Speculating vs. Investing

If you are saving 20% of your income and investing it in a boring, long-term, buy-and-hold portfolio that's well diversified with a professional-level asset allocation - then you can feel good about speculating on some "fun stuff." 

  • Love real estate and enjoy being a landlord?  Cool!  Go get yourself an investment property.
  • Obsessed with finding the next Facebook?  Nice!   Go invest in some Pre-IPO companies.
  • Think you've got a knack for currency trading?  Awesome!   Go-to-town arbitraging dollars for euros.
  • Feel like you your poker skills are second-to-none?  Sweet!  Go hit the high-stakes tables at Vegas.

But only - and I repeat ONLY - after you have your investment foundation built - saving 20% in a well-diversified, low-cost, index portfolio.

Don't let Wall St. (or your neighbor) sucker you into thinking speculating is investing.   If you can't predict your return, then you are speculating.  And if you are speculating, one of those unpredictable returns is -100%. 

Consider The Source

6 hours of my "reading time" every week is dedicated to honing my craft- staying on top of industry trends… researching new financial planning strategies… studying client psychology… etc. 

What do I read, you ask?

Advertising, of course.

…I dive deep into the 4-page annuity advertisements in my industry rags. 

…I devour "Top 5 Mutual Funds" articles in Money magazine. 

…I'm glued to the CNBC commercials slinging gold with limited-offer "Patriot Coins." 

Why do I read advertising to educate myself?  Because the best way to learn is from someone trying to sell you something.  (A universally accepted "sarcasm font" is way overdue, don't you think?) 

Personal finance is complicated.  It's too complicated… and too confusing… and let's be honest - too boring -  for most people to be motivated to educate themselves.  The financial industry takes advantage of this.  

  • The company hustling gold hopes you don't know their Patriot Coins are a terrible investment.
  • The Pre-IPO investment company hopes you don't understand the investment and liquidity risk of investing in pre-IPO companies.
  • The insurance company hopes you don't know that whole life policy is really expensive insurance and a really lousy investment.

But they gotsta eat too, ya know?

The point is to consider the source.  If you are "learning" from someone trying to sell you something, take the time to educate yourself outside of what the salesman… or advertisement… or commercial is telling you.

After that, if you've just got to have those Patriot Coins then more power to you. 

Look Out for IRS Tax Scams

Repeat after me:

"The IRS"…

"Does NOT"…

"Contact people"…

"By email, text message or social media."

If you ever hear from the IRS by email, text message or social media - do not respond, do not open any attachments and delete immediately. 

It is 100% a hacker.

And if you ever get a call from the IRS, it's 95% likely bogus.   Until 2015, they never called.  Now they only call after sending you something in the mail first. 

These scumbags particularly like to prey on senior citizens, so be extra alert if you're a baby boomer. 

Here's some good info straight from the IRS website:

  • Scammers make unsolicited calls.  Thieves call taxpayers claiming to be IRS officials. They demand that the victim pay a bogus tax bill. They con the victim into sending cash, usually through a prepaid debit card or wire transfer. They may also leave “urgent” callback requests through phone “robo-calls,” or via phishing email.
  • Callers try to scare their victims.  Many phone scams use threats to intimidate and bully a victim into paying. They may even threaten to arrest, deport or revoke the license of their victim if they don’t get the money.
  • Scams use caller ID spoofing.  Scammers often alter caller ID to make it look like the IRS or another agency is calling. The callers use IRS titles and fake badge numbers to appear legitimate. They may use the victim’s name, address and other personal information to make the call sound official.
  • Cons try new tricks all the time.  Some schemes provide an actual IRS address where they tell the victim to mail a receipt for the payment they make. Others use emails that contain a fake IRS document with a phone number or an email address for a reply. These scams often use official IRS letterhead in emails or regular mail that they send to their victims. They try these ploys to make the ruse look official.
  • Scams cost victims over $23 million.  The Treasury Inspector General for Tax Administration, or TIGTA, has received reports of about 736,000 scam contacts since October 2013. Nearly 4,550 victims have collectively paid over $23 million as a result of the scam.


The IRS will not:

  • Call you to demand immediate payment. The IRS will not call you if you owe taxes without first sending you a bill in the mail.
  • Demand that you pay taxes and not allow you to question or appeal the amount you owe.
  • Require that you pay your taxes a certain way. For instance, require that you pay with a prepaid debit card.
  • Ask for your credit or debit card numbers over the phone.
  • Threaten to bring in police or other agencies to arrest you for not paying.


