Watch Out for This Investment Mistake
Avoid this investment mistake, by using the financial snapshot tool. Getting a snapshot view of your finances makes investment decisions easier.
Is The Right Company Managing Your Money?
Are you getting customized financial advice? How can you tell if the right/wrong company is managing your money?
Do These 4 Things to Have a Financially Successful Retirement
To make sure you have a financially successful retirement in Israel, follow these 4 easy tricks.
4 Times You Should Speak with a Financial Advisor
What should motivate you to get financial advice? Learn when you should speak to a financial advisor about your situation, and what he can do to help.
Want Help Understanding and Organizing your Money?
Consolidating your various banks and financial firms can help you understand and organize your money better. Learn how consolidating your accounts can make investing easier.
How to Discuss Money Matters With Your Parents
Sometimes aging parents find it hard to discuss money matters with their adult children. How can you talk about finances with your parents more easily?
What You Need to Know about Moving Money
If you’re thinking of moving money from one account or country to another, here are some tips to help you do it more easily and efficiently.
Here’s When to Stop Supporting Your Children
When should you stop supporting your children? What is the difference between monetary gifts that help or encourage bad habits? This tale of two couples explains.
How to Protect Someone You Love from Financial Abuse
Financial abuse among the elderly is growing. What do you need to know to protect your parents and other people that you love?
Why You Shouldn’t Worry about Market Volatility
Market volatility affects the risk-return trade-off of your investments. Learn what you should do to protect your money.
The Financial Lesson that I Learned From Chess
What financial tactic can you learn from a world chess champion? Why is it important to look at the big picture when making investing decisions?
What do you need to know when choosing a financial advisor? Make sure to ask these questions to any potential investment advisor that you are considering.
What Is the Best Way to Teach Children Investing?
What’s the best way to teach children investing? How should they learn basic concepts in personal finance? Should you use investment games or real money?
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When analyzing a company, look at past performance and fundamental assets. Profile Investment Service’s most important asset is its dedication to clients.
3 Important Things to Do Before the New Fiscal Year
There are 3 steps you should take at the end of every fiscal year. Find out why some calendar dates are important in personal finance.
Secrets to a Financially Strong Marriage
By Douglas Goldstein, CFP® - helping you handle your American investments
Displayed prominently in our living room is a list titled, “Abba’s Secrets to Success” Now, as my oldest daughter is about to get married, I’ve compiled “Abba’s Secrets to a Financially Secure Marriage” for her and her groom. With their permission, I’d like to share it with you:
1. Be completely honest – Open communication is better than financial infidelity. Hidden spending not only damages your future goals but erodes trust. Discuss money regularly, not just when you have a big bill to pay.
2. Work on joint financial goals – Don’t fall into roles of good cop/bad cop where one of you wants to spend and the other wants to save. You’re merging your lives; now merge your money. There is no such thing as “my” money – no matter who brings home the paycheck, consider it “ours.”
3. Live below your means – Accumulating “stuff” is expensive. Create a budget and stick to it. Review your spending/saving goals regularly. And most importantly, ignore financial peer pressure to spend.
4. Make charity a priority –Get involved in tzedaka and make the world a better place.
5. Pay yourself first – You’ll grow old together; begin planning for it now. Compound interest and time are your new best friends. Make sure your savings is divided into three pots: an emergency fund, short-term, and long-term savings. Having an emergency fund is the best way to ensure that an unexpected problem won’t turn into a crisis.
6. Avoid debt – Make sure you have enough money saved before you buy. Avoid tashlumim! The only exception is taking on a mortgage (and then be careful not to buy a house that is too expensive.)
7. Find a financial advisor that you trust – Though I would be honored if you choose me, read the article at Profile-Financial.com/pick-advisor to make sure you select wisely.
8. Be detail-oriented - Pay your bills on time, file taxes, make sure you have insurance and healthcare directives.
Remember money is a tool to help you achieve great things, not an end in and of itself. Use it carefully and build well. And Mazel Tov!
Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd. www.profile-financial.com. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation on how to set up your American assets to meet your financial goals. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates. Neither PRG nor its affiliates give tax or legal advice.
Debunking 3 Myths About Not Needing an Emergency Fund
By Douglas Goldstein CFP®- helping olim handle their U.S. investments from Israel
One of the most fundamental principles of financial planning is to prepare for the unexpected by keeping three to six months’ worth of living expenses in an emergency fund. The trouble is many people succumb to the myth that emergency funds aren’t necessary because you can always withdraw from savings. Here are 3 myths about emergency funds and why they are wrong:
The best place to keep an emergency fund is in your investment portfolio
Yes, an investment account is technically marketable; and it can provide you with access to cash should you need it. However, you can lose real money if you are forced to sell assets at the wrong time. Imagine selling off $5,000 of your equities to cover an emergency expense after the market has declined 25%. It could take you years to gain that back. Better to have that money sitting in a low-yielding money market fund. Read this blog post to learn more about why investing your emergency fund is a bad idea: www.profileperspectives.com/emergencyfund.
Once I turn 59½ I can use my retirement plan
Yes, once you reach age 59½, the 10% penalty in your Individual Retirement Account (IRA) goes away. However, when you access your retirement account, the withdrawal is taxed as ordinary income. But the real issue is that it could put you into a higher tax bracket, which would be even more costly. Covering a $10,000 expense could require you to withdraw as much as $15,000 to cover taxes. While I do not give tax advice, it is important to keep tax considerations in mind when withdrawing funds.
It’s better to pay down debt than to save for an emergency fund
While paying down debt may be the best use of your excess cash flow in most situations, few would argue that it should be done at the expense of building an emergency fund. Without an emergency fund, you could end up taking on even more debt, which just compounds the problem. The better approach is to apply a portion of your cash flow to both eliminating debt and building an emergency fund.
Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd. www.profile-financial.com. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation about handling your U.S. investments from Israel. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates. Neither PRG nor its affiliates give tax or legal advice.
How to Choose the Right Financial Advisor for You
By Douglas Goldstein CFP®- helping olim handle their U.S. investments from Israel
Choosing the right financial advisor can be like seeking the right life partner. Your financial advisor needs to be the perfect match for you and your situation. Your advisor must be knowledgeable, honest, reliable, and, most importantly, have your best interests in mind.
There are many financial professionals, who all offer a range of services and expertise. How should you choose? When considering whether to work with a prospective advisor, ask yourself these questions:
Is this financial advisor qualified?
Before you set foot inside a financial advisor’s office, make sure that he is licensed and has expertise with the types of investments that interest you. You can check out his qualifications, background, and experience through the online checking facilities provided by FINRA (Financial Industry Regulatory Authority) in the United States and ISA (Israel Securities Authority) in Israel.
Who is the topic of your first meeting?
If your prospective financial advisor spends a lot of time talking about himself and his credentials, but doesn’t ask you about your investment goals and current financial situation, then choose someone else. The main subject of your first meeting should be you. A financial advisor needs to learn about you, your specific needs, goals, and the ultimate purpose of your investments.
Talking with you or at you?
When a financial advisor speaks with you about investments, make sure you understand how these investments work and why he suggested them. Not everyone understands financial jargon, so make sure everything is explained clearly. If you don’t feel comfortable asking questions, interview another advisor. During your conversation (and yes, it should be a conversation and not a monologue!), make sure that you feel comfortable. You should leave the meeting with a sense that your finances are in good hands.
What else do you need to know about finding the perfect (financial) match? For more ideas, read this: Profile-Financial.com/pick-advisor
Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd. www.profile-financial.com. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation about handling your U.S. investments from Israel. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates. Neither PRG nor its affiliates give tax or legal advice.
