Re-establishing Your Financial Identity During Divorce

April 23, 2018

Many divorces start out rather amicable. When two people decide they will “consciously uncouple,” there is often a high level of trust as they begin to unwind their lives. However, once you make this decision the process can still take a while. Depending on where you live an uncontested divorce can take from 2 days up to 18 months. In other cases, it may be to your advantage to end the year married for tax filing purposes. The tendency can be to postpone doing things like establishing separate accounts, refinancing the home, closing credit cards, etc. because with such momentous change on the horizon; why disturb the status quo?

Things can change quickly

Then something happens, like one person gets into a new relationship, and things sour quickly. All those divorce nightmares you heard about can suddenly become a reality if you have financial exposure to someone that sees you as an adversary. This is why it makes sense to start limiting financial exposure as soon as possible once the divorce decision has been made.

Here are some steps to take immediately and a few tips to consider after the divorce is final. Because there could be long-term legal ramifications to these decisions it would make sense to consult with a family law attorney along the way.

What you should consider right away

Checking and savings

If all your accounts are owned jointly, you will need to establish new accounts. If you have accounts in your name only already in place then it may make sense to operate in those accounts going forward. You can choose to operate out of a joint account for joint expenses like mortgages and utilities (more on this in a moment) but keep in mind that you will be responsible for any account mismanagement, like overdrafts.

Credit cards

If you have credit cards in your joint names the best practice is to either close or freeze these accounts. If you have separate accounts but your spouse has a card in their possession as an authorized user, it may make sense to close their card and have the number reissued.

Your home

If you are in the divorce process and you have mutually agreed that the home would be too much for one of you to keep, go ahead and start the selling process. While that sale is in process it probably would make sense for one of you to stay in the home. That person would be responsible to keep the house staged for showing. It would be ideal to have some written agreement in place outlining how expenses for the residence will be split until a sale occurs or the divorce is final.

Accounts with beneficiary designations

Any account where you can change the beneficiary without a spouse’s consent should be updated immediately. Others, such as your retirement accounts, will have to wait until the divorce is final, depending on your state. Be sure to update any POD or TOD provisions on financial accounts and don’t forget any life insurance you have.

Cash flow

As soon as possible, readjust your budget for your new standard of living. This is the perfect time to lay out a spending plan that keeps you on track for your future goals.

Once the divorce is complete

Beneficiary update part 2

Now that you’re officially unmarried, make sure you update all accounts that required spousal permission. These are typically retirement related benefits like 401ks and pensions.

Healthcare and other benefits

Reassess your benefits to make sure they are right fit for your newly constructed household. For instance, you may be in a situation where a lower or higher deductible would make better sense now that you are on your own.

Estate planning

Move forward with updating your estate plan for your new reality. Update who would serve as your executor for your estate and who would serve as power of attorney for finances and healthcare. If you have a trust, you’ll want to make sure your ex isn’t named as successor trustee, nor are any in-laws named. You may also need to update potential guardians for any minor children.

Mortgage

If your spouse is keeping the house, be diligent in making sure the mortgage is refinanced with your name removed. Any mortgage delinquencies will also affect your credit, as my colleague learned the hard way.

Revisit your spending plan

Sometimes the financial terms of the separation can change at the last moment. You will need to update budget considering these changes. This is also a good time to review your plan with a financial planner.

Retirement

Use a calculator to determine if you are still on track for retirement. Also contemplate how your social security benefits can be affected by your decisions going forward.

Going through a divorce is emotionally and financially challenging. No matter what you’re feeling in the moment, it’s important to make decisions keeping your “5 years from now” self in mind, the person who will look back on this stressful time and sigh with relief. Do what you can to avoid also looking back and wondering, “what was I thinking??”

The 6 Essentials Of Disability Insurance

April 02, 2018

It is easy to imagine experiencing a house fire and needing homeowner’s insurance coverage. We have heard the horror stories of the consequences of not having enough life insurance. But what about insuring what’s arguably your most valuable asset: your paycheck? Disability insurance is the coverage that kicks in if you find yourself unable to work, either for a period of time or for the rest of your life.

A 1 in 4 chance you’ll need it

According to the Social Security Administration 1 in 4 workers over the age of 20 will experience the need for income protection during their working years. Your ability to earn money is the most powerful asset you’ll have during your working year — other assets you’ll accumulate don’t even come close. The average high school graduate is expected to earn just under $1 million over their working career — the numbers just go up for those with college degrees.