Be safe out there.

Pay Yourself First

The concept comes from The Millionaire Next Door, a very famous personal finance book.   It studies 1,000 "ordinary" millionaires and how they got that way.  (Hint: none of them got lucky working at the right startup.)

Pay yourself first simply means save, THEN spend.   Most of us pay everyone else first.   We pay the Whole Foods cashier and the contractor and the golf course attendant and the waiter and our lawn guy and pool guy and the list goes on.

For the next 6 months, try paying YOURSELF first THEN pay everyone else. 

If you hate it, then in 6 months go back to normal and enjoy spending all the money you just saved.  

Here's how: 

  1. Multiply your monthly take-home pay by .05
  2. Set up an automatic, monthly transfer from your checking to savings for exactly that amount
  3. Don't look at your savings for 6 months.

On August 22, I'll send you a reminder to tell me how much you saved and how good you feel.

Baby Prep Planning

Are you about to have a baby? 

Are you about to be a grandparent?

If so, there are things you (or your kids) need to do right now to get your house ready.  And I don't mean plugging the outlets.

We're talking about your financial house.

It's the Baby Prep Plan trifecta - college, life insurance, and estate planning.

As part of my ever-expanding service offering, I will help you customize your own personal Baby Prep Plan.  

We'll make sure:

  • The grandparents will have somewhere to save for Baby's college expenses  (You'll need $350k to send Baby to UC Berkeley in 18 years.)
  • You have enough life insurance to protect your family (just in case).  (Promise you don't have enough through work.)
  • Your will, guardianship and all the other legal mumbo jumbo is squared away. (I'll make it super easy for you.)

As if that wasn't enough, that service is free for Financial Zen financial planning clients.

If that's you, and we need to talk, click here to schedule your Baby Prep Planning appointment.


Full Disclosure: As a fiduciary financial planner, I cannot accept compensation from third parties.  Therefore, I have no financial interest in working with any particular estate attorney or insurance guy/gal.   (Although I know some excellent ones we can use if you don't know anyone.)

THE BIG REVEAL: You can, but should you?

With a dose of market ambivalence injected into our veins, let's get back to IRA contributions and close the loop on if you should, just because you can. 

To recap: 
Part 1  - You have until April 15, 2018 to make your 2017 Roth or Traditional IRA contribution.

Part 2 - For a Traditional IRA, you can contribute money pre-tax (aka deductible) or after-tax (aka non-deductible)

Part 3 - Your options are based on your income.  If you can make a deductible or a Roth contribution, you probably should.

That leaves the great white whale of personal finance - the non-deductible Traditional IRA contribution.   You CAN.  But SHOULD you?!?!?  Bum bum buuum

To unravel the mystery, let's jump in our time machine.   Fast forward (or rewind) to your 141st half-birthday. 

You're exhausted from blowing out 70.5 candles when you hear a knock at the door.  It's Uncle Sam!  He wishes you a Happy Half-Birthday and reminds you that you have to take money out of your Traditional IRA today. 

"But why Uncle Sam?  I don't need the money," you ask.

"Because when you take money out of your Traditional IRA, you pay taxes.  And I needs mah taxes!" Uncle Sam replies. 

It's called a Required Minimum Distribution (RMD for short).  It applies to Traditional IRA's and BOTH Traditional and Roth 401k's... but not Roth IRA's.    (Got that?  Don't forget we pay Congress to come up with this stuff.)  

Your RMD is calculated by dividing the money you have in your IRA by an age-factor.   At 70.5, the age factor is 27.4.  

So if you have $100,000 in your IRA at 70.5 years old, you have to withdraw $3,650 (100,000 / 27.4 = 3,650)

Still with me? 

That $3,650 IRA withdrawal counts as income on your tax return.  So you'll pay taxes on it as if you earned it from a paycheck.

Now if you have $100,000 in your IRA, adding $3,650 to your income won't have a huge impact on your taxes. 

But what if you have $100,000,0000? (Lucky you!)  Then your RMD is $3,650,000.  Adding $3,650,000 to your income will push you into the 37% tax bracket.    That's $1,350,500 in taxes you're paying Uncle Sam.  Oof.

Buuutttt what if your $100,000,000 was in a regular brokerage account, not an IRA?  Well, none of that would have happened because RMD's don't apply to regular brokerage accounts. 

