Tag Archives: financial consulate

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Study Reveals Investing Is Hazardous To Your Health

Investing Hazard-01I don’t need to inform you that investing is dangerous business.  You already know in your gut what Joseph Engelberg and Christopher Parsons at U.C. San Diego found in their new study, that there is a noticeable correlation between market gyrations and our mental and physical health.

But when do you think the financial industry will get the point?

Shortly after I became a financial advisor, I was given a book to commit to memory.  It told me what my role in life would be: To make a very good living helping approximately 250 families stay in the stock market.

The text insisted that regardless of my client’s age or risk temperament, it would be in their best interest to be—and stay—in stocks, exclusively and forevermore.  I was the doctor; they were the patients.  I was the ark-builder; they were the—you get the point.

The book might even be right.

But…

The Behavior Gap

My friend and New York Times contributor, Carl Richards, has been drawing a particular picture for years.  He’s struck by the research acknowledging the noticeable difference between investment rates of return and what investors actually make in the markets.  (Investors make materially less.)

Investors, it appears, allow emotions to drive their investing decisions.  A desire to make more money causes them to choose aggressive portfolios when times are good, but a gripping fear leads them to abandon the cause in down markets, missing the next upward cycle.

Investors buy high and sell low.

Well-meaning advisors, then, including the author of the book I referenced, have claimed their collective calling to be the buffer between their clients’ money and their emotions.  Unfortunately, it’s not working.

Maybe it’s because the intangible elements of life are so tightly woven into the tangible that we can’t optimally segregate them.

Maybe it’s because we’re not actually supposed to forcibly detach our emotions from our rational thought.

Maybe it’s because financial advisors and investing gurus should focus less on blowing the doors off the benchmark du jour and more on generating solid long-term gains from portfolios designed to be lived with.

Livable portfolios.

Portfolios designed to help clients stay in the game.

Portfolios designed to help clients (and advisors) avoid falling prey to the behavior gap.

Portfolios calibrated with a higher emphasis on capital preservation.

How much less money do you make, anyway, when you dial up a portfolio’s conservatism?

The Same Return With Less Risk

In his book, How to Think, Act, and Invest Like Warren Buffett, index-investing aficionado, Larry Swedroe, writes, “Instead of trying to increase returns without proportionally increasing risk, we can try to achieve the same return while lowering the risk of the portfolio.”

Using indexing data from 1975 to 2011, Swedroe begins with a standard 60/40 model—60% S&P 500 Index and 40% Five-Year Treasury Notes.  It has an annualized rate of return of 10.6% over that stretch and a standard deviation (a measurement of volatility—portfolio ups and downs.) of 10.8%.

Next, Swedroe begins stealing from the S&P 500 slice of the pie to diversify the portfolio with a bias toward small cap, value and international exposure (with a pinch of commodities).  The annualized return is boosted to 12.1% while the standard deviation rises proportionately less, to 11.2%.  (Remember, this is still a 60/40 portfolio with 40% in five-year treasuries.)

But here’s where Swedroe pulls the rabbit out of the hat:  He re-engineers the portfolio, flipping to a 40/60 portfolio, proportionately reducing all of his equity allocations and boosting his T-notes to 60% of the portfolio.  The net result is a portfolio with a 10.9% annualized rate of return—slightly higher than the original 60/40 portfolio—with a drastically lower standard deviation of 7.9%

Same return.  Less Risk.

This, of course, is all hypothetical.  This happened in the past, and for many reasons, it may not happen again.  These illustrations are not a recommended course of action for you or your advisor, but instead a demonstration that it is possible—and worth the effort—to work to this end.

Because we can’t keep hiding from the following logical thread:

1)   Volatile markets increase investor stress (even to the point of physical illness).

2)   Heightened investor stress leads to bad decisions—by both investors and advisors—that reduce investor returns.

3)   Market analysis suggests that portfolios can be engineered to maintain healthy long-term gains, while at the same time dramatically reducing the intensity of market gyrations.

How could we not, then, conclude that more investors would suffer less stress, thereby reducing (hopefully eliminating) their behavior gap, thereby allowing investors to hold on to more of their returns?

Isn’t that the point?

If you enjoyed this post, please let me know on Twitter at @TimMaurer, and if you’d like to receive my weekly post via email, click HERE.

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In 2014, Accomplish More By Doing Less

DO LESS-01Instead of bullying yourself into adopting new practices that are designed to overhaul your life for the better in 2014, consider finding the path to success by simply doing less.

The arctic blast of our fledgling 2014 offers a chilling reminder that the kindred warmth of the holiday season is over.

That’s enough being. It’s time to get back to doing.

“So, how’s it going?”

“Good. Busy. Super busy.”

“Me too. Never been so busy.”

It’s as if there is a self-worth contest sure to be won by the contender most frazzled.