Insuring your goals

How you harness that income determines the place you live and the lifestyle you maintain. Your retirement depends heavily on how much of your income can you set aside while you are working. In short, disability coverage protects your ability to achieve your financial goals.

Despite its importance, I find that most people are unaware of the specifics of their disability insurance unless they have been faced with the possibility of needing the coverage. If you ever need to make a disability claim, it will quickly become clear that the specifics matter. Here are some questions you need to ask yourself to make sure you have adequate coverage.

The essentials of disability coverage – what you need to know

1. Should you go with group or individual coverage?

Group: Many people work for employers who provide disability insurance as a paid employee benefit. As part of that, you may be able to purchase supplemental coverage that you pay for yourself. Being part of a group plan has some advantages:

Premiums are usually lower
Your employer has done the research for you
A medical exam may not be required

Individual: Having your own policy that’s not tied to your work can have advantages as well. Although you have to qualify medically, once your insurance is approved, that coverage remains in effect as long as you pay your premiums. Other advantages:

You can tailor your coverage to your specific needs
Tax free benefits (since individual policies are paid with after-tax dollars)
You don’t have to worry about losing coverage if you leave your job

Which way you go will be decided by your job stability, affordability and perhaps your own health — if you have a condition that could impact even getting individual coverage, it will be important to enroll in your work-based plan during the window that doesn’t require underwriting (which could only be when you are initially hired).

2. How much income can you insure?

One long-held theory regarding disability insurance asserts that a person would have little incentive to recover from an illness or injury if their policy paid a benefit equal to 100% of their salary. For that reason, most policies cover between 60% – 70% of your income. In many cases, group policies only cover 50%-60%. That would be one reason you may want to look into purchasing supplemental coverage to get you closer to 70%.

3. How long is the waiting period?

This is the time between when you become disabled and when you can start collecting benefits, sometimes also called the “elimination period.” During this period, no benefits are paid to you. Typical waiting periods depend on the type of coverage you have:

For short-term disability insurance provided by your employer or the state, the waiting period can range anywhere from 0 – 14 days.
For long-term disability group or individual policies, it can range anywhere from one month to a couple of years. Generally, the longer the waiting period, the less you (or your employer) pay.

Rule of thumb: long-term policies with a 90-day waiting period are typically the most cost efficient. Hence the other rule of thumb about your emergency fund being able to cover at least 3 months worth of expenses.

4. What is the benefit period?

The second timeline you need to understand is how long your policy will pay you once it kicks in. Short-term disability policies are typically provided by employers, and they usually pay anywhere from 30 days up to 52 weeks (aka 1 year).

Long-term disability policies pay for a specified number of years as outlined in the terms of the policy. If you have employer-provided coverage, the short-term and long-term usually coordinate. Most long-term policies pay for 2 – 5 years, with the best policies paying until you turn 65.

5. How does Social Security fit into this picture?

It’s true that Social Security pays disability (“SSDI”), but there are limitations, some of them major. Things to know about that include:

SSDI doesn’t cover short-term disability or partial disability. Your disability must be TOTAL – which means it’s expected to last at least one year or result in your death.
If you are approved, there is a five-month waiting period before benefits begin.
It’s difficult to qualify. More than half of all initial disability claims are denied by the Social Security Administration.

6. How does workers compensation affect disability?

Workers compensation only pays if your disability is work-related (i.e., injured on the job), and it offers only limited protection. How much you receive and what disabilities are covered varies by state. For information on your state, visit www.workerscompensation.com. It’s best not to rely on workers comp, which is provided by your employer, as your sole disability coverage.

The best policy: take care of you

Regardless of what disability coverage you have, nothing beats a policy of taking care of your health. To the extent that you can, take every opportunity to care for yourself. Make sure you are following the best practices for preventative care like scheduling your annual check-ups and getting those screenings when you hit certain ages. Visit your dentist and floss. If your employer offers wellness initiatives, take part in them — good health is priceless (plus you may earn some incentives).

It’s true that even the healthiest of us can get seriously sick or injured no matter what — sometimes there’s nothing we can do about it. But we can prepare for the financial impact a disability may create for us.

