Resist Progress at Your Own Peril

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Ask most people who watch TV and cable news if they think the world is safer now than it was 30 years ago, and they’ll tell you no.

But if we look at the data, it’s clear that in most parts of the world — and certainly in America — we’re safer now than we were in the past.

The problem is that we have more and more access to hearing about the bad stuff. 30 years ago, if something terrible happened across the country, you might never have known about it.

But today, we live in a world of 24/7 news cycles. There are more media reporting on more stories for more periods of time.

It’s not that bad stuff happens more. It’s just that you hear more about it than you ever did in the past.

 

Dealing with Negativity Around Financial Markets

The media is always looking to sensationalize stories and trigger the emotions of their audience. That’s how they keep people engaged (and sell advertising.)

If you pay attention to the media, you’ll start noticing that doom-and-gloom headlines tend to dominate the news. The press continually make forecasts about what the markets will do next –and those forecasts are almost always ominous (and wrong.)

Why? They get more viewers that way.

When they’re wrong in their predictions, there’s no one to hold them accountable for the fact that they got it wrong. And when they’re right, they have a field day hyping up the negativity.

This is the reality of the world investors need to navigate. One of the best investing skills you can develop is the ability to tune out the news and talking heads and to ignore all the media hype.

 

The Consequences of Resisting Progress

There’s real danger in letting the media scare you away from investing or opting to hoard your money in cash.

It might feel like the safe bet today. But you still face serious risks when you refuse to move money into more than just cash.

 

One of the biggest? Inflation.

If you keep all of your money in cash, you will lose purchasing power. That dollar that is earmarked for retirement will buy fewer goods every year as inflation strips the value away from your cash.

There are real risks in investing haphazardly or without a plan. You increase your risk every time you act emotionally, fail to diversify, forget to rebalance to keep the right asset allocation, or simply invest in places that don’t align with your needs or goals.

But “playing it safe” is a risk too. And you’re far more likely to fail to reach your goals if you don’t take appropriate, measured risks inherent in investing strategically.

 

The Real Risk Is Staying Scared, Not Staying Invested

Think about it for a moment: how many times has the media predicted we’re all headed for a massive crash that we might not be able to recover from? How many times have we heard that we’re driving straight for a cliff and investors in the market will lose it all?

Now think about how many times either A. nothing happened or B. we experienced a market downturn… followed by a recovery.

There’s no denying that it is painful and difficult to live through a tough economic period. The Great Recession hurt many, many families.

But if you stayed invested in the market, that pain was temporary, and you wouldn’t have lost anything if you didn’t sell. In fact, you would have dramatically increased your wealth by staying invested and riding the market all the way up to new record highs.

The next time you’re tempted to tune into the media hype and react to what you hear on the news, take a step back. Set your emotions aside. Stay the course.

If all else fails, call your financial planner to talk through what’s on your mind or how you feel.

Generation X? I feel your pain!

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Photo-Bill Gracey

Generation X has some problems—and not just their own. Perhaps the biggest one of all is that this group has everyone else’s problems too! On one hand, they’re dealing with aging parents. On the other hand, they have young kids, college-aged kids, or adult kids who are moving back home or need financial support because they can’t find a decent job post-college. And all this is happening right when stressed-out GenXers are in mid-career and trying desperately to build their own net worth.

 

If you’re in your late 30s, 40s, or early 50s, you know the scenario well. Your career is in full swing, and even if you are making a great salary, it seems money is just flying out the door. If you have kids, they’re more expensive than ever (who knew $100 cell phone bills, iPhones, laptops, and SAT prep camps would be part of the new parenting equation?) and college costs are skyrocketing more each year. Your house is another story. Even if you were lucky enough to purchase a home (or at least refinance) in today’s low interest rate environment, you’re still paying a higher percentage of your income than previous generations toward housing. And if you’ve been in the same place for a while, renovations can throw another blow to your budget. But it doesn’t stop there. You are the “sandwich generation.” Your parents are aging…and they need your help. According to the Pew Research Center, about one in seven GenXers is providing financial support to both a child and an aging parent. From helping your parents through illnesses, to getting them set up on Medicare, finding great assisted care, selling their real estate, and more, the tasks you have to tackle seem endless.

