Drove up to San Francisco to visit a friend this weekend.
After a boring six and a half hour drive filled with many pit stop (due to bladder size of a peanut), I reached the Bay Bridge along with a few hundred other cars. Twenty minutes later, I was two cars behind the toll collector.
As I scramble for my wallet to make sure I have enough money to pay for the toll, I heard a loud BAM! and felt my car jolted.
Great. Some moron has hit me from behind.
Or so I thought.
Upon closer inspection through the front windshield, I noticed a few things:
- The front of my car is awfully close to the Jeep in front of me.
- There was an angry pair of eyes looking at me through the Jeep’s rear view mirror.
Foot must have slipped off the brake somehow (first time ever for me to hit a car). Normally not an issue in stop and go traffic for a manual transmission car, but I must have been on a small incline, which resulted in the car rolling forward at a brisk pace of 0.05 mph.
Needless to say, he was pissed. After paying the toll, we both pulled over to inspect the damage, or rather, lack there of. The less-ticked off motorist waved me good bye and soon I was on my way to get lost in the crowded streets of San Fransisco.
On the way home, I met up with Noah of Okdork.com in Saratoga over a cup of so-so coffee, and got my first speeding ticket in Valencia, forty minutes away from home.
What do you do?
To follow up on the previous post, there are a few things you can try out:
- Let them go through with the decision and hope that they learn from it.
- Try to set an example and convey a healthy financial lifestyle.
- Try to talk to them and convince them the potential problems they’ll face.
Here’s the thing. It’s been mention before that I spent rather frivolously in the past (hence the name of the blog). During my money-grows-on-tree days, if a family member — like my sister — was to tell me to watch my spending, I would have given her the finger and told her what she often tells me when she flips me off: “sit on it and spin.”
When my mom told me to watch my usage of the credit card, I ignored her advice. She tried to convince me a bit more but unfortunately I was a stubborn moron. Long story short, mommy was right. Being in debt is not fun.
My mom tried option #3, which didn’t work. So she went with option #1 and left me alone. It wasn’t easy and it wasn’t fun, but I eventually figured things out for myself. Had I not seen the light earlier, this blog would have been named StopGoingInDebt.com.
If you try those options above and none of them work, what should you do? Although it can also be an option, giving up doesn’t seem like the right thing to do. After all, whether they be friends or family, most people wouldn’t want the people they care about to continue making decisions that results in financial hardship — especially when they’re avoidable.
My sister’s car engine had to be replaced recently. With property tax due soon, she’s having difficulty paying all the expenses and the unexpected $2,000 car repair bill.
So instead of putting the cost of the engine replacement on her credit card (which already has a balance), I offered to pay the bill for now and she in turn can pay me back later in monthly payments — which should save her a hundred dollar or so in interest.
Of course, there’s always those generic problems of letting people borrow money. I have no doubt that my sister will pay me back, but I certainly don’t want to create any weird lender/borrower relationship during these months.
Another minor beef is that, in my opinion, my sister could be managing her cash flow a bit better. She could also spend a little bit less on buying crap, but whenever I try to mention that, my sister has a tendency to try to kick me in my genital area.
So even with some of those misgivings, I decided to help my sister out a little bit — after all, a loan is hardly a hand out, and she can definitely use the help this month.
Which brings me to the question above: At what point should you lend a hand, give some money or extend a personal loan?
Remember how my Bank to Bank Transfer got suspended because I foobared a transfer?
Well… two calls, two emails and two months later, it’s been reactivated. Huzzah.
The calls never did much, but the email through their site interface seemed to have worked.
This is a friendly reminder to everyone that high-yield online savings account (and to some extent other online-only banking accounts) are generally self-served accounts — expect lighter customer service in return for higher-yields.
There’s Always Those
Annoying Cool Guest Pass for Friends
Personally I think they’re a big waste of money — and it has nothing to do with my love for the couch and television set.
Out of the three friends I have, none of them really use their gym membership. This can be quite a waste, especially since gym membership dues can be rather expensive.
You should also note that having gym membership can turn you into a heartless human being, exemplified by the exchange below between me and Jim of Blueprint for Financial Prosperity:
Cap: Hey Jim. What’s up?
