If you’re in your 50s or 60s and have put off managing your money or even learning how to do it, author John Schwartz feels your pain. The New York Times science writer was just like you until he decided, in his late 50s, enough was enough.
In his new, often surprisingly funny and highly practical book, This Is the Year I Put My Financial Life in Order, Schwartz candidly reveals how much he needed to learn about subjects like investing and insurance estate planning; the time in 1996 when he and his wife, Jeanne (a school crossing guard), nearly went bankrupt; and how his family frequently has just barely managed to make ends meet over the years. Better still, he shares what he learned during the course of his year (actually a little more than a year) so you can profit from his knowledge and the advice he received.
Also on Forbes:
“It’s not a get-rich-quick book,” Schwartz told me during an interview. “But it is a book about confronting our own phobias, and the advice I give is pretty straightforward. I tried to make this the kind of book someone might actually want to read.”
During the interview, I asked Schwartz to offer some tips for others who’d also like to finally put their financial lives in order. Highlights:
Next Avenue: You said the impression you got from personal finance websites, magazines and books was that you’re an idiot. Why do you say that?
John Schwartz: We respond as fretful people, so [personal finance writers think] it’s better to send a message that ‘you’re doing it wrong’ even if, in some ways, you’re doing it right… Was I smart or stupid? I had to do research to find out.
What do you think were your biggest money mistakes before you started putting your financial life in order?
We started off pretty disastrously in real estate. We bought an apartment in New York City at the top of the market and then we moved for work and couldn’t sell it. So we came close to bankruptcy.
Beyond that are the usual things: not paying close attention to spending — although I’m pretty cheap — and letting credit card spending spiral out of control. We certainly made every possible mistake.
What was the trigger that made you want to put your financial life in order?
There was no trigger. It was the building apprehension over not having done it for so long and not having any idea whether I was going to be comfortable in retirement or eating Hamburger Helper and cat food.
I knew I had a pension, but I didn’t know how much it would be. I’ve had a 401(k) since I was 27 — thank God for that! — but I didn’t know if that was enough. I just wanted to know where I stood. It seemed to me I had a last chance to fix things. If I look at my finances at 65 and find the money’s not there, what am I going to do?
Do you think many other people in their 50s or 60s feel like you did and want to get their financial lives in order?
All I can tell you is that when I posted about the book on Facebook and Twitter, the most common response I got was: ‘Oh my God, I need this book!’ Look at all the other things vying for our time and attention — our kids, our lives, our families. Everything presses against us. It’s kind of delicious to say: This is the one thing I can put off. Except you shouldn’t.
How hard was it to put your financial life in order?
It took a fair amount of time to figure out what I needed to do and execute on those plans. I had to read books and websites; I got to interview [Vanguard financial firm founder] Jack Bogle. He led me to understand that picking mutual funds out of a hat is not the best way to build a portfolio. I had made quick investing decisions at 27 and stuck with them.
How hard do you think it would be for other people to get their financial lives in order?
I would say it will take some time and some thinking, but it’s actually not that hard.
Some people over 50 who haven’t gotten their financial lives in order might say: It’s too late. What do you say to them?
I would say what one of the financial experts I talked to said: It can be late, but it’s never too late. The best time to plant a tree is 30 years ago. The second best time is today.
You suggest in the book that people do it by taking on one task a month for one year. Why?
Getting your financial life in order is a big thing. Breaking big things down into small things is how we get stuff done — by creating a set of tasks I hope anyone could take on and spreading them out over a year. Creating a set of doable things is what gets us moving.
You have a wife and three grown kids. Why didn’t you have a will?
Because I hate thinking about money and about death and I’m a procrastinator.
How should someone find a financial adviser? You went to a financial seminar and that didn’t turn out very well for you and Jeanne.
I’m not big on going to a financial seminar to find an adviser; it’s a sales pitch more than anything else.
What you want to do is find someone who is there to help you and has a minimal level of conflict of interest in doing so. For me, that means looking for a Certified Financial Planner — a CFP.
But you have to ask a lot of questions. Ask: If I buy this [financial product], do you get paid and what do you get paid? Is this pushed by your company? It may be uncomfortable to ask, but you’re about to give them money. You would ask tough questions if you were going to buy a Honda Civic. This is a commercial transaction and you’re the customer.
What advice do you have about investing and retirement planning?
My main piece of advice is to seek to match the market with the lowest possible fees. Don’t try to be an investment genius. Bogle’s invention — a low-fee, market-based index fund — is the best tool for seeing your assets grow over time.
Beyond that, as you get older, balance things out with conservative investments.
And what did you learn about life insurance?
The main thing I learned was if you’re as old as I am, you may not need as much as you thought. I hadn’t understood the way financial obligations tend to diminish over time. You’re not trying to make your beneficiaries millionaires; you want to make sure they’ll be OK and not leave them with enormous outstanding debts.
Also, take care of yourself. This would be a very good time to stop smoking and lose weight; it’ll save you a ton of money. Then, once you get a decent rate for insurance, lock it down; I locked down my rate for 10 years.
How about estate planning — having wills and advance directives? Do people need to do this if they don’t have substantial assets?
Estate planning is still important. If you don’t do it, a court will and your estate will be tied up in probate. If you have any complications in your life, for instance a child who needs a little money management into adulthood, you can't leave that to chance.
As for advance directives [documents noting your wishes for medical treatment if you’re unable to communicate them], don’t we all know horror stories about a medical crisis and all hell breaks loose, meanwhile the parent or grandparent is suffering?
You can circumvent that by drafting a statement that gets you at least part of the way — a medical power of attorney — and lays out what you want to happen. The lawyer who was doing our will ran through advance directive questions as part of the process.
What has putting your financial life in order done for you?
I would say that I am a little smarter than I was and a lot calmer. Money isn’t keeping me up at night anymore.