Why You Need to Build an Emergency Fund
By Douglas Goldstein CFP®- helping olim handle their U.S. investments from Israel
What would happen if you had an emergency – like a huge dental bill or unexpected car repair? And even worse, what if you had lost your job a month before and couldn’t even get an interview for a new one? To top it off, you get a call that a close relative in the States is sick and you desperately want to fly in to help. Do you have cash available to pay, or would you need to withdraw from your long-term retirement account or sell investments (possibly incurring a large tax bill)?
How to build an effective emergency fund
Generally, folks should have three to six months’ worth of essential living expenses as the benchmark, and sometimes as much as twelve months or more, depending on their other assets and job prospects.
Your emergency fund money should be in a liquid investment so it can be accessed instantly, when needed, without penalties. It’s true that you won’t earn a lot on it, but that’s the cost of liquidity. Investing in something that yields a higher return usually involves greater risk… risk you shouldn’t take with your emergency fund. Since you may need all of this money, you can’t afford a drop in its value. Additionally, if you put this money into an illiquid investment, you may not be able to sell it quickly enough when faced with a bill. Remember, emergencies don’t wait for a bull market.
Review your personal life and work situation. Someone who works in a field with frequent turnover – like technology, or on a commission-based salary, may need a larger emergency fund. Likewise, a single person may face fewer emergencies than a family with many children, and his fund may not need to be as large.
If you continually need to call on your emergency fund, you should also reevaluate your budgeting practices.
For other advice on saving and investing, download a free copy of The Retirement Planning Book at: Profile-Financial.com/rpb
Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd. www.profile-financial.com. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation about handling your U.S. investments from Israel. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates. Neither PRG nor its affiliates give tax or legal advice.
What You Need to Know About Financial News
By Douglas Goldstein, CFP® - helping olim handle U.S., IRA, investment, and brokerage accounts from Israel
Should financial news and media reports affect the way you make your investment decisions?
Recently, a client said: “I just read about _________ (fill in Israeli company name) in The Jerusalem Post, and I’d like to buy 1000 shares.” I hear comments like this fairly often. Since I help people who live in Israel with their U.S.-based IRA and brokerage accounts, I am able to help them trade stocks. However, before putting in an order, I recommend that they ask a few questions before considering buying an investment.
How accurate is the news?
The media frequently misrepresents information. News reports are only as accurate as the journalist’s orientation. Therefore, it may be reasonable to assume you are not getting the complete story.
Is the information fresh?
Once “hot” news reaches the general media outlets, it probably isn’t hot any longer. It might be warm at best. Some types of news items about long-term company strategies might give you an indication of where the firm wants to focus its growth. Such reports (e.g., that the company wants to enter the self-driving automobile market) may not have an immediate impact on its stock price. However, if you believe in the future of the product/company then it may be appropriate to invest. However, if short-term news breaks, for instance, a drug company receives FDA approval, and you think the stock will shoot up in value as a result of the new information, be aware that you’re possibly already too late for the party.
Does news make you a better investor?
Studies have compared investors who have made decisions with the input of news versus those who made decisions in a news vacuum. Interestingly, those folks who weren’t distracted by the media hype outperformed their well-informed peers. I wrote about this, along with many other behavioral finance facts, in Rich As A King: How the Wisdom of Chess Can Make You a Grandmaster of Investing. Check it out, and sign up for the free articles and podcast at www.RichAsAKing.com.
Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd. www.profile-financial.com. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation about handling your U.S. investments from Israel. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates.
What Really Happened in the 2008 Market Meltdown: A book review and analysis of Ben Bernanke’s book, The Courage to Act: A Memoir of a Crisis and Its Aftermath
Douglas Goldstein, CFP®
As a financial advisor who worked with clients throughout the 2008 market meltdown, I was particularly interested in understanding the Chairman of Federal Reserve Bank’s perspective of that period. Ben Bernanke’s book The Courage to Act: A Memoir of a Crisis and Its Aftermath is an exceptionally well-written autobiography that explains the background of the banking crisis, the crisis itself, and its aftermath. The perspective that Bernanke shares, however, does more than put another page in the history textbook of the world economy; it raises a number of fundamental questions about how the mess began, why many innocent bystanders were injured, and whether we have made appropriate structural changes to avoid such catastrophes in the future.
