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Financial Empowerment: Tailored Investment Solutions For Your Success in Silicon Valley Video

In This Episode:

Nearly half of American households aged 55-64 face a retirement savings crisis. Compounding this, only 17% of Americans reported having high school financial education, highlighting a critical gap in knowledge. In 2022, investment fraud and scams in the U.S. soared, with losses nearing $8.8 billion, a 30% increase from the previous year, including over $3.8 billion from investment scams. These trends emphasize the urgent need for improved financial literacy and awareness.

Silicon Valley's Financial Illiteracy Problems:

  • Retirement Savings Crisis: Many Americans, including nearly 50% of households aged 55-64, have insufficient retirement savings, raising concerns about financial security.
  • Lack of Financial Literacy: Only 17% of the population reported taking a personal finance class in high school, highlighting a substantial gap in essential financial education.
  • Investment Fraud and Scams: Investment fraud and scams surged in 2022, with reported losses nearing $8.8 billion, a 30% increase from the previous year. Over $3.8 billion of these losses were due to investment scams.

My role, if we're doing it properly, is to be able to provide people with enough information, without information overload, right, so that they can then process it."

About Sarah Clish:

Sarah Clish, a highly experienced financial professional, currently serves as a Private Wealth Advisor and Vice President at Ameriprise Financial Services, LLC in San Jose, California. With a strong foundation in financial planning and wealth management, Sarah offers personalized advice to help clients achieve their financial goals. Her educational background includes a degree in Business Administration and Management from the University of California, Berkeley. Prior to her current role, Sarah has held various positions in marketing, sales, and human resources, contributing to her diverse professional skill set.

"Make sure you have a savings account first. You gotta have a safety net."

Show Notes:

  • What Financial Challenges She Addresses: Exploring key issues like home-buying decisions, education planning, and retirement.
  • What Strategies She Advocates for New Investors: Understanding her advice for young adults embarking on their investment journey.
  • How She Utilizes Her Diverse Background: How Sarah's varied experiences enrich her financial advising methods.
  • How She Engages with Clients to Resolve Challenges: Describing her approach to understanding and addressing clients' unique financial situations.
  • Why Personalized Financial Planning is Crucial: Examining the importance of tailoring financial advice to individual needs and goals.
  • Why Her Approach Leads to Empowerment: Discuss why Sarah's method of financial advising fosters confidence and control in her clients' financial lives.
  • Real-Life Transformations: Sharing success stories from Sarah’s clients to illustrate the impact of her financial planning.
  • Key Advice for Financial Success: Highlighting Sarah’s top recommendations for smart financial management and investment.

"We're all presented with financial decisions every day in some way, shape, or form."

Episode Transcription

Can you share a brief background about yourself and your expertise as a financial advisor?

Sure. So… I went to Berkeley and got a business degree. But what really defines the difference that I bring to the table is that I had a lot of life experience before I came to this career. So, I have worked in small businesses. I have worked in the nonprofit sector. I've worked in media. So, I've done many things, including human resources, marketing, and event planning. And so… 24 years ago this month, when I started this career, I came to it with a different perspective. In large part, it was a strong desire to take all the skills I had from those other things and apply them to something that could help people move forward in making financial decisions. Because we're all presented with financial choices every day in some way, shape, or form. And so, being able to be a part of some of those more significant decisions and help people with the education they need is what I found appealing about this career and what still makes it fun after 24 years.

