its largest rise since the end of 2013, halting a streak of five consecutive quarters of falling yields.

Most bond funds of all stripes, sizes and flavors have performed well since the crash. It’s been such a smooth ride, interest rates have stayed low for so long that it’s easy to forget bond prices don’t just go in one direction - up.

They can also go down in price as we’re seeing now. When interest rates rise, the prices of bonds fall, whereas when interest rates fall, the price of bonds rise. Wait, what?

If you’re confused, as most people are, about the inverse relationship between bond prices and interest rates, let me help.

For the sake of not getting too wonky and hopefully avoiding the risk of your eyes glazing over, below are some links to a few pages on Investopedia that help explain, mostly in plain English, how this crazy inverse relationship with bonds work and how that impacts your bond funds. Gain just enough knowledge to be dangerous.

Bond Basics: Yield, Price And Other Confusion

Why do interest rates tend to have an inverse relationship with bond prices?

How Does Duration Impact Bond Funds?

Bond Funds Hedge Your Stock Market Risk

Many investors, whether individual or institutional, hold a diversified bond portfolio primarily to mitigate the volatility inherent in stocks or other risky assets, while others, especially those in retirement, hold bonds for the income they produce as part of a portfolio spending strategy as well. However, with yields presently at or near historic lows, more investors view the bond market as abnormally risky.

The majority of thought currently is that when interest rates rise, the fixed income portion of an investor’s aggregate portfolio may face volatility and loss. Coincidentally, the phrase ‘bond bubble’ is gaining currency among the talking heads of Wall Street. So with all that said, please allow me to put this potential bond risk in context.

As interest rates begin to rise, some say that will happen in September, I’m thinking more like December, many investors will see the price of their bond funds go lower. Ouch! After the pain wears off, your next thought may very likely be - I need to do something. What should I do? Sell my bond funds, move into cash? Help.

Per Vanguards plain talk bulletin - Interest Rates, Bonds & Misconceptions:

- Rising rates reduce the returns of most bond funds in the short term, but can boost returns in the long term.

 - If you’re investing only for income (and can ignore fluctuations in your fund’s share price), rising rates won’t make much difference to you in the short term.

 - What’s essential is that you understand why you own the bond fund.

Interest Rate Rise is Good News for Long Term Investors

Rising interest rates are good news for long-term investors and here’s why. Yes, your bond fund prices will decline initially, but between five and seven years later, the portfolios returns are higher than they would have been if rates had not risen. How does that work?

Here’s the secret sauce about rising rates when you have bond funds in your portfolio. Remember, your bond funds generate monthly interest income. That interest income is reinvested monthly at higher yields and over time, those higher interest rates produce higher yields for your bond funds.

Summing Up: The Right Response

If you’re holding bond funds as part of a long-term asset allocation, rate changes are rarely a good reason to change your investment plan. In fact, as long as you reinvest your interest income-or invest new cash-higher rates can enhance your long-term total returns. And if you’re investing for income, rate changes won’t make much difference in the dollar amount of a fund’s income distributions, at least in the near term.

What about getting out of bonds before rates rise, then getting back in after rates have settled?

That approach sounds good in theory, but in reality, rate changes are impossible to predict with accuracy.

The best reason to take action is if you discover that your bond fund no longer fits your needs. Maybe your circumstances have changed. Or you may decide that you picked the wrong fund. Maybe you invested in a long-term bond fund, tempted by its relatively high yield, and now find you took on more risk than you bargained for. If you can’t tolerate any fluctuation in the amount of your principal, your best options are money market funds.

Whether interest rates are rising, flat, or falling, the same principle should govern all investment decisions. Know how each investment fits into your overall financial planning strategy and why you own it. If you can answer those questions, rate changes are just part of the markets’ daily spectacle.

So tune out the noise as much as possible and enjoy the rest of your summer.


Photo credit Banspy

Tags: bond funds, investing

Your Investment Strategy-Never Confuse Risk Tolerance with Risk Capacity

Posted by Mark Zaifman on Fri, Jul 03, 2015 @ 11:12 AM



If you have a financial advisor who manages your investments, at some point you most likely completed a multiple choice risk tolerance questionnaire and answered some version of the following hypothetical question:


If the stock market dropped 20% in one week, would you:

a) Sell 100% of your stock positions

b) Sell a portion of your stock positions

c) Use the downturn as an opportunity to buy at a lower price point

d) Not make any changes to your portfolio

So as you sit in the comfort of your home or office and contemplate the answers to the above types of what-if questions, thinking and feeling like you’re able to tolerate higher levels of risk is very common and easy to do.