But busyness is no virtue. If anything, it makes us—me included—distracted, forgetful and often late. It diminishes our capacity and saps our creativity.

That’s why we can actually accomplish more by doing less.

But how do we decide which activities absolutely must stay and which might have to go?

Five Minutes to a Leaner You

This quick and simple exercise should give you several top candidates for the chopping block. You need only one piece of paper with a line down the middle (or click HERE for a printable form). On the left side, write LIFE-TAKING, and on the right side, write LIFE-GIVING.

life-taking-life-giving---blank-2Fill the Life-Taking column with the roles (or tasks within roles) that drain you. They’re onerous chores, not labors of love.

On the Life-Giving side, list the opposite—those practices you can pursue for extended periods of time, wondering where the time has gone. You might be tired after a long day of life-giving activities, but you’re not weary.

I should be clear that this exercise is not a license to shed roles to which you’ve pledged yourself—like being a good parent or spouse—or common duties that appear on no one’s life-giving list—like changing diapers or cleaning dishes. Heck, the president of my company, Drew Tignanelli, washes whatever dishes he finds in the company kitchen sink.

But if the majority of your roles and the duties you’ve accepted are life-taking, I encourage you to consider making some difficult decisions in an effort to improve that ratio. That may mean saying yes to something, but it almost certainly means saying no.

Two caveats:

1)   Following through on this exercise may be simple, but it’s not easy. Stakeholders are likely to be disappointed, whether you’re giving up a board seat, book club, church committee or poker night. Your income may also be reduced if you sacrifice an activity that creates income, change jobs or invest in furthering your education.

2)   Many activities are not wholly life-taking or life-giving. For example, last year I decided that maintaining a presence on Facebook took more life than it gave. I certainly derived some benefits from being on Facebook, connecting with friends and family, but the net effect was life-taking. (By the way, I dumped FB six months ago and don’t miss it at all.)

Addition by Subtraction

You can cause a monumental shift for the good in your life and work by simply removing life-taking activities. Your performance in life-giving roles has room to flourish, increasing your productivity and satisfaction. Even more surprising, some activities will move from life-taking to neutral—or even life-giving—after your overall burden is lightened.

Hitting the delete button on even one or two life-taking commitments can make you a better partner or parent, boss or employee, friend or family member. And especially for those whose vocations fall under the creative heading, creating more blank space on the canvas is essential to maintaining and improving your art.

Special thanks to Josh Itzoe, a colleague and good friend, for encouraging me to undertake this exercise several years ago.

If you enjoyed this post, please let me know on Twitter at @TimMaurer, and if you’d like to receive my weekly post via email, click HERE.

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Top 5 Posts of 2013

Top Blog Posts of 2013-01One of the great blessings of my career—heck, my life—is the opportunity I’ve had to communicate through the written word.  Thank YOU for reading my work.

In 2011, my bucket list daydream of having a book published came true; then in 2012, I began actively contributing to Forbes.com, for which I write a weekly blog post.

I enjoy the creative process enough that if only one person read a post, article or book that I wrote—and benefited from it—that would be reward enough for me.  The pleasant surprise of 2013, though, was that far more people read and responded to my work than I ever could have imagined.

Even more of a shock, however, was the subject matter of the posts that became popular and garnered the most attention.  I’m a financial planner who writes about the intersection of money and life, but my most viewed posts definitely skewed toward the life part of that equation.

In case you missed any of them, here are the top 5 most viewed posts of 2013:

5. Haiti Doesn’t Need Our Help (Forbes.com) — Though it only ranks fifth in views, I think this would be my personal favorite—and most important—post of 2013.

4. 10 Days Is the Magic Vacation Number. Here’s Why (Lifehacker.com) — This post was initially published on my Forbes blog, but Lifehacker republished it (with permission), where it racked up an even higher number of views.

3. Two Reasons Why Copying People Won’t Make You Successful (Forbes.com) — On this most recent post within the top five, I got to work with two of my favorite “success authors,” Michael Hyatt and Laura Vanderkam. We discussed why the path to success isn’t necessarily found following someone else’s footsteps.

2. What you don’t know about Social Security can hurt your retirement (CNBC.com) — I’ve had the privilege of working with CNBC for several years on video projects, but this article was my first contribution on the written front.  I’m looking forward to more of these in 2014.

1. 7 Reasons I Dumped Facebook (Yahoo! Finance) — I’m still dumbfounded by the popularity of this post.  Yes, I decided to quit Facebook and hesitantly chose to write about why.  Apparently, this sentiment happened to hit the online airwaves at just the right time, because after getting more views than anything else I’ve ever written for Forbes.com, it was picked up by Yahoo! Finance and went viral on their site. Crazy.

I’m really looking forward to 2014, excited about the opportunity to bring money to life—and life to money—in writing.  I’m soaking up wisdom from the Forbes editorial staff, have two new book projects in the works and was humbled by CNBC’s invitation to join their inaugural group of 20 financial advisors making up the CNBC Digital Financial Advisor Council.