Jim: Nothing much.
Cap: Sigh. I had a really bad day today —
Jim: Can’t talk now gotta hit the gym see ya.
*Your Buddy Jim Has Signed-Off*
Anyway. Maybe I’m being a bit subjective. Maybe working out at home is overrated, and having strangers staring at you while you’re slaving away is fun.
Crap or not?
You can vote on the top left of the blog.
The Boglehead Guide on Investing
Authors: Taylor Larimore, Mel Lindauer, Michael LeBoeuf
Publisher: John Wiley & Sons, Inc.
ISBN: 0471730335 – Hardcover, 336 pages
Let Me Take Care of All Your Money and You’ll Be Rich
I’m Cap. I’m a financial analyst, financial consultant, financial planner, and also an investment consultant. Basically, financial expert extraordinaire.
You shouldn’t be. All four of those titles are generic designations that required no special education, no experience, no testing, and no certification process.
According to the SEC, “Anyone can use these terms without registering with securities regulators or meeting any education and experience requirements.”
Welcome to Chapter 16 of the Boglehead’s Guide to Investing: Do You Need an Advisor?
This is an overview of a chapter within the book, Boglehead’s Guide to Investing. During the month of October, numerous sexy personal finance bloggers have teamed up to review this most excellent book, thanks to All Financial Matters.
Obviously, not all financial advisors are as full of crap as I am. Many of them have the education, training, experience and certification to back up their titles. Before we get to them, let’s examine three interesting scenarios from the Boglehead’s Guide to Investing on utilizing a broker’s investment service:
- Boglehead Numero Uno got burned. They were sold expensive investment that earned their brokers big fat commissions while they ate up the fees. They eventually realized that these are costly mistakes and decided to educate themselves so they can take control of their own finances.
- Boglehead Numero Dos didn’t get burn. They had brokers that took care of their portfolios well, but eventually reached a point where they were capable of handling their own finances.
- Bolgehead Numero Tres just didn’t deal with a broker at all. From the onset, they didn’t want to assign this important part of their life — the financial well being of themselves and their family — to a stranger. So they never used a broker or any other investment advisor.
In all of these scenario, the Bogleheads eventually became a do-it-yourself investor by educating themselves. As the book said, financial education is the key. Whether you decide to be a do-it-yourself investor or you decide to hire a broker or financial advisor, you should educate yourself before you make the choice.
To put it simply, you most likely won’t buy a car without some research. After all, a car is expensive, usually non-refundable (hah), and is an important financial decision. The same applies to choosing a financial advisor. Afterall, will you simply take the word of some douche who claims to be a financial expert extraordinaire?
The 411 on Financial Desgination (or Who’s Full of Crap and Who’s Not)
There are many, many financial professional designations.
AEP: Accredited Estate Planner; BCAA: Board Certified in Asset Allocation; CAC; Certified Ann unity Consultant; CCPS: Certified College Planning Specialist; CPM: Charactered Portfolio Manager; FAD: Financial Analyst Designate; MFP: Master Financial Professional; QFP: Qualified Financial Planner; the list goes on and on.
The Boglehead’s Guide to Investing points to two very noteworthy certifications: Chartered Financial Analyst (CFA) and Certified Financial Planner (CFP).
CFAs are required to:
- Have an undergraduate degree
- Work in the financial field
- Have either three years of professional experience involving investment decision making or four years qualified work experience.
- Complete 750 hours of study (250 hours for each three levels).
- Pass comprehensive exam for each level, at only one exam per year (for level 2 & 3).
CFPs are required to:
- Complete approved courses before taking 10-hour long exam.
- Master more than 100 financial planning topics.
- Beginning of 2007, earned at least a bachelor’s degree.
CFP applicants will often enroll in extra exam prep courses due to the large number of applicants failing on the first try. As you can tell, becoming a CFA or CFP is no walk in the park. This isn’t to say that other designations are without merit, but these two certifications were pointed out by the book due to their high standards.
You may also notice that some of the designations mentioned above are tailored for specific financial situation, thus the type of training, experience and certification varies from one designation to another. To learn more about the requirements entailed for each designations, check out the National Association of Securities Dealer’s database.