Well, when they're first starting out, it's honestly the decision to invest in a single-family home. And so with that process, I usually help people with essential cash flow management initially, right? The challenge in buying property of any sort is that even though you can write off Mortgage interest, etc. You still have to pay the bill right, so clearly understand how you handle your finances and where the money's going. That you can ensure that you have the resources available is the first step. Looking at how they can't do it right now, right? What do we need to do? Financially, to put them in that position? Is it borrowing money from a down payment from family? Is that an option? Is it working for a couple of more years, and if they're in tech, utilizing restricted stock units or an employee stock purchase plan? So, figuring out what the various different elements are that they can tap into to make that investment. If that's something that is of interest to them, it is one of the financial challenges that I see. The second phase in most people's lives is starting a family and planning for college. And unfortunately, in my personal opinion, college has become a very expensive proposition. Yes, it is. And so even sending a child to UC Berkeley, where I happily went, is a large bill today. And if you have an infant today and project based on the inflation factor, it's an astronomical amount of money. I really hope it won't be that way. However, be that as it may, we need to understand the parent's goal in terms of financial obligations. Is it paying for a portion of it or all of it? Is it paying for all of it to go to a certain level of institution but not to pay for it if you're going to an Ivy League school? So, having clarity first about what that goal is and then figuring out what the financial obligations are and how much money you need to set aside now to make that happen is something that I feel is valuable to empower people. And then, as part of that, I frequently encourage them. You know? Family and friends are going to enjoy tremendously giving things to your child. Those things won't last very long, but that education will last them a lifetime. So if you, in your heart, as a parent, can communicate to those people, OK, give them something small, but contribute to their college education fund, that's a great way to get everybody invested. I do not mean the pun, but it is true and also impacts that child that will last them a lifetime. The third thing that I see people struggle sometimes with is this concept of retirement, right? And so helping them, first and foremost, to better understand what that looks like. What does that mean for them? Because people define retirement differently. Sometimes it's, I wanna get to a certain age, and I just wanna stop. Sometimes it's. I don't really ever envision myself not working anymore. I just want the financial flexibility to not have to do so, right? So first, it's helping them define what that looks like. Then that helps to inform what kind of monetary goal we have out in the future, and how do we then incrementally break that down and monitor those goals over time, right? So it's not just a one-process situation. It's being able to check back in periodically to make sure that you're still on track. And if you're not on track, what do we have to do? How do we have to address that? So those three things are the things that I see people kind of grapple with the most, right? Purchasing their first home, sending a child to college, and figuring out retirement are three big financial elements that I can help people focus on, move the needle forward, and help them get to where they want to be.

Yes. So, first and foremost, people must understand that everybody has a different comfort level of risk. Being able to understand how you view money and how you assign risk is really important. Because you can look and say, “Oh, so and so invested in this particular stock, ” they did very, very well, but it might be that their risk profile is significantly different from yours. And if you had made that same investment, if it had been very volatile along the way to get to that end goal, you might not have felt very good, right? So, first is to have a clear understanding of how you approach money and how you approach risk. Secondly, Make sure you have a savings account first. You gotta have a safety net. If you're investing everything and something goes awry, which happens in the market from time to time, then where are you gonna go for the basics should you need them? So, you need to have a safety net. And then educate yourself a little bit. It's not difficult to learn about investing, but it takes some time and some interest in doing so. You could work with a financial advisor to begin that process, but honestly, there's a lot of really good basic information available, so if you decide to work with a financial advisor, you come with your own basic education tools, right? So you can have a more collaborative relationship because investing is something that is very emotionally based for a lot of people. We tend to be very emotionally tied to money as human beings. And so when things go well, we want more of it. And when things don't go well, we wanted to say we will protect it all, right? And so, having a better foundation on your own about how you view money and feel about risk and some basic understanding of the market will help you help yourself. It's right to not be emotional when things aren't going how you want them to. And the other piece of that I would say is, in addition to savings, you have to understand the goal you're working towards and the time frame. Because if it's a short-term goal, let's say you plan to do a remodel on a home, and you'd rather save the money than use an equity line of credit. OK, fine. Well, maybe that's a two or three-year time horizon. That's a very different risk profile for everybody than a goal 10, 15, 20 years out, right? So, investing based on the timeframe for using the money will also help inform the level of risk that you would be comfortable taking based on your risk profile.

