As our last post on saving for retirement, here's a brief report on The Animation Guild's financial panel at last night's membership meeting, and the wisdom they dispensed to TAG members ...
The panel's moderator, E-Board member and trustee Stephan Zupkas, began things with a disclaimer that the Guild was not recommending any of the panelists, or endorsing any of their advice or strategies.
The three panelists, financial advisor Janet Gibson (818-239-3847), CPA and registered Personal Financial Specialist Ralph Bovitz (818-715-0819), and financial advisor/broker Shawn Loddy (619-384-3068), emphasized that their clients need to figure out what they spend (many don't have much of an idea) and develop a blueprint for budgeting, investing, and saving for the proverbial rainy day.
It was clear from members' questions that many in the Animation Guild struggle with bills, credit cards, and putting something away for their gray-haired years.
Bovitz explained that financial planning is simply doing "what it takes to make somebody independent." To do that, people have to be aware of the mistakes they're making; financial planners are good for helping individuals avoid major pitfalls.
Gibson said that her typical animation client is on his third job in two years and had credit card debt and minimal savings. She said that her first order of business is to "get her arms around" the state of a new client's finances and get him or her to chart what they spend for food, drink, and various extras over a week's time. Many, she said, are surprised how all those frappucinos from Starbucks quickly add up to real money.
Loddy said that he has his clients develop a comprehensive financial plan and have the discipline to invest. He pointed out that the name of the game today is to avoid big credit card debt and beat inflation. To do that, people need to look at both domestic and foreign stocks, since foreign countries were probably going to offer higher prospects for growth than U.S. stocks in coming years, since the United States is "a more mature market."
The three planners had different approaches to investing. Janet Gibson liked managed funds (these usually have higher administrative fees), Ralph Bovitz liked index funds (which have lower costs), and Shawn Loddy preferred to "build his own mutual fund" by putting together a group of stocks from different economic sectors that he knew well. All three like the "buy and hold" approach to investing.
All three admitted that with the hire-layoff cycle of artists and technicians in the animation biz, long-term planning is often tough; and makes it hard to build "a rainy day fund" for periods of unemployment when you don't know how long your job will last. Still, they said, people need to plan, budget, and get a general grip on where the money goes if they want to have a comfortable retirement.
Addendum: Kevin here, piggy backing on Steve's posting. I just wanted to add a few notes about some of the panelist's comments that struck me as being useful. One great quote, to which all agreed, was "You cannot have wealth if you have debt." That was identified as absolutely the first place for everyone to start before worrying about the best investment strategy.
Regarding eliminating debt, none of the panelists thought it was useful getting a consolidation loan if you owe on multiple credit cards. That can hurt your credit score, and it probably won't get you out of debt any faster. A simple strategy is to pay the minimum on the cards you owe the most on, and aggressively pay down the lowest-balance card. Getting that first card paid off will be a useful psychological victory. Then, attack the next smallest-debt card, and so on, till all your revolving credit is paid off.
As to credit cards, Janet Gibson urged people to avoid cards that use "two-cycle billing" in calculating interest payments. Those include MBNA, Capital One, First USA, and Discovery, among others. If you use a credit card regularly, use one that uses "average monthly balance" or "average daily balance" for calculating interest. You'll usually find those kinds of cards from the bigger banks and credit unions.
The point was also made that working class folks need financial planning much more than the wealthy, even though it's usually the wealthy who go in for professional help. As one panelist stated, if you make $300 grand a year and you make a $10,000 investing mistake, so what. But if you make $60,000 a year and you make that same mistake, it hurts.
Shawn Loddy also sang the praises of Roth IRAs (and Individual 401(k)s for those with substantial 1099 income). I won't go into the details, but it might be something to explore with your financial planner.
Finally, Ralph Bovitz emphasized that Social Security frequently has errors in their records regarding how much you have coming to you. Sometimes this is their mistake, and sometimes it's because some of your income wasn't properly reported to them by an employer. So carefully review those annual Social Security statements so you can catch any mistakes (and, frankly, you should be doing the same with you annual Motion Picture Industry Pension Fund statements, too).Happy investing!