 

It’s exhausting just thinking about it. As an advisor, one of my most important roles is helping my GenX clients juggle these overwhelming responsibilities today while also planning for the future. Because no matter how mired you are in today’s challenges, your own retirement could be an even bigger problem—unless you plan well today. To help make the juggling as easy as possible (let’s face it: it will never be easy!), here are my top five tips for getting through the “sandwich generation dilemma” with your sanity in tact:

 

  1. Take care of yourself first. With so much responsibility for others, it’s easy to forget to take care of you. But just like we’re told to put on our own oxygen mask first before helping others, it’s vital that you keep yourself healthy too. Get your annual physical. Get a flu shot. And see your medical team when something isn’t quite right. These are the years when preventive care makes a huge difference in your health today (so you can take care of everyone else) and helps to ensure your wellbeing as you age.
  2. Start thinking about how you want to define “retirement.” Unlike your parents, you probably don’t see yourself retiring at 62. You expect to live a longer, healthier life, and you may be planning to keep working much later or start a second or even third career—something that invigorates you and keeps you socially, intellectually, and physically active later in life. You want to play by your own rules, but that takes money. Which leads us to…
  3. Invest in yourself now so you can buy your independence and dignity later. Let’s face it: money is the key to independence. Once you’re ready to move on from your current career, you’ll want to have the assets to support your “non-retirement” dreams in the future.  Whether investing in yourself means earning an advanced degree, nurturing a talent, or simply putting a percentage of today’s salary into a “next career” bucket, being proactive now can help you make your dreams come true down the road.
  4. Lower your stress by getting your financial “house” in order. If you’re like most GenXers, your finances could be in better shape, in part because you’re money is so tied up in everything from your kids’ college tuition to your parents’ medical bills. That might be why 68% of GenXers report that they don’t have a good handle on cash flow, 53% don’t pay off their credit cards regularly, and 23% pay late fees. While changing this behavior may feel like one more thing to add to your to-do list, it will save you time—and stress—in the long run.
  5. Keep an eye on your endgame. Yes, all this juggling can feel overwhelming, but it’s vital that you attack your finances with gusto as soon as possible. Don’t just get your parent’s estate documents squared away—tackle your own as well. Make sure your money is working for you every day, and be sure you have adequate insurance in place to protect your assets and your family. Just like taking care of your health, making your finances a top priority can help lower your stress, give you more time to spend with your family, and ensure you have the financial strength to keep all those balls in the air.

Need help with the financial piece of the puzzle? Contact me to schedule a time to review your specific situation. Together we can plan for the future—your own, your kids’, and your parents’.

Michael Rivas quoted in Investment News

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The following content originally appeared in an article by Liz Skinner on Investment News on Nov 8, 2015.

Forget boomers and millennials, Gen Xers need advisers’ help the most

Even though they are in their peak earning years, they have the poorest financial habitsShare

Armando Castellano: Gen Xer turned to financial adviser for help with budgeting.
Armando Castellano: Gen Xer turned to financial adviser for help with budgeting.

Despite having a nest egg of $5 million — much of it inherited — Armando Castellano was always uncomfortable spending money. So three years ago, the 45-year-old musician hired a financial adviser to help him and his wife set up a budget and do some long-range planning.

The adviser, Emilie Goldman, set up a budget with monthly allotments for clothing, cars and a dozen other spending categories. She also set up a plan to ensure that the couple won’t outlive their money.

“It’s completely freeing,” said Mr. Castellano, who plays the French horn in regional orchestras in the San Francisco Bay area. “Now I have stability and clear boundaries.”

Mr. Castellano is part of Generation X, sometimes overlooked by advisers who are paying more attention to baby boomers as they enter retirement or millennials as they look forward to inheriting their baby boomer parents’ money.

And yet, Gen X, those between 35 and 50 years old, may need more help than the other two generations. Even though they are in their peak earning years, they have the poorest financial habits, according to a January survey by Northwestern Mutual Life Insurance. The group includes more spenders than savers, and Gen Xers are also most likely to have more debt than savings, the survey found.

