How A Poor Financial Adviser Delays Your Retirement Plans

Who cares about the economy? Investing in the stock market seem to be the in thing in town for 2011.

When it comes to investments, you have to monitor your portfolio closely, especially if you are going it alone. Entrusting your wealth to a professional financial adviser sounds like a good idea as they will be doing all the research and analysis work for you.

Though an adviser provides value, you should still know what is happening. It’s the only way you know that the adviser is producing attractive returns at reasonable cost.

The following pitfalls of poor advisers could set your retirement plans back by many years. Pay heed and avoid where possible.

7 Bad Habits of A Lousy Adviser

1. Frequent portfolio changes.


Once you have the right asset allocation, it should work in good and bad markets with little changes except for periodic rebalancing. There should be no wholesale changes unless the adviser is more concerned about his own pocket.

2. Pressure to invest in new products.

Be wary of advisers who pressure you to buy new fancy products. Such products usually lack track record and have high hidden costs. Best to stick with proven managed products with suitable risk-reward instead of shooting for the next star mutual fund or stocks.

3. Aggressive trading.


Excessive trading comes at your expense. End of the day, remember you are paying for the high trading, product and account costs. Also, few professional managers trade well enough to beat a benchmark. Chasing returns with leverage is a faster way to delay your retirement if things go wrong.

The richest investor, Warren Buffett, is not "smart enough" to time the market. Hence, neither should your financial adviser who has to depend on commissions for a living.

4. No return calculations.

You can't tell if you are getting value if the real return you are getting is omitted or buried under complex language.

5. Frequent capital losses.


Obviously, this is not sustainable if your portfolio keeps shrinking under your adviser's charge. When you are constantly selling at a loss, your portfolio has the wrong or risky products and the asset allocation needs to be changed.

6. Too much contact.

Advisers call you rarely to socialize or help out with your house chores. They are mostly to generate commissions, like recommending hot stock or churning products. Such practice can reduce your returns by up to 80%.

7. No contact


This is definitely much safer than too much contact, but it is not a small sum to pay especially when your portfolio is huge. You will be better off relying on yourself by being a long-term value investor.

It is not too late to make changes and get your retirement plan back on track. To ensure that the relationship with your adviser stays healthy, ask for for return calculations.

Then compare with a relevant benchmark and see if your annual costs are too high. If the returns are much lower than the benchmark, and the adviser refuses to change his wayward management, do it yourself or get a new adviser.

6 Tips To Financial Independence

We all have dreams and resolutions, earn our first million dollars, lose weight, exercise more, quit smoking, etc.

How about becoming debt free for a change? The average American has about $9000 of credit card debt and as a nation, consumer debt is approaching $2 trillion.

You can change your life by aspiring to financial independence, instead of living paycheck to paycheck and getting further into debt each month.

Take a long look at how you're spending your time and money, and determine your financial priorities. Here are 6 easy tips to help you become financially independent:

1. Make a Commitment


Be responsible for your own actions as nobody will look out for your financial future. The best option is independence. Try to save up enough in your retirement account to last till the end of your life.

2. Prioritize Needs vs Wants

We want a lot of things but income is limited. By prioritizing wants and needs, you can create a monthly budget and save for the most important "wants" on your list, after meeting your needs.

Evaluate your wants to see what value they bring to you. You may be surprised that a lot of wants are useless!

3. Pay Yourself First, Then Forget About It

Before you pay a single monthly bill, including your mortgage, rent or insurance, pay yourself first, meaning your saving account. A simple rule of thumb is to have at least 10% of your gross income saved and invested for the long term.

Resist spending any of your savings. Time is your greatest asset, so the sooner you start saving and the longer you keep your savings in place, the more financially secure you'll be in retirement.

4. Practice Responsible Credit Card Use

Credit cards provide the convenience of not carrying cash in your wallet but the spending power comes from your future income. To become a responsible user, change your mindset.

Don't go for instant gratification by paying much more later. Start paying out of your pocket with cash or at least pay down the outstanding amount diligently so that you are not a lifelong prisoner of credit card debts.

5. Prepare for a Financial Emergency

Personal, property or business risks are inevitable. Thus, emergency fund is a good idea so that you don't turn to predatory schemes for help.

First, assess your current insurance coverage. Is it enough to cover your assets while allowing you to pay higher deductibles? Next, build an emergency reserve fund based on three to six months of living expenses. The reserve fund should remain readily available, safe and income-producing.

6. Get Your Money's Worth

Try keeping a record of every purchase for a month by listing exactly the item and the cost. At the end of the month, review the list and ask yourself whether you are getting your money's worth.

If you are not satisfied, then reassess the things bought. Your goal is to continuously refine the way you spend money until you are completely comfortable with your habits.

You cannot accomplish your goal of achieving financial independence by wishing. It takes being committed and acting on your desire. So start today!

