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Lauren's Blog

Lauren’s blog covers topics that impact your finances, your family, and your future. Is there a topic you’d like Lauren to tackle? We’d love your suggestions and feedback.

Market Alert: Putting the Brexit in Perspective

Market Alert: Putting the Brexit in Perspective

The news was big last night. The British cast their votes, and the outcome was what many had feared—especially David Cameron who resigned in the wake of the historic Brexit vote. He said he will stay to “steady the ship,” but this ship needs some smart hands on deck to safely escape this storm.

The reaction in the US is much more predictable. Global uncertainty never bodes well for stock prices, and that proved true at the opening bell this morning. And yet, at least as I write this morning, the Dow index or (“the market”), is still down less than 3%. To put that statistic in context, just six months ago the market dipped more than 3% in a single day. Since then, we’ve seen a step-by-step recovery. It hasn’t been a smooth upward climb, but even in its volatility, the market has continued to grow at a slow and steady pace.

There’s intense analysis happening at the moment regarding the implications of Britain leaving the European Union, but in reality, only time will tell. What may be most important to remember from a financial perepective is that time is what matters most. It will take time—months or even years—for the situation to play out economically and politically. As an investor, it’s important not to react to the news. While it’s normal to feel unsettled when the market falls, fear is your biggest risk when it comes to long-term financial success.

Here’s what’s important to know:

  • Keep your seatbelt fastened. The market has given us all a bumpy ride for years now. While we’re nowhere near the Dow’s 15,000 level we saw just last year, the uncertainty overseas is sure to continue to shake things up—just as China did last year, and oil prices did in Q1 of this year. The US election in November may also have an impact on market indices. Just be prepared
  • Despite what’s happening in the UK and Europe, the US economy is gaining strength. US earnings are solid, employment is up, and there are no indicators of a pending slide. As long as US consumers continue to gain confidence, this should not change.
  • Interest rates are likely to remain low. In the wake of the Brexit, the odds are low that the Fed will opt to raise interest rates any time soon.
  • Stocks are on sale. Today’s stock prices have no relationship to the underlying value of the companies they represent, and our portfolios are built on strong companies with growth momentum. If you still have time on your side from an investment perspective, now is the time to purchase stocks—not run from them.
  • If you’re taking distributions, sit tight. Retirees are often the most fearful in a downturn. And while fear may spur some to pull out of the market, that’s the best way to ensure an immediate loss. If you’re concerned about the impact of the market on your retirement income, let’s sit down and look at the situation together.

The Brexit vote is today’s big news, but my perspective on the market remains the same as one year ago when I wrote Beyond the headlines, it’s an up market after the market tumbled in reaction to the “Grexit,” Greece’s potential exit from the EU. By looking at the big picture, I hope you can watch the global events play out while remaining confident in your personal financial plan.

Of course, if you’re unable to ignore the headlines, and your confidence begins to wane, let’s schedule a call to talk through your specific situation. As always, I’m here to help.


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Investing 101: creating the right recipe

Investing 101: creating the right recipe

My Kindle is always filled to the brim with new e-books—many of which I read simultaneously. And while Dorothy L. Sayers’s wonderful and classic Lord Peter Wimsey mystery series is perfect for lazy beach reading, what has my attention at the moment is the much more mind-bending How to Bake Pi: An Edible Exploration of the Mathematics of Mathematics by Eugenia Cheng.

Wait! Don’t run! What’s fabulous about Cheng’s approach is how she uses cooking (and, more precisely, recipes) to explain some pretty complex mathematical theories, some of which I think I’m fully grasping for the first time. Of course, it’s no surprise that my mind immediately began to translate this idea to the world of investing, and I’ve already found the analogy of following a well-balanced “recipe” to be a great tool for introducing some important financial concepts.

Cathie, a brand new client, came to my office for our first meeting, and before I even had a chance to begin the conversation about her financial needs and goals, she blurted out a big barrier to success: “I don’t like the stock market.” She went on to tell me why. “My father taught me the value of real estate, and that’s the only way I want to invest.” Whoa. I had to put on the brakes and throw our whole discussion into reverse. And with the help of How to Bake Pi, I found myself talking about the importance of recipes. And cooking. What I shared was this:

Investing, quite technically, is “the act of committing money or capital to an endeavor with the expectation of obtaining an additional income or profit.” And yet investing is just a means to an end—to reaching your personal goals. Everyone’s goals are unique. They might include retiring early, opening a business, putting your children or grandchildren through college, or traveling the world. The options are endless. Whatever your goals may be, it’s important to follow the right recipe, blending all the available “ingredients” in a way that produces the desired outcome.