Take action

If you have coverage through your employer, you were probably given the details of the plan when you were first hired. It’s a good idea to review those details (the waiting period, the percent of income your policy will replace, etc) and make sure that the rest of your financial plan accounts for those factors. If you don’t have coverage through work, think about what a long-term absence from work will mean to your finances. The cost of the premiums might be well worth the coverage you’ll get if you do become disabled.

Avoid These 8 Home-Buying Mistakes

March 13, 2018

The prospect of buying a new home can be exciting. Once you zero in on that property and prepare to make an offer, all types of dreams begin to rush in like your new commute to work, your first time having family or friends over, grilling out, enjoying the scenery of your space. As exciting as all of this sounds, before you make your offer, you must take a moment consider the long game. You must de-romanticize the process and the think about selling before you buy.

Here are some mistakes you should avoid so the home of your dreams doesn’t become a nightmare.

Mistake #1: Buying too much house

Why it’s a mistake: You met with your lender and they gave you the amount that you can qualify for in terms of a mortgage. That number may look good but a lot of times it is the top amount that they are willing to lend you, but not necessarily what you can afford. Just because you can qualify for that much does not make it the ideal amount to finance.

How to avoid: Do not rely on the lender to set your target. The right house is the intersection of your family’s needs/wants and cost. Take a moment to list the must haves for your home purchase. Then examine your budget and determine how much you can dedicate toward housing while maintaining savings and your standard of living. Then use a calculator to determine how much of a loan you will need to achieve your goal.

From there determine what properties satisfy your must haves at the right price. You will eventually need to work with a mortgage company, but you should have good idea of what you plan to pay for a home going in and not just what you qualify for.

Mistake #2: Buying too little house

Why it’s a mistake: You risk outgrowing it too quickly and losing money by have to sell again too soon. Realtor costs, attorney’s fees, and mortgage closing costs can make the cost of buying home expensive. Multiple transactions in a short period of time can make it very costly without yielding growth in your equity.

How to avoid: When you decide on what house makes the most sense, be sure it is at least a five-year decision. Are you looking to grow your family (get married, have kids, adopt a dog) in the near to midterm? If so it makes sense to buy with that in mind. When we moved into our home we were expecting our first child. Now we are family of five and thankfully we have not had to move because of the additions. If we had to move 5 years in we would have likely lost money on the sale due to the mortgage crisis.

Mistake #3: Buying because it’s a “good deal” and not because you love it

Why it’s a mistake: You’re going to come home to this property every day so you better love it. It’s true that owning a home is a good way to help increase your wealth, but that shouldn’t be the primary consideration in choosing. Buy a home that you won’t mind living in even if it falls in value for a little bit, rather than speculating and trying to make a buck, and risking that you’re stuck in a money pit you hate.

How to avoid it: Ask yourself if you could keep living there beyond your initial plan. If the answer is no, keep shopping or consider the house as investment property and NOT your primary residence.

Mistake #4: Getting in a bidding war and overpaying

Why it’s a mistake: It’s easy to let our competitive side get the best of us, especially when we find something we really love. But unless you’re bidding on a home that is under-priced in order to sell quickly, making an offer for higher than the asking price could cause problems both with the appraisal (you may not actually get approved for the mortgage you need if the appraisal comes in a lot lower than your offer price) and should you have to sell sooner than you plan.

How to avoid it: Unless you live in a hot market right now (like Denver), it’s best to stop at the asking price when it comes to a bidding war.

Mistake #5: Buying a home that’s 15 – 20 years old with all original appliances, roof, HVAC etc.

Why it’s a mistake: You found the right size house in the right neighborhood and it seems to be at a steal of price. You notice the house can use a little TLC and the appliances are a little outdated but you can always update that later right? Not so fast. You want to make sure you take the value of that TLC into account when making your offer.

How to avoid it: If you are purchasing a house it is imperative to determine when major repairs and replacements are due. Once you know where you stand with the age of these items consider your cost to update or continuously repair such items. Be sure that you take this cost into account when you compare it with similar properties in the area that have been recently renovated and make sure you are getting the house at a discount. Also request the seller include or give a cost concession to purchase a home warranty.

Mistake #6: Thinking you can easily flip

Why it’s a mistake: Watching too much HGTV can lead to thinking that flipping a house takes only 23 minutes of hard work. The truth is house flipping is a lot harder than it looks on TV. It takes not only real estate knowledge but financial savvy, budgeting discipline, and some good luck.

