Brad:What are some of your personality traits that make you a great advisor?
Eric: I think about all aspects of a decision. Decisions that can seem obvious in a vacuum but become less clear after gaining additional perspective, and playing those decisions out over long time horizons. I also enjoy researching and learning things on my own. I believe that perspective is imperative when advising on long-term financial decisions.
When I think of and analyze decisions, I always think of them in the context of a pachinko machine. The ball is launched to the top of the machine, where it then begins to fall. Bouncing off seemingly randomly to end up at its destination at the bottom. During that fall, the ball will go to each section and bounce off the pegs. The difference between it bouncing left and bouncing right can be a fraction of a millimeter, but that minuscule difference can lead to a very different outcome (whether the ball goes right or left). And, the ball bounces left and right several times before making it to the bottom. As it reaches the bottom, the outcomes are still random, but the further it comes to the end, the slimmer the range of outcomes. When it’s at the very top, that first bounce can make a huge difference in where it ends up.
Brad:What is something not many people know about you?
Eric: I ran the 1990 Goodwill games marathon in Seattle. The Goodwill games were created by tv and media mogul, Ted Turner, as an alternative to the Olympics. In February of that year I could not run one mile, so I decided to challenge myself to run a marathon. Slowly, I got in better and better shape, and was able to complete a 10k in April, which was a great stepping stone for the upcoming marathon in July which I was able to finish. When I finished, I promised myself I would do a marathon every 30 years to help keep me accountable, and my next one is coming up in a year and a half.
In addition to the marathon, I have always loved electric motors since I was a little kid. In my teens, I was always building them. I started out making small car motors to compete in middle school races, and the fascination continued. Today that interest continues at my family’s cabin along the scenic Highway 20, where I have created a small hydroelectric station on our creek to provide power to one of our buildings. I also enjoy reading up about the newest tech on electric cars and have now converted all my outdoor landscaping tools from gas to Green Works electric tools. I kind of went crazy with that transition, but I am very glad I made the switch.
Brad:If your son and daughter only took one lesson from you, what would that be?
Eric: Do away with expectations, regarding how their lives will play out and their relationships with others.
When you start thinking the world will be a certain way, it’s just a matter of time before you realize it isn’t going to go the way you think it will. When that happens, you’ll feel let down, even though the way life plays out could end up being perfect. As time passes, you can have a more complete perspective on seeing how that pachinko ball ended up in the right place, even though it may have taken an unexpected path to get there.
Instead, let life be an adventure. That way you don’t have to experience the same pressures and disappointments that come with having expectations. In short, plan with a pencil, not a pen.
Oh, and save 10% of your income, and wear sunscreen.
While much of the current emphasis about scams and fraud is focused on the cyber worlds of the internet, email and social media, the telephone is still a very prominent entry point for scammers into your world. (more…)
If you use email, you are under constant attack. Every ploy imaginable is being used against you in attempts to get you to open an email that has the goal of connecting you with a website to enter your account number and password information. This “phish” email will look very official, be urgent in nature, and connect you to an official-looking website. Don’t take the bait!
One scheme sends you an email stating that your credit card or bank account at Bank XYZ is going to be closed immediately unless you reset your password by clicking on the attached link. The link will take you to a very official looking Bank XYZ website where you are instructed to type in your current account number and password. They now have your login information and can access your real account directly. Keep this in mind: Banks and other financial organizations will not ask you to provide account and password information via an email. Common scams include more than just trying to get your banking information; be on the lookout for wire transfer requests from friends stuck overseas, lottery winnings, investment schemes, fake checks and pretty much anything related to money.
For a long time we thought it was safe to click links and attachments from people we know, but hackers have gotten much more sophisticated and now use your friends’ email names and addresses that have been harvested from social media or malware. By using the email addresses and names of people you know, they increase the chance that you will open those emails. The links and attachments can often lead to software that will attempt to infect your computer with malware or take you to a bad site. So always use extra caution when you get an email asking you to provide any type of personal information.
How do you protect yourself? First, don’t give out personal information that is requested in an email. Also make sure that the address in the browser matches where you think you should be. If you expect to be at www.paypal.com and the browser says you are at www.stealingyourmoney.com you should leave that site immediately. Of course, it’s not always quite so obvious. But if you look closely, you’ll often be able to detect a discrepancy in the web address.
You should always make sure your computer and devices are patched and up-to-date with the latest security updates. Most major software companies update their software on a regular schedule to help keep security issues down, so don’t avoid those update notifications. Use a firewall and anti-virus software, which will do a good job of keeping a lot malicious items at bay. Most Internet browsers have pop-up blockers that can help reduce your risk as well. Finally, if you are unsure if the email is real, call the person who sent it to you and ask them about it.
