Introduction
This is a book about the importance of planning for your financial future, but it is about so much more. I have been in the financial industry for more than thirty years and in that time, I have seen it all—the good, the bad, and the ugly. I have worked with all kinds of people from different walks of life, and I have learned many valuable financial and life lessons along the way.
My goal in this book is to educate, motivate, and inspire you to act and delay gratification today, so you can enjoy the tomorrow you have always dreamed of. I have seen firsthand, the consequences of inaction, and nothing demonstrates this lesson better than the story of someone very dear to me.
Donna Mimi Chaikin died on August 3, 2019 at the age of 74. She was the daughter of Richard and Mildred Levy, and she was also was my sister.
By all accounts, Donna did not have the easiest of childhoods. When WWII ended, her father, Richard, ruled his first child with somewhat of an iron fist. As other families enjoyed the prosperity of a postwar life, Richard was much more conservative with his family’s budget. He had been a primary breadwinner for his divorced mother and younger brother since the age of 13. This upbringing resulted in an extremely frugal discipline with his own family.
As fortunes boomed during the 1950s, birthrates soared, and consumption rose dramatically. However, it was a very different story for Donna. Although she did not live a life of poverty, her memories of childhood were dominated by thoughts of everything she did not have. As classmates enjoyed family trips to New York and new clothes, Donna’s recollections are consumed by all the things she had wanted but was refused.
She went on to some post-secondary schooling, but never went to college. Other than working as a low-level assistant in New York’s fashion district, she had no real career path prior to marriage. In her mid-twenties, she met a handsome Jewish dentist and they were married soon thereafter. Mom was happy because she married “a nice Jewish boy.” Her father was thrilled with her choice because he was from the same religious faith, had been in the military, and most importantly, could support his daughter.
Life seemed perfect for the first ten years of Donna’s marriage. With her helping administratively, the dentist opened a couple of offices and they enjoyed a healthy income. It would not be long before two beautiful daughters came into the world. Donna was finally living the high life.
Over time, Donna’s father began to lecture her husband about spending, trying to persuade him to avoid giving into her every whim. This only drove Donna to live a more extravagant lifestyle. She insisted that her children attend the best private schools, take piano lessons, and, of course, they joined the local country club. The curious thing about Donna’s new lifestyle was it did not seem to make her happy. In fact, quite the opposite.
Increasingly more often, she flaunted her materialism as some dysfunctional payback to her father for his alleged failures in her childhood. This began her downward spiral and over time, people began to avoid her in social circles. Her husband fell out of love with her and her family began to distance themselves from her. It was not long before she fell into excessive drinking, prescription drugs, depression, suicide attempts, and, finally, divorce.
The years went by and the money ran out. Medicare became Medicaid and she eventually died a lonely, broken woman. The most heartbreaking part of all is that her situation could have been avoided. One of Donna’s primary problems was she had no real purpose in her life. She had no charitable inclinations, and certainly no interest in exploring employment opportunities that might have peaked a long-forgotten passion or buried interest.
Prior to the finalization of her divorce, I had a conversation with my sister—a conversation that could have changed her life. One night after dinner with family, we went back to my home where Donna continued her “woe is me” routine. I asked everyone to leave the room while I sat with her. I quietly but directly explained that she was at a crossroads in her life. I soon discovered an underlying problem. Her complete identity hinged on her being part of a family unit. I remember wondering if the individual Donna Chaikin could survive or ever be “happy.”
I thought it was important in her journey to find something—anything—that could help her discover some sort of passion in her life. It could have been religious, volunteering for a cause, or working in an interesting job. The latter offered the additional benefit of giving her an opportunity to build a nest egg for later years. It might also have helped her develop a new social network of friends and even build her self-confidence.
Unfortunately, when Donna arrived at her fork in the road, the choice she made was one of self-destruction. It takes effort to rise above all the personal baggage you have acquired since birth. Donna made the decision to not even try.
As tragic as my sister’s life may appear, her time should not be written off as insignificant. It was Donna’s story, along with many others I have encountered over the years, that prompted me to write this book. These stories of what people did or failed to do at critical junctures in their lives are designed to teach. By sharing these stories, if just one person (or millions) learn that there are always consequences to one’s actions or inactions, then my effort was well worth it.
You see, Americans have a big problem. The U.S. is at a crossroads—one that could change the very fabric of society. Every day the media reports on the growing divergence between the “haves” and “have nots.” Just as I never dreamed, we would be self-quarantining in this country during the Coronavirus, I also could have never imagined a time in this country when political debates centered around a path from capitalism to socialism.
An October 24, 2019, The Wall Street Journal ran a story on the Texas capital of Austin and how the city was forced to face its homelessness epidemic. Compared to other major metropolitan areas such as Los Angeles, San Francisco, or Seattle, Austin’s homeless numbers did not jump off the page. However, the estimated point-in-time count of 2014 had grown an estimated 30% over five years.1
The growing problem resulted in heated discussions on how the crisis could be handled in a more humane and efficient manner. While the absolute number, a little over a 2,000 homeless in a population of 1.2M seems minute, it was a crisis in the making.2
The homeless problem not only infects the desirability of living in a area, but subsequently, home and rental prices, business formation, and health issues. As homeless numbers balloon, it becomes increasingly more common for residents, tourists, and business owners avoiding sidewalk tents, needles, feces, growing crime, and more.
So, what does that have to do with a book on planning? Everything!