Ah ha!


Whether or not you should make a non-deductible IRA contribution TODAY depends on how much you'll have in your IRA when you turn 70.5.  

(Warning: That's a rather complex calculation best left to a professional.  Talk to your financial planner.)

If your forecasted RMD will force you to pay a ton of taxes, then you SHOULD NOT make a non-deductible IRA contribution today.  Instead, save that money in a regular brokerage account.

It won't stop your weird Uncle Sam from coming to your 70.5 birthday party, but his visit will be a little less painful and weird….well, less painful anyways.  

Run for the Hills!

The markets FINALLY took a breather last Friday and Monday.  That presents a teachable moment, so let's also take a breather from our IRA Contributions series.

The markets had their biggest point loss EVER on Monday.  AAAHHHHH!!!!!  (On a percentage basis, it didn't even crack the top 10, but I digress.)

Should we run for the hills?

First - pat yourself on the back.  If you're a Financial Zen client, you deserve kudos.   I did not receive one single email, phone call or text about the markets.  That tells me that you are smarter than the average investor, and don't lose your head over a couple down days (even big down days) in the market.

Second - some perspective.  If you didn't know what happened the last two days and I told you you're up 26% over 15 months, would you be stoked?  I bet you would be.  Focusing on the long-term positive is a great way to deal with the short-term negative (and the negative is always short-term).

Third - should you worry?  If you were foolish enough to invest next month's mortgage payment in the stock market, then yes.  (If that's you, do yourself a favor and schedule an appointment with The Financial Zen Group.)  

If you’re a Financial Zen client, you don't have next month's mortgage payment in the market.  In fact, the ONLY money you have in the market is long-term...which means you don't have to worry.

So the last two days?  Meh.   It gave the financial news media something to blab about, so good for them.  Otherwise, who cares?  

Oh and the market snapped back 600 points Tuesday, proving once again that short-term market movements are impossible to predict.  Mr. Market loves to make fools out of people staring into crystal balls.

You Can, but Should You? - Part 3

Over the last two weeks, we covered the basics of IRA contributions.  (Riveting material, I know.  That's why I'm keeping them short.)

Part 1  - You have until April 15th to put money into a Roth or Traditional IRA for 2017.
Part 2 - For a Traditional IRA, you can contribute money pre-tax (aka deductible) or after-tax (aka non-deductible)

Out of the three options, which should you choose?  Uncle Sam decides for you.

How much money you make determines which contributions are allowed. 

These are the limits for 2017.  (For the nerds - these are all based on your Modified Adjusted Gross Income):

MAGI Contribution Limits.png

The rule of thumb for deductible and Roth contributions is "if you can, you should".  

If you file taxes "married, filing jointly," and make under $99,000 you should probably make a deductible contribution to your Traditional IRA.

If you're "married, filing jointly" and make more than $99,000, but less than $186,000, then you should probably contribute to your Roth IRA.

Like all good rules of thumb, these are just guidelines.   You need to talk to your financial planner to determine if the rule of thumb applies to you.  Current retirement savings, future retirement savings, and future income are just a few of the things that factor in.

Now comes the tricky part - if you make over $186,000 ($118,00 single) and can't do a deductible or Roth contributions, should you make a non-deductible IRA contribution?

That brings us full circle to the original premise - you can, but should you?

We'll close the loop next week. 

You Can, but Should You? - Part 2

Liquidity cartoon.gif

You can make your 2017 IRA contribution until 4/15/2018….but SHOULD you?

Last week's recap: 

  • Money you take out of your Traditional IRA will be taxed at your tax-bracket rates
  • Money you take out of your Roth IRA is not taxed at all
  • …So why would you ever contribute to a Traditional IRA?

You need a little more info to answer that question…

There are two types of contributions you can make to a Traditional IRA:


Before-Tax Contribution (aka deductible contribution)

If you make a deductible contribution then you can deduct the contribution from your income.   Which means you'll  get a bigger tax refund… YAY!   But then you'll pay income taxes on all of it when you take it out in retirement - NOT the lower capital gains tax rates…BOO! 


After-Tax Contribution (aka non-deductible contribution)

If you make a non-deductible contribution you can't deduct the contribution from your income.  Which means you won't get a bigger refund… BOO!   But you also won't pay income taxes on that money when you take it out.  You'll only pay taxes on the growth and interest….YAY!....but at the higher tax-bracket rates, not lower capital gains rates….BOO!

