(Illustration: Mikey Burton)

Managing Money

A Matter of Dollars and Uncommon Sense

People worry often about making money but spend far less time learning what to do with it. According to Forbes.com, two-thirds of Americans cannot pass a basic financial-literacy test, and only five states have a personal finance requirement in high school. The problem is real when there’s an entire month devoted to National Financial Literacy (That’s April, for those who are wondering.)

An FDU Poll in 2018 found that New Jersey residents are confused when it comes to understanding money. Only 35 percent of respondents felt sure about how much they needed to retire, and fewer said they are well-versed in the basics of stocks, bonds and other investments. And, the youngest respondents are the least knowledgeable, with only 19 percent of those under age 35 saying they understand those basics well.

“If knowledge is power, and power paves the way for an early retirement, financial illiteracy is partly to blame for delayed gratification,” says Patrick Cozza, MBA’82 (Flor), former senior executive vice president of wealth management and chief executive officer of North America Insurance at HSBC, and now a lecturer of wealth management and executive-in-residence in FDU’s Silberman College of Business. “What people know and how they make investment decisions point to the need for greater assistance in charting financial futures.”

Eighty-five percent of respondents say that adults do not receive enough education to make sound financial decisions. Most blame schools (33 percent) and parents (31 percent) for failing to educate young adults on investing and spending.

“What people need to know really depends on individual circumstances,” says Cozza.

(Illustration: Mikey Burton)

Early in the Game
Advice for Young Earners

By Maren McEvoy

Maren McEvoy, BS’18 (Flor), completed FDU’s financial planning and wealth management minor and is currently a premier relationship manager with HSBC’s Graduate Development Program.

As individuals are entering the workforce, becoming financially independent from their parents and starting families, they need to develop excellent money management habits early. These good habits can act as a catalyst in achieving financial aspirations. At this stage in a young earner’s life, time is a friend.

Simply start by focusing on three Cs: cash flow, credit and company benefits.

Understanding personal cash flow is a foundational requirement. Young adults should create a monthly budget to identify their current income, expenses and discretionary income. This knowledge will then assist in achieving two common goals: growing savings and paying down debt.

Establishing a responsible credit history and generating a good credit score is another requirement to achieving short-and long-term goals. Young earners may improve their credit score by making payments on time, utilizing low amounts of their revolving credit lines, having a longer credit history and managing different types of credit. Good credit allows large purchases at preferential rates, such as buying that new car or a first home.

Company benefits are perks that should not be overlooked. Young earners should strive to understand and take full advantage of savings benefits that employers offer. Such benefits may be making the maximum contribution to a 401(k) to qualify for the company’s dollar-for-dollar match, taking part in a health-savings account or participating in the company’s share-plan program, where individuals can buy shares at a discounted price. All of these benefits are free money and smart ways to save.

Plan ahead. Everything young earners do now affects their financial future.

(Illustration: Mikey Burton)

Middle of the Road
Advice for Mid-career Professionals

By William Cerone

William Cerone, BS’05, MBA’08 (Flor), is a financial adviser at Merrill Lynch.

It is important for mid-career professionals who have retirement on their radar to focus on a balanced approach to savings. As people work toward retirement, they tend to save on three fronts: equity in their home, retirement accounts and non-retirement accounts.

As a financial adviser, I find it crucial to track the values of these three types of ‘savings avenues’ for clients as I build their respective retirement plans. For example, having most of your net worth tied up in a home doesn’t help in retirement — you can’t spend a living room. Retirees with large traditional IRA/401(k) accounts must be aware that every withdrawal from these retirement accounts is taxed as ordinary income.

Who wants to sell their home to pay a large medical bill? Nobody. Who wants to pay a large tax bill after withdrawing money from a 401(k) to pay for a son’s or daughter’s wedding? No, thank you.

Working to balance the three asset avenues gives retirees options and leaves them less vulnerable in their nonearning years.

(Illustration: Mikey Burton)

Ready to Relax
Advice for Those Nearing Retirement

By John Hogarty

John Hogarty, BS’86, MBA’89 (Flor), retired from Bank of America/Merrill Lynch as managing director/chief operating officer for global wealth and investment management. He currently is a senior adviser to private equity firms. He also has been active with FDU’s Silberman College of Business to develop its wealth management program and serves on the College’s Board of Advisers.

Retirement is a journey that starts with the savings and planning work done during the years leading up to it. To be fully prepared, planning needs to go beyond just finances. Near retirees need to envision life in retirement, how they plan to stay active and where they will find their sense of purpose or identity in place of their career. Every aspect of life is impacted by this decision.

Before making that final decision on when to retire, it is important to make sure your financial house is in order. Remember, it’s planning not for one to two years but for 30, so be confident that you are ready.

It starts with understanding current household monthly income and expenses. In retirement, expenses will likely change, but they may not go down. It will depend on retirement lifestyle choices as well as personal health and wellness. Health care costs continue to rise and the most recent estimates for a couple retiring at age 65, in 2018, project out-of-pocket health care costs during retirement to be $280,000, and that excludes the cost of long-term care.

The big question for most people considering retirement, without the benefit of a pension, is how will they replace their paycheck. Common sources of income include: investments, the draw down of retirement savings/investment assets and social security or other supplemental income sources.

As a general rule, individuals can begin by withdrawing four percent of their retirement nest egg’s value per year, adjusting subsequent withdrawals for inflation, and avoid running out of money for 30 years. When it comes to claiming social security, the longer individuals can wait to claim their benefits, the higher the monthly payout they’ll receive.

About FDU’s Wealth Management Program

Fairleigh Dickinson University offers innovative programs in financial planning and wealth management. In addition to an undergraduate concentration and minor,

FDU is developing an executive-education path that may lead to an online master’s degree program.

“No matter where you live, saving and proper investing will always be a challenge. However, financial literacy offered at a young age — like through FDU’s wealth management program — and sound, experienced financial advice can make the process less painful, less confusing and create opportunities for early retirement,” says Andrew Rosman, dean of FDU’s Silberman College of Business.

He continues, “Fairleigh Dickinson’s Silberman College of Business has recognized the need to better educate students on financial literacy by developing a concentration and minor curriculum in financial planning and wealth management.

The foundation course alone, Personal Financial Management, provides students with a complete lifetime overview of managing wealth.

“Additionally, students who graduate with the financial planning and wealth management concentration or minor are in a terrific position to explore career options in that industry.”

Ed. note: A version of this article first appeared in the Fall 2019 edition of FDU Magazine.

Selected features from Fairleigh Dickinson University’s biannual, signature publication.