Another Wall Street Journal article highlighted how the historic asset boom (10-year recovery since the Great Recession) passed half of All-American families by. This bottom half of all U.S. households have only recently regained the wealth they lost from the 2007-2009 recession.3 Even after all this time, they still have 32% less wealth (AFI) than in 2003.4 Comparatively speaking, the top 1% of households have more than twice as much as they did in 2003.5
Why the discrepancy? It appears that the bottom 50% have most of their net worth (assets minus liabilities) in their home (assuming they own one).6 However, the top 1% have an estimated 85% of their net worth in stocks, bonds, or stakes in private companies.7
Remember that net worth is very different than income. Economic and regulatory trends over the past decade have favored stocks over owning a home, making it ironically, more difficult for the less affluent to buy a home. Home ownership has fallen from 43% in 2007 to 37% in 2016.8
What does that have to do with a book on planning? Everything.
When we examine generational concerns, it only makes sense to start with the Baby Boomers. A 2018 Retirement Confidence Survey by the Employee Benefit Research Institute and the independent research firm, Greenwald and Associates, showed that those born between 1946-1964 are retiring at a rate estimated to be 10,000 per day for the next 10 years.9
The survey also found that 45% of workers report a total value of their household savings and investments less than $25,000 which would not begin to cover an adult 65 years or older who spends an average of $48,885 a year.10 Additional research by the Insured Retirement Institute also supports trouble on the Baby Boomer horizon with 45% of the Baby Boomers having no retirement savings and of the remaining 55% who do, 28% of them have less than $100,000.11 This translates into almost 50% of retirees depending on their Social Security benefits almost exclusively to live in retirement.12
What does this have to do with a book on planning? Everything.
Let us go a little younger in the generational chart! The 2018 Pew Research Center reflects that 29% live in “lower class” households which is comprised of a median income of $25,624.13 Lower class is defined as household income less than two-thirds of the national median (after income has been adjusted for household size).14 More than 52% of households are considered middle class (median income of $78,442 in 2016) while 19% are upper class (median income of $187,872 in 2016).15 While there is no disputing a growing gap between the middle and the upper class over the last decade, recent social versus capitalistic sparring is less likely to provide any effective resolution in improving such circumstances.
What does this have to do with a book on planning? Everything.
I believe there is a real need for a book like this. Let us face it. When it comes to financial acumen, most Americans are relatively uneducated. This is evidenced by statistics regarding financial preparedness. What this book will do is guide you through your financial life cycle. I will be your guide and mentor as I point out important issues you should know at each stage of your financial life, the options available to you, and the potential pitfalls and challenges you must be aware of.
We begin with the early years from birth through high school. I will walk you through the decision on whether pursuing a post-secondary education is right for you or your children. We will take a realistic view of the approximate cost associated with that additional education and attempt to analyze the cost/benefit of such decisions. Our discussion will cover an undergraduate education, as well as graduate studies.
It is important to note that the costs associated with these decisions will often follow you through the next phase of your financial life as you begin your career. We will discuss how to best prepare yourself for decisions such as geographic considerations, job opportunities, salary and benefit packages, growth potential, expense breakdown, quality of life, life balance considerations, social network considerations, and taxes.
As you age and mature financially, there are many important factors to consider. What are the financial ramifications of a live-in versus a marital relationship? Our planning will help you prepare for transitioning from a one to two-person household. We will explore these considerations in detail, as failure to do so can cause irreparable damage, both emotionally and financially.
As you move on to having children, we take our planning to a whole new level. The expenses of raising a child, depending on geographic location, has been estimated to be approximately $233,610 but may be higher depending on where you live.16 Note that this is the cost before college expenses are included. We will discuss why a financial analysis should be done before such a decision is made.
This book will help you to think “big picture” and factor in the many variables that should be considered when two people (or perhaps a single parent) make such monumental decisions. We will explore all the factors that should be considered from both, a financial, and emotional perspective.
The planning journey continues as you enter the later stages of your working years. There is a myriad of costs to consider as you prepare to enter retirement. We will take a look at all the family costs that should be considered. These are things like post K-12 education considerations, costs of young-adult children, financial obligations to aging parents and grandparents, budget considerations, retirement considerations, health, health care costs, and many others.
As one enters the end of the accumulation phase of investing, it is time for a “come to Jesus” self-assessment of one’s financial, health and future goals/desires. This chapter will likely be the most important part of the book as it will provide a measurement of how well you have done in each of these areas up to this point in time.
Examining the interconnectivity between different aspects of your life is essential in determining decisions regarding how you will live in retirement, continue employment, transition into a semi-retirement, or completely retire from your job. Included in this chapter are some thought-provoking tips that will help you anticipate “what if” situations that could arise throughout your life and prepare you to address them.
Finally, we will briefly discuss the later stages of your life about remaining healthy, relevant, engaged, and financially capable of living within your means. That may be at home, with assistance, with children, or as you move to an exciting, new senior housing development.
We will discuss the reasons why estate planning should be reviewed on a regular basis. I will give you guidance on what family documents you may need such as durable powers of attorney and living trust documents. These are important when making wise decisions regarding health, financial, and end-of-life issues.
What does this have to do with a planning book? Everything.
This book is intended to be a general roadmap for introducing the concepts of planning and to help you avoid my sister, Donna’s fate. It is certainly not a one-size-fits-all solution, but it can be a roadmap for the hundreds of thousands of people who want and need direction or face financial challenges.
My goal is to educate you if you desire guidance and to help you recalibrate to a path of success. My hope is that you may find yourself in a much better place than you were yesterday, regardless of what stage you begin your journey. All it takes is a little bit of planning!
