Finance and Investments

The stark truth about managing our money these days is that we are mostly on our own.

Few employers want us around for 40 years, so our income is likely to have ups and downs and could disappear altogether for brief periods between jobs. Saving for retirement is now mostly our responsibility, too. Health insurance, for those of us who have it and manage to keep it, requires increasingly large amounts of money out of our pockets. The list goes on and on.

At the same time, all sorts of individuals and institutions have smelled opportunity and lined up to peddle their wares, resulting in an explosion of credit cards, bank products and advisers of various stripes. Some of this is helpful because competition has led to lower costs. But in other instances — say, newfangled adjustable-rate mortgages — the result has been painful.

Complicating all of this is the housing downturn, which has affected the largest asset in many portfolios. Rising fuel and food prices along with tougher loan standards do not help.

Given the stakes, it is hard to avoid the persistent low-grade fear that we have made wrong choices or cannot find the right ones, even though they are out there somewhere. There’s no guarantee that the choices will be available, attractive or appropriate for everyone.

Here are five basic guidelines.

INVESTING IS SIMPLE
Boiling down investing; Save regularly. Reallocate infrequently. Diversify.
For most of us, investing— and sticking with it— is the hardest part of the mantra to accept.

The fact is, however, beating the overall market in most investment classes is nearly impossible over long periods of time. Sure, it may be fun to try. But if you enjoy that sort of thing, do it with a tiny piece of your portfolio. And remember to call it what it actually is: gambling.

IT STILL MAY BE WORTH PAYING FOR HELP
Investing is only one small part of your financial life. Mortgages, taxes, savings, insurance and debt are a few of the hugely important tasks we have to figure out.
Perhaps the best thing a versatile professional — whether it is a financial planner, accountant, stockbroker or lawyer — does is provide discipline. It is difficult to get most of this stuff right. And to get it done at the right time. Professionals help make sure it all happens on schedule.
Most of us would rather avoid paying for help but getting the right structure is well worth the cost.

PEERS MAY KNOW MORE THAN PROFESSIONALS
Financial planners may not have all the answers, or the best answers, all of the time. Moreover, they tend to be stronger on core areas of money management like insurance and taxes and less so on day-to-day budget or purchasing consumer goods type financial decisions.

EVERYTHING CAN (AND SHOULD) BE AUTOMATED
One of the great consumer-friendly innovations in the world of money in recent years has been the automation of bill paying.

This has a number of advantages: no stamps, no envelopes, no late fees. Then you can do things that are a lot more fun.

HAVE THE TALK
As fewer people have pensions and more retirees live longer, an increasing number of people may need financial help from their children. The question is whether your parents will be among them.

Trying to pry financial information out of your parents does not make for a pleasant conversation. But the fact is, we are entitled to demand some answers if our parents do not initiate the discussion themselves.

This is not a case for callousness. They took care of us for 20 or so years, and we will take care of them, too, if it comes to that. But it is not fair of them to withhold warnings of deteriorating finances. If we do not know what is coming, we cannot help them plan for it.

Just as we should talk about money with our parents, we should be less reticent about discussing it with others.