Think of it this way: flour by itself isn’t very appealing. The same is true for salt, a raw egg, vinegar, and baking soda. But when these ingredients combine with others, we can create a vast menu of outcomes—anything from pancakes to a buerre blanc sauce to a chocolate pudding. It just depends on the recipe or method we use to get there. Each ingredient presents an opportunity, and the more complex the menu, the longer the grocery list. To determine the best recipe to reach Cathie’s goals, we needed to consider every ingredient in our investing “pantry.” Stocks, bonds, mutual funds, real estate, and more. And it was most important to focus on the desired outcome—not the individual ingredients.

There’s chemistry involved in cooking and investing. Taking away stocks would be a lot like throwing out the flour and trying to bake a great loaf of bread. Can it be done? Yes. But it surely won’t create the same outcome as the recipe with flour. Of course, time plays an important role as well. If the loaf of bread doesn’t have enough time to bake, we end up with an inedible, gooey mess. But when we combine the right ingredients and bake them at the right temperature for the right amount of time, the result may even exceed our expectations.

By the end of our discussion, Cathie agreed to keep our pantry of ingredients full, and I had a clear understanding of her short- and long-term goals so I could determine the most appropriate recipe. I’ll certainly include real estate as part of the equation since she has a “taste” for that particular ingredient, but by agreeing to let me toss in the right amounts of stocks and bonds plus a dash of low-cost mutual funds, we’ve created a time-tested recipe that should deliver just what she’s looking for.

Ready to explore a recipe to help cook up your own financial freedom? This email address is being protected from spambots. You need JavaScript enabled to view it.  to schedule a time to chat. As always, I’m here to help.

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Retirement stress: When “living the dream” doesn’t come easy

Retirement stress: When “living the dream” doesn’t come easy

I came into financial planning in the second half of my career. It is truly a calling for me. As a CFP®, I adhere to a code of ethics that holds competence as a core principle and requires a commitment to lifelong professional education. Because there is always more to learn and new ways to help my clients achieve their goals, I recently began coursework through the Sudden Money Institute to become a Certified Financial Transitionist®. It’s a natural fit for me, and I’m thrilled to say that after completing Part One of the program, I’m already putting some of the lessons into action.

One of the topics we covered in the first session last weekend was the importance of mindset in how one defines and handles the stress that comes with every life transition. Mindsets exist at two ends of the spectrum, with a growth mindset at one end and a fixed mindset at the other. People with a growth mindset see stress as a challenge, while people with a fixed mindset see stress as a threat. Every transition comes with stress, but your mindset dictates how you respond when something you care about is at stake.

Oddly (or so I thought so at first), one of the most stressful transitions I could think of with my clients is one that is viewed as a positive change: retirement. In nearly every case, approaching retirement is full of a crazy amount of stress. So much for that vision of the happy couple laughing hand in hand as they stroll on the sand! Instead, retirement often comes with a ton of uncertainty, fear, disagreement, and emotional chaos. Here’s an example:

My clients Wendy and Brian have been looking forward to retirement for years. Brian is five years older than Wendy, so he retired a few years ago. Wendy is still working at a job she loves, but Brian wants to travel, hike and fish, and do all the things he’s afraid they’ll soon be too old to enjoy. They agreed on a retirement date for Wendy, and with my help, they’ve been working toward that goal. Now that date is just around the corner, and instead of feeling joyful, Wendy is completely stressed out. When she and Brian met in my office last week, I could feel the tension between them, and despite my best efforts, I couldn’t seem to help them focus on the rational aspects of their retirement plan. Both Wendy and Brian were swimming in emotion, and their upset was palpable. When life changes, money changes—and that’s stressful.

Wendy’s mindset about retirement was a fixed mindset. She had a negative view of stress, and every decision felt life-threatening. When I asked Wendy what she was thinking and feeling, she said, “I realize how confused I am about what my life will look like after I leave my job. Who will I be? What can I afford? Will we have enough money to live like we do now? Brian wants to travel the world, but I’m not sure that’s at the top of my list,” she said. “Everything feels upside down. I realized I’ve been running so hard to get to the end of work that I haven’t been able to face what is beyond. What is retirement? There are so many things I need to understand before taking the leap!”