How to avoid it: Go into the flipping process with a healthy appreciation for what it will take to earn a profit. You can do this by researching real estate in your area and networking with local professionals that specialize in investment real estate. Offer to help a friend or acquaintance that is actively flipping or renovating their own home. The free labor will be valuable to them but the lessons learned will be even more valuable to you. If your primary focus is not getting your hands dirty but reaping the profits there are national and local investor networks that pool their money but pay professionals to do the work.

Mistake #7: Not attending the inspection or ignoring warnings that the inspector uncovers

Why it’s a mistake: As much as you are excited about the prospect of buying a home, it is the job of the home inspector to see all the warts that you may miss. The home inspector gives you the opportunity to address any issues, usually at the seller’s expense, before the home becomes yours.

How to avoid it: Talk to your home inspector and review their process to make sure they are as thorough as possible. The best way to do this is speak to multiple inspectors. Make sure to attend the home inspection and ask questions. When I bought my first home the home inspector could show me imperfections in the home and gave me tips on how to care for the home. For my last home purchase, I not only had an inspector but a very finicky friend that happened to be a builder to pick apart the home. We walked away with a comprehensive list to of things to present the seller.

Mistake #8: Taking the home buying “package” rather than finding the best team for you

Why it’s a mistake: It may feel easier and less confusing to take on the home buying team offered by your Realtor or your lender but “one size fits all” does not apply to one of the most important financial transactions in your life. As mentioned earlier there is a long list of interested parties to the home closing process.

How to avoid: Be leery of taking anyone’s predetermined home buying team without understanding everyone’s role and comparing to them to determine if you are getting the best deal. Shop around for everything. Are your Realtor’s commissions competitive for the market? Shop for mortgage rates and compare your options. Pay attention to how to how and why the home inspector, closing attorney and even title insurance is chosen.

Buying a home is a milestone to be proud of — taking steps to avoid these mistakes can help you enjoy the fruits of your labor for potentially decades to come.

Tax Reform Review: Should You Switch To Roth?

February 23, 2018

You’ve probably heard by now that Congress recently enacted a significant tax cut for most of the population. Beyond adjusting for lower withholding rates is there anything else you could consider? What about whether you should be saving into a pre-tax/traditional retirement account or a Roth/after-tax?

Get out your crystal ball

Making this decision is a bit of a prognostication game. If you make pre-tax contributions in order to save money on taxes now, you are locking in the need to pay taxes later. With a Roth 401k or IRA you are accepting the fact you are paying taxes now and electing to not have to pay taxes later. Essentially the decision comes down to when you think your tax rates will be higher.

One popular way to look at this question is to compare the amount of income you generate today vs what you think your income will be in your retirement years. If your income is higher now and rates remain the same then you may assume you can save more in taxes by making the pretax contribution. Conventional wisdom used to say that this was the case for most working Americans.

Things have changed

If you were assuming you would have a lower tax bracket in retirement you may need to rethink that. This most recent tax rate change actually has an expiration date — the new rules are set to sunset by 2026. That means that without a significant legislative move we will go back to the old higher rates. And considering the state of our national debt, social security and other fiscal matters of our nation, that’s very likely to happen.

Lower income may still equal higher tax rates

If the current tax rules can sunset this could mean that even if you have a 20% reduction in income at retirement you may be paying the same or higher tax rate in retirement than you would today. For example, if your income is $100,000 today your current top tax bracket is 24%. Let’s say you retire in 10 years and you anticipate your retirement income to be $80,000. If we go back to the old tax rates as planned, that would put you in the 25% bracket. Lower income could equal higher tax rates.

Roth might make more sense than ever … for now

It doesn’t sound like much, but consider for a moment the full power of Roth. Not only does the money you put in come out tax free, but also any growth on those dollars. Locking in the taxes you pay on that money at low rates could make great sense for people who expect to maintain similar income needs in retirement as they do today, and especially for savers with a long timeline for that money to grow.

For a mid-career person like me, this law change has made the landscape easier to plan for the next few years. It’s even prompted my colleague Kelley to change her retirement contributions from half pre-tax and half Roth to all Roth, despite being in what she considers peak earning years. However, once rates go back up, I imagine she’ll be looking at pre-tax again.

Who it might not make sense for

Despite the fact that tax rates are lower than ever, paying your taxes today on retirement income by using Roth may not make sense for everyone. For example, people in the highest tax brackets may still find their tax rates lower in retirement if they are socking away much of their earnings today and plan to retire at a much lower income in the 5-figure range. It’s best to consult a tax professional or a calculator for an answer specific to your situation.

