The Scarcity Fallacy: Is Less Really More?

Originally in ForbesHaving the privilege of walking through life with people vocationally, aiding in the acquisition, maintenance and dispossession of earthly resources as a financial advisor, I’m burdened with a heightened sense of the battling spirits of scarcity and abundance.

The dehumanizing poverty that torments the Majority World screams that resources—here and now—are scarce. Remembering when I handed a bowl of vitamin-charged oatmeal to a boy who lives and breathes in La Chureca, the Nicaraguan squatter town subsisting off of Managua’s trash, I occasionally twinge at my willingness to pay $5 for a cup of premium Central American coffee. That expenditure could buy a week’s worth of mush, keeping children of the dump alive.

This is one of the children at the feeding center in "La Chureca," the city dump in Managua, Nicaragua.

This is one of the children at the feeding center in "La Chureca," the city dump in Managua, Nicaragua.

How could I not consume less?

And share more?

Why Beating The Market Is An Uphill Skate

Originally in ForbesIt is absolutely possible to beat the market, just as I’m sure it’s possible that someone could climb Mt. Everest in a pair of roller skates.

It is so improbable, however, that it’s rendered a fruitless, if not counterproductive, pursuit.

After 16 years in the financial industry and seeing countless great investors eventually humbled by market forces they could not control, I’ve finally relinquished my skates.

Mt._Everest_from_Gokyo_Ri_November_5,_2012

Make Your Career Move An Easy Job

 

Originally published CNBCYou know what has to be done, but it doesn't make it any easier. You've done all the research, asked all the questions and mulled over your options, and you know that moving on from your current company is the right thing to do.

 

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You wince, imagining the look on the face of your boss and co-workers when you tell them. You're no longer an insider, but an outsider or—worse—a competitor. Even your relationship as friends could be compromised. It's stressful for everyone, but especially for you because ultimately it's your choice.

As you go through your morning routine on the day you're delivering the news to your company, every step seems more pronounced than it typically does. Maybe it's because you recognize it could be the last time you'll go through the paces exactly like this. Or maybe it's because the adrenaline has already notched up in anticipation of the discussions you're about to have with your boss and colleagues.

Indeed, along with marriage, divorce, death and personal injury, changing jobs is consistently ranked as one of the most stressful things a person can do. That stress can be substantially reduced, however, if you're better prepared for what comes next. Here are three ways to make the most of your job transition:

1. Leave well. "It's more important to leave well than it is to start well," a good friend once told me. And it's true. You've already made a good impression on your new company—you got the job! But while you're heading on to new and exciting adventures, your former employer is left to deal with the rejection and cleanup from your departure.

Make it easier by offering to stay on for a reasonable period of time, but not longer. In most cases, shorter is better for all parties, as it reduces the awkwardness and hastens the healing.

Part of leaving well is preparing to deal with impulsive counterattacks mounted consciously or unconsciously by your former co-workers. Especially if you brought or maintained client relationships, the words "I'm leaving" may magically transform you from friend to foe—but let that be their choice, not yours. Take the high road whenever possible.

2. Don't leave anything behind. Along with your personal Swingline stapler and the letter opener your parents gave you, don't leave your 401(k) or any other transferable benefits behind.

Specifically regarding your 401(k) or other comparable plan, you typically have three options, depending on the design of the plan you're leaving and the plan your new company offers. The first option is to leave it there; I rarely recommend this unless you're in love with the plan investment options and pay close attention to them.

Option two is to transfer the old 401(k) into the new plan, if they allow it. This gives you the benefits of consolidation and, while rarely advisable, the ability to borrow from your plan—a provision not available in old retirement plans or IRAs.

For most, the sensible choice is to aggregate the newly antiquated 401(k) plan with other prior plans in the form of a direct rollover to an IRA. In this case, you are not limited to the investment options in the new 401(k)—options that are notoriously mediocre. Be certain to check all the right boxes to ensure that your rollover is not a taxable event.

It's also important to take stock of any company benefits that are transferable. Although they are nearly extinct, pension plans of various sorts accrued during your tenure may do nothing for you now but could be meaningful in the future.