(Roth IRA contributions works this way too.  You put in after-tax money.  The difference is you won't pay taxes on the growth and interest….YAY!)


So before 4/15/2018, you have 3 different IRA contributions you can make for 2017:

  • Roth IRA contribution
  • Deductible Traditional IRA contribution
  • Non-deductible Traditional IRA contribution

But which one should you choose?  You don't.  Uncle Sam decides for you….next week.

You CAN Still Contribute to Your IRA, but SHOULD You?

You can still put money in your IRA for 2017.  You have until 4/15/2018 to make your 2017 IRA contribution.

But just because Uncle Sam says you CAN, doesn't mean you SHOULD.

Over the next few installments, Financial Zen Education will give you everything you need to figure out if you should contribute.   And if so, where you should put it - Roth IRA or a Traditional IRA.

Let's start with the bare-bones basics.


Traditional IRA
How it works: 

  • You deposit money in it today. 
  • Your money grows for the next 10, 20, 30 years tax-free.  
  • You withdraw the money in retirement to buy groceries, vacation, etc.
  • You pay taxes on the money you withdraw.   (You pay at your tax-bracket rates, NOT the lower, long-term capital gains rates.)   


Roth IRA
How it works:

  • You deposit money in it today. 
  • Your money grows for the next 10, 20, 30 years tax-free.  
  • You withdraw the money in retirement to buy groceries, vacation, etc.
  • You do NOT pay taxes on the money you withdraw.


I know you're asking yourself "Why would I ever put money in a Traditional IRA?  If I wouldn't pay any taxes when I withdraw, shouldn't I only put money into a Roth IRA?"

Spooky how I knew that, huh?

That's a very smart question.  There's a good reason you might still want to put money in a Traditional IRA.   And it depends on how much income you make today.

And more on that next week….(don't you just love cliffhangers?)

4 Tips to Achieve Your 2018 Goals

It's week 2.  Still going strong on your 2018 goals?

Below are 4 tips to keep your momentum going when February rolls around and your shiny, new motivation starts to wear off. 

  1. Make your goal specific.  "Save more" isn't as motivating as "Saving $1,000 per month".  A measurable goal lets you know if you've crossed the finish line.   And if you haven't, you'll know how close you are… which then motivates you to keep going and finish. 
  2. Set "input-based", not "output-based" goals.  We humans think we control the output.   We don't.  We only control the input.   The trick is getting the inputs right, so the desired outputs follow.  Setting goals based on inputs will make you accomplished even if the desired output doesn’t follow immediately.  A better goal than "losing 10 lbs" is "6 days a week, I'll eat only fruits, veggies, whole grain carbs, lean protein and healthy fats."  
  3. Track your progress.  Jerry Seinfeld has a calendar.  Every day that he sits down to write jokes, he X's off the day.  His calendar is one long chain of X's.  And it's not because he loves writing jokes every day.  Like all of us, he has "those" days.  But "breaking the chain" is worse than sitting down to write.  So he writes…and he X's.   If your goal is to "exercise 4 days a week," print off a calendar and X off every day for every week you work out 4 times. 
  4. Reward yourself.  Achieving goals takes discipline.  And discipline is hard work.  If it wasn't, we'd all be billionaires with six-pack abs.  Reward yourself for achieving your incremental goals (daily, weekly, monthly).  On the 7th day, eat pizza or a sundae or whatever it is you've sacrificed that week.

Consider an "I will spend less" resolution.    Applying these tips, it becomes "I will bring my lunch to work 4 days per week."  It's specific, input-based and leaves a day to eat out to reward yourself.  All that's missing is a calendar and a chain of X's…

Goals for 2018

Hope everyone had a nice New Years.   It's January 4th, and the world is back to work.

My 2018 planning is complete, so I thought I'd share my 2018 New Year's "Resolutions" (aka Goals).