Well, it begins by asking many questions and doing a lot of listening, right? I think that the fallacy that some people have about my profession is that we give you all the answers. And that's not really the case, right? We have a lot of tools and information. Potentially products, et cetera, right, that could possibly be good in a particular situation. But it's not our decision to make. Our role, if we're doing it properly, is to be able to provide people with enough information, without information overload, right, so that they can then process it and go, well, OK, based upon my circumstances, I'm thinking X, Y, or Z. So I think honestly, no matter what the general context of the interaction is, it's always a matter of asking questions, listening, asking more questions, to kind of get to… the point where we can then make some decisions. Right? Through that process, though, my role is to be fair. Do you think that Through that process, my role is to be a fiduciary? As a certified financial planner, I am not supposed to look out for my best interests. And Ameriprise, my firm, is the same way. Whether we are CFPs or not, we're all held to that fiduciary standard. So, looking at the general context of the types of things that we can provide advice on, such as investment products, insurance products, and debt management, right, and coming to a consensus with a client about what makes the most sense for them based upon their circumstances is really where I believe I can help people move forward. Sometimes, it's the thing you don't know much about that keeps you from taking action. Right. Right? And the reality is that there's a point in time. There's the information we have available at that point in time, and then there's a choice to act or not to act. Both are conscious. It's the fact that oftentimes humans act unconsciously. They're not really thinking in the forefront of their minds about here's choice Y or Z, or here's information A or B. They… they process without really knowing how they got to that point. And I think that when you talk about working with a financial advisor, it's bringing that out to a conscious level. And with that, I think the benefit of that process is that people understand why they did something. And when you understand why, you're more likely to stay committed to it if it's still the right path. Or to say the why at that time made sense, the why now does not make sense, so is there something different I should be doing? And that's my role with my clients over the long term, right? We work together on a collaborative relationship, we figure out a particular path, and if that path changes for any number of different reasons, we go, well, OK, it's changed. How do we now apply the new situation, the new information, so that you can move forward and make a choice? And that's how I feel like I help empower people, right? It is through giving them those opportunities to have those conscious decision-making processes that help them move forward. Happy? Whether you are happy with the answer or not, it will come from within you. And just listening and just facilitating.

So, first and foremost, one needs to be conscious about your choices. And understand your financial goals. Why is that important? Well, I have people who come to me to get advice, and they say, I wanna grow my portfolio. OK, well, that's a common goal, right? That's not unusual. But what is the purpose of that particular pile of money? To grow it just for growth's sake is OK, but it doesn't give enough context, right? So, I share with people that to be effective in your financial life, having a goal or more than one goal is helpful. Because with that goal, then, you can determine milestones and benchmarks, whether I am on track or not on track, and be able to make accommodations and changes as needed. So first is being conscious about it having goals. Once that's in place, then it's being mindful. If you are in a circumstance where you don't have to worry from paycheck to paycheck about how you're paying your bills, which hopefully we all get to at some point in our lives, we frequently become immune, for lack of a better term, to where the money's going. And so we spend because we can. And then, we sometimes recognize that we don't have the resources we want for a particular goal. Well, we probably have those resources. It's just a matter of being aware of where is the money going now? And is that the choice you want to make? One thing I tell people all the time is that financial choices are not good, bad, right, or wrong. They just are. However, could you have made a more informed choice that would have moved you closer to your intermediate or long-term goal? Right. And so, if you understand how you're spending your money, and then you decide that you wanna make a different choice about that to change that process, to move that money to something else, then you're gonna be more successful, right? The other thing I would share with people is not to be too concerned about what others are doing. That's so true. Because the bottom line is there are a lot of external signals that we attach to financial success. Wearing nice clothes, driving nice cars, living in big houses, right? But I can tell you that as a financial advisor, Some of those mirrors are interesting when you pull back behind and look at how people are functioning financially, right? So my caution is, don't necessarily compare yourself with somebody else. Think about what's important to you and how you wanna operate, and let them make their own choices, right? It's not bad to talk to people about what they're doing. That's fine. But it's, I think, a self-preservation to be sure that you're taking care of your own stuff and don't worry too much about how you think somebody else is doing. And if you do that and you're mindful about how you're utilizing your funds and set a goal, you will get there.

This is an excellent question because debt can be a very powerful thing, and it can also be very detrimental. So, my basic counsel in effective debt management is not to go into debt for things that do not last. So, what do I mean by that? So, revolving credit card debt. It can be very useful for leverage, right? Utilizing the credit card company's money until you pay the bill, right? Or very rarely when there's a larger expense that you can't pay off, but you plan to get it paid off quickly, right? Because revolving debt is painful when it accumulates over time. And it becomes the thing like a black hole that sucks all of your financial resources to try to serve it. On the other hand, effective debt management is utilizing debt to invest in property that will appreciate over time because you will, in the long run, have an asset worth more than you borrow. Right? We're in an interesting time right now with interest rates because, for the last,, 15 years or so, we've been able to take out mortgages for very low amounts of money. So I've been doing a little cleaning of paperwork, and I found the first paperwork for the home I live in now that I bought in 1996. I didn't remember this. I had a first and a second mortgage. My first mortgage was eight and three quarters. The second was nine and a quarter. We're almost there. Yeah, we're almost there, right? But we forget, right? So the challenge, of course, I understand today that the level of interest expense makes buying the property that a year and a half ago seemed affordable, not as affordable. However, it is if you can do the stretch. It is something that, first and foremost, you're in. Secondarily, somebody told me once you date the property, not the rate, something like that. You date the property and marry them. No, you marry the property and date the rate. That's it, yeah. So, you know, at some point, interest rates will likely go down, probably not in the next year or so. So, work with what you have, right? Buy to the limit that you can comfortably or with a small stretch right, invest in, and then look to potentially refinancing when the rates go down, right? So my general counsel for people on effective debt management is don't use revolving credit except to your advantage, not to the credit card companies. Right? Use debt to buy things that will appreciate over time, and… re-evaluate that debt when things get better and refinance it, right, rather than just paying that over time if you don't have to.

