Executive Development: Q &A with "America's Financial Planner" Jonathan Pond

The Center for Executive Development will offer a course on personal financial management on April 26. The course will be led by Jonathan Pond, known as “America’s Financial Planner.” Pond is regarded for his ability to explain complex financial strategies and with current economic conditions, this course is particularly timely.

Below is an interview with Jonathan Pond.

1. Currently markets are very volatile. How should investors approach this situation?

Investors who are well-diversified should probably sit tight, as hard as that is to do amidst a declining stock market. This is particularly so in 2008 when the alternatives to stocks - real estate and interest-earning securities - are themselves going through a rough patch. There is always a danger in abandoning an otherwise sound investment program when you’re losing money. The problem is that when the investment markets rebound, they usually do so very quickly, leaving those who fled the markets in a lurch.

2. What are your top three tips in preparing for a financially comfortable retirement?

First, prepare a retirement projection to find out what you need to do to achieve a good retirement. I’ve found that most people are pleasantly surprised to find out that their situation is not as bad as they thought. Retirement projection programs are commonly available on the Web sites of mutual fund and brokerage companies.

Second, review your total financial situation to make sure there are no omissions that could impair your retirement prospects, including making sure there are no gaps in your insurance, paying down your debt and putting too much money in a risky investment. Obviously, the closer you are to retirement, the more attention you should pay to these matters.

Finally, continue to add to your investments, including workplace retirement savings plans and IRAs. But saving is only part of the task. You also need to make sure you diversify your investments between stocks and interest-earning securities like bonds - or better, mutual funds and index funds that invest in these securities. Spread your money around among the various categories of stocks, including large company, mid-sized company, and small company stocks, as well as international stocks.

3. What are the main issues to think about when consolidating debt?

The main issue is to avoid pitches that extol the virtues of debt consolidation loans. If you’ve got a lot of debt and your credit rating is impaired as a result, chances are you’ll have trouble consolidating your debt at an attractive interest rate. Also, if you do manage to consolidate your credit card debt, avoid the temptation to once again run up credit card balances. In lieu of consolidating debt, devise a plan to pay down your debt, starting with the highest interest loans, probably credit cards. It will take time - years, perhaps, but ridding yourself of debt will give you a fresh start on achieving a great financial future.

4. What role has the Internet played in educating people about personal finance?

The Internet is a double-edged sword. It can be a great source of guidance for people of all ages and financial circumstances. On the other hand, you have to approach a Web search with a healthy dose of skepticism. Many sites are out-of-date or biased. I recently did a search on a simple question regarding retirement plan contributions. The first five sites all had incorrect answers. But on balance, the Internet can be very useful. Stick with the well-known financial Web sites and the sites of the major investment and mutual fund companies. Incidentally, the IRS Web site (IRS.gov) and the Social Security site (SSA.gov) are frequently recognized as two of the best sites on the Internet.

5. How much time is needed to plan for retirement? What can be done in less than 10 years to prepare for retiring?

The earlier you start, the better, of course. But many of us are late starters who might be a decade or so from retirement age with nothing much in the way of savings. It’s never too late. Put as much money as you can spare into tax-advantaged retirement plans, emphasizing stock mutual funds. If you’re a homeowner, consider moving into lower cost housing when or before you retire. Finally, delaying retirement can be enormously beneficial to your retirement prospects. For example, delaying retirement by five years will increase your lifetime retirement income by about 40 percent.

6. Is the information presented in your course applicable to all levels of investors?

The course will provide understandable and useful guidance to investors of all experience levels. I start out with a brief investment tutorial, which even expert investors appreciate as a review. My remarks are designed to give you suggestions that you can put to immediate use. But the course covers a lot of important financial matters beyond investing, including planning for a great retirement, getting the right kind of insurance at the right price, cutting your income taxes and preparing wills and other important estate planning documents. Attendees will have abundant opportunities to ask questions, both as a group and individually.

For more information on Pond’s personal financial management course at the Rady School, visit http://www.rady.ucsd.edu/exec/open/personal-finance/.