Who’s in Charge?
By learning about the inner workings of the Fed’s decision-making system, I couldn’t help but wonder: Is it smart to have the largest and most influential economy in the free world dependent on one man? The Chairperson of the Fed wields incredible influence over money supply and employment levels that even if it’s run by the sharpest mind, it might be better to have the free market control the level of interest rates and employment. The central bank and other government offices should enforce transparency and encourage better financial education, but ultimately the combined interests and wisdom of the millions of market participants would ultimately dictate the rate at which money is lent as well as the regulations that could promote full employment. Why should the law of supply and demand that governs all other commerce be suspended for money supply?
Although Bernanke credits his Fed comrades and Treasury associates for their involvement, it’s clear that he, much like his predecessor Alan Greenspan, figured out the required policy and then usually succeeded in persuading others to join him.
Is the Fed a Giant Investment Company?
When describing the AIG bailout, which put $182 billion of taxpayer money at risk, Bernanke notes that the Fed demanded an 80% ownership stake in the insurance company’s core business “to ensure that taxpayers shared in the gains if the company recovered.” Though the Fed’s goal to protect the investment interests of those who had entrusted their tax money to the Federal Government may seem noble, I can’t understand what gives the government the right to act as a mutual fund. We, the people, don’t give our money to Washington so it can make investment decisions for us. Congress is a legislative body, not an investment company. If we want risky investments, we can pick our own funds and investment managers. Frankly, if I had to invest $182 billion, I would prefer to diversify it among several money managers rather than to politicians and their appointees. It’s not the government’s job to confiscate funds of private citizens, which are what taxes really are (“Give us your money or go to jail.”), and then select stocks to buy. Ultimately, the theme of the Fed’s conversation in dealing with the crisis was, “Let’s make a huge bet on AIG, even though the private markets are unwilling to make that bet because they think it’s a bad idea and don’t want to risk their own money. Luckily, we have taxpayer money to throw at this idea.”
Compare the amount of time that private investment companies spend researching and making investment decisions to the fast pace at which the Fed invested our money, and under great pressure to do so. Interestingly, Bernanke notes that when Congressman Barney Frank asked where the Fed would get the money, Bernanke said that the Fed had $800 billion, so this was only around 11% of its balance sheet. It’s incredible that anyone would put such a huge percentage of a portfolio into a deal with “little time for careful reflection.” It’s as if your investment advisor told you, “Look, I am really busy now and I don’t have time to research the details, but I’ve decided to take ten percent of your portfolio and invest it all in one company that is on the verge of bankruptcy. And even if you don’t make money on the deal, at least your investment will help the country... so it’s a patriotic investment if nothing else.” Would you still want to invest with him if he did?
Just Because it Worked, It Doesn’t Make it Right
Ultimately, it’s true that the bet paid off. But should we be happy? Even Bernanke himself wasn’t sure the deal would work, and he continues to question the wisdom of the move. But the worst part of the whole situation is that rather than saying, “Phew, we really dodged a bullet that time. Now we have to make fundamental changes in the way the government, the economy, and these banks are so intertwined,” it’s back to business as usual. The lack of transparency and inability to understand the depth of the financial complications that Wall Street players create under the permissive oversight of the regulators should frighten everyone. This risk cannot be solved by more regulation, since writing thousands of more pages of law will not contain the peril. Indeed, the crisis surfaced even though there already were thousands of pages of rules and regulations. Those with large profit incentives will always be more creative and wily than the government workers tasked with reining them in. Instead, the government should announce that it absolutely will not backstop the firms, and it should demand transparency of the financial tools that are created and traded. Then the risk will fall back where it belongs – on the owners of the companies (the shareholders) and anyone who lends them money. Complexity is the enemy of the consumer, and without better transparency, consumers are at a distinct disadvantage.