  1. Hire an assistant. You don't pay me to fill out paperwork.  You pay me to guide you towards your best financial lives.  An assistant will free up time so I can spend it in the most impactful ways.
  2. Onboard remaining clients to the new service model.  2017's focus was to upgrade my service model to something my clients are stark, raving mad about.  How I serve clients - contact frequency, service offering (retirement, college, investments, etc.), easy-to-use client technology - is my "product."  Based on clients who have upgraded and embraced the technology, I've nailed it.  Now I need to chase down clients who haven't been quite as responsive. 
  3. Launch my marketing campaign.  With a product I am proud of, I'm excited to share it with the rest of the world.   "To help and educate as many people as possible" has been part of my mission statement since 2008.  It's time to help the masses.
  4. Hire a junior financial planner.  The strategy behind your financial plan is the hard part.  Taking that strategy and putting it into a client-friendly design is labor-intensive, but not difficult.  That's the perfect place for a junior planner to learn the ropes and prepare for taking on client relationships. 
  5. Take guitar lessons.  I've been self-taught for 4 years.  It's time to leverage an expert. 

There are many other smaller goals I've set, but those are the big 5.  If I accomplish nothing else this year than those 4 goals, I will have a successful 2018.

Now it's your turn.  What are your big goals for 2018? 

Send them my way.  I would love to hear from you!

Reflections on 2017

The week of limbo between Christmas and New Year's is a time of reflection. 

Think about what you accomplished in 2017.  Also, what didn't you get to?  I find this simple exercise often births the following year's goals. 

Accomplished: Financial Zen Education.   I sent my educational newsletter every Thursday for 52 weeks.   Not only did I create a year's worth of content for people's reference in the future, but hopefully my readers learned a thing or two along the way. 

Didn't get to: Hiring an assistant.  Between new clients, retiring clients and everything in between, I was too busy to hire an assistant (who ironically would free up my time). 

Accomplished: Mediated 365 times.  It helped keep my head on straight working 80 hours a week. 

Didn't get to: Guitar lessons.  I still practiced every day, but never leveraged an expert.

Accomplished: Saved 20% of my earnings.  Between a ring, a wedding and a honeymoon, it won't all go to retirement, but I saved 20% nonetheless.

Didn't get to: Automatic savings.  The 20% I saved was me moving money every month.  I know I could have saved more if I had automatically transferred money to my savings account every month.

Accomplished: Got my CFP credentials.   $5,190.   21 months of college-level study.   6,000 hours of experience.   And 12 years in the making.

Next week, I'll reflect on what I want to accomplish in 2018.

How'd your 2017 go?  Write me back and let me know!  I would love to hear all the wonderful things you accomplished last year!

URGENT: The New Tax Law - 3 Things to Do Before December 31st

The Financial Zen Education newsletter is being sent a day early because the new tax legislation will likely be signed into law on Friday.  There are 3 things you need to do immediately before January 1st and 1 thing you probably don't need to worry about.

  1. Pay your 2nd 2017/2018 property tax now.   The new law will cap the deduction you can take on state, local and property taxes to a maximum of $10,000 (that's combined, not each).   So if your combined property taxes and state taxes will be more than $10,000 next year, then pay your property tax by December 31 to get the full deduction in 2017. 
  2. Pay 4th quarter taxes.   You are not allowed to prepay 2018 state taxes.  It's written into the law.  However, if you pay taxes quarterly (all you retirees and business owners), you CAN pay your Q4 2017 taxes.  If you pay it by December 31, you can still deduct it. 
  3. Defer income.  The tax brackets will be lower.  So any income you can delay until next year should be to your benefit.  Ask if you can get your year-end bonus paid after January 1st.   Don't take anything out of your IRA this month.  Ask to get your RSU grants after January 1st. 
  4. Mortgage interest deduction - It has changed, but it probably won't affect you.   You can still deduct your mortgage interest on the first $1,000,000 if you closed your mortgage before December 15, 2017.  You are grandfathered into the old law.  However, if you close a new mortgage AFTER December 15, 2017 then you can only deduct interest on the first $750,000.  

This is not intended to be comprehensive, but it's everything that I was able to research and think of since they finalized the bill last weekend. 

Disclaimer: This blog is for educational purposes only and should not be considered financial, tax or legal advice.  These statements have been simplified for illustration purposes.  Consult your financial planner or tax advisor for help with your specific situation.

An Early Christmas / Hanukah Present

I've got a $609 holiday gift to give every single one of you.  Read on to claim it. 

Earlier this year, I ponied up for very expensive concert tickets to the Red Hot Chili Peppers.  They're on my bucket list, so I decided it was worth it just this one time. 

I missed the initial sale, so I went on StubHub and found they were 3x the face amount.  I held off, expecting prices to come down.  They didn't.   I ended up paying $100 more than the already expensive 3x face amount. 