But I’d love to hear what YOU want to read more of in 2014.  Please shoot me an email at tim[at]timmaurer[dot com] with your thoughts.  (Yes, I know email address is not “spelled” correctly; it’s so robo-spammers don’t snag my email address.)

THANKS AGAIN, AND HAPPY NEW YEAR!

If you enjoyed this post, please let me know on Twitter at @TimMaurer, and if you’d like to receive my weekly post via email, click HERE.

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20 Lessons We Can Learn From 20-Year-Olds

20 YO Graphic-01It’s become enormously popular to publicly lecture 20-somethings.  I’m not a 20-something, but my regular interaction with the Millennial generation as a college instructor leads me to conclude that we may have more to learn from 20-somethings than we have to teach them.

Here are 20 lessons in LIFE, WORK and MONEY inspired by the Millennial generation:

In LIFE…

Nobody responds well to being lectured.   Despite the ineffectiveness of self-righteous bombast, it seems never to be in short supply.  Insisting that someone else sees how wrong they are may guarantee that we will feel more right—but it doesn’t necessarily make it so.  Even if you have good intentions, the best time to teach someone something is after they’ve asked for input.

Life needn’t be so strictly compartmentalized.  Work, family, leisure, service, worship and artistic expression are elements of life that remain segregated for most.  But this schizophrenia of roles leads to inauthentic living in one or more of these venues (and drives us crazy).

We should give ourselves permission to be more of who we are and less of who people want us to be.  There’s an externally successful business owner who shows up at my gym for his morning workout dressed to the nines in a suit and tie.  He didn’t come from a meeting—he just thinks it’s important to send a message everywhere he goes that he is successful (and he’s happy to announce it).  The Millennials’ refusal to engage in such posturing is often mistaken for aloofness or apathy, but it’s really more about a healthy yearning for authenticity.

Being miserably busy is not a good measure of self-worth.  Busyness is no virtue.  It leads to forgetfulness, distraction and tardiness.  And it’s exhausting.

We are human beings, not human doings.  We tend to explain who we are by listing what we do for work and what we have accomplished professionally.  Millennials are more comfortable in their own skin and more capable of enjoying time that can’t be measured in terms of productive output.

 “American” is not actually a language.  Millennials are the first generation in decades who don’t take American pre-eminence for granted.  They’re expanding their personal and professional horizons with international travel and picking up a second or third language.

Traditional education is overvalued.  While Millennials are known for having overpaid for higher education, their dissatisfaction with what they got in return—fueled by their angst over the loans that now burden them—are serving to ensure that they and their children will spearhead the biggest education overhaul in a couple centuries.

In WORK…

Being a slave to work is no badge of honor.  Being the first in and last to leave may send a message to the types of people who value an ascetic work regimen, but it will also send a message to your family and close friends that your work is more important than they are.  Which message do you want to send?

We’re not all productive in the same ways and at the same times.  Sure, there are advantages to being an early bird, but the best employees will figure out where, when and how they work most effectively, and the best bosses will encourage them to do so (to a mutually beneficial end).

Work and life aren’t something to be balanced, but instead something to be integrated.  That we must balance work and life implies that they are seemingly opposed forces incapable of being effectively blended, but the most effective leaders and satisfied employees find ways to bring work to life by inviting more life to work.

Success is overrated.  Boomers have made an art form of becoming successful, or at least appearing so.  Success certainly isn’t a bad thing, but when the visible representation of success (more impressive titles, bigger houses, nicer cars, granite everything) takes precedence over those for whom we supposedly became successful to serve, we have a problem.  This isn’t even a generational thing.  It’s never really been true that reaching the pinnacle of success is what ultimately makes our lives fulfilling—it’s really significance and meaning for which we hunger.  Millennials seem to have a better handle on that.

In MONEY…

You don’t have to “get settled down” right away.  Financial planner, Roger Whitney, told me “[Millennials] are getting married later in life [than Baby Boomers] which gives them time to mature and be more financially secure when entering marriage.”

Money shouldn’t be a taboo topic of discussion.  30-something personal finance writer, Arielle O’Shea, finds Millennials to be more open about money.  Even if it’s because they’re more cynical about financial security, having seen a couple bubbles burst and many of their parents split over financial issues, Millennials seem to be more open to discussing their personal finances (to good effect) with each other and in public.

We don’t have to own everything—sharing is ok too.  Having to own everything we touch in this lifetime may be good for auto and home improvement companies, but it’s certainly not the most efficient or inexpensive way to do things.  Airbnb allows users to swap living spaces, Lyft offers a network of drivers when you need a ride, and that’s just the tip of the iceberg in the growing sharing economy.  Millennials are making and saving money with services like these, according to Forbes writer, Maggie McGrath.

