Show Me the Money

Show Me the Money

Financial planning for dummies (and these days, aren’t we all)?

The market is down, the market is up; interest rates are lower but credit is impossible to get. Food costs more than ever and my dollar doesn’t go as far anyway. I’m no dummy, but what I know about the economy could be written in a Sharpie on one small square of toilet paper. Single ply. So what’s a dummy to do?

The most basic step, I’m told, is to get organized around finances. Rumor has it that we may have hit the bottom and that things are looking up—but that doesn’t mean you can’t get a better grip on your financial future. Be proactive, get organized, and be the master of your money instead of its victim.

You also may want to turn down the volume on the bad news from Wall Street. Jason Dudum, CEO of Dudum Financial in Lafayette, says his number one tip for his clients these days is, “Turn off the TV.” Penny Righthand, a financial adviser in Emeryville and Oakland who hosted the KPFA call-in money show, “Pennies from Heaven,” from the mid-’90s to 2003, agrees. “It’s been a trying time because there was no place to hide. Most stocks and bonds suffered over the last year. And people didn’t—and still don’t—know whether to get in or out of the market,” Righthand says. “Constant anxiety makes [people] fearful and anxious—which is paralyzing.”

Finally, my buck-savvy buddies tell me, call an expert: a financial planner, someone who can help figure out where your money goes, and how to make it work for you. Now, before you nod off (boring, boring, boring) or go into freak mode (the sky is falling!), consider that financial planning for dummies isn’t really for dummies. After all, these people are professionals at providing a broader, perhaps less alarmist perspective about your money, and keeping an eye on your dollars and cents. But don’t just choose a name at random from the phone book. You’ll want to pick your planner just as carefully as you’d select an attorney or a doctor, according to the Financial Planning Association of the East Bay (FPAEB), a local support network for financial planners that also offers general financial planning information.

Debborah Knowles, a financial adviser with Edward Jones in Alameda, says her personal attachment to her doctors—and her dislike for having to change doctors—is similar to a client’s intimate relationship with a financial adviser. “Pick someone that you connect with,” she suggests. “If you connect with the person, you’re probably going to be able to talk through your differences.”

You may prefer a conservative investment plan, or want to build a socially responsible portfolio. Chemistry, as in any relationship, is important, Knowles says, since you have to believe that the adviser is working for your benefit. “Trust your gut,” she advises.

Questions to ask a potential financial planner include: What is your basic approach to financial planning? What services do you offer? What is your area of specialization? What kinds of clients do you serve, and do you require a minimum net worth or income? How do you prepare a plan? How will you address my particular needs? How are you paid, and what are the typical costs? What is your professional background?

Make sure the adviser is a registered broker with credentials, a license to operate, and the backing of a company for financial liability. Getting some information about this prospective financial whiz will also help you feel more comfortable in taking his or her advice. In other words, money knowledge is money power.

Mapping your future

Financial professionals offer different advice, depending on whether you are just out of college, married with young kids, just about to hang up your wage-earner’s hat, and so on. “There’s no pat answer for anyone,” Righthand says. “People near retirement shouldn’t risk much of their money in the market. But they do need to have some exposure because inflation will return.”

“All you can do is stick it out,” advises Jason Dudum, CEO of Dudum Financial in Lafayette. “If you’re 30, don’t even look at it [the market]. But if you’re 58, it would be worth it to meet with a professional and take away some of the risk.”

For anyone over 62, for example, looking to take out a payment-free loan, it makes sense to consider a reverse mortgage, says David Chee, of Seniors Reverse Mortgage in Pleasant Hill. A reverse mortgage is a special kind of loan that allows senior homeowners to turn some of their equity into cash.

“It really helps people out, especially in this economy, and in this difficult lending environment when banks are not willing to lend in general,” he says. “It’s easy to qualify for. It’s safe and regulated and insured by the Federal Housing Administration.”

That said, Chee cautions that “it is a loan. Only borrow money if you need to borrow money.”

Contrary to what you might assume, financial planners don’t cater only to the well-heeled. Some specialize, to be sure, in assisting clients with large portfolios or vast sums of money to invest. Others, however, are just as happy to help Mrs. Small Potatoes here figure out how to get out of debt and get a handle on runaway expenses, plan for the kids’ college funds and, with any luck, eventual retirement. Even clients like me and my husband are an investment for a financial planner, so to speak, because eventually we’ll be in better financial shape and able to make bigger investments.

“People tend to plan in pieces,” says Dawn Hale, a financial planner for some 28 years in the Bay Area and Los Angeles. “If you plan in pieces, you end up in pieces.” A good financial planner will include short-, medium- and long-term goals, “with a plan for each, and a way to bring them all together,” says Hale.

So what can you expect from teaming up with a planner? For one thing, he or she can help figure out what is right for your family and your income, guiding you through different decisions about college savings plans, refinancing a mortgage (yes or no), and even how to educate your kids (public or private). He or she will also talk about tax liabilities, your insurance needs, long-term care, and disability. After meeting for two hours with a married couple in their 30s with two children, for example, a good financial planner can create a road map that spans their lives, complete with what year to replace that ancient Honda, when to repaint the house and how to pay for that, what to budget for vacations, and when they might be able to retire. “A financial planner has tools,” says Knowles. “You can what-if just about any scenario.”

You can also expect your planner to help you create a budget for living within your means. “Before we talk investing, let’s look at how we’re meeting your needs,” says Knowles. “There are a whole hierarchy of things to consider,” such as six months’ savings, an emergency cash stash, dealing with debt, and creating a budget.

The B-word can be a tough concept for those of us who have relied on retail therapy, lust for designer handbags, or must have the latest electronic gadget. We all need money, certainly—but how we spend it determines whether or not we have control over our finances. Even one soy chai latte can make a difference.