After all, it’s one thing to imagine having the risk tolerance to see your portfolio drop 20% in one week and not panic. But in real life, when it really does happen, that’s when an investor discovers their true tolerance for risk.

If you slept well the night of the hypothetical 20% drop in the stock market, chances are you have a very high tolerance for risk and would most likely be considered an aggressive investor. Aggressive investors want to take risk, lots of it, and usually like to have portfolios constructed that have at least 80% of their investments on the equity side of the ledger if not 100%.

Risk Capacity

The other component of assessing risk is your capacity for risk taking. Never should an investor or potential investor confuse risk tolerance with risk capacity. To do so could and often will lead to awful consequences.

Say your risk tolerance answers assessed you as aggressive. At our firm, an aggressive risk tolerance score would mean a portfolio constructed with a 95% allocation to stocks and a 5% allocation to bonds. Stock market volatility is this type of investor’s best friend. This is a high risk, high reward investment strategy.

With a 95% allocation to the stock market, the potential hit to your portfolio if/when the markets have a wicked downturn would be significant.

Now imagine you retired in your early 50’s. You’ve been a risk taker your whole life, in fact that’s how you were able to achieve much of your financial success. You live large because that’s the way you roll. Your portfolio is your only source of income. So far, your high risk taking has been a winning strategy and you see no reason to change course.

Over the past few years, your annual spending has increased rapidly but you’re not concerned about it because your high risk investing strategy has paid-off in a big way. The bull market we’ve had has made you feel invincible. You invested in a start-up, purchased a second home, bought a new Tesla and racked up lots of new debt because the banks were making it so easy to borrow.

Then, a crisis somewhere on the globe occurs and the stock market drops 20% - not in a week, but in two days. You shrug it off, only to watch the market drop another 20% the following day. Suddenly, it dawns on you that although you have a high tolerance for risk, the capacity you have to take risk was not as high as you had imagined or hoped.

As you slowly start to assess the damage, you realize that the lifestyle that you’ve grown accustomed to is about to get altered in a big way. In order to meet your monthly overhead costs, you need to withdraw the same amount of money from your portfolio as you’ve been doing - only now, you’re doing it with a portfolio that’s lower in value by 40%.

To add insult to injury, after blowing through the 5% of bonds in your portfolio, and because you did not set aside any emergency reserve cash funds in the event of a stock market crash like this, you’re now forced into selling your stock positions at a huge loss. What were unrealized losses in your portfolio suddenly become realized losses.

In the course of one week, your life as you knew it, your lifestyle has changed dramatically. Loans and lines of credit you established over the past few years that seemed like no big deal now feel like an albatross around your neck. How did your life turn so quickly from living the dream to living the nightmare?

Eyes Wide Open

Although the above is a fictional story, there are plenty of people taking much more risk than they have the capacity to handle. Taking risk, even being an aggressive investor - it’s all good, but please, do not purely use a risk tolerance questionnaire to make that crucial decision. It’s just too important to rely strictly on that one data point.

A financial advisor looking out for YOUR best interests and not their own, will always go deeper and play the role of devil’s advocate by modeling worse case scenarios before recommending an investment strategy. Only then can you understand your true capacity for risk.

Many investors are do it yourselfers and going it alone has its advantages for sure, yet from what I’ve observed, most of these investors tend to focus too much on best case scenarios and too little on worse case.

So the moral of this story is - never confuse risk tolerance with risk capacity and never underestimate the value of a professional, independent and objective, second opinion. That opinion could and often is worth its weight in gold.


Photo credit Jake Rust

Tags: investing, stock market

Women & Money & the Fear of Being a ‘Bag Lady’

Posted by Mark Zaifman on Thu, Jun 04, 2015 @ 05:36 PM



“Despite the good withdrawal rate, I still fear some catastrophic situation and imagine sitting on the curb as a bag lady!  That, of course, requires a therapist--not a financial planner, eh?”



The above quote comes directly from a client, let’s call her Mary (not her real name) responding to an article I emailed her about the 4% withdrawal rule in retirement.

Mary’s retiring from the UC system at the end of the year. She’s very savvy with money, has a net-worth of close to $3 million and earned a Masters and Ph.D from UC Berkeley. Together, we developed a comprehensive financial plan focusing on a tax efficient retirement income strategy.

