CFOs Rethinking Retirement Plans, Courtesy of the Economy


If you’ve been reconsidering your retirement options due to the choppy economic waters, you’re in the same boat with many upper-echelon workers. And that boat is anything but a cruise ship.

A recent study by Robert Half Management Resources (RHMR), a Menlo Park, CA provider of senior-level accounting and financial professionals, indicates that apparently, a lot of financial executives may also be spending more of their golden years on the job instead of the golf course.

The study was conducted by an independent research firm for RHMR, and was based on more than 1,400 telephone interviews with chief financial officers (CFOs) nationwide, taken from a random sampling of U.S. companies with 20 or more employees. 52% of the respondents stated that they are delaying or reconsidering their retirement plans, and 62% who intend to extend their working years attribute the change to the economy.

The CFOs were asked, “How, if at all, have your retirement plans changed in the last five years?” Forty-three percent said their plans hadn’t changed at all. However, 27% noted that they plan to spend more time working than they did five years ago. 25% indicated that they now have more uncertainty about the future and are unable to predict exactly when they’ll retire. Only 5% said they plan to spend fewer years working than they did five years ago.

The CFOs who indicated they plan to spend more years working were also asked, “Which one of the following is the primary reason your retirement plans have changed?” 62% indicated the economy as the major factor, while 11% cited concerns about Social Security, 10% noted healthcare concerns, and 9% said changes in family needs. Only 2% indicated a renewed desire for the type of stimulation offered by work, and 6% either didn’t know, declined to answer, or offered other reasons.

“Employers may reap unexpected benefits from experienced workers who delay retirement, as their deep knowledge and skills will remain available to the firm,” says Paul McDonald, RHMR executive director. “Even in a weak economy, companies must be mindful of retaining tenured staff by offering benefits they value, such as greater scheduling flexibility or part-time employment.”

McDonald adds that not everyone planning to stay in the workforce may want to put in a40-hour week: “Firms could also engage the increasing pool of experienced workers as consultants or project professionals to provide cost-effective solutions to staffing concerns.

DMBA 2009
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Create the Next Generation of Millionaires


If you want your children to be part of the next generation of millionaires, the time to begin is now. You can get a head start by investing for your infant. But the best way to ensure your child’s long-term financial viability is to teach them to use their own money wisely. And when it comes to teaching kids about money, the sooner the better. Long before most children can add or subtract, they become aware of the concept of money, though where it comes from is not quite clear. Understanding the relationship between work and money requires a more mature mind. Once children learn how money works, that they can buy things they want with money – like candy and toys – many children begin hoarding every dime they can. The type of financial manager your child will grow up to be is determined by how this urge is channeled.


Finances are a Family Affair

Begin by having your children participate in the family budget process. Simple] recommends the following exercise. First, assemble a list of your monthly and/or weekly expenses and their amounts. The amounts don’t have to be exact. Write the expenses and their amounts on separate slips of paper. Then, add up your monthly income and use pretend money to represent the amount.

Next, take the expense slips and give them to your children. Have them come to you and “collect their bill” one expense at a time. This is an excellent visual representation of how quickly paychecks get depleted. Afterward, discuss ways you can cut spending to help stretch paychecks for things that are really important. You might be surprised at your children’s input.

Or, take your child grocery shopping. If your child can run a calculator, she can help you grocery shop. Give her a fixed amount that you will spend on groceries and have her subtract each item from the total as you shop. Teach her to compare food labels and get the best product for the money. Ask for her input about how you can reduce your overall grocery bill.

Establish spending limits for items like clothes and shoes. Be willing to pay so much for something, but your child must make up the difference with her own funds if she goes over the allotted amount. Also, try to avoid mixed messages like telling your child there is no money for toys and then buying gadgets you don’t need.


Making Allowances

People differ on whether or not an allowance is a good tool for teaching financial responsibility, but if you do decide to give your children an allowance, the key to success is a good structure right from the start.

First, make it clear what the money is to be used for, and part of it is to be saved. Younger children should probably not be held accountable for things like school lunch, but older children should. Older children benefit from that added responsibility and it helps you keep up with how much money is actually changing hands.

Some experts advise that allowances should not be linked to household chores because as members of the household, they should take chores as part of their responsibility. However the idea does not preclude payment for specific chores, like shoveling the sidewalk or washing the car, particularly for children 10-years-old and up.

Some parents complain that their offspring beg for raises or advances. This is where an allowance becomes a teaching tool for adult life, by helping them develop negotiation skills that will help when they get a job in the real world.

Have them consider the raise the way an adult would. How long since the last raise? Will new expenses be covered? What amount of the raise will be saved long-term for expenses that require your approval?