Go through your budget “with a fine-toothed comb,” Righthand says, and look at bundling your phone services, taking a staycation instead of a trip to Hawaii, and refinancing your mortgage to a fixed rate. Oh, and resist the temptation to squander even one cent of that re-fi money, she says. “If you really look at your spending—at what you spend on lattes or movies,” you’ll find ways to cut costs, Righthand says. Stop using credit cards—cut them up, lock them away, make them into a nice mosaic for the family room wall. The most economical choice will always be not to buy anything, and guess what? It’s the greenest choice you can make, too.

And speaking of credit cards, Righthand takes the party line on the question of whether you need to pay down debt before you start building savings. “Paying down your credit card is [like] earning 18 percent” interest on the money instead of paying it out, she says. “Eliminate non-deductible (bad) debt as much as possible. Mortgage debt is different.”

“We’re Americans; 100 percent of us spend too much, and borrow too much,” says Jonathan DeYoe, founder of the Berkeley-based DeYoe Wealth Management. In his view, we make investments or borrow money first, realizing too late that a solid plan should guide our decisions. “Forward-looking planning is always better than backward-looking planning,” he says, citing a couple near retirement who sought help after investing in a lovely new home that was beyond their means. DeYoe ran the numbers and helped the couple see that they needed to sell the house as soon as possible—otherwise, they would go broke paying off the mortgage. While DeYoe was able to steer these clients out of trouble, a much better scenario, he says, is one in which a client with a new job comes in with his or her benefit options, and gets a personalized “prescription” for building a solid future.

Eric Turowski, 43, was recovering from various financial landmines when his company’s CPA recommended he get some financial advice. “I sold the house [in Oakland], and the CPA said, ‘You’ve got to find someone to help you protect this money. This is your nest egg.” Turowski went to Alameda financial advisor Bill DeMar, who went over tax shelter information, retirement, money markets, and college funds for his stepson.

“I know absolutely nothing about money,” admits Turowski. “[Bill] tells me, ‘Yes, do this,’ and ‘No, don’t do that.’ He keeps an eye on my money.” And that is a major relief for Turowski, who no longer has to sweat the dollars and cents.

Opportunity knocks

Because knowledge is power, it behooves you to know your financial situation. Gather all of your account information, current bills, and your most recent tax papers before you visit your new financial adviser, to give him or her the big picture. Think about your priorities—a new car or bigger home? Going off the grid? Traveling around the world or starting a home business? Take notes on your must-haves and upcoming expenses (whether it’s private school, lessons, travel for the kids, or your own retirement) and be prepared to make some choices in order to achieve what you want most.

And get a hold of your credit report. If you google “free credit report,” your eyes will swim with all the possible sites to visit. Know this: Most of them aren’t really free. However, everyone is legally entitled to a free annual credit report, according to the Fair Trade Commission (FTC). But there’s only one online source authorized to do so: www.annualcreditreport.com. Beware of other sites that may look and sound similar. With your credit report in hand, you’ll be able to see any errors or identity theft issues, as well as have a clear view of your financial status. And if it doesn’t make sense, ask your financial adviser.

Still stressed out by the economy? “Everyone has been feeling overwhelmed and vulnerable,” says Righthand. “They don’t know what and who to ask. It’s a really good time to stop and ask yourself what’s really important in your life. Look at your priorities. Realize what you have and be grateful.” And seek professional help if you want someone to coax you through. (See resource box for how to find a local financial adviser.)

In times like these, it may be challenging to know what the best financial choice is. But look at the glass as half-full, says Knowles. “I’m optimistic,” she says. “A bear market is there to provide us with an opportunity.”

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Julia Park Tracey knows her dollars from her sense. Read more at www.modernmuse.blogspot.com.


Dollars and Sense

FINANCIAL PLANNERS

Financial Planning Association of the East Bay, (925) 686-4819; www.fpaeastbay.org (has a locator to help you find a certified financial adviser in your area).

Jim Bell, Bell Investment Advisors, 1111 Broadway, Suite 1630, Oakland, (510) 433-1066; www.bellinvest.com.

David Chee, Seniors Reverse Mortgage, 3478 Buskirk Ave. #343, Pleasant Hill, (510) 436-3100; david@davidchee.com.

Audi Constance, The Constance Company, 1060 Solano Ave., Albany, (510) 898-1313; www.audiconstance.com.

William DeMar, Edward Jones, 935 Marina Village Pkwy., Alameda, (510) 521-0734; www.edwardjones.com.

Jonathan DeYoe, DeYoe Wealth Management, 1400 Shattuck Ave., Berkeley, (510) 848-0012; jonathan@
deyoewealthmanagement.com.

Jason Dudum, Dudum Financial, 959 Mountain View Drive, Lafayette; (925) 284-9900; www.dudumfinancial.com.

Debborah Knowles, Edward Jones, 1336 Park St., Suite D, Alameda; (510) 749-0403; www.edwardjones.com.

Penny Righthand, Eagle Strategies, 5980 Horton St., Suite 500, Emeryville; (510) 601-3384; www.pennyrighthand.com.

Walt Tcherkine, RINA Accountancy Group, 475 14th St., Suite 1200, Oakland, (510) 893-6908; www.rina.com.

GENERAL RESOURCES
www.annualcreditreport.com (for one free credit report per year).

www.bankrate.com/brm/fico/calc.asp (credit score estimator).

www.simple-financial-planning.com (basics for how to get started on your own financial planning).

www.fpaeastbay.org, Financial Planning Association of the East Bay (a list of local financial planners).

Faces of the East Bay