The Government Had Encouraged Toxic Loans
When describing the TARP program, wherein Congress authorized taxpayer money to be lent to banks and possibly other companies too, at the Fed’s discretion, Bernanke says, “...while we wanted banks to lend [to consumers and businesses], we didn’t want them to make bad loans. Bad loans had gotten us into this mess in the first place.” What he should have stressed was that the banks had made all of those bad loans at the behest of a Congress that made legislation that forced the banks to originate loans that had a poor chance of success, with the alleged goal of helping low-income families fulfill the American Dream of home ownership.
It is the government’s obligation to fund its citizens to build the white picket fence, or should it only create a favorable opportunity and environment?
The Truth about a Government for the People
Bernanke explains a great deal about the political machinations of Washington. He admits the depressing reality that he had to contort his ideas in order to fit into the political restrictions that stopped him from pursuing more responsible plans. For example, he talks about the importance of regulatory reform. He notes any significant reform would not make it through Congress because, “The congressional oversight committees jealously guarded their turf because the market players regulated by the two agencies could be counted on to provide lucrative campaign contributions.”
Could there be a more clear admission that good policy is trumped by campaign contributions? Regardless of whether Bernanke’s massive overhauls would make sense, the big money interests are the ones who come out winning. So much for free markets and protecting consumers!
More and More and More Government
In order to fend off future bubbles and crashes, Bernanke established yet another taxpayer-funded office, the Office of Financial Stability, Policy, and Research. This multi-disciplinary team unites great minds in an attempt to monitor and oversee financial institutions and create programs whenever it looks like trouble is brewing. Though I respect the brilliance of the team members of the new Office of Financial Stability, I wonder how the public can continue to put so much trust in more banking bureaucracy. What steps were taken to allow the public to clearly see the inner workings of their banks so that folks could make up their own minds about whether to trust the institutions?
Worse, however, was the backstopping by the FDIC that allowed, and continues to allow, banks to take inappropriate risks with their deposits since they know the FDIC will bail them out if necessary. I am all for having some insurance on bank deposits, but not if it means greater risk-taking by the banks themselves. Why not have the banks actually pay a market-level premium to buy FDIC coverage? Maybe allow other governments to sell bank deposit insurance to the banks, too?
During the 2008 crash, Main Streeters questioned the ongoing ability of the FDIC to deliver on its guarantees. When clients were running scared and I told them they could put their money into the FDIC-backed CDs, they said they weren’t sure that this was a safe option. Regardless of the fact that not a single penny of FDIC-insured money was ever lost, the fact of the matter is that the public didn’t have faith in the agency. That makes sense. The government’s coffers are limited and should not be used to bail out the excesses and unreasonable risks that banks take. If no private insurance company would cover those risks, then the government should realize that there is a problem with putting taxpayers’ money at risk.
The Fed’s and the Taxpayer’s Interests Aren’t Aligned
Bernanke helps financial advisors like me to realize an inherent conflict of interest between the Fed and the people. Many regular folks got a wake-up call in 2008 and decided to slow their borrowing and spending, and increase their savings. That was a responsible choice for them. The Fed, on the other hand, wanted them to pull out their credit cards and spend. Using debt to buy things allows people to spend more than they really have, which can supercharge the economy. But responsible advisors encouraged their clients not to spend what they don’t have. Bernanke notes that lack of consumer spending made the downturn “deeper and more protracted,” which caused the Fed a problem. However, the spending slowdown helped those individuals who chose to pay down their debt rather than dig themselves deeper into a hole. This was a particularly prudent move since no one knew what financial surprise was lurking in the shadows.