The lesson was there.  I wasn't listening. 

5 months later the Foo Fighters announced dates.   They are also on my bucket list.  (What are the chances?  My concert bucket list only has 3 bands on it.)

Having watched ticket prices steadily rise for the Chili Peppers, I bought 3 extra tickets so I could sell them at a profit 6 months later. 

Last week I sold the tickets.  At a loss.  A $509 loss.   They didn't go up and I was out half a grand. 

This time I listened to the lesson.  Don't make decisions based on short-term predictions.

Of course, the irony is I preach incessantly about not speculating on short-term price movement.  How many thousands of times have you heard me say not to try and time the market?  That you can't predict the future and should never make investment decisions based on your or anyone else's crystal ball.

So yeah.  My mom was wrong.  I'm not perfect after all. 

But the good news is I get to give all of you a $609 Christmas/Hanukah present! 


4 Steps to Avoid the Holiday Spending Hangover

It's official - the holidays are upon us.  We've got a lot to look forward to over the next few weeks - holiday parties, eggnog, gifts giving, great food, holiday cookies, Christmas trees… the list goes on.  

The holidays are a season of generosity.  Americans spent $656 billion on holiday shopping in 2016.  (The next biggest shopping season is Back to School, which "only" roped in $84 billion.) 

The downside of all that holiday generosity is the dreaded January spending hangover. 

Below are 4 easy steps to avoid the post-holiday spending hangover and still enjoy giving your loved ones really cool stuff.

  1. Create a spending goal - Humans are wired to enjoy achieving goals.  By setting a spending goal, you trick your subconscious into enjoying not going overboard. 
  2. Save then spend -  Your spending goal should be whatever you've saved up for the holidays.  Haven't saved anything?   Then "splurge less" in equal amounts to your holiday spending.  If you normally eat out 6 times a month, then eat out 3 times in December instead.
  3. Track your spending - The simple act of "witnessing" your spending has a self-regulating effect.  And it's really easy to track your spending these days - use www.financialzengroup.com  or www.mint.com or www.youneedabudget.com or any of the other spending tools out there. 
  4. Reward yourself - To reinforce your goal, decide ahead of time how you'll reward yourself for achieving it.  Treat yourself to a massage or a nice dinner out or whatever else slides your sleigh.

Don't let your January credit card bill kill your holiday afterglow.   By thinking ahead and using a little financial technology, you can enjoy all the fun stuff that December brings without having to pay for it in January.  (See what I did there?  Ho! Ho! Ho!)

Portfolio Magic

After reading this, you will know more about investing than every caller that's ever called into Jim Cramer's show.

What we've learned so far….

Over the last 90 years, the average annual return for the S&P 500 is 9.8%.  

Rolling returns less than 90 years vary.   The longer you are invested, the smaller the variability becomes.

The 1-year rolling return varies between -47% to 61% per year.
The 20-year rolling return varies between 6.5% to 20% per year.

So the longer you are invested, the more predictable your return becomes.  But long-term investing is not the only way to do this.

The other way is diversification.

"Don't keep all your eggs in one basket."  Diversification is usually thought of a way to reduce risk.  However, it's also the way we get more predictable, consistent returns. 

For example, consider two investments with identical return profiles.

Investment A:   9.8% average annual return / 20 year rolling returns between 6.5% and 20%
Investment B:   9.8% average annual return / 20 year rolling returns between 6.5% and 20%

The magic happens when you put them together.  When you combine them, the new return profile looks like this:

Portfolio A & B:  9.8% average annual return / 20 year rolling returns between 8% and 17%

You retain the expected long-term return of 9.8%, but you reduce the variability of possible outcomes.

And now you understand Modern Portfolio Theory.  Jim Cramer's callers ain't got nuthin' on you!

Thanksgiving Gratitude

Thanksgiving may be the time we verbalize our gratitude, but my gratitude for you is something I reflect on every day.

Part of my morning ritual is writing down 3 things that I'm grateful for and 3 things I'm looking forward to that day. 

A disproportionate amount of my gratitude and eager anticipation each morning is focused on you.

Here are some examples (names changed): 

  • I am grateful John "feels on top of things, like never before"
  • Today I'm looking forward to explaining Tim and Lisa's retirement distribution strategy, so they won't worry about retiring anymore
  • I'm grateful for engaged, enthusiastic clients like Sue
  • Today I'm looking forward to showing Rob and  Mary how they'll send Bobby to college

So if you've ever felt your ears burn at 5:45 am, now you know why.  