After much careful analysis, stress tests, modeling worst case scenarios, using Monte Carlo simulation - even after all those tools illustrated clearly that Mary had a secure retirement ahead of her, something still nagged at her.

I couldn’t quite put my finger on what it was. It seemed to me at the time, that like many clients that develop financial plans when they’re nearing retirement, it takes a while for the actual numbers to sink in and become your reality.

Mary’s annual portfolio withdrawal rate when she retires is projected to hover between 2-3% for the rest of her life. Much of this has to do with a pension she’ll be receiving from CalPERS as well as living well below her means. And because she likes to play it very safe, we assumed an annual investment return rate of 4.5%.

The Fear of Becoming a ‘Bag Lady’

If Mary’s email was a one-off, I probably wouldn’t have thought too much more about it. But this fear of becoming a bag lady that many women have is real and more common than most people would imagine possible.

I’ve heard this fear expressed by women so often that perhaps Mary’s response was a tipping point. I don’t think most men understand how prevalent a fear this is for women. On the surface, it seems irrational, right? How could someone with such a high net-worth that leads a frugal lifestyle be worried about being a bag lady?

In Mary’s case, she knows intellectually that her financial future is as secure as could be, it’s the emotion of fear about her future security that’s causing her problems.

Fear around money is a very primal emotion. When we feel our security, our future, is in jeopardy, all the financial analysis in the world is not going to alleviate the fear. We move into fight or flight mode. So e-mailing the article to Mary and hoping she would understand AND feel safe and secure about her future retirement was not going to do the trick.

The nexus of money and our emotional intelligence, (EQ) being mindful that are thoughts create our feelings is where I needed to go in order to help Mary deal with her anxiety. So that’s where we focused our energy and time after I received her email.

Be Mindful of Your Thoughts

Feeling safe is one of our primary human needs according to Maslow’s hierarchy of needs. And when we don’t feel safe, we worry and worry, which increases our stress level which negatively impacts our health.

Full disclosure - I’m a recovering worrier around money. Worrying about money was a skill I mastered at a very young age. If there were an Olympics for worrying about money, I would have taken the gold.

Fortunately for me, my turn around occurred after I read the seminal book on your relationship with money-Your Money or Your Life-Transforming Your Relationship With Money and Achieving Financial Independence.

I mention this because it’s so easy to relate to Mary and many other women clients that deal with this chronic fear of winding up homeless one day. On the surface, all looks good financially, but underneath the surface is a different story. And because women are not shy about sharing their feelings around money, I’ve heard their stories and felt their fear, pain and anxiety up close and personal.

Becoming mindful of your thoughts is one way to deal with your fear. Although easier said than done, if you’re someone that worries about money and it’s affecting your ability to feel happy, then being the observer of your thoughts is a good first step.

I used to keep a journal of all the crazy and irrational fears my overly active mind would conjure up. Getting them out of my head and into a journal allowed me to see more clearly that it was me and me alone causing my fear. Soon, being the observer of my thoughts became an ingrained habit that continues to this day.

Fear, worry, anxiety - these are not bugs or viruses we catch. These are our thoughts and we’re responsible for our thoughts. Our thoughts determine our feelings. So back to Mary, when she gets emotionally hijacked with thoughts of being a bag lady, rational thought get tossed aside and all she can think and imagine is the worst happening to her.

This pattern of going into a dark, spooky place when thinking about your money and your future becomes a dominant thought and easily overrides your ability to think clearly and rationally. It follows you around like a dark cloud and zaps your happiness whenever you begin to feel all will be well.

Fear around your money and your future will only grow stronger if you allow it to grow stronger. The enemy of fear is faith. Having faith in your future, shining a light on the darkness that fear thrives in is the path forward. You have the power to change the way you look at things and the things you look at will change.

Seeking professional help may also be in order. Our recommended financial coach is Pat Chambers, Ph.D. She provides group coaching for women using ‘Money Salons’ and she’s also available for individual sessions as well as working together virtually.

Liberating yourself from the fear around money is one of the greatest gifts you can offer your divine self. We all deserve to lead a fearless life.

What’s stopping you from being fearless?



photo credit Sean MacEntee

Tags: retirement planning, women and money

Beware of 'IRA Rollover Specialists' Masquerading as Financial Advisors

Posted by Mark Zaifman on Fri, May 15, 2015 @ 06:33 PM


False Promises, Dashed Dreams

A couple weeks ago, a client in Oakland emailed me an article from Money Magazine titled: 4 Disastrous Retirement Mistakes and How to Avoid Them.

The premise of this must read article for anyone getting close to retirement and wanting to rollover their IRA is to see past the hype being touting by many a financial salesperson masquerading as an advisor, but really only concerned with their commission payout and not your financial wellness and security.

My client who sent the article expressed her outrage and disbelief that this practice is so widespread. She asked if I would highlight this topic in my next blog post. Oh yes I will, gladly, was my response.

So with that said, below you’ll find some excerpts/highlights from this well written and informative article. Please pass it on to anyone you know that may be vulnerable to these slick sales pitches.


“Lured by a promise of higher earnings or guaranteed returns, you could roll your money into an investment that’s far more expensive than what you already own. Financial advisers gunning for IRA rollover dollars like to pitch variable annuities insurance products that allow you to invest in stock and bond funds, tax-deferred, and later convert your balance into regular income.

The drawback is the high fees you’ll pay every year for a VA—typically 2.4% of your assets for investment management and extras like income guarantees, according to Morning­star. But the more serious trouble comes when an adviser won’t stop at one, exposing you to large penalties”


“Another pitch is the tantalizing prospect of early retirement. The danger is that it’s based on sloppy or misleading math, says ­Gerri Walsh, head of investor education at FINRA.

Verizon retiree Cindy Rog­ers says her adviser told her that her annuity would produce ample income to cover her expenses, while the principal would last her lifetime, according to her FINRA complaint. But Rogers’ $3,700 monthly payouts mean she’s withdrawing 8% a year—twice what’s typically suggested for a retiree who’s 65, let alone 49. Including fees, she’s depleting her savings at a rate of 11% a year. Plus, Rogers owes an estimated $9,000 in tax penalties.”


“Chasing high returns can get you in trouble. Rolling money into what’s known as a self-directed IRA so that you can shoot for the stars is especially perilous. The SEC estimates that in 2011 investors had $94 billion in this type of IRA, which lets you invest in pretty much anything, from real estate to tax liens.

Last year the state securities regulators association warned that because self-directed IRAs can hold exotic assets, which IRA administrators don’t generally vet, the accounts leave you vulnerable to risky pitches.

In a video of a 2013 sales presentation, Curtis De­Young, founder of American Pension Services, a Utah-based retirement plan administrator, promised retirees the freedom to “take control of your own destiny” with a self-directed IRA. At the end of 2013 his nearly 5,500 clients had IRA accounts worth $352 million. But a lawsuit filed in April by the SEC claims that ­De­Young steered $22 million in clients’ money into now worthless real estate investments and loans to friends. A lawyer for De­Young told MONEY that the retirees chose the investments; the firm was merely an administrator.”


Increase Your Financial Literacy

One of the best ways to guard against getting ripped off is to increase your financial literacy. Knowledge is power and the more knowledge you have around your money, the more self-confident you’ll feel about the many financial decisions you’ll need to make as you approach retirement.

Don’t let the title turn you off because Personal Finance for Dummies, written by Eric Tyson of Nolo Press fame, is one of the best money books out there. It will teach you just enough to be dangerous.

Also, if you decide to seek guidance from a financial advisor, my recommendation is to work with a fee-only advisor that works in a fiduciary capacity. The simple truth is that advisors working in a fiduciary capacity are legally obligated to provide advice that is in your best interest, not the other way around.

Retirement planning in the 21st century demands a more efficient and effective approach that is transparent, accountable and open to new ideas and strategies. At age 75 and 10 years into retirement for example, there are no do-overs in regards to the financial decisions you made ten years ago.

That’s why financially speaking, getting it right the first time and finding an advisor that you can trust is how in retirement -  peace of mind is yours for the asking.


Click me


Photo credit by James O'Gorman

Tags: book recommendation, fee-only financial planning, fiduciary, registered investment advisor

Is Your Financial Road Map Outdated?

Posted by Mark Zaifman on Thu, Apr 30, 2015 @ 05:25 PM


When was the last time you reevaluated your personal financial goals? Did you set initial goals when you were in your 20’s and haven’t looked back since?

So many new clients I meet are operating from outdated financial road maps. Even though their lives may have changed drastically over the years, their financial goals have remained static, stuck in time and in major need of an overhaul.

Just like maps become outdated, so do financial goals. Many times, what our financial goals look like when we’re young bears no resemblance to what we desire as we live life, get knocked around a bit and gain further awareness of our wants and needs.