Retirees Took a Beating
During Bernanke’s battle to save the economy, he and his team leveraged their main tool, control of interest rates. They did this by lowering the Federal Funds rate and also by buying longer term bonds in order to push rates down further, a practice called “quantitative easing.” One of the goals of this strategy was to assist people to keep or buy homes by lowering mortgage rates. But a consequence of low rates is the income destruction of people living on fixed income, mainly the elderly. Ordinary folks who had saved responsibly for decades, and deposited their hard-earned money into savings accounts were not getting the 4% or more that they had expected. Instead, they found themselves praying to get half of that. Bernanke, in fact, points out even more extreme figures, noting that bank CDs paid only half a percent, one-tenth of what savers expected. Pensioners and others living on fixed income had to radically cut their lifestyle or else invest in riskier securities with the hope of higher returns.
In effect, the Fed’s policies injured the financial prospects of retirees in order to rescue people who had voluntarily chosen to take out mortgages that they could not maintain. Nothing like giving a slap in the face to those who loyally paid their taxes for decades! Though I feel sorry for the people who lost their homes, as a financial planner who has had to explain to retirees with battered returns and shattered dreams, I am not too sympathetic to the decisions of the Fed that led to the older generation’s suffering.
Bernanke justifies his decision by saying that low rates were necessary to stimulate the economy, and that this would help the retirees because it would “prevent their twenty- and thirty-something children from moving back home.” In my decades of advising retirees, I haven’t met any who feared their adult children would move back with them. What I did here, though, was their worry that they wouldn’t have enough to pay the cost of a retirement home and they could not count on their kids to help them. I’ve heard retirees worry about the cost of health care and finding competent help. I’ve heard retirees worry about low interest rates and having to adjust their lifestyle accordingly. But, the fear of adult children moving back in is not at the top of their concerns. Bernanke seems a little out of touch with the reality of the low interest rate environment.
Low Taxes and Buying Decisions in the Hands of the People
Several mentions throughout the book of encouraging lending to small businesses and lowering taxes reminded me of the importance of getting cash into the hands of the consumers and business owners so that they can make their own spending and savings decisions.
Having government puppeteers pull the strings of the economy requires god-like omniscience, which is impossible. Even the former Fed Chairman, Alan Greenspan, known as “The Maestro,” could not control all aspects of the economy to avoid every pitfall. After all, it was under his watch that the real estate market expanded until he passed the reins of the ready-to-pop bubble to his successor, Ben Bernanke. The reality is that no centralized government can take into account all aspects of the economy, nor make truly objective decisions. Rather than letting special interests dictate the government’s monetary and fiscal policies, the marketplace is a much more effective tool for stabilizing the economy than the government. Bernanke’s own comments about getting cash into the hands of the people seem to support this theory. This proposal doesn’t mean supporting a system of financial anarchy. The government certainly has a role to play in overseeing the economy. Specifically the regulators and lawmakers need to ensure a level playing field with a solid judiciary to back it up, extreme transparency, and quality education for people to make them capable to make their own decisions. In order to create a nation that can handle that level of self-responsibility, however, the education system needs reform so that high school graduates understand how the world of money works. Reforming the education system? That’s for a different essay (I recommend reading Seth Godin’s book, Stop Stealing Dreams: What is school for?, which you can download for free .)
Finally, although I am a financial advisor associated with a broker/dealer, the opinions in this piece are mine alone.
Take the time to read Bernanke’s book and judge for yourself if you think the system is better now than it was eight years ago.
Is Financial Success Just a Matter of Luck?
By Douglas Goldstein, CFP®
Is financial success more about planning or luck?
In the book Rich Kids, Tom Corley discusses three different kinds of luck:
Random luck is the kind of luck we can’t control. Random good luck includes winning the lottery or getting an unexpected windfall. Conversely, examples of random bad luck include sudden illness or being struck by lightning.
