Thursday, February 5, 2009

The 60-minute family finance makeover

What can I do to improve my situation quickly? A great question. I've outlined the steps everyone should take below.

Consolidate similar accounts. One reason families fail financially is because they are overwhelmed by monthly papers and statements. It might take a few minutes, but transferring all IRA accounts to the same place makes it much easier to follow each month. The same with other accounts. Find a convenient place where you can consolidate all your mutual funds, stocks, bonds, and bank certificates.

Simplify your investment process. Simple is good. For most families, a diversified portfolio of good mutual funds will earn solid results without all the bother and fees. A few investment hobbyists love the complexity. Most people, though, benefit from the simplest possible approach. Eliminate clutter and confusion.

Tune out “market pornography.” You’ll be happier and more successful if you ignore market clutter. Almost everyone agrees that a long-term investment approach works best for most people. Yet, we’re smothered by minute-to-minute coverage of all the markets. Just skip it completely. Enjoy life without the daily noise.

Study a good investment book. An hour reading the right book can change your financial life forever. Try Ric Edelman’s “Ordinary People, Extraordinary Wealth” or Andrew Tobias’s “The Only Investment Guide You’ll Ever Need” or Jonathan Clements’s “25 Myths You’ve Got to Avoid If You Want to Manage Your Money Right.”
Our book, “Million Dollar Management: Simple Lessons to Use Wealth Management Principles for your Family Investments” is an easy-to-read explanation of investment things that really work. Learn the basics, and you’ll succeed.

Create a simple filing system. People hate all the paper, and who can blame them? It all seems important, but it’s not. Keep a temporary file for each account, then empty it and start over after tax time each year. You accountant can help decide what’s necessary. A simple system helps reduce monthly paralysis and anxiety.

Meet with a qualified, commission-free financial advisor. Most quality advisors offer an initial meeting for a reasonable price. Bring your investment statements and a list of questions, and they’ll offer immediate insights and advice. Many families I meet with don’t need a second meeting because we can answer their most pressing questions on the spot.

Interview and hire a qualified, commission-free financial advisor. This flies in the face of today’s conventional wisdom, but many people aren’t interested in or suited to investment management. These families can hire an advisor on an ongoing basis. The world has changed and it’s cheaper and easier than ever to find quality help. Many, maybe most families, could be better off with a trusted financial advisor.

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