 

Sharad, this is my favorite question. So, retirement planning when you're younger. Let's do this in phases. OK. So let's say you're 25 or 26, you're out of college, you've worked a couple of years, and this amorphous thing of retirement is, you know, 45, 50 years down the line. Down the line, yeah. Right? It's very hard conceptually. Humans don't think like that. We just don't. And yet, what I describe to young people is the power of compounding. If you think about the beginning portion of savings, it's this little acorn. And then over time, you add to it, and it becomes a walnut, and then it gets bigger, and it gets bigger, and it gets bigger, and finally it becomes a snowball. And that snowball rolls downhill, and it gets bigger and bigger and bigger and bigger. And that's because of the power of compound interest. And so the younger you begin by setting aside funds that you in your mindset a wall behind the wall, I don't get to use it. It's not available for me now. It's for my future me. the better off you'll be, the less honestly you'll have to save over your lifetime because of that compounding effect. And the other element I share with young people is paying the taxes now if you can do it. So our two primary ways of saving for retirement are putting aside money into a 401k if available or setting up your own retirement plan if you're a self-employed individual. Right? Most of us do that pre-tax because we get a tax benefit today, and I'd like to lower our taxable income. But what that's doing is pushing the tax bill down the road. And so, if you can manage it from a cash flow perspective, you can save that money into a Roth 401k. or just invest in a taxable account and do it tax-efficiently, right? The power of that money further down the line is so much greater from a spending perspective because it won't be subject to taxation, right? Right. So with young people, I just tell them, anything, do something, put 3% in your plan, right? And every time you get a salary increase, put it into the plan. Make that a habit because that money will be there for you when you're farther down the line. When you're in your 40s, that's the time to start thinking about what it will look like 25 or 30 years ahead. Because most people in their 40s can see retirement, it's a little less amorphous, right? It has a little more shape a little bit more form. They can talk about… and articulate what it might look and feel like. So, that's a good time to start checking in if you haven't been paying attention. If I wanna maintain my current lifestyle or what it's gonna grow to with inflation over time and with the current amount I'm saving and what I've already saved, am I on track, yes or no? Sometimes, people don't wanna know the answer to that question, but ignorance does not help you make changes in force. Right? So, finding out where you stand in your 40s and early 50s is key. Right? Let's say that you say to yourself, I want to be in a position of not having to work by the time I'm 65. Right? So put a stake in the ground, let's figure out, can I do it? Right? That is something that once you understand whether you are on track or not, five years out, so when you're 60, if you say 65 is it, and you're on track, Five years out is when you need to start figuring out your retirement distribution strategy. Here's why. Accumulating, it's not easy. You have to put the money aside. You have to pay some attention to the investments. Sometimes, the less people pay attention to the investments, the better because they usually shoot themselves in the foot. But by the time you reach 60, you usually do not know how to take the money you have saved. and turn it into a paycheck. And there are so many different factors that go into that. There's planning for your Medicare Part B premium, directly driven by your income. There's planning for tax brackets, which today are pretty generous and low but may not be that way when you retire. So, understanding how that money that maybe got saved mostly pre-tax will actually be spent? How much will it be worth to you based on the tax brackets, right? And then there's the: should I take money out of my pre-tax accounts early? Should I wait until I have those required minimum distribution things that my current clients have to take them to hate? I don't need the money, Sarah. Doesn't matter that you don't need the money. IRS wants their taxes, right? So, understanding what are the right pools of money to pool from? Should I start Social Security at my full retirement age? Or should I delay it? These are all elements of your retirement distribution strategy that, if you clearly understand how that will work five years before you get there, you can line everything up. You line all your investment accounts so that they support that plan. And then you… have a little bit easier time making that transition because it is the most difficult transition I see people make. It's like jumping out of a plane without a parachute because, suddenly, there's no paycheck anymore.