I'm grateful you've given me the opportunity to help you.

I'm grateful for your patience while I got The Financial Zen Group up, running and dialed in.

I’m grateful that you've allowed me to live my dream

And I'm grateful that you are in my life.   You've helped me to grow - not just professionally, but personally as well and I'm a better person because of you. 

Thank you, thank you, thank you!

Enjoy your turkey and football (and nap) today!

Rick Valenzi, CFP

The year was 2005 and the light bulb had gone off  - I was pretty, kinda, almost positive that my destiny laid in financial planning. 

After making a few blind wrong-turns early in my career, I wanted to make sure.   I cold-called financial planners for informational interviews.  I did a bunch of online research.  I read books like "So You Want to Be a Financial Planner". 

And when I was 95% sure of my decision, I took the last leap and spent $3,395 for my CFP coursework materials. 

What's a Certified Financial PlannerTM? It's the most well-respected and well-recognized designation in personal finance. It is the gold standard of financial planners.

One of the requirements is passing a rigorous educational program.  It covers in-depth - and I mean bottom-of-the-ocean depth - knowledge of:

  1. Professional Conduct and Regulation
  2. General Principles of Financial Planning
  3. Education Planning
  4. Risk Management and Insurance Planning
  5. Investment Planning
  6. Tax Planning
  7. Retirement Savings and Income Planning
  8. Estate Planning

Fun stuff, right?

For the next 18 months, I spent every second of free time studying for the CFP exam which is a 7-hour test of your knowledge and application of your knowledge.   I'd study in conference rooms at lunch.  I'd get home from work and study for 3 hours every night.   I'd spend 8 hours every Saturday and Sunday holed up in coffee shops.

It was brutal.  I had majored in finance at the University of Texas, but college finance programs focus on corporate finance, not personal finance.  It was like learning Spanish by sign language.

After 18 months, I passed all six courses and could have taken the exam.  But I didn't because you also need 6,000 hours of experience.    Even if I had passed the exam, I wouldn't officially be a CFP® professional for at least 5 more years.

Instead, I decided I'd start my practice and reinforce what I learned by actually using it. 

6,000 hours came and went.   I was neck-deep in my own personal hell while I built my business trying to figure out how to pay SF rent on $1800 per month.  Passing the CFP exam was not on the priority list. 

Once I was through the worst of it, I was then laser-focused on going independent and starting The Financial Zen Group. 

And after launching May 2016, it was all-hands-on-deck while I transitioned clients and got my business up and running and dialed in. 

After 12 months, it had come together.  I had done the (nearly) impossible and successfully launched my own financial planning firm. 

But after all those accomplishments, I still didn't have "CFP®" after my name.   I felt incomplete. 

Only things with deadlines get done.  So last May I forced my hand.  I paid the nonrefundable $595 exam fee and scheduled my exam date.   I then paid $1100 for the capstone and review courses. 

I studied 3 hours after work and 8 hours every Saturday and Sunday for 3 months. 

Finally, the day arrived - July 18.   I went to the testing site with my financial calculator in hand, and 7 hours later I emerged victoriously. 

It's taken another 3 months to jump through the administrative hoops, but my certificate arrived last week. 

$5,190.   21 months of intense study.   6,000 hours of experience.   And 12 years in the making.

The loop is closed, and I feel complete.   Not only have I established my own financial planning firm, but I can now proudly say I am the gold standard of financial planners. 

I am a Certified Financial PlannerTM.

-Rick Valenzi, CFP®

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What Should You Expect?


That's the average annual return of the S&P 500 over the last 90 years.

Is that the return you should expect to get in your portfolio?   Yes, but only if you have 90 years to invest.

Personally, I don't have that long.  

But I've got 20 years. 

So should I expect 9.8% average annual return over 20 years?


Remember from last week that the best annualized return over 20 years was 20% and the worst was 6.5%.

That means over the next 20 years it's very reasonable to expect an average annual return somewhere between 6.5% and 20%. 

But the longer you are invested, the more that gap will close in on 9.8%.

And diversification will also shrink that gap.  More on that next week.

Disclaimer: The performance numbers reflect an investment in only the S&P 500 and should not be considered investment advice.  Please consult your financial professional before investing.  Past performance is no guarantee of future results.