Opportunity luck is good luck created as a result of your actions. You can create good luck by following positive “rich” habits that enrich your lifestyle and protect you from fiscal harm. An example of this would be getting an unexpected bonus from work, based on your diligent work. If you hadn’t worked hard and made yourself indispensable to your company, you may not have received a reward. In other words, your hard work created this piece of good luck. By following good practices, you are able to create your own good fortune.
Detrimental luck is the dark side of opportunity luck. This is when, as a result of following “poverty habits,” bad things happen. For example, poor money habits, such as overspending and not saving, can bring you to a financial crisis. If your bad financial habits mean that you don’t have an emergency fund, then you can easily find yourself in a financial crisis.
What is the best way to create your own good luck?
Random luck will never be within your control. But you can create better opportunities for yourself and head off potential crises by adopting rich habits. Following a positive lifestyle gives you a positive outlook and the tools to create better opportunities for you.
Acquiring good habits may be easier said than done. To learn how to create habits that really stick, listen to my podcast at www.richasaking.com/61.
Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation about handling your U.S. investments from Israel. Securities offered through Portfolio Resources Group, Inc., Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates.
The Best Way to Pay for a Wedding
By Douglas Goldstein, CFP®
After accepting all the good wishes and mazal tovs, the first thing parents of a newly engaged couple need to think about is the best way to pay for a wedding.
Making a wedding can be costly. If you have savings to cover the cost, great. That’s the topic of today’s article. If you haven’t saved for the big day, however, you’ll need to adjust your child’s expectations since you should certainly not take on debt to cover a four-hour party (no matter how much your bank – or children – encourage you).
From which account should you withdraw?
If you have retirement accounts, don’t use those funds to pay for a wedding. Those funds were earmarked to pay for your retirement, and will likely be subject to onerous taxes and fines if you withdraw them before retirement age.
If you have some well-performing assets and some under-performing assets, which ones should you sell? Though it’s not written in stone, analysis of stock portfolios often shows that winning stocks tend to outperform losing stocks going forward. So all else being equal, sell the stocks that are at a loss. Another benefit of selling positions that have declined is that you won’t have to pay capital gains tax.
Sometimes people accumulate a large cash position in their savings or investment account. Although cash is a safer investment than stocks and bonds, today’s interest rates won’t make you rich, so depending on your other investments, it may be wise to withdraw the cash. Just make sure you don’t use your emergency fund to pay for the wedding.
A pre-nup?
Before writing any checks to pay for the wedding, make sure the bride and groom sign a halachic prenuptial agreement. Not sure why? Send me an email (doug@profile-financial.com) and I’ll send you a copy of the article I wrote about it.
Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd. www.profile-financial.com. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation about handling your U.S. investments from Israel. Securities offered through Portfolio Resources Group, Inc., Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates.
Some people say the next best thing to being personally financially successful is having rich kids. However, teaching children good financial habits can be challenging. Here’s where Tom Corley and his book Rich Kids comes in handy. This is a great resource for teaching children (of all ages) about money.
The three paths to wealth
There are three paths to wealth:
Starting young
While these paths sound like they may only apply to adults, children can - and should - acquire these habits. If you give your children an allowance or if they have a job, they should save part of their income.
Your wallet shouldn’t be the sole source of your kids’ income; encourage them to work and learn the powerful life lesson of self-reliance. Whether your child babysits, walks the neighbor’s dog, or gets a regular part-time job with a tlush (paystub), he or she learns personal and financial responsibility. Children who internalize these lessons are less likely to grow into dependent adults… who expect their parents to pay off their debts.
To find out more about rich habits and how to teach them to your children, listen to my discussion with Tom Corley on The Goldstein on Gelt Show at: www.GoldsteinOnGelt.com/RichKids.
Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd. www.profile-financial.com. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation about handling your U.S. investments from Israel. Securities offered through Portfolio Resources Group, Inc., Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates.