Dollars and Sense

Experts Confess

I've been giving college-savings advice for more than two decades. As a financial journalist, I've covered the subject for more business publications, major newspapers, personal-finance monthlies and women's magazines than I can recall.

One might naturally assume that by the time our son, Max, left for the University of Pennsylvania two years ago (projected expenses: $160,000), my husband and I would have been well prepared to pay for his degree, and to foot the bill for his younger sister, Emma, when it was her time to go. Not quite. Really, not at all. Our tuition-savings account didn't even add up to the price of a used minivan.

Okay, it's time for me to confess: I don't always follow my own financial preaching. There. I said it.

And I am not alone among the pros, with whom the "save as I say, not as I save" philosophy is as common as coins between sofa cushions. Just ask Candace Bahr, a San Diego-based financial adviser who cofounded the Women's Institute for Financial Education (WIFE). She's also the coauthor of It's More Than Money -- It's Your Life (Wiley, 2003), a book that touts budgeting as a key tool in handling one's finances. "Devising a budget may seem a daunting task," the planner assures readers, "but it isn't that difficult."

For her, it's especially not that difficult: She never bothered to plot one for herself.

Muriel Siebert is a legend among successful executives. She was the first woman to have a seat on the New York Stock Exchange and to serve as New York State's superintendent of banks. "I advise people to put money into a retirement account every month," she says. "A good rule of thumb is to put in a sum equal to the most expensive piece of clothing you bought that month." But the chairman and founder of Siebert Financial Corporation didn't exactly follow her own advice: "I never put money into a retirement account," she acknowledges.

Of course, her career was so brilliant that the balance in her checking account would likely provide more than enough for any pensioner's golden years. But Siebert knows that it might not have ended up that way. "There was no law saying I would have all the money I would need as I got older."

Learning the Hard Way

Are financial experts insincere? Incompetent? Untrustworthy? No, we're more like the doctor who suggests a diet to a patient his own size and then orders creme brulee at lunch. In other words, the real world is full of temptation and tough decisions.

"We all have to make choices," says Marsha Firestone, president and founder of Women Presidents' Organization (WPO), a New York City-based peer advisory group for female business owners. "Maybe you didn't save the cash you needed for college, but you invested in your children in other ways, by taking them on trips or paying for piano lessons. Or you might have decided to reinvest in your business, even if it meant delaying your retirement goals."

That last point hits close to home for Firestone. Although she urges other women who own businesses to set up retirement accounts as soon as their companies can afford it, she didn't heed her own message when it came to the company she founded. "In the beginning, the business couldn't have handled it, but two years ago, it could have," she says. She's now begun to set that account up, but she's painfully aware that it will be impossible to make up for those years of tax-sheltered savings.

Even with ready cash in hand, financial experts don't always put their money where it should be. Jean Chatzky, the author of Pay It Down! From Debt to Wealth on $10 a Day (Portfolio, 2004), is proof positive that Myth #1 about personal finance pros -- that we never make mistakes -- in fact is myth.

"Early on in my career, I was sitting on $3,000 in a savings account," Chatzky recalls, "which was earning about 3 percent interest. At the same time, I had $3,000 in credit-card bills, which was costing me 18 percent interest. People who knew much more about money than I did told me that it was crazy not to pay off the debt. But I can't tell you how long I ignored that advice and just sat around doing nothing."

That error was costly, but nowhere near as much as Chatzky's failure to roll over her retirement account when, as a rookie journalist, she switched jobs. "The truth is, I didn't really understand the rules about retirement accounts. So my savings ended up getting cashed in, which meant I owed taxes and a penalty."

Luckily, she has no intention of retiring anytime soon, and I guess that's my consolation, too. After all, I failed to sign up for a 401(k) plan at my first job because I was convinced I'd be fired any day. In the end, I missed out on 10 years' worth of savings. It won't be any surprise to learn that I wrote plenty of retirement-savings articles during that same decade.

Nobody's Perfect

If Myth #1 about the experts is that we're mistakeproof, Myth #2 is that we don't feel anxious or guilty about money the way everyone else does. Ginita Wall has watched herself switch from a confident CPA and certified financial planner to something of a Scrooge about squash.

"The other day, I bought zucchini for $1.49 a pound," Wall recalls. "Then I saw an ad in the newspaper offering it for a lot less at another store." The result: "I felt guilty," she says, "even about something so small that I knew it shouldn't make a difference." Any of us could've told her that stressing out over a few bucks doesn't make sense. She should've been able to tell herself that as WIFE's cofounder, it's her job to help women get past emotional attitudes toward money. But as the case of the overpriced zucchini makes clear, we all succumb to irrational moments. "I needed to step back and have a reality check," she says now.

And then there's family, our greatest joy and greatest emotional drain -- especially when it comes to money. Karen Altfest, a fee-only financial planner, is so committed to promoting honest cross-generational communication about estate-planning and inheritance issues that she's been a panelist on AARP seminars devoted to the topic. But when it came to her own mom and dad, she couldn't initiate that tough conversation about how to handle their assets. Fortunately, she says, "nothing awful happened, like those 'cat food for dinner' stories you read about. But I wish I'd been more proactive, the way I advise my clients to be. Their investments might have been better managed."

Do you believe Myth #3 -- that the experts are so virtuous, we never make the sin of the splurge? Every time Bahr opens her closet, she's reminded of just how untrue that myth is. "Back in the '80s, I was working for a big brokerage firm and I visited Manhattan on business," she recalls. "I had just received a large bonus. While I was there, I saw all of these high-powered women wearing mink coats. I bought one, because it seemed like the epitome of success. I live in Southern California. I never wore it. I'm so embarrassed now."

Wall and Bahr are both convinced that the cult of Quicken-like perfection that surrounds many financial experts and their recommendations can backfire and discourage regular folk from trying to take control of their finances. But you're not likely to meet many planners who 'fess up to their biggest mistakes in a first meeting with a client.

The truth is, personal finance is an art, not a science, and there's no one-size-fits-all formula for success. So don't beat yourself up if you find that, despite your very best intentions, you can't live by the letter of a financial expert's money laws. We can't live by that letter ourselves. But I do try to learn from my mistakes, which is one of the biggest lessons any financial adviser can offer. That's the best way to get your family's finances from where they are to wherever it is you want them to be.

Personal Finance 101

Overwhelmed by oodles of advice? Beset by fears of fiduciary failure? Relax, and check out this no-risk list of hot tips:

1. Identify your financial goals. "If you don't know what you're working toward, you'll never get there," Jean Chatzky says. Only you can decide whether it's more important to save for retirement, your kids' education, or something else. Just make sure you're saving and investing toward something.
2. Seek help. There's never been a time when financial advice was so readily available at low or no cost through the Internet, magazines, and books. If you'd like to work directly with a fee-only financial planner, find one through www.napfa.org.
3. Make healthcare a priority. If a job loss leaves family members with inadequate health insurance and illness strikes, say goodbye to your money. Check trade associations for group plans you can join.
4. Focus on the long-term. "If it will matter to you six years from now, then by all means do it," says Ginita Wall. Investing in your kids' education will improve their future. Today's splurge? Not so much.
5. Keep tabs on the financial climate. When interest rates go up, as they are now, borrowing becomes a risky business, Muriel Siebert warns. "Pay only the minimums on your credit cards, and you'll be paying for last night's pizza for years." Another danger: Borrowing heavily against home equity, especially with variable-rate loans that are likely to rise.
6. Start small and take pride in your accomplishments. Money-management skills are best learned in small steps. WIFE.org is one good place to start -- it offers personal-finance tips that can be tackled in just 15 minutes each day.

1. Pristine paperwork. Whatever record-keeping system works best for you is probably fine. Wall is a CPA, but she tosses her receipts into a giant file during the year and then sorts them out at tax time.
2. Balancing your checkbook. If it's a task you hate, says Candace Bahr, just look at the statement to make sure you know what's cleared and what hasn't.
3. A formal budget. If you can live within your means and save without one, you don't need it.
4. Avoiding errors. Nobody's perfect. If you try to be, you'll paralyze yourself.
5. Outperforming "the market." "People make themselves crazy over comparing their investments to the market," says Karen Altfest. "Are you saving? Are you working toward your own goals? Are your investments doing well over time? Then you're fine."