What if I make too much money for Roth

If you have access to a Roth 401(k) through work, then there’s no such thing as making too much, as income limits don’t apply to 401(k). However, it is true that Roth contributions are limited to taxpayers whose incomes are below the annual limits. There are ways to get around it, but beware potential pitfalls.

Even Jay-Z Has Investing Regrets — Why That’s Not Always A Bad Thing

November 09, 2017

“I could have bought a place in Dumbo before it was Dumbo for like 2 million. That same building today is worth 25 million. Guess how I’m feelin’?” — The Story of O.J., by Jay Z

Have you ever heard someone rave about their investment successes? They tell you how they got in that stock when it was worth nothing or how they sold out of the market just before the bottom fell out. It is easy to point to your successes in life, but I think failures teach the best lessons. Here Jay-Z gives us a glimpse of some of that pain. He speaks of an opportunity to buy a property in Brooklyn and passing on it. Now that property is worth more than 10 times what he would have paid for it.

Financial mistakes can be good for you

I am a strong believer that the lessons learned from financial mistakes are the best. You can be told a million times that it is a good idea to have a diversified portfolio but nothing gets your attention like going through a downturn with the wrong mix.

It definitely doesn’t feel good to lose like that, but if you can bear to examine those mistakes you will walk away with information that will put on the right side of opportunity the next time. Here is how to mine those investment mistakes to take away those gems of wisdom for future reference.

Making the most of money mishaps

Perform an autopsy on the mistake. Instead of kicking yourself over missing out on an opportunity or beating yourself up over buying something that did not perform, take a moment to think about what led you into that decision in the first place.

Was I being narrow minded or stubborn?
Were my priorities in a wrong place?
Did I not take the time to implement some basic rules into my investment decision?

My big investing lesson

When I look back on my own investment history, one big lesson I learned is that you cannot take advantage of an opportunity if you do not have the resources. I started in the financial planning business at end of the dot com boom. Coming out that recession I had a decent grasp on some of the brands that would thrive over the next decade because of my age.

What I didn’t have at the time was the savings to make truly meaningful moves on those opportunities. I was not in a financial crisis, but I was not prepared to sink capital into my own convictions. Because of that I missed on several great investment opportunities.

My lesson there was clear. I had to have my financial house together in order to take advantage of great opportunities when they come up.

Learning from others’ mistakes

While making your own mistakes is the most likely way to keep you from repeating them, there’s still value in examining what others, like Jay-Z, have to say about their own financial regrets. If you have a friend, a family member, or just someone you admire, ask them what lessons they have learned from their investment failures. I find the wisest people are the most gracious when sharing about this topic. They want others to know that success is not an easy road.

Warren Buffett, considered one of the greatest investors ever, essentially publishes his investment failures in his annual shareholder meeting. There are articles and podcasts dedicated to just that.

So now the secret is out: if you have made an investment mistake you are in very good company (assuming you consider Jay-Z and Warren Buffett to be good company!). The key is taking the lesson — your long term success is based on what you will do with your learnings.

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On Conspicuous Consumption: How Jay-Z’s 4:44 Album Gets It Right

October 26, 2017

When hip hop artist Jay-Z released his most critically acclaimed album 4:44, it was praised not only for its transparency, but also because of its economic messages. It’s no secret that pop music does not have the best track record of promoting good financial decisions. And with a few exceptions, hip-hop is the worst offender. You can even find a song like “Money Ain’t a Thang” in Jay-Z’s old catalog.

Essentially that is what has driven the buzz about this project — Jay-Z goes counter to the braggadocio of his youth and gives a little sage advice on areas we could all stand to work on. Here’s what I mean.

“Ya’ll on the ‘Gram holding money to your ear. There’s a disconnect, we don’t call that money over here” – The Story of O.J., by Jay-Z

Calling out conspicuous consumption

In “The Story of O.J.,” he raps, “Ya’ll on the ‘Gram holding money to your ear. There’s a disconnect, we don’t call that money over here,” which is referring to the “money phone” phenomenon. If you are not sure what that is, search the term “money phone” and you will find countless images of people holding stacks of cash to their ear. It is a show-off maneuver that is supposed to convey that money is calling the person.