The acquisition of real estate is overrated.  Creating stability, building equity and getting tax deductions are all good things—but losing money and depriving yourself of the freedom and flexibility to be mobile are not.  Millennials haven’t abandoned home ownership, but we all need reminding that it does have its drawbacks and shouldn’t be a foregone conclusion for everyone all the time.

We can and should embrace the role of technology in our financial lives.  The financial services industry is known more for hindering progress and clinging to antiquated, high-margin practices and procedures.  Millennials, however, are creating and “using websites such as Mint, You Need a Budget or Manilla, which not only help to track spending, but serve as accountability partners with e-mail alerts when spending limits are exceeded,” according to Mary Beth Storjohann, founder of Workable Wealth.

Youth isn’t a license to embrace reckless investing.  Carmen Wong Ulrich, host of Marketplace Money on APM says “[Millennials are] less likely to want to risk investing their money in the markets, but that also means they’re more likely to stay away from the financial products (and marketing) that burned their parents.”  Indeed, losing money isn’t a good strategy, regardless of your age.

Experiences are more valuable than things.  David Burstein, Millennial author of Fast Future: How the Millennial Generation Is Shaping Our World, acknowledges that 20-somethings are spending more than any past generation on travel and eating out, but it’s because they place a higher value in deepening interpersonal relationships and creating lasting memories.

The “traditional” notion of retirement isn’t necessarily an ideal.  Millennials tell me that they expect to be working a long, long time.  They don’t expect pensions and don’t trust Social Security, leaving them with little choice, but they also don’t idolize the notion of full-time feet-in-the-sand retirement.  They plan to work longer and enjoy themselves more along the way, many of them hunting more for a calling than a job.

You can do well and do good at the same time.  Profit or charity—take your pick?  The Millennials have invited us to consider that we don’t have to choose between Robber Barron or do-gooder.  In addition to Google’s unofficial motto—“Don’t do evil”—companies like Toms and Warby Parker give one pair of shoes and eyeglasses (respectively) for every pair sold.

Every generation finds comfort in the norms it helped establish and relishes in the norms it helped deconstruct—but the outgoing generation tends to not-so-quietly mourn when the incoming generation does the same.  Pew Research calls the Millennials confident, connected and open to change.  Yes, it’s a little scary that 20-somethings are changing the way we live, work, play, invest and worship—all without even asking our permission!  But it’s not necessarily a bad thing.

If you enjoyed this post, please let me know on Twitter at @TimMaurer, and if you’d like to receive my weekly post via email, click HERE.

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5 Things The Most Successful People Do In The Bathroom

Bathroom4Please don’t feel misled or manipulated by this parody title—I’d have clicked on it too.  But before you read another three-to-three-hundred bullet points on how you can be more successful, please consider that doing so may actually be unproductive or counterproductive without a proper frame of reference:

We wake each day on a quest for personal validation that we apparently believe is found in someone’s definition of success.  We then presume that rote replication of the habits of the supposedly successful will directly correlate to similar degrees of success in our own lives.

While appealing, this logic fails—for two primary reasons:

1)     You’re not them.

2)     They’re not you.

You’re Not Them

Michael Hyatt is a leadership/writing/speaking/creative/success blogger whom I’ve been following for a few years.  He is a certified member of the successful people demographic, especially as a best-selling author and sought after speaker.

Michael blogs on a host of valuable topics and has introduced me to many productivity and technological tools, some of which (like Evernote) are now a major part of my life.  But what attracts many if not most of his followers is that Michael is what his readers hope to be—a professional writer and platform speaker.

If you want to be a professional writer or speaker, I highly recommend Michael Hyatt’s blog.  He offers oodles of free content on blogging, self-publishing, finding a literary agent and getting published.  He also sells e-books on writing a book proposal, books on building a platform and conferences on launching a business as a public speaker.

Having personally consumed a wide range of Hyatt’s free content and paid-for products and services, I can attest to their benefit.  But none of Michael’s followers (myself included) should delude themselves to think that by following Michael’s precepts to the letter their own success is guaranteed.  Why?

You’re not Michael Hyatt.

You don’t have a lifetime’s worth of experience in publishing.

You weren’t the “Chairman and CEO of Thomas Nelson Publishers, the seventh largest trade book publishing company in the U.S.”

You might not even be a good writer or public speaker.

While Michael Hyatt’s success is certainly at least a byproduct of the tangible habits that he has practiced and well-articulated to his followers, it’s possible—if not likely—that his success is contingent even more on the personal intangibles that he—and only he—possesses.

They’re Not You

I say this not to discourage you on your path if you’re an ardent follower of Hyatt’s or anyone else’s, but instead to affirm that the innate gifts you were born with are almost surely different from those with which Michael was endowed.