Binge Years Over, Make Do With Modest Living

Frugality is entrenched in Americans' mentality right now; for how long... I do not know but I hope it last, as living well within our means is essential in a sound financial plan.

Ben Bernanke believes the recession is most likely over. To the many Americans who remain unemployed, that is scant consolation. The Fed can pull the wool over our eyes that economic outlook has improved but I am not convinced that the binge years will return.

The financial crisis has ravaged the US Dollar and tarnished the credit worthiness of the US Government. Hence, I have little confidence in government pensions and social safety net. It is best if we devise our own retirement savings plans.

Nevertheless, retirement planning is going to be more challenging. Frivolous, uncontrolled spending must be curtailed. Even if you have a steady job now and earn a reasonable income, it is prudent to adjust your financial goals and start living modestly. By that, I mean shunning materialism and taking pleasure from simple things in life.

Instead of living in a mansion, what is wrong with staying in a 1000 sq ft apartment? When I was little, I remembered cooping up at a relative's house with my parents and the kids sleep two or more to a room. There were no fancy baby clothes or shoes but only drappy hand-me-downs.

That didn't make my childhood any less happy. I am not tempted by material goods because my past makes me appreciative of the fact that earning money is not easy. Sometimes, I wonder why people feel the need to buy many pairs of shoes, ties, or clothes - only to wear it once or twice (sometimes not even opening up the box at all).

That is not the way to spend money, especially when you don't have a million dollars in the bank. All the money is actually coming from credit cards, home equity, etc.

If you are guilty of reckless spending and are now crushed under the massive weight of debts, it is no use beating yourself silly.

Review your expenses, savings, income and the amount of money you need in the future. Figure out what it takes to live modestly for a month. You’ll need to cover your regular bills, such as, mortgage/rent, utilities, transportation, food, clothes, etc.

Once you have a figure for your expenses, say $500, try making do with $300 or $400 instead. Take that as a challenge for modest living. Even if you don't succeed on the first try, at least you know where you have failed and can improve on it next month.

Living modestly usually involve battling impulse buying and various motivations to spend: advertising, friends, etc. It often means taking a little more time to find what you really need, and not what you desire. And you have to be content that what you already have is good enough.

If you do away with Starbucks coffee, downsizing your home and holding off new purchases (clothes, gadgets, shoes, etc.) until your stuff are worn out, that is a lot of money you can save every year. The savings from living modestly can be placed in a Roth IRA, bonds or equities.

Keep your sense of balance and sleep tight at night by living modestly today.

Tips To Pay Your Bills On Time

I have a friend who told me he is stressed out whenever he opens the mail box because it is swarmed with bills all the time.

I was quite surprised that this guy who gets his andrenaline rush from car racing and bungee jumping is freaked out by the monthly bills. From what I know, he is single, has a steady job and doesn't spend lavishly, so his finances should not be a concern.

The main reason turns out to be his disorganized lifestyle. He told me he is already tired after a hard day's work and has no energy to attend to the bills.

So whenever he brings his bills home, they are strewn around the house (some on the kitchen table, floor, dining room, bedroom, etc) and they get buried under subsequent newspapers and letters.

Not surprisingly, even when he remembers his bills, locating them is a chore and eat up more of his time and energy. Clearly, treasure hunting is not his favorite past-time so he ends up paying up the late bills, after being issued reminders and penalties.

I guess my friend isn't alone in this situation. There are many people who get antsy from their stack of bills and cannot motivate themselves to dig in and tackle them.


Well, avoidance is not going to help matters and you end up paying more money. Here are some tips to make bill-paying easier:

1. Process Bills Immediately

Don’t let your mail sit for more than a day. Go through all the mail and have a rubbish bin ready. Keep the letters from friends or relatives, if you want. As for junk mail, credit card offers, magazine subscriptions, the bin is there or you could recycle them. Finally, the bills - pay them right away.

2. Place Your Bills In A Designated Place

Sometimes, we have pressing matters to handle and do not have time to process the mails. That is ok. Just have a designated place for all your bills.

For me, it is on a shelf in the kitchen (easier to take out whenever I have family discussions on the budget). You have to ensure all the bills are kept properly for your future reference. A lost bill runs the risk of late fees and I don't like paying more than is necessary.

3. Designate A Time To Pay Bills

For the procastinating types, expecting them to process bills right away is a fantasy. But at the very least, you have to pay your bills once each week.

Just designate a time, weekend will be good. You can choose a Sunday night before sleeping, flip open the check book, write the checks, review your bank balance and pay the bills.

4. Prepay your bills

Since you are going to take effort and time to pay a bill, why not do it for two or three months in one shot?

The cost is about the same as paying month by month but if you are the forgetful type, you avoid the chances of missing a payment. When you prepay bills, I do assume you have the spare cash though and not living from paycheck to paycheck.

5. Set Up Automatic Payments and Pay Bills Online

Set up automatic payments and consoliate your bills whenever possible. Also, nearly every major utility and bank now offers the ability to pay your bills via the web. Some even offer small discounts for using this service! Online payment is more convenient too as it saves you the trouble of walking to the post office.

6. Reduce Unnecessary Bills

Do yourself a favor by terminating services or subscriptions you no longer desire. It is not only a waste of money. You don't have to deal with the bills.

7. Ask For Lower Rates

If you haven't done this for credit cards, now will be a good time to start. You can save a huge chunk of money simply by calling and asking for a better deal.

8. Paying Bills Immediately Is Fun

When I pay my bills right away, I get such a kick it is kind of fun. The main thing is that it is a load off my shoulder as I am paying off a debt and not beholden to anybody.

Compilation of EzineArticles #1

I really have to apologize for not having enough time to update this blog as frequently as I will have liked.

Here is a compilation of my articles which I have submitted to EzineArticles. If you have some spare reading time over the weekend, just take a look and leave some comments.

1. How to Save Money on College Education and Get Free Tuition?

2. A Practical Survival Guide to the Recession

3. Five Tips to Achieve Debt Elimination

4. Writing a Financial Plan on Your Own

5. Online Coupons Turning Tide Against Traditional Couponsc

Teach Our Kids About Money Management

Our education system has enabled our kids to be proficient in topics like maths and science but when it comes to financial education, I will say they are clueless and even illiterate.

It is not their fault as our education has neglected the importance of budgeting skills and the practical concepts behind assets, liabilities and cash flow. The idea is simple: you must have more assets than liabilities to increase your wealth.

These are the bread and butter issues facing a corporation but equally applicable and essential to managing our personal finance. As they say, "What is left is not right, and what is right has none left." This is what happens when a company's balance sheet or our personal finance go awry.

Is it a deliberate attempt by our education ministry to deprive our kids of finance curriculum in schools or just a blind spot? Does our government actually prefer us to cede control of our finances to the greedy financial institutions?

Regardless of the reasons, I feel a lot of problems facing our kids and heavy indebted nation stem from finance illiteracy and irresponsible spending habits. Hell, I think our House Representatives, senators, or regulators don't know much about basic finance either, not to mention complex financial jargon. Just look at their inadequacy when questioning the fat cats on Wall Street.

Maybe the government should take a leaf from Sand Creek High School which is teaching its seniors the street smarts of managing money.

I am also glad that financial literacy competitions like MoneySKILL Mania (hosted at the University at Buffalo with M&T Bank), are open to high school kids.

Globalization has made the world more competitive (jobs are not easy to come by) and the least we parents can do, is to impart money management skills to our kids, not to leave them an inheritance, which most likely will be squandered away.

I always believe that people who make a lot of money but never learn how to handle it simply end up in more debt than the people who have less money.

What do your guys think about our education system? Has it prepared our kids to handle their personal finances? Please share your thoughts here.

What Are Your Personal Financial Goals?

Being an avid student of personal finance, I set out to create a list of my personal financial goals from the outset, so that I can measure my success or failure yearly.

1. Providing for daily living expenses.

2. Eliminating debt.

3. Supporting our children till they are self-sufficient.

4. Giving a children a good education - a basic college or university degree.

5. Supporting our parents as they age.

6. Buying a house and/or car.

7. Building our retirement savings.

8. Vacations.

Do you find anything familiar in that list? If you are also interested in personal finance, do share your goals here and your progress in achieving them so far.

What Is Personal Financial Planning?

Personal financial planning is a huge topic on the internet and the concepts are not difficult to grasp, though implementation may be difficult as you have to kick some bad habits.

A lot of people prefer to leave their personal finance in a mess or in the hands of others. I do not know if it is out of laziness, indifference or a fear of managing their own money affairs. If it is the latter, then I assure you that being an accountant is not a prerequisite to successful personal financial planning.

I was never particularly bright in college math but thankfully, personal financial planning is mainly common sense and simple arithmetic. The finance professionals may have an edge over us because they have paper qualifications and are accredited with a professional board.

However, their advice on personal financial planning is not always gospel or beneficial since they are likely to take care of their own interests first in the form of commissions.

So what does personal financial planning entails? In a nutshell, it involves organizing and growing our money as well as creating and implementing long term financial goals.

Our assets include the money we take in, also known as cash inflows, and the money we spend known (expenses) are called cash outflows. To be debt-free, you simply plan your expenses on how how much you make.

Any money that is left over every month is your net cash flows and you can save or invest it to meet your financial goals.

To have spare cash left over each month, you need to learn budgeting, which is an important part of personal financial planning. And today, it is so easy by using budget software like Quicken. You can try out the FREE online version Quicken Online - Web-based Money Management.

Or, you can find many personal financial planning books to help you along the way. And of course, reading many personal finance blogs around the internet as as we share valuable and practical life experiences in managing our money.