(Related read: 5 reasons advisers should be targeting GenX clients)

Advisers said they see many in this group who already have made big mistakes. Some have failed to save enough to pay for their children’s college educations; others have bought homes that are too expensive or co-signed loans for adult children. Advisers also report the average Gen Xer typically has signed up for too many well-marketed credit cards, and taken on monthly cell phone, day care or private-school tuition bills that stretch the family finances too thin.

“There are a lot of Gen Xers who make $200,000 to $400,000 a year and they’re going broke,” said financial adviser Ted Jenkin, who started oXYGen Financial seven years ago to focus in part on serving Gen X.

STRAPPED FOR TIME

Many in the group are strapped for time, have lost track of their personal finances and don’t even read their bills, which likely come in electronically and may be paid out automatically online, too, he said.

While Gen X incomes may be rising, expectations — what its members believe they need or should be able to provide — have ramped up, compared with baby boomers’. Many more of those in Gen X are sending kids to expensive private colleges, taking exotic and posh vacations, and otherwise “chewing away at the growth of their incomes,” Mr. Jenkin said.

The No. 1 goal financial adviser Philip Olson works on for Gen X clients is to help them clean up consumer debt.

About 38% of responding Gen Xers said they have more debt than savings, compared with 31% of the overall population, according to theNorthwestern Mutual Life survey.

(More on GenX: Gen X lags boomer generation in retirement savings)

“Most advisers don’t get paid for helping with debt strategy,” so there hasn’t been much incentive to become expert in the craft, Mr. Olson said.

Ms. Goldman, Mr. Castellano’s financial adviser, helps clients gain a handle on spending and “lumpy” sources of income such as sales commissions or restricted stock units, or even inheritances. Many also consult with her before deciding whether they can afford to buy a bigger house or remodel their existing home.

Gen Xers appreciate the help, but as a group this demographic is pretty skeptical of financial professionals.

About three-quarters of Gen X investors said they believe most financial professionals are just out to sell them something, according to an Allianz Life survey conducted in November 2014. Many blame the financial sector for the 2008 financial crisis, from which they may have lost jobs or value in their homes and investments, or even watched their parents’ retirement accounts get crushed.

COOL WITH STOCKS

However, Gen X wasn’t as traumatized as those from the younger Generation Y set about investing in the stock market, according to advisers.

Ms. Goldman, founder of Tamarind Financial Planning, said they seem more willing to let their long-term investments ride than those coming after them.

“Generation X saw assets grow before the 2008-09 crisis hit and they have that positive experience,” she said. “Generation Y stepped in when it was horrible and now they don’t’ even want to try.”

Financial adviser Jennifer Harper, who started a practice in January aimed at Gen X, said she sees people who need help saving for college, an expense that will be a bigger issue for this generation because many married late and therefore will be at an advanced age when their kids are in college.

She pointed out that many Gen Xers will still be paying for college during “the retirement catch up years” that many former generations have used to sock away money the decade before retirement.

As it turns out, even Gen X’s idea of retirement looks different than past generations’.

Adviser Michael Rivas, founder of Bienvenue Wealth, whose clients are 90% Gen Xers, said about half of his clients don’t plan to retire in their 60s or really, ever. Instead, they want to open restaurants, or start new businesses or begin new careers.

“This is a change from the last generation, who set their clocks for 62,” he said.

Mr. Rivas encourages clients to “invest in themselves ahead of time,” by starting early to get any additional education and training they’ll need to pursue new careers in their later years.

He also helps them figure out how to fund their dreams, whether that means coming up with a large sum to start a venture or just preparing to live without an income stream for a number of years while the next endeavor gets going.

Mr. Rivas, 49, knows of what he speaks in this area. He opened his financial planning firm five years ago after a career working on the floor of exchanges in Chicago and in other financial services positions.

He said an adviser’s fee structure can make him or her more attractive to Gen X.

Transparency is the most important aspect with this suspicious group. They’re on the lookout for the “gotcha moment” when they find out what they will really pay for financial help, Mr. Olson said.

Spelling out all the fees is important, and many prefer paying a monthly charge, as opposed to annual fees, because that’s the way they’ve grown up thinking about their finances, as monthly obligations.