You might become Michael’s next contemporary co-headlining conferences with him—or you may be an even bigger commercial success than Hyatt pursuing a completely different methodology—BUT you also might be a better editor, copywriter, photographer or literary agent—or maybe a doctor, a sailing instructor, a stay-at-home dad or a rock-star plumber.

Laura Vanderkam is another successful person who has written extensively on successful people.  Her What the Most Successful People Do e-book series is well-researched, artfully written and entirely practical.  One of the books focusses on what the most successful people do before breakfast, outlining many of the great benefits of early risers.

I was shocked, then—and more than a little relieved—when Laura told me that she is NOT particularly a morning person.  (Neither am I.)

Instead, Laura has designed her mornings to cater to her strengths.  She has learned that her most productive hours are between 8:00am and 10:00am.  Those two hours are sacred writing and creating time for Vanderkam.  Phone calls, appointments and emails are never scheduled or touched until thereafter.

Who are you?

Sure, there’s a piece of me who wishes I was one of the star football players featured prominently for my beloved Baltimore Ravens on Sunday afternoons.  But if I took one hit from an NFL safety while coming across the middle on a slant pattern as a receiver, you’d be reading my obituary, not this blog post.  I’m not made to do that.

What were you made to do?

Once you get that far, once you declare who you are and what you were made to do, then it’s time to analyze how well you are applying your skills with the limited time that you have.  “Know how you’re spending your time, so that you can see where space is available,” Vanderkam said (and she’s written an entire book on that practice alone).  Only then is it time to start analyzing best practices of the people you most admire and integrating them into a regimen designed specifically for you, your skillset and your calendar.  “You have to apply it through the filter of what will work in your life and what will not.”

“People should strive to be the very best version of who they are,” Michael Hyatt told me.  “There are many paths to success.  The best one is the one that allows you to use and develop your innate strengths.  Those will look different in different people.”

The worship of success and successful people has become so aggressive in the blogosphere that I wouldn’t be surprised if we do see an article in the future instructing us on what the most successful people do in the bathroom.  But we shouldn’t hope to find significance in being deemed successful (by whatever measure).  Instead, when we cultivate our own unique significance through a perpetual cycle of self-examination, education and practice, success becomes a natural byproduct.

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How To Show People You Don’t Care About Them This Holiday Season

0079936679582_500X500Bankrate reported the findings of a survey this week, suggesting that 53% “of the general population preferred general-purpose gift cards.”  These cards, unlike brand-specific gift cards (for iTunes or Best Buy), allow a gift recipient to spend their gift allowance however and wherever they choose. But think about this for a moment—if everyone gave everyone else a general-purpose gift card, it would effectively eliminate the purpose for giving entirely!

Envision this with me:  If I give you a $35 general-purpose gift card (GPGC) and you do the same in return, we’ve effectively given each other nothing at all.  We could just skip the whole charade and spend our own money on ourselves.

In giving each other the opportunity to buy anything, we’re actually giving nothing at all.

Why the rise in the popularity of GPGCs?  Bankrate answers that question:

“It’s a much easier, more popular way to provide a gift to somebody,” says Madeline Aufseeser, senior analyst at Aite Group. “If I don’t know your particular taste or size, then I am safe with a gift card.”

It’s easier.  It’s safer.

It doesn’t require you to really know or care about a person.  It saves you the time of applying any meaningful thought to what makes your friend or loved one unique.

It eliminates the possibility that you’ll read someone incorrectly and guess wrong, but in playing it safe you’re also guaranteed not to get it right.  Not to leave a memorable impact.

So if you want to show that special someone that you really don’t care that much about them this holiday season, by all means, get them a general-purpose gift card.

Heck, maybe we could even start a movement among our family and friends openly acknowledging that we’re all too busy and we care far too little to engage in the antiquated notion of purchasing gifts that symbolize our mutual affinity for one another.  Let’s just agree to ditch gifts all together and go on individual shopping sprees for ourselves.

Tis the season.

If you enjoyed this post, please let me know on Twitter at @TimMaurer, and if you’d like to receive my weekly post via email, click HERE.

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Don’t Bet Your Portfolio On The Twitter IPO

Twitter Announces Plan To Float On Stock MarketConsider keeping your social media activity on your computer, phone or tablet—and out of your portfolio.

People seem to either love or hate Facebook and Twitter, with emotions ranging high, like rooting for our favorite sports teams.  Personally, I’m unlikely to win any football or basketball office pools because I’m so biased toward my favorite teams.

We can also suffer from some of these polarizing bias issues with individual stock selections—and especially social media stocks bearing the names of the most recognizable thumbnail icons of our time.

There will be winners and losers with Twitter, as with any stock, but I’m content to be an observer.  This is for a couple specific reasons:

1)     I am biased.  Unlike Facebook, which I dumped as a personal social media outlet (for seven reasons that were important to me), I really like Twitter.  I hope Twitter continues to do well so that those of us who are fans will continue to benefit from its many uses well into the future.  In other words, I’m biased.  I’m vested, and that detracts from my ability to be the best investor.

2)     Another reason that I’m tentative about this whole Twitter IPO business is that, well, the company has never made a profit.  One of the reasons for its cult following is that you don’t get slapped in the face by endless ads hunting for the content you seek (unlike some other social media platforms).  You don’t have to be a stock picker to know that Twitter will have to access “as-yet-untouched monetization levers,” according to Jeff Bercovici at Forbes, in order to reach the upper end of its anticipated price range.  That means they’ll have to find new ways to sell us, and if you’re anything like me, you’re probably hoping to be an untouchable monetization lever.

This is not investment advice—it’s gambling advice, because at this stage of the game, it’s anyone’s guess whether or not Twitter is going to successfully remake its loyal followers into a money-printing machine, 140 characters at a time.

TWEETABLE: Consider keeping your social media activity on your computer, phone or tablet–and out of your portfolio. #TwitterIPO

If you enjoyed this post, please let me know on Twitter at @TimMaurer, and if you’d like to receive my weekly post via email, click HERE.

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Retire Like These Guys…Not These Guys

Executive Summary2While most of the commentary these days regarding retirement is about the math and “science” of cash flow and portfolio management, there is also an art to retiring well.  Making a graceful transition from the vocation that marks your life into whatever follows helps form your legacy—for better and worse.

Led Zeppelin was the best rock band of all time—at least in their time, and for many of us, still. Jimmy Page was the musical mastermind behind this super-group of savants, but it’s hard to imagine that they could’ve reached legendary status without Robert Plant.  Every generation since has attempted to replicate Plant’s voice and stage presence.  Although the band’s retirement was unplanned after drummer John Bonham’s death in 1980, Plant and Page’s work since is a fascinating case study in retirement.

Retire like Robert Plant…not like Jimmy Page

pageplantRobert Plant has explored, experimented and remade himself several times since retiring from Led Zeppelin.  As I write, I’m listening to one of my favorite albums, Raising Sand, a Grammy-award winning collaboration between Robert Plant and Alison Krauss, a legend herself in the realm of bluegrass.

Maybe since it was his baby, Jimmy Page has struggled to ever let go of Zeppelin, a fact that was evident in his 2012 Rolling Stone interview.  He’s struggled to retire well.  He seems to have lived between a handful of attempted (and certifiably mediocre) Led Zeppelin reunion gigs, and implies Robert Plant is at fault for resisting a full-out remarriage.

It’s not easy to retire from the best gig you’ve ever had, but unwillingness to acknowledge that it’s over can be even more painful.  Loosening your grip on the past, however, can free you up for a fulfilling and rewarding second act.

Retire like Michael Strahan…not like Brett Favre

07-1t107-kelly-300x450I had to recuse myself from using my beloved Ravens’ Ray Lewis as the favorable example in this gridiron comparison to preserve objectivity, but objectively speaking, Michael Strahan’s exit from the winning New York Giants in Super Bowl XLII may indeed be a better example of one of the very few NFL players who managed to truly go out on top.  Strahan capitalized on the Giant’s surprise win over the New England Patriots to position himself for a second and third career that now pits him against the less-than-menacing Kelly Ripa.

Brett Favre, on the other hand, who was the most exciting quarterback of a generation, couldn’t let go.  He leads the NFL in retirement threats, retirements and comebacks, finally ending his career in a concussive fog as a Minnesota Viking.  Favre wisely turned down a request from the St. Louis Rams just this week to replace injured Sam Bradford, citing his many concussions and subsequent memory loss.  He can only hope to forget the sexting scandal that marred his good-old-boy reputation at the end of his career.

When you excel at your craft and you’re competitive, it’s hard to let go, but holding on too long can destroy your reputation, damage your legacy and hamstring the team you leave behind.

Retire like Sallie Krawcheck…not like John Thain

Sallie Krawcheck’s retirement was involuntary—she was fired from her position at Bank of America—but she still managed to do it gracefully.  Krawcheck is the former lots-of-things Wall Street, having been at the helm of major divisions at Citi and more recently Bank of America, as the head of Global Wealth and Investment Management (including Merrill Lynch and U.S. Trust).  But she doesn’t talk or act like most Wall Street execs, and not just because she’s a woman.  She’s taken surprisingly principled stances on conflicts of interest, like the “cross-selling” mandate pushing Merrill brokers to sell banking products, and the touchy topic of regulatory reform within the industry.   While maintaining her principles may have led (in part) to her forced departure from Wall Street, in retirement her striking combination of competency and transparency have earned her respect that few of her scandal-ridden colleagues enjoy.

John Thain has handled himself, well, differently.  He’s the former Merrill Lynch head who infamously gave his office a $1.22 million dollar upgrade and paid out billions in bonuses to country club cronies as the American financial system came crashing down.  Even the financial industry couldn’t stomach him and he was “tossed out on his ear” by then CEO of Bank of America, Ken Lewis.  Thain is Wall Street excess personified and an easy target for the 99%, but don’t feel too bad for him; while he may have traded a $35,000 in-office toilet for “plastic and Formica,” he’s back on the scene with the $2 billion bailout beneficiary, CIT.

It’s much better to make a graceful early departure than to be thrown out in disgrace.

Three Keys To A Successful Retirement

What retirement lessons do Robert Plant, Michael Strahan and Sallie Krawchek teach us?  Three keys to a successful retirement are to know when to leave, leave well and retire to something meaningful.  You don’t have to be a rock star, a professional athlete or Wall Street royalty to model and benefit from these practices.

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The Only Lesson You Need To Learn From The Debt Ceiling Debacle

Executive Summary-01Few of us would argue that the government shutdown and this year’s debt ceiling debacle are issues of importance, but over the course of your lifetime, which do you think has a bigger impact—the decisions the government makes or your own personal decisions?

We tend to spend more time bemoaning the action and inaction of those with less of a direct influence in our lives—especially legislators and Presidents—than those who most directly impact our lives: US.

You are an entity.  You and your spouse (if you’re married) and your children (if you’re a parent) are certainly beholden in part to other entities, like companies, cities, states and countries, but you also enjoy a great deal of sovereignty.  You decide where to live, what to eat, whom to befriend and marry, how to derive an income and how to spend it.

Please allow me to disabuse you of a few “It’s their fault!” self-deception anthems especially common in the realm of personal finance:

  • The arc of your career is not your boss or company’s responsibility. Good bosses and companies create environments in which good employees can flourish.  Bad bosses and companies inspire good employees to join better companies or create new businesses.  Bad employees play lots of video games.  At work.
  • Regardless of your levels of income or net worth, your financial success or failure will be predicated primarily on the effectiveness of your cash-flow management system.  This is most commonly and disdainfully referred to as a budget.  I recommend YNAB to college students and millionaires alike.  You can never be too rich or poor to budget.
  • Your long-term success in investing is not the responsibility of your financial advisor or investment manager (although they can help or hurt).  There are innumerable (good and bad) variations on the portfolio creation and management theme, but if all you ever did was establish a reasonably diversified, indexed, balanced portfolio (call it the “minimum effective dose”), you’ll likely outpace most of your peers and many professional investment managers.
  • Your ability to retire comfortably will be impacted by many factors—especially the three you just read—but none more so than your willingness to make regular contributions equal or greater to 10% of your annual income.

Although politicians and pundits may attempt to convince us otherwise, the long-term trajectory of our lives are more a consequence of impulsion than compulsion—UNLESS we give someone or something else that control. If you rely more on outside influences than those within your control, you have ceded too much.

If we worry more about that which we can’t control (governmental bumbling, short-term volatility, the outcome of the World Series) than acting on that which we can, we do so only to our detriment.  And maybe—just maybe—the reason we gripe so much about that which is holding us back is that we fear the consequences of being held accountable for our own decisions, our own lives.

[tweetable]Control what you can, and worry far less about that which you can’t.[/tweetable]

 

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Revolutionary Retail: Test-Driving Warby Parker And Dollar Shave Club

Eyeglasses and razors are two notoriously high-margin personal commodities for which we’ve been overpaying for decades, but two companies have declared war on these monopolistic product lines.  Using vastly different marketing strategies, Warby Parker and Dollar Shave Club sell eyeglasses (for men and women) and men’s razors respectively, almost entirely online and via mail-order—at a fraction of the prices we are accustomed to paying (as little as $95 for prescription glasses and three bucks a month for razors).  But are they worth it, and what’s the experience like?  Since I’m physiologically incapable of recommending anything I haven’t experienced, this largely late-adopting guinea pig offers the results of his experience here:

A Rebellious Spirit and a Lofty Objective

Let’s start with Warby Parker, as they were founded first.  According to co-founders and Wharton grads, Neil Blumenthal, Andrew Hunt, David Gilboa and Jeffrey Raider, “Warby Parker was founded with a rebellious spirit and a lofty objective: to create boutique-quality, classically crafted eyewear at a revolutionary price point.”  Admittedly, I’m a sucker for anti-establishment world-changers, especially those who save me money, but I had to be sure Warby Parker would meet the high expectations they set for themselves.  Here’s how the process worked for me:

1)     I chose 5 sets of glasses online.

glasses1

2)     A few days later, I received this package in the mail:

glasses2

3)     I suffered through two NO WAYs, a NOPE and a MAYBE before finally reaching a YES from my wife and kids.

4)     I sent the box of five back in the same packaging in which it arrived (postage paid) and ordered my new glasses online through an intuitive, step-by-step process that included plugging in my prescription.

5)     I received my new glasses in about a week.

glasses3

What if you don’t like any of the first five pairs of glasses you try on?  They’ll send you another five at no cost.  What if the final product isn’t to your liking?  Returns are also free.  What about anti-reflective coating?  It’s included in the price.

The all-in pricing was, for me, the most satisfying part of the entire process.  We have a pretty basic vision insurance plan at work, but I was shocked at how little that actually got me when I went to one of the mainline brick-and-mortar eyeglasses carriers (not to be named, but rhymes with Crenshafters).  There, I got an eye exam at no charge.  Then, I had $45 to put toward frames and $52 for lenses, separately priced even though they both play a pretty important role.  The only frames priced anywhere close to my reimbursement rate looked like they were rejects from the bargain bin at the Dollar Store.  I was already a couple hundred bucks out-of-pocket just for frames that I was willing to put on my face.  Then, unless I was willing to live with a painful glare when using my glasses where light was present, I had to pay extra for anti-reflective lenses.  More still was tacked on if I preferred not to view the world through scratched lenses.  At Warby Parker, there were no extra add-ons—everything I actually wanted in a pair of glasses was included.  And true to their pledge, the glasses indeed look and feel as though they are higher quality than my name brand (rhymes with Bayran) spectacles.

How do they do it?  They cut out the middlemen by creating their own designs and selling directly to consumers.  According to Warby Parker, high end brands sell their recognizable names to the companies who design and produce the glasses.  The production companies then mark-up their final product to the optical shops who then boost the prices by another 200-300%.  Don’t you love being taken advantage of?

On top of that, like Toms shoes, Warby Parker gives away a pair of glasses for every pair they sell to paying customers.  The icing on the cake was that I learned my health insurance will actually reimburse Warby Parker, so my new and improved glasses will cost approximately zero dollars.  Viva la revolucion!

Downsides

While Warby Parker has worked to eliminate virtually all of the hesitations we might have of buying something online with their home try-on service, what they noticeably lack is opportunities for customization.  Although their frame selection continues to broaden, most of the frames fall under the vintage heading with a hipster vibe, so if you’re going for a Bono look, you’re out of luck.  If you need bifocals, progressive lenses or transition lenses, you’re not going to get them at Warby Parker, although they pledge to be working in that direction.  And while I found their customer service by phone to be very helpful, you obviously won’t have a Crenshafters employee to clean your new glasses and place them on your lovely face.  You may even want or need to take your new purchase to a local eye specialist for an adjustment.

Shave Time. Shave Money.

Dollar Shave Club attacked the high-margin world of razors from an entirely different angle than the high-minded Warby Parker.  They’ve used humor—almost exclusively—to attract and retain customers.  I heard about DSC the way most men did, through a hysterical, irreverent video featuring the company’s co-founder, Michael Dubin, and decided it was worth the minimum $3 investment to check it out.

They offer three different razor/blade combinations with corresponding price points:

1)     The Humble Twin, “Reliable; this is the ’82 wagon that starts when the temp’s below zero,” at three dollars per month (including shipping) for five blades

2)     The 4X, “The Lover’s Blade,” six dollars per month for four blades, or

3)     The Executive, “The final frontier; it’s like a personal assistant for your face,” nine bucks for four blades

Per blade cartridge, that’s $.60 per Twin, $1.50 per 4X and $2.25 per Executive.  To put those prices in perspective with comparable Gillette razors, my previous blade of choice, you’ll pay $2.30 per Sensor Excel cartridge, $2.90 per Mach 3 Turbo and $3.62 per Fusion Proglide, premiums of 283%, 93% and 61% respectively.  (The Gillette pricing comes via Amazon.com.  It requires you to buy in higher quantities and may not include shipping and handling.)

As any good financial planner would, I opted for the cheapest Dollar Shave Club offering to start and have been pleased enough with the Humble Twin for over a year now that I see no need in upgrading.  And the humor keeps coming; each month when I receive my new set of blades, it comes with an accompanying card featuring a funny profile of an employee or patron.

glasses4

Downsides

For the Humble Twin, at least, the handle and the blades are noticeably disposable, but that’s what I expected and I’ve yet to suffer as a result.  Dollar Shave Club, as one might expect, is now branching into presumably higher margin product lines, like their “Shave Butter” and “One Wipe Charlies, flushable moist wipes” for men, but they will eat into your shavings savings.  I’ll stick with Barbasol and TP.

Conclusion

I’m not an early adopter prone to trying every new product trend, or a frugal fiend dying to shave pennies off of every single purchase I make, but Warby Parker saved me $200-$300 on my new glasses and Dollar Shave Club saves me over $100 per year for products that are as good or better than those they’ve replaced.  It’s possible that neither will suit you for numerous reasons, but they offer no- or low-cost entry points making them worthy of exploration.

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