How Advisors Earn Their Doughs and Why It Matters To You
Besides being familiar with an advisor’s designation, you should also be aware of how an advisor is being paid.
Take the car buying example mentioned earlier. If you head to a Hyundai dealership and the salesman proclaims that the 06 Sonata is the best car for you, will you simply take his word for it, especially since his pay is tied directly to the sales of the vehicle?
The same applies for a finance advisor. Thus, the Boglehead’s Guide to Investing advise you to stay away from commission based advisor, as there is an obvious possible conflict of interest. The book also suggest you to stay away from fee-based advisors (different than fee-only), since the structure basically contains a possible conflict of interest too.
This leaves us with fee-only advisors as a viable choice in a financial advisor. In the Boglehead’s Guide to Investing, the chapter explains briefly on the concept of the Assets Under Management (AUM) payment arrangement, but the real payment options the book suggested are the one-time fee or hourly-rate arrangement.
In these payment option, you pay for a flat one time fee for an advisor’s service, or an hourly-rate depending on the situation, a much cheaper alternative for many people compare to the AUM payment option. Because you are paying for the service entirely yourself, the advisor can better serve you objectively, as compare to commissioned-based or fee-based advisors.
More Things to Consider Before You Take the Plunge
If you haven’t realized yet, educating yourself fully about the financial advisor choice prior to receiving service is critical. Besides finding the right advisor for you, you should consider fully what you’re looking for before you set out.
Perhaps you need a better roadmap to save for your children’s colledge fund? Or maybe you have some specific questions regarding estate planning (and that financial advisor is a really hot dude). Distinguishing what you need before you buy will always be a smart and cost conscious thing to do.
Here are 10 questions to ask when you’re choosing a financial advisor, from the CFP:
- What experiences do you have?
- What are your qualifications?
- What services do you offer?
- What is your approach to financial planning?
- Will you be the only person working with me?
- How will I pay for your service?
- How much do you typically charge?
- Could anyone besides me benefit from your recommendation?
- Have you ever been publicly disciplined for any unlawful or unethical actions in your professional career?
- Can I have it in writing?
To get more details on each of these specific questions (including the all important 2, 6, 9), download the PDF of the brochure (347 KB).
The Chapter and Book in a Nutshell
Despite the long post, the chapter was fairly brief (around 8 pages). There are much more on the subject of financial advisor but the gist mentioned in the book was quite simple and contained all the important concept you should be aware of in the jargon-filled field of financial advisors.
Although being an beginner guide on investing, the book also contained sound advice on general personal finance. By no means is the book an end-all guide on investing, nor did it claim to be. But it’s a worthwhile read, and if you have never seriously consider taking care of your own investment, you’re bound to learn many things from this great book.
To be frank, seeking a financial advisor isn’t a stupid move when you decidedly need the service. It is only a stupid move when you grab the first advisor that comes along without doing due research. When a purchase affects your financial future, there’s no reason not to be an educated consumer.
Related Links and Resources:
From Monday’s paper (that I finally got around to reading). These are tried and true tips that are worth mentioning again (yes, even if gas prices have gone down a bit):
1. Take it easy.
Driving at a reasonable speed will conserve gas. EPA’s rule of thumb: for every 5 mph over 60 mph, you’re paying an additional 20 cents a gallon for gas.
2. Cruise Control.
Engaging cruise control on the highway for better fuel management.
3. Lighten Up.
Take everything out of the car that you don’t need so your engine doesn’t have to work as hard. If packing for a road trip, try to keep luggage inside the vehicle rather than strapping to roof where it creates wind resistance.
4. Stay in tune.
Keep up with regular maintenance. Simple things such as changing the engine air filter on a needed basis can improve gas mileage as much by 10%.
5. Pump them up.
Properly inflated tires play a big role in good fuel economy. Check the sticker at the driver side door or glove box for the proper inflation pressure. Besides its effect on fuel economy, under/over inflated tires can significantly effect ride handling, vehicle safety, AND add unnecessary wear to your tires, costing you more money in the future.
6. Cool it on the AC.
Use air conditioners conservatively. Most air conditioner have a “economy” or “recirculation” setting that reduces the amount of outside air that must be chilled.