Brian’s mindset about retirement was a growth mindset. He realized all the changes he would have to address, but he was excited and challenged. Although Wendy and Brian were in sync with their goals and dreams, their different mindsets triggered very different responses to the stress that comes with the transition to retirement. Given that there are two sides to money—the technical and the emotional—our work together will address the emotional side first so Wendy and Brian can rise to the challenge of the next phase of life, connect with others, and learn and grow together.

If your retirement (or another life-changing event) is around the corner, here are three steps to get you started on a path toward your “new normal”:

Step 1: Examine your mindset about stress
By taking a deeper look at how stress triggers your responses, you can harness the power of stress and position yourself to learn and grow. Do you act or react to major change or loss? Are you reactive and closed off, or are you responsive and open? Acting puts you in a growth mindset, while reacting puts you in a fixed mindset. Explore ways to take control of change. Share your stories and your history so you can better understand yourself and those who share your life.

Step 2: Know what’s at stake in the future
This iswhere you move towards the stress to name it, understand it, and embrace it. When life changes, money changes, and this is important. At this stage, it’s important to name your fears. Are you afraid of being a bag lady, or are you afraid of failing to live the life of your dreams? Maybe you’ve always wanted to write a novel, but your career got in the way, and you now have the time to realize your dream. Maybe you want to see the Northern Lights or spend more time with grandchildren or take up a second career (perhaps a service-based career like the opportunities I talked about in my recent blog Inspirations: Finding purpose in your second half of life). There are no rules. Take the time to explore how you want to live it so you can make it happen.

Step 3: Harness the power of stress
With a growth mindset and a clear idea of what is at stake—for you—you will be more open to opportunities and learning. Now you can work on the technical side of money; set realistic budgets, set meaningful goals, and strive to build a community of friends and family. Remember that after 50, changes come fast and furious, so when the next change comes (and it will), you’ll have created the capacity to be responsive rather than reactive. You’ll get a little older; you’ll get a little wiser, and the trade-off will be a good thing!

When I meet with Wendy and Brian meet next week, we’ll follow these steps, taking the time to dig into each area to help them find a deeper connection, decrease stress and, most importantly, have a shared growth mindset that will serve them well through this transition and all the rest to come.

Remember: endings bring transitions, and every transition leads to a new normal. Fostering a growth mindset through transitions will enable you to harness the creative power of stress so you can get to your “new normal” with as little uncertainty, fear, disagreement, and emotional chaos as possible.

Having troublesliding smoothly into retirement? This email address is being protected from spambots. You need JavaScript enabled to view it.  to schedule a time to chat. As always, I’m here to help!

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Mental health, money, and breaking the silence

Mental health, money, and breaking the silence

Here we are again, talking about another month dedicated to something, but this is one I simply couldn’t let pass by without addressing it. May is Mental Health Month, and it’s something near and dear to my heart. While this awareness campaign has been happening every May since 1949, this year’s theme of Life with a Mental Illness calls on individuals to share what life with a mental illness feels like for them and tagging their social media posts with #mentalillnessfeelslike. (You can read the collected posts on the Mental Health America site.) The goal is to break down negative attitudes and misperceptions surrounding mental illness and to let people suffering from mental illness know they’re not alone in their feelings or their symptoms. Breaking the silence is an important mission. All too often, mental health issues are hidden away, giving them the power to have a negative impact on our lives.

I read an article in The Atlantic a few years ago by a successful professional and Duke graduate who felt that impact heavily. Despite her passion for telling her story, she used a pen name because “The stigma that surrounds mental health is suffocating, and I don’t feel comfortable talking about it with most of my friends and family, and certainly not my boss or colleagues.” She talks about how the need to keep her mental illness a secret has impacted her professional life, as well as relationships with friends and family. It’s a sad and all-too-common story that, hopefully, is beginning to shift.

As a financial advisor, I’m very aware of another often hidden consequence of mental illness: financial distress. I’ve learned firsthand that, in many cases, high levels of debt and financial chaos are directly tied to mental health, with financial issues either resulting from or leading to mental health issues. I’m not alone in my findings. A 2011 study by a team of UK researchers found that “financial strain and debt are strong risk factors for mental-health problems.” A separate study in 2012 found that “adults in debt were three times more likely than those not in debt to have (common mental disorders).”