One client recently had a premonition that she'd left a small pension behind from a previous job. I encouraged her to call the company's human resources department, and indeed, there was $9,000 sitting in a plan earning 3 percent per year that she can't touch for another 15 years.

If you're blessed enough to have annual income in excess of your saving and spending needs, you may have a qualified or non-qualified deferred compensation plan to handle. And while also rare, there are occasions in which group benefits—such as life, disability income or long-term care insurance through your company—can also be traversed to private policies with the vendor.

3. Make the most of your fresh start. Nobody's perfect—including you. But as the saintly image of yourself you've been promoting to your new company starts to settle into something closer to reality, you do have an opportunity to trade some bad habits for good ones.

Take advantage of this clean slate by embracing the time-management method that's worked so well for your friend, or finally start using a system to seize control of your email inbox.

Develop a healthier rhythm of life and work. Be careful not to overextend yourself at the beginning of the new gig, lest you set expectations you'll never be able to live up to.

Make wise choices with your new benefits package. Increase your 401(k) contribution to the level you know you should be saving, and put sufficient time into really understanding the new investment options and determining the optimal mix for you. Don't forget to add beneficiaries to your new 401(k) plan and any group life-insurance coverage in the new benefits package.

As you review your group benefits—especially health, life and long-term disability-income insurance—be sure to actually understand them and acknowledge whether or not you should be supplementing them privately. (You can be almost sure that the base level of free life and disability-income insurance is insufficient.)

Consider opening your mind to a high-deductible health plan, which gives you the option to utilize a Health Savings Account (HSA). Many assume this is too complicated or costly, especially if you have a young family, but even in that case, this can be a great way to make nearly all of your household medical expenses tax deductible.

While certainly stressful, a job change navigated well can be an amazing personal and professional launchpad—especially when you leave on good terms, don't leave anything behind and take full advantage of the fresh start.

If you enjoyed this post, please let me know on Twitter, @TimMaurer.

Tim Maurer, a certified financial planner, is director of personal finance at the BAM Alliance and an adjunct faculty member at Towson University. He has co-written two books with best-selling author Jim Stovall. Their most recent release is "The Ultimate Financial Plan: Balancing Your Money and Life." 

 

What You Can Learn From Bill Gross And PIMCO’s Troubles

Originally in Forbes“Trouble. Trouble, trouble, trouble, trouble.” Reading all the news about Bill Gross and PIMCO, I keep hearing that Ray LaMontagne song in my head. (Go ahead—give it a listen while you read this, just for fun.)

The king of bonds isn’t yet abdicating the throne, but it’s been a rough stretch since PIMCO came down from the mountain to translate the etchings on the “New Normal” tablets. It was, of course, hard to argue the logic in 2009, that U.S. markets would struggle under the weight of a sluggish economy hampered by high unemployment and systemic government debt. But as it often does in the face of supposed certainty, the market defied man’s expectations.

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Allocating Your Most Valuable Asset—You

Originally in ForbesWhat is your most valuable asset? Your home? Not likely, even back in 2006. Your 401(k)? Doubtful, even when it was 2007. No, if you’re not yet glimpsing your retirement years, it’s likely that your biggest asset is you—and not just metaphorically.

Let’s say you’re only 30, with a degree or two and some experience under your belt. You’re making $70,000 per year. If you only get 3% cost-of-living-adjustment raises, you will crest a million in aggregate earnings in just the next 13 years.

Over the course of the next 40 years, over which you’ll almost surely continue working, you’ll earn more than $5.2 million.

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Survey Shows Students Are Dumping Top Colleges Due To High Cost

The disproportionate rise in the cost of college relative to the cost of everything else is not news, but a new survey shows that college students are dumping their top choices for education based on price. Have we finally reached the tipping point?

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Well, I’m a planner—not a prognosticator—so I’ll defer judgment to those with functioning crystal balls, but let’s address the college cost crisis and a way to avoid becoming the next student or parent squashed by education overpayment.

Is there really a crisis?