You may not have hundreds of dollars to your ear while posting it to Instagram, but it doesn’t take much to fall into the trap of conspicuous consumption — the desire to have the newest car, the swankiest house and even the newest iPhone — which can actually result in a circumstance that puts you further away from having the wealth you’re looking to represent in the first place.

The problem with conspicuous consumption

Conspicuous consumption says you don’t belong. Many try to increase their consumption level in order to raise their status among others and be a part of the “in crowd,” but it has been my experience that such conspicuous consumption often highlights the insecurity of the person.

In my years of working with truly affluent clients, one thing I gleaned is that it is very difficult to convince someone who is actually wealthy enough to have that status that an outsider belongs there. It is like being a traveler to a foreign country. The natives know tourists when they see one and affluent people know who is affluent and who isn’t, regardless of consumption levels. Gaudy shows of wealth tend to confirm a person’s status as lower; it doesn’t improve it.

Conspicuous consumption could be a symptom to a deeper concern — and it never ends. Outward displays of wealth can result in sabotaging your journey to building your actual wealth. Wealth is a relative concept and when we fall into “Keeping up with Joneses,” it can be a never-ending spiral. When you see someone with that new phone or in that nice car, it is likely that that person could be judging themselves against someone in an even nicer car.

The real way to measure your wealth

Here at Financial Finesse we have come up with a definition of financial wellness that is objective and has very little to do with what you own. Through our work with millions of Americans, we’ve defined that true financial wellness is:

A state of being where an individual has achieved the following:

Minimal financial stress
Living below their means with no high interest debt
An adequate emergency savings fund
Income and assets are protected from loss
And an ongoing plan to reach future financial goals

So for example, if you use debt to get those extra things that might make you look wealthier (or more financially well), you could find yourself cutting back on your lifestyle later to pay off the things you thought you would make your life better today. By making good financial choices now, you set yourself up for more of the things you like later, without sacrificing your future.

This is not say you cannot enjoy nice things — financial health does not mean you must quench your sense of style. I have my own penchant for Italian loafers and German cars, but I also recognize I really only need one black pair and one brown pair of loafers. I also purchased my Audi used and it has been paid off for several years now. There’s a balance.

Next time you feel like you need to buy something that would compromise your ability to reach that state of financial wellness, take a self-assessment — ask yourself if the things you want are the things you really want and not just for PDC (public displays of consumption.) Be authentically you, but keep your financial future in mind.

How To Invest Like A Shark

August 18, 2017

Are you a fan of Shark Tank? It’s must-watch TV in my household — we love the creativity of the business pitches and the investment insights of the sharks. One of the realizations I’ve had while watching is that much of the interaction between the sharks and the business owners is about one simple thing: What is the business and does it make money? Here’s how that insight can translate into making your own investment decisions.

Ask the following questions

How much does it cost for me to invest in this? The biggest point of contention on Shark Tank is the dollar amount at which to invest. Every investment opportunity has some cost. The question you should be asking is what value are you getting for the cost and is there any other type of investment that could give you better value for that cost? When comparing investments, it helps to have a third-party resource that can give you reliable information. A couple of resources I like to use are Morningstar and Yahoo! Finance.

How is this better than what I am currently doing? In many cases the sharks will turn down an opportunity if the potential income is not more than what they could earn on their own. If you are considering making a shift in what you are investing in, first do some research to determine what you could earn after fees. For instance, if you are considering whether to rollover your 401(k) to an IRA with a financial advisor, be sure to compare the returns of your current plan to whatever an advisor may recommend.

Is it simple? You’ll notice the pitches on Shark Tank are no more than a couple of minutes long. The sharks may ask a few follow-up questions but the investment concept must be relatively easy to understand. If you cannot get the basic idea of how the investment makes you money in a few minutes, then it may not be the best investment at that point.

I have had the opportunity to witness how investing concepts play out over long periods of time and anecdotally, simple beats complex. It’s not just me, there is some great research on this topic out there. When an investment is simple, it is easy to remember why you made the decision to invest in the first place. That can make it easier to stay invested for the long-run.

Do not be intimidated if you are struggling to make sense of an investment. If whoever is selling you the investment opportunity cannot explain to you in simple terms how it works at a level that is comfortable for you it makes sense to follow Warren Buffett’s advice: never invest in a business you cannot understand.

Swimming with the sharks

You may not have the resources or business experience that the sharks have, but by answering these three questions, you will definitely be swimming in the right tank.