In the end, you are the last line of defense. Always be skeptical of things that don’t seem quite right. While in the real world it may be admirable to trust the good intentions of others, things are not always what they seem in the online world, and it is best to have your best defenses forward.
After cleaning the garage, packing away your winter clothes and cleaning the windows, turn your spring cleaning efforts to your finances. Here are ten ideas to freshen up your financial situation:
1. Reduce paper: Most banks, brokerages, credit cards, and utilities offer online delivery and storage of statements and bills. Sit down with your paper statements and see how many you can move to online. You will save the time spent opening mail, remove clutter and help the environment.
2. Pay your bills online: Sign up for an online bill payment service if you don’t already. Set up automatic payments for recurring bills.
3. Purge: Get a good shredder and use it aggressively. You really don’t need the water bill from two years ago. Purge! This can also help reduce your risk of identity theft.
4. Eliminate redundancies: Eliminating clutter is not only about getting rid of paper; Identify what accounts are redundant and can be combined and/or closed.
5. Organize: Get a label maker and create a small, efficient filing system.
6. Reduce costs: Review bills you get from cable and phone companies, because when contracts expire they may revert to higher charges. Give them a call and you’ll be surprised how easy it is to have your rates reduced.
7. Check your coverage: Review your insurance coverage to make sure that it is appropriate for you.
8. Compare interest rates: Make sure your banks and credit cards are competitive for their fees and interest rates.
9. Track your goals: Create easy-to-use systems for tracking your big picture goals, including a simple budget, college savings, and retirement.
10. Think about getting help: Identify what areas you may need professional help, and create a plan to interview candidates.
The stereotypical vision of retiring includes gold watches, sun filled landscapes in foreign lands, vacation homes, and lots of smiling faces. We hold on to this vision to get us through the long road of a lifetime of work. A comfortable retirement is our motivation, and ultimately a reward for a job well done. For a few the transition to retirement is wonderful as they waltz into their retirement years with ease. In my observations over the past 25 years, I believe these lucky individuals are the exception, not the rule.
For most the transition to retirement is a very difficult time of their life. The distress that many new retirees feel is not widely acknowledged or discussed. For a life transition that is supposed to be joyous, new retirees often feel uneasy, fearful, and overwhelmed. Many feel like a rudderless ship. Issues surrounding self-worth, mortality, and lack of control can make a person feel anxious or even depressed. Spousal dynamics often change with the new schedule and routine and can be another source of stress, adding to the confusing mix of emotions that are part of this difficult transition.
Some things that I have seen help make the retirement transition easier are to acknowledge and understand that this transition is going to be another one of life’s challenges, and to prepare yourself for a full range of emotions. It’s perfectly normal to feel uneasiness for no particular reason.
Celebrate! Employers rarely throw a party for retirees anymore as most of us ultimately quit our jobs, or are downsized. Even if you retired some time ago, throw your own party or event to let you and others appreciate your accomplishment.
Communication is very important as you navigate the many emotions you will feel. Talk to your spouse, family, and friends openly about how you are feeling and you might find comfort in the fact that many feel the same as you do. Professional counseling can be very helpful.
Most importantly, ease into retirement. Many retirees feel out of control and rush to “take control” and end up making poor decisions about finances, housing or personal relationships when they should be taking a year of “vacation” to let the rhythms and patterns of your retirement life form. Give yourself a relaxed existence as you deal with the wide range of emotions that come with this difficult transition.
As I read many articles about how to select a financial advisor I frequently see mentioned the importance of working with a Certified Financial Planner™ (CFP®). But what does the designation mean, and how does a person become one? Since I am in the middle of working on my designation, I thought I would provide some insight.
If you decide to become a CFP®, here’s the process you would face. First, you must have a Bachelors degree from an accredited university and a minimum of three years of applicable work experience. I’ve got these requirements covered and am working on the next step, which is the educational work. The courses are offered by numerous sources and follow the same general topics. I chose the College of Financial Planning for my coursework.
Each course listed below is similar to a college quarter of studies with approximately 1000 pages of reading and 500 pages of questions and casework. Each course takes about 160 – 220 hours of study and has a final exam. My program includes the below five courses, and starting in 2012 the college will add a sixth “capstone” course that will be casework on the entire program.
Financial planning process and insurance
Income tax planning
When you finish your coursework, you can then sit for the comprehensive exam given by the CFP® board three times a year. It’s a two day test of your knowledge, comprehension, and your ability to apply what you know to cases. The approximate pass rate is 50% and it’s recommended to have an additional 250 hours of study for the exam. The course, materials, testing fees and test prep can easily cost you $5000 – $7000. After passing the exam there are ethics requirements and continuing education. To see a complete listing of requirements and topics, visit www.cfp.net.
To become a CFP® is a rigorous and costly endeavor. The process has helped me to do a better job advising my clients and I can see the value in the recommendation that people work with a CFP®.