Probably the toughest decision about allowances is how much. Don’t let your children influence you with what their friends are getting. It’s almost guaranteed the figure will be high. Many parents like to give their children the equivalent in today’s dollars of the allowance they received at the same age. It’s generally the most comfortable choice.


Savings and Budgeting

One way to encourage your children to develop sound money discipline is to make savings a condition of their allowances. So try to account for this when deciding on a weekly or monthly figure. Of course, this means setting a budget. A simple working budget requires a sheet of paper and a pencil. Have your child divide the paper into three columns. Head these columns as “Incoming” and “Outgoing,” or “Paycheck” and “Bills” or “Allowance” and “Expenses, with the third column being “Balance” or “Remainder.”

The “incoming” column should list the monthly amount of allowance or salary (if your child has a job) and the “outgoing” should list all the expenditures that have to come out of the incoming column, including long and short-term savings. Subtract the outgoing from the incoming, and the balance column should ideally equal zero or, even better, a positive number. That positive balance should then be either rolled over into savings or used toward an investment strategy. Of course, it is a good strategy to include an investment item in the outgoing column, particularly for a teenager.

If you’ve started them early, children shouldn’t have trouble understanding the concepts of long-term and short-term saving. If not, illustrate by using goals like a new video game a month from now versus a bicycle this summer. Remind them of these goals to keep them focused.


Checks and Credits

To keep future college freshmen from suffering the stress brought by a first checking account, start them off as early as their junior year in high school. Keep it simple and avoid frills like overdraft protection. The reality of bounced checks goes a long way toward understanding the importance of keeping accurate records.

Many credit card companies actively solicit on college campuses so many college freshmen today have credit cards. A growing number of parents also allow their college-bound children to have credit cards. CNN recommends that before your offspring get their credit cards, they’ll need a lesson in how to use them responsibly. Make sure they understand that this is where finances can go seriously wrong, and illustrate with interest tables that show the damage 18 percent annual interest, compounded over the years, can do to their savings potential. Also, tell them that credit is a privilege, not a right, and to abuse it means they will lose it.

After setting up rigid criteria for the use of a credit card, start them off with a secured card – where the holder charges only up to a cash account kept with the issuer. This way, they become accustomed to using the card judiciously without getting into trouble.


Young Investors Make Mature Millionaires

Educating your children on investing will introduce them to the magic of compounded growth. It will also probably be the single most important lesson toward becoming a millionaire you can give. However, before putting actual money into stocks, you should investigate and experiment together. recommends building a mock portfolio.

Have your children think of companies that interest them. Every day they are exposed to a wide variety of choices like Nike (NYSE: NKE), Coca Cola (NYSE: KO), Barbie, made by Mattel (NYSE: MAT), Apple Computer (NASDAQ: AAPL) and McDonald’s (NYSE: MCD). Have them make a list of five to 20 on a sheet of paper with ticker symbols, current stock prices and today’s date. Every day or week, have them record the latest prices. Calculate the gains or losses regularly. Such short-term stock price movements can help a child understand how the market works.

It’s a good idea to follow the companies together. Check newspapers and magazines for stories about the businesses, and note how news affects stock prices. Eventually, help your child actually invest money. You can open a joint brokerage account, with you as custodian. Or informally sell some of your own shares to your child at their current price. Your progeny can also open their own brokerage account at age 18, and you can transfer shares into it.

Teaching your kids to be smart about money today will make them both wise and wealthy tomorrow.

Diversity MBA Summer 2007
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10 Rules for Building Wealth


The person who wants to be rich saves a lot from an early age, chooses a mix of investments that suits his or her age, lifestyle and attitude to risk, and lets time and compound interest work its magic. There are steps you can take to make sure that you are maximizing and protecting your gains at the same time. Without these steps, you are destined to experience the gain-loss cycle, which in the end, is like spinning your wheels in the mud.


#1 – Planning for the Long Haul

You are responsible for where you are in your life. Where you are today is determined by the choices you made in the past. So if you want to be better off in ten, twenty or thirty years, start planning now. All successful people have a clear vision of what they are working towards; people who don’t just bumble along.

If you are just starting out, put off getting married until you become financially independent, with little or no debt, and have your investments in place. Study and admire successful people and try to emulate them. And if your parents aren’t successful, don’t do what they did.


#2 – Pick the Right Job and Career

Obviously, the more you earn the more you can salt away. When considering where you want to work, look at what the top executive makes to get an idea of your earnings potential with that employer.

Investigate and understand how your employment circumstances affect your wealth building strategy. Identify your biggest expense and manage it without having to make more money.

Remember, these days you are not limited to making a living by your physical labor. The only limit you have on yourself now is your own imagination – your ideas are the most valuable thing you possess. Finally, pick a profession you love and you’ll never have to work a day in your life.


