Portfolio Management: How to get a portfolio to manage

Tina Haapala |

By Gary Silverman, CFP®


This is the last of my portfolio management wisdom articles. And it’s not really about how to manage a portfolio. Instead we’re looking at how to have a portfolio to manage.

I’ve had many people come in to my office and tell me that they don’t have any money to save (which begs the question as to why they are in my office in the first place). When I ask them to show me their budget, they don’t have one. When I send them out with homework to come up with a listing of their income and expenses, they can usually tell me where 100% of their income is coming from, but they usually can only track between 50-70% of their expenses. Likely somewhere in the gaping hole is the money they could be saving.

Often I find that small changes in your habits can create a good amount of money you can invest. Let’s take my hypothetical odd couple, Fred & Wilma (Wilma’s the smart one). Both work; Fred gets his hands dirty at a quarry and Wilma holds an executive position at a law office.

Wilma doesn’t find enough time to have any kind of breakfast at home, so she stops at Frank and Joe’s and gets a Coconut Mocha with an extra shot on her way to work every day. She wants to look her best, so she gets a manicure once a week. Wilma has been trying to quit smoking for years, but with her high stress job, she still lights up a pack a day.

Fred likes to eat, but he still “forgets” to pack his lunch a couple of times a week and “has” to go out to lunch with the gang. Why not add the extras to the baked potato for a bit more? And who ever heard of too much bacon?

 Fred and Wilma are doing their part to keep the local economy going.

Wilma loves Fred (we’re not sure why) and Fred just adores Wilma. They golf each weekend, go to the movies every Tuesday night, and have a pizza delivered on Friday when they stay in and snuggle up to shows they recorded during the week.

Unfortunately, they, as is common with most Americans, never got serious with their savings. They both have IRAs and a 401k plan at work, but are spotty in contributing to the IRA and only do the amount that’s matched in their 401k. Well, we can help fix that.

They could golf every other week, Wilma could cut back on her smoking, and Fred could still go out with the gang, just less often. According to research my staff did, cutting back half on these little extras would save between $7000 and $8000 each year. For most people, “finding” an extra $7000 would make a big difference in their lives.

Looking for money to save? Try looking at the little things. Changing habits isn’t easy. It might not be fun. But it can be worthwhile…and you’re worth it.

We’ll take a break from investment stuff for a bit in this column, but when I return, I’ll begin a rather long series on do-it-yourself investing…the easy way.

Gary Silverman, CFP® is the founder of Personal Money Planning, LLC, a Wichita Falls retirement planning and investment management firm and author of Real World Investing