I think everybody thinks about that all the time. Right. OK. How does the current economic climate influence investment strategies? First and foremost, we're in a very dynamic economic situation. And there's a lot of uncertainty as individuals, a lot of fear in some cases about investing. I get people asking me all the time, what should we do? People ask me frequently why I should put money in the market now if a recession is coming? Won't it just go down? So the way that I help people through these types of processes and through the thinking is we have to think about, again, the money in timeframes. So the money that will be needed in the near term say in the next zero to three years, is not money you want in the market. The market's too volatile. So you need that to be in interest-bearing accounts, which we currently have. What a lovely thing. That has been a nice change. Not great for mortgages, but great for savings, right? So, interest-bearing type investments, looking at potentially laddering of CDs, money market funds, things that don't create volatility but will earn you some better interest, right? Then, we might pull back for monies that are maybe four to seven years out. If you're normally a risk taker for long-term money, we would bring you back maybe two ticks, so to speak. So that money, that's the four to seven-year timeframe. Again, you could weather a cycle or two because you've got the cash, right? So you could take a little more risk, but not as much risk as you would with money you don't need for eight to 15 years because that's got at least a couple of cycles, right? So, I try to help you understand that being out of the market is not a good strategy. But what you want to do is be confident about what the time frames for each of those buckets are going to be and that they're allocated appropriately for your risk tolerance so that when things do get choppy, which they do, you can look and go, OK, that's right. We have a plan. Right. We've got short-term money, medium-term money, long-term money. As long as my risk profile has not significantly changed, I should just take a deep breath and recognize that the plan in place will get us to where we want to be. Because we cannot control the economy, we cannot control the market. All we can control is how much we save and how we react when things go poorly. 

 

So, I will use a first name that is not hers. We'll call her Bertha. OK. So Bertha became my client 15 years ago. Single mother, two young girls, living paycheck to paycheck, having overdraft protection put onto her star one credit card. Not good. Not good. And I told her, Bertha, this is not a good strategy, right? We've got to get this debt paid off. You must stop buying stuff at Target for your girls just because they say they want it. This is not going to be financially successful for you. And she kept the same process for about four years. Well, a couple of circumstances changed. First, she got a certificate that allowed her to do a different job within her company. So she was able to make more money. I see. With more money, she could start to pay down the debt. We did a very clear program. She had three credit cards, actually. So, we started with the credit card with the highest interest rate. You pay the minimum on everything else; you pay that one down. You take that money, you put it on the next highest one. And this is a very good strategy. It works very well as long as you stick with it, right? So she did that. And she saw… that it was making a difference. So she got all the credit card debt gone, and then she went, I'm never doing that again. And she started putting money into savings to pay cash for a car, which she did. In the meantime, daughters are growing up, becoming adults, getting their own jobs, starting to help a little bit with household finances, et cetera, and finally moving out. Mom continues to be successful at her job, making more money and being mindful. Of what she's spending, so she's got more disposable income. Now, Bertha did have the benefit of working for a company that had a pension. So this did help, OK. But she came to me three years ago and said, Sarah, I think I'm ready mentally to retire. And I need to know that financially, I can do it. She was 61 at the time. So we took a look. And we did all the numbers, and she had turned everything around. And I said, if you want to do this, you can do this financially. She said, OK, now I have one other thing. I want to buy a house. I said, OK, where do you want to buy this house? And she said I know I can't afford to do it here because I have to keep my payment the same as what I'm paying in rent. After all, you've just shown me this. I said, yep, you're right. She says, OK. So she started looking. She decided she was going to move outside of Denver, Colorado. She found a house, and she was able to put a down payment on it. Her payment is the same as what her rent was with payment, mortgage, property taxes, and insurance, same as her rent. She was able to give notice. She retired a year and a half ago. She moved to Colorado. She is so happy. I just talked to her this last week. She's having a wonderful time. She's exploring her community. She's taking care of her health. Which she hadn't been focused on. And I said to Bertha, I said, what you're just telling me about what you're doing with your health is the same way you felt empowered when you figured out you had control over your financial life. You did all the hard work. I just gave you the tools, but you had to embrace it and do it, and you did. And you're gonna do the same thing with your health. So I'm thrilled for her because it is a rags-to-riches story, and she did it all on her own; it was great.

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