It’s easy to see the connection. Binging, which often involves spending, is one way to numb the feelings of anxiety, stress, and depression that can come with mental illness. “Retail therapy” is something people often joke about, but shopping binges are a very real problem for many people with mental health issues. If you’re depressed, shopping gives you a way to surround yourself with cheerful people and boost your endorphins with the pleasure of a new purchase. But when shopping becomes binging, it can result in skyrocketing debt—which causes more stress and, yes, more depression. It’s a vicious cycle, and the best way to break that cycle is awareness.

Clinical psychologist and mental health advocate David Susman offers these five steps to reduce stigma about mental illness:

1.     Don’t label people who have a mental illness.
Don’t say, “He’s bipolar” or “she’s schizophrenic.” People are people, not diagnoses. Instead, say “He has a bipolar disorder” or “She has schizophrenia.” All of this is known as “person-first” language, and it’s far more respectful, for it recognizes that the illness doesn’t define the person.

2.     Don’t be afraid of people with mental illness.
Sure, they may sometimes display unusual behaviors when their illness is more severe, but people with mental illness aren’t more likely to be violent than the general population. In fact, they are more likely to be victims of violence. Don’t fall prey to other inaccurate stereotypes, such as the deranged killer or the weird co-worker depicted in the movies.

3.     Don’t use disrespectful terms for people with mental illness.
In a research study with British 14-year-olds, the teens came up with over 250 terms to describe mental illness, and the majority were negative. These terms are far too common in our everyday conversations. Also, be careful about using “diagnostic” terms to describe behavior, like “that’s my OCD” or “she’s so borderline.” Given that 1 in 4 adults experience a mental illness, you quite likely may be offending someone and not be aware of it.

4.     Don’t be insensitive or blame people with mental illness.
It would be silly to tell someone to just “buckle down” and “get over” cancer, and the same applies to mental illness. Also, don’t assume that someone is okay just because they look or act okay or sometimes smile or laugh. Depression, anxiety and other mental illnesses can often be hidden, but the person can still be in considerable internal distress. Provide support and reassurance when you know someone is having difficulty managing their illness.

5.     Be a role model.
Stigma is fueled by lack of awareness and inaccurate information. Model these stigma-reducing strategies through your comments and behavior and politely teach them to your friends, family, co-workers and others in your sphere of influence. Spread the word that treatment works and recovery is possible. Changing attitudes takes time, but repetition is the key, so keep getting the word out to bring about a positive shift in how we treat others.

I would add one more to his list:

6.     Don’t be afraid to share your experience with mental illness.
I’m proud of my daughter Jamie for sharing her story on Facebook as part of Mental Health Awareness Month. In her post, she shares her experience living with anxiety, OCD, and bi-polar disease, and writes, “There is nothing wrong with you, and there is nothing wrong with me. It’s a real issue probably facing more people than you will ever realize. Be proud like me that you were able to face your issues, confront them, talk to someone about them and treat them. We all deserve a normal life. We all have struggles. If yours is some kind of mental illness, don’t be ashamed. You are not alone. Don’t be afraid to share with others…”

While changing perceptions about mental health may not come easily, the shift is happening slowly but surely. My friend’s daughter Emma is another great example. In her junior year of high school, she was suffering from severe anxiety and depression. A star student, her condition got so bad that she had to withdraw from regular classes for a semester and continue through independent study. When she returned for her senior year, she agreed to talk about her experience in the school newspaper. The day the paper was distributed, Emma’s mother got an urgent call from a close friend. “Have you seen the paper?! Did you know she was doing this? Are you ok?” And while the friend’s reaction was full-blown alarm, when Emma got home from school, she shared a completely different experience. “It was great Mom,” she said. “So many people came up to me and thanked me for doing the interview…they thought they were the only ones at school who had an issue until I spoke out.”

Hopefully, Jamie and Emma’s generation will erase the stigma of mental illness. If they do succeed, I have no doubt we’ll all be better off for it—mentally, socially, and financially.

Has a mental health issue impacted your personal finances? This email address is being protected from spambots. You need JavaScript enabled to view it.  to schedule a time to talk about how to get back on track and regain your financial confidence.

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Inspirations: Finding purpose in your second half of life

Inspirations: Finding purpose in your second half of life

Retirement. It’s a concept that certainly means different things to different people. But is it time to change how we define it—completely?

While I was away on my abolutely blissful vacation in Belize last week, I finally had time to dig into Marc Freedman’s book, Encore: Finding Work that Matters in the Second Half of Life. It has me utterly inspired. It’s no secret that I’m passionate about retirement planning—and not simply from a financial perspective. I feel part of my personal mission is to help people of all ages discover how to be truly happy both pre- and post-“retirement,” however they choose to define it. But as I read the book, I found myself swimming in new ideas.

First, I realized that I am in an “encore career,” Freedman’s term for a later-in-life career that has a greater purpose and serves a greater good. My path to becoming a financial advisor wasn’t straightforward, but once I found my passion, I was able to apply the myriad skills I’d learned in my prior career and in my life to help others. The result: I’m fulfilled every day because my life has greater meaning and value.

I’m not alone. In his book, Freedman shares his experiences watching others go through similar shifts. But it’s not always easy, in part because of society’s expectations of those of us in the second half of our lives. Think about it: Here is a person at the height of professional ability. A person who has accumulated a career’s worth of knowledge and personal insight. And our culture suggests that now is the perfect time to bring that growth to a screeching halt and, in essence, dive into a second childhood. To reduce our activities to simple leisure as though we’re no longer capable of achieving or providing any good in the world. So we substitute busy-ness for purpose. We focus on building a better golf game instead of building a better world. As a result, people who have been successful in their careers are often thrown sideways when facing a traditional retirement. It’s no wonder!

But what if we took a completely different approach to “retirement”?

This is precisely what Freedman is trying to help foster. He founded Encore.org, a non-profit organization with the mission of “building a movement to tap the skills and experience of those in midlife and beyond to improve communities and the world.” By engaging millions of people in later life as a vital source of talent to benefit society, he hopes to help create a better future for young people and future generations. If it sounds lofty, just take a look at some of the personal stories on the site, and you’ll soon see how very real it can be.

What Freedman found is that highly skilled individuals—attorneys, physicians, volunteers, business leaders, artists, teachers, and more—thrive by finding new ways to apply their expertise in new, meaningful ways. He even created the Purpose Prize to recognize and reward passionate change-makers in the second half of life who are tackling the world’s most urgent problems though social entrepreneurship and innovation. The organization has awarded over $5 Million in prizes to people working in everything from early childhood education to eradicating homelessness.

As I read his ideas and stories, I couldn’t help but wonder if our highly publicized “retirement crisis” isn’t a crisis at all, but rather a major shift—and an incredible opportunity for change. What if every one of us was able to find an encore career that not only gave us greater personal purpose but also helped build a better world? How much change could we drive together? How much happier would our communities be when filled with older, wiser women and men doing good for others? How much stress would be diminished if these encore careers could support the financial needs of those who have been “aged out” of their earlier careers and are seeking something new?

Of course, as a financial advisor, I understand that this type of change takes money (see my blog on creating a freedom fund for more on that topic!). I was lucky when I transitioned into my encore career; I had a solid “freedom fund” on hand, so I was able to take the time to explore options, identify dreams, and discover my purpose. I was blessed to work with Stanlee Phelps, an amazing life and business coach who helped me find my path. Since becoming a financial advisor in 2003, my passion has never waned. After reading Freedman’s book, I decided that now is the time to take it one step further. Before I made it home from Belize on Saturday, I signed up for a year-long course to become a Certified Financial Transitionist™ (CeFT™), beginning in June. This training will give me even greater knowledge and skills to guide my clients through financial transitions, including managing the physiological, sociological, and psychological impacts of change. I can’t wait.

No matter where you are in life, I urge you to read Freedman’s book. You just may find yourself no longer looking for a “job,” but instead looking for a way to help others. And that small but significant shift may lead you to a new life’s work that is much more fulfilling—and financially rewarding—than you ever dreamed possible.

Ready to start rethinking your approach to retirement?  This email address is being protected from spambots. You need JavaScript enabled to view it.  to schedule a time to chat. As always, I’m here to help.

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09 November 2016

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All written content on this site is for information purposes only. Opinions expressed herein are solely those of Lauren S. Klein, President, Klein Financial Advisors, Inc. Material presented is believed to be from reliable sources and we make no representations as to its accuracy or completeness. Read More >