The Chances Are Good That Your 401(k) Isn’t

We need not look far to learn that 401(k) plans are imperfect or worse, so instead of lumping on more criticism about how you and your employer have botched your 401(k), let’s discuss how to make the most of a not-so-great situation.

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Step 1: Don’t blame shift. There is a time for criticism, so keep reading, but too many people use the imperfections in, or a lack of understanding of, their retirement plan to feed the self-deceptive siren’s call to inaction.

Financial Advisors: Differentiate Yourself By Being Yourself

The most freeing day of my career was when I sold my golf clubs.

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Although the transformation had been under way for several years, it was a moment of symbolic importance. It signaled an official decision to permit myself to be something other than what I had come to believe the financial industry wanted me to be. I was officially granting myself permission to be myself.

Conformity

I apologize in advance for stereotyping, but the sales managers I had worked for had personified the industry for me. Not fond of nuance or implication, they simply had expressed that I was to be, among other things, a golfer. So I bought a set of new clubs outfitted with a nice bag, and I hired an instructor to help me master the gentleman’s game.

After several lessons, my laidback instructor told me he’d never seen anyone grip the club quite so hard. We discovered that I had complemented my less-than-elite athleticism with heavy doses of intensity and hustle to remain competitive in sports while growing up. Unfortunately, as it turned out, these traits were counterproductive to success in golf.

Instead of investing thousands of dollars in psychotherapy to try and loosen my grip on a golf club, I sold my clubs and bought a used road bicycle. I grew to love the sport, which rewarded my overcompensation of will and desire.

But I wasn’t just dumping golf at that moment. I was dumping it all—the notion that I should only wear dark suits, plain white (or light blue on Friday) shirts, power ties, hair that is neither too long nor short and a clean shaven face. Eureka—I could even wear a pair of jeans to the grocery store now!

Differentiation

Paradoxically, as long as I lived inside of the industry’s box, I was taught to differentiate myself professionally—to become “the guy” for orthopedists or cosmetic dentists or corporate attorneys. Everything I did in life, work and play was supposed to send a message that would presumably attract a specific niche of people who are known for making especially profitable financial advisory clients.

Of course, there is nothing wrong with golfing, differentiating yourself or serving a niche. In fact, each of these pursuits can be beneficial for you and your clients when practiced in earnest. What is wrong—or at least unhealthy and more than a touch manipulative—is becoming someone you are not for the benefit of purposefully differentiating or conforming.

What if the Holy Grail of finding your niche and setting yourself apart from the crowd was found simply in permitting yourself to be yourself?

Being Yourself

If you always wanted to be a Navy fighter pilot but got turned down because you’re too tall or your eyesight was worse than 20/20, you could develop a niche serving military officers. If you aspired to be a surgeon but threw up all over the cadaver on the second day of medical school, you could serve the medical community. And of course, if you’re passionate about golf and enjoy the simplicity of uncomplicated garb, you should be entirely free to live up to the stereotype of the financial advisor.

There’s only one caveat, but it’s a big one: When you give yourself the freedom to be exactly who you are, you might disappoint other people. It’s easier for companies and managers—even parents, spouses and, in some cases, kids—to put you in a predictable construct that may best serve their needs and wants.

What if you want to help social workers navigate the world of personal finance and thereby would likely have to take a pay cut? What if it means you’d be working with clients less and drawing more? What if becoming fully you means moving to Latin America to manage a micro-finance operation and teach English? What if it means educating advisors more than investors?  What if it means designing a practice that conforms to your family instead of the reverse?

You might have to change ZIP codes, companies or professions altogether.

Unfortunately, being who you are—especially in the financial industry—may not be the easiest thing to do, but choosing to be yourself is simple because it’s natural, and incredibly liberating.

If you enjoyed this post, please let me know via Twitter @TimMaurer.

 

Sadly, I'm afraid we gave up long ago on a simple tax code, and it ain't getting any easier in 2014. I discussed some of the big changes to watch out for on the Nightly Business Report on PBS (produced by CNBC).

Date: February 17, 2014
Appearance: Tax Tips – 2014
Outlet: Nightly Business Report
Format: Television