#3 – Change the Way You Think About Money

Realize that more money is not going to solve your problems. The problem isn’t the size of your checkbook, it is the way you were taught to use money. The gap between the rich and poor is getting wider because the rich understand money and how to use it.

Think of money as a seed; learn how to plant it to produce the best harvest. When you do this, you will rule your finances, not the other way around. Each dollar you save is a dollar working for you, not you working for the dollar. Over the course of time, the goal is to make your money work hard and make more money for you.


#4 – Debt Equals Bondage

Debt is very expensive. Every dollar spent paying interest on your debt is money lost. The average investment earns about 13 percent over time, that’s also just about what you pay out in debt interest!

Payoff your debts as fast as you can––aim to increase your monthly payments by 10%. Start with your smallest debt. Once that debt is paid off you can turn the payments you were making toward a larger debt, sometimes doubling the rate at which you are able to payoff that bigger debt.

Living above your means – on the bank’s money – is foolish and is likely to set you firmly on the road to financial ruin. Pay cash whenever possible and use debt very sparingly.


#5 – Make a Budget and Stick to It

Today you should sit down and find the monthly expenses that truly don’t mean as much to you as building wealth does. See how you can eliminate some of your spending to payoff your debt or put in savings in order to maximize your cash flow faster. Wealth building actually begins with debt reduction and strict management.


#6 – Get Into the Habit of Saving

The biggest single potential influence on wealth is what economists call the propensity to save. Obviously if you spend everything you earn, you build no wealth. But with the magic of time and compound interest, you increase your potential to become wealthy.

Many people suffer from the “not enough” mentality; namely that if they aren’t putting away large sums of money, they will never get rich. Develop a habit of saving, and steering clear of debt; that’s all it takes to set you on the road to becoming a millionaire. Ideally, you should be saving 15% to 20% of your monthly income, and this percentage should increase, as you get older.

Become disciplined in your saving; save on a regular schedule. One of the least painful methods of regular saving is to authorize a monthly bank debit into a high-growth money-market account or growth fund.


#7 – Think Before You Spend

Develop an understanding of the power of small amounts. Try this idea – save all the receipts you get for everything you buy in a month, from dinners out right down to that latte you bought ·this morning. Figure what you can do without and put that money into a savings account.

Making more money doesn’t make a difference. Most people think an increase in income means they can spend more. Drawing up a monthly budget and sticking to it is a great deterrent against falling into the trap of willy-nilly spending.

Remember, with each dollar you save, you are buying yourself freedom. When you think about it like that, you see how spending $20 here and $40 there can make a huge difference. Since money has the ability to work in your place, the more of it you employ, the faster and larger it will grow.


#8 – Invest Wisely

A survey of America’s affluent (those who make over $225,000 a year or own $3,000,000 in assets) revealed that 27-30% of all the income the wealthy earned went into investments and savings. That isn’t a result of being rich–that is why they are rich.

True wisdom in investing is a difficult subject, since investment wisdom is obvious mostly in hindsight. Some people invest in a single activity they know well. Often this is a recipe for financial success, since deep knowledge and strong focus work pretty well. Just make sure the investment is in something that actually makes money.

The standard approach to investing is to have a variety of investments like cash, bonds, equities and real estate with a wide geographic dispersion. This is because different types of investments do well and badly at different times.

When choosing an adviser, be very careful to check credentials and to establish the basis on which the adviser is being paid. There is no reason to pay up-front fees (loads) on investments. The better advisers will charge an explicit fee and reveal any other basis of remuneration.

Even a small amount of money, wisely invested, can produce astonishing returns over time, but don’t be foolish and fall for a get-rich-quick scheme – they never work.


#9 – Give Yourself a Tax Break

Aim to lower your taxable income and hence pay less tax. There are a few perks and plans that the taxman has not yet snuffed out. A qualified tax consultant can help you here.

You stand a better chance of achieving millionaire status from running your own business than by earning a salary. The business owner gets more tax breaks and reaps the income from hard work, but the greatest reward usually comes when the business is sold. If you aren’t keen to run your own business, there is another route to wealth; exercising the stock options given to you by your employer.


#10 – Don’t Sweat It, Have Fun

When you understand that any power money has over you is derived from your relationship with it, you suddenly become free from the constant pressures and stress of thinking about it. Once you have made the choice to take control back of your life by building up your net worth, don’t give a second thought to the “what ifs.” Have fun. Earn a lot, save a lot, spread your risks and don’t try to be too clever at picking individual investments or changes in market sentiment.

The rules so far may seem rather old-fashioned, even boring. But it’s okay to take a small portion and invest in something fun or have an occasional small indulgence. Just don’t go overboard; those little luxuries add up.

Black MBA Magazine Spring 2006
Photo Credit: Graphic Stock