Whose road map is it anyway?

Often times, we set financial goals without much insight into what’s driving the goals we’re establishing for ourselves. Often times, it’s the ‘back story’ that usually informs these decisions.

For example, say you grew up in a family where making money, a lot of money, was prized and reinforced into your psyche. Quantity vs. quality of life approach to your money or your life.

Perhaps your Dad or Mom or both were very ambitious and self-motivated. Growing up, you watched them achieve financial success. Let’s say they were very driven in their careers and sacrificed much to reach a certain level of financial status and power.

You graduate from college, spend the first 10 years or so figuring out what you want to do with your life and by your early 30’s, you’ve landed. Your career looks very promising and you’re happy. Now it comes time to start saving money and setting financial goals.

It’s at this point in your life where your relationship with money or lack thereof truly matters. Maybe you will follow the path your parent’s role modeled for you, maybe not. Regardless of the path you choose and the financial goals you establish, what’s most important is that your goals represent you and your vision.

Being conscious of your choices around earning, spending, saving and investing requires you to be mindful of your past money history and the assumptions and financial baggage you may still be carrying around unconsciously that heavily influence and impact your life today.

Many new clients I meet have been operating on auto-pilot in terms of their financial goals for most of their lives. The default position for many of us is to follow exactly what and how our parents dealt with their finances. For some this works fine. For most though, not so much.

Striving But Never Arriving

Another crucial aspect of reevaluating and or updating your financial road map is to make sure your goals are realistic given where you are right now, financially speaking. Very often, new clients I meet have set very unrealistic goals for themselves. Often times this leads to taking unnecessary and sometimes reckless investment choices.

Are your financial goals attainable? Do you have a viable chance of reaching the goals you set? Or do you constantly beat yourself up for not reaching your goals, only to take ever more risk with your money and striving yet never quite arriving.

Or are you someone that keeps moving the ‘goal posts’ on the road to financial independence farther and farther out of reach, with the result that you sabotage your chances of achieving financial success and most importantly, peace of mind around your personal finances.

It’s never too soon or too late to reevaluate your financial road map, so as the Nike saying goes, just do it!

Photo credit Patrick Barry

Tags: financial success, financial planning, relationship with money, financial goals

Are You Playing Chess or Checkers With Your Money and Financial Future?

Posted by Mark Zaifman on Fri, Mar 20, 2015 @ 11:29 AM

If you’re a boomer, perhaps you’ll remember Hasbro’s famous “The Game of LIFE”? The Game of Life challenges players to manage their money and get to retirement wealthy. Different spaces on the game board offer life challenges like babies, houses, night school, you name it. Spin to win!

Like with any game you play, besides having fun, ultimately, you also would prefer to win the game. So in that spirit, as you think about the way you manage your money and plan for the future, stop and ask yourself; are you playing checkers or chess and are you playing to win?

If you’re a Spiritus client, the answer is a given. You play to win and you think and act strategically. You know where you’re going and you have a dynamic financial road map that illustrates how you’re going to get there, move by move. Checkmate for you is about achieving financial independence on your terms, on your schedule and just as you planned.

Below are what I think are a dozen major differences between these two types of money management styles. How do you stack up? And wouldn’t you rather be a playing chess than checkers when it comes to your money and your life?


I could probably list another dozen or two differences, but you get the point. At the end of the day, what often determines whether you wind up with an ‘ocean view; retirement or a ‘garden view’ retirement is how well you planned. As the saying goes, fail to plan, plan to fail. That’s truer than ever.

Planning is not easy. It requires lots of thought, tapping into your imagination, trusting your intuition, visualizing your future, and that’s just for starters. Procrastination, inertia kicks in, life gets busy, demands at work pile up, and next thing you know, guess what, you’re 50 years old. What happened?

Show me anyone that reached financial success in life, especially if early in life and you can be pretty assured that person had a plan and played the game of life as a chess player.

Now it’s your turn to play. And this time, play like a master, plot your moves strategically, look over the horizon, course correct when needed and most importantly, have fun and play to win.


Checkers photo credit Phillip Taylor

Chess photo credit Tristan Martin 

The Possible End of College-How to Prepare Financially For an Unknown Future

Posted by Mark Zaifman on Wed, Mar 04, 2015 @ 12:46 PM


Kevin Carey, author of the new book, The End of College: Creating the Future of Learning and the University of Everywhere is a must-read for any parents of young children that hope and plan to send their kids to college.

Terry Gross, host of NPR’s Fresh Air just had Kevin Carey on her show and the interview she conducted was fascinating on many levels.

If you’re unsure how you’re going to save enough by the time your kids are ready to enroll in college and or how much too actually save, then it’s even more important you listen to this interview and check this very interesting book out of your local library and inform yourself further.

There’s no question that making sure your kids have the best opportunity to succeed in the future is a major priority for parents. The most often asked questions that comes up over and over again when developing comprehensive financial plans for young parents regarding this subject are:

 What will the future of education look like 15 years from now?

What will a 4-year college degree cost 15 years from now?

Should we put all our college savings into a 529 plan?

What happens if we fully fund a 529 plan over 15 years and our son/daughter decides not to attend college?

How will our income and investments impact our ability to receive financial aid?

Should we consider using student loans or saving enough to avoid any borrowing?

What are the best 529 plans currently available?

As if these questions are not challenging enough for parents to figure out, adding to this conundrum of what to do is Carey’s new book which challenges the entire assumption of what college will look like in the future. Here are a few excerpts from his book:

“A lot of parents start worrying about paying for college education soon after their child is born. After that, there's the stressful process of applying to colleges, and then, for those lucky enough to get admitted into a good college, there's college debt.”

“But author Kevin Carey argues that those problems might be overcome in the future with online higher education. Carey directs the Education Policy Program at the New America Foundation. In his new book, The End of College: Creating the Future of Learning and the University of Everywhere, Carey envisions a future in which "the idea of 'admission' to college will become an anachronism, because the University of Everywhere will be open to everyone" and "educational resources that have been scarce and expensive for centuries will be abundant and free."

"If only the rich can afford to go to the 'good colleges,' then we don't have a system of opportunity; we have a system of replicating privilege that already exists."

So does this book make the decisions parents face right now any easier when deciding the best course of action for their kid’s college education? Nope.

Yet two things are for sure. One, we have no idea what the concept of college education will look like 15-20 years from now. And two, the global economy will be even more hyper competitive in the future than it is right now. Maintaining a high quality of life will be that much harder.

All that said, if nothing else, this book will generate lots and lots of discussions around the kitchen and financial planning tables, that’s a given.

Carey does not claim to have a crystal ball that could predict the future. But he has done tons of research and devoted much time to pondering the future of college education. That research and higher education trends he sites alone make this book a great investment of your time.

Vanguard's John Bogle on including International Stocks in Your Portfolio

Posted by Mark Zaifman on Thu, Feb 05, 2015 @ 12:07 PM


Should you include international stocks in your investment portfolio? If yes, how much? If no, why not?

John Bogle spoke to this question when he was recently interviewed on CNBC. Thanks to my client Jim T. on the east coast for sending me the link to the video and suggesting I post to my blog.

Be wary of stocks outside the US: Bogle

Sharing his overall market view during the interview, Bogle recommended not to exceed 20% in non-U.S. securities if you must invest internationally. Interesting that he uses the phrase if you must. Obviously, he’s not a big fan of going abroad when investing.

Here at Spiritus, we use Ibbotson asset allocation models when constructing investment portfolios for our investment management clients With Ibbotson long considered the ‘gold-standard’ of asset allocation models, of course it made me curious to see how our portfolios compared to Bogle’s recommended 20% max international securities exposure.

For our 60/40 model, the most widely used at our firm (60% allocation to equities-40% allocation to bonds) we have a 17% allocation to international securities. So we’re within Bogle’s international comfort zone, aka- the Bogle sweet spot.

That said, our most aggressive Ibbotson model, which has a 95% allocation to equities and 5% allocation to bonds does exceed a 20% allocation to international securities. So definitely some food for thought here….

Key Takeaways per John Bogle

“Stick with U.S. securities. You don’t need to do international investing because the U.S. is an international economy. Because you earn your money in dollars - you save your money in dollars, you invest your money in dollars - you retire and receive your social security or pension in dollars, avoid the currency risk when you invest internationally.”

It is worth mentioning that many international funds do provide hedges against currency risk, but for most investors, that’s too confusing to sort out and often hard to figure out the mechanics behind the hedging strategy. So point taken, Mr. Bogle.

Next time you receive your investment statement, check out the total amount of your money that’s invested in international securities. See how that stacks up to Bogle’s recommended 20% max allocation to this asset class.

Are you over, under or sitting pretty in the Bogle sweet spot?

Tags: investing, stock market, John Bogle