Facing Reality Head On

Facing Reality Head OnLindsay S. Bourkoff is a financial advisor at Shrier Wealth Management LLC, a boutique wealth management firm headquartered in Los Angeles, CA. Read more about Linsday at the end of the article.

As a teenager, my father would tell me stories about how my grandparents went from riches, to rags, and riches again… many times over. My Grandfather Harold passed away a successful entrepreneur, but his road to success was paved with many financial challenges. At the height of his success, he built a mansion in Beverly Hills, only to have to sell it less than 1 year later, when he lost much of his fortune.

I write this story, not to dredge up the trauma that my grandparents faced back then, but to emphasize the importance of taking action and adjusting one’s lifestyle when faced with a prolonged financial change in one’s life.

When my grandfather lost much of his wealth and realized that his loss was not a temporary situation, instead of ignoring his new financial reality, he and my grandmother made immediate changes to their lifestyle to stem further losses. They sold their brand new house, moved to much smaller, more humble home, and made drastic cuts to their spending level.

But while this may have been an extremely difficult choice, their rapid response to their deteriorated financial situation allowed them to preserve the wealth that still remained and helped them to eventually re-build their savings.

A Real Life Example

As a financial advisor practicing in Los Angeles, I advise many clients on wealth building strategies. But all of the investing and financial planning advice is useless if an individual is in denial of his or her financial problems and unwilling to confront a change in that reality.

This week I was reminded of the virtues of my grandparents’ decisive action as I coached a long-time client through a difficult personal financial period. Her income had been seriously decreasing for nearly five years because her industry was in secular decline. For many years I had advised her to sell her luxury home (with a $7,000 monthly mortgage) and use the equity in the home to pay off expensive credit card debt. I reminded her of the necessity to reduce her spending and cut out her exorbitant restaurant bills until her income stabilized. But unfortunately, none of these changes ever occurred. My client was intent on keeping her house no matter the cost and continued spending in the manner in which she was accustomed. This past week culminated in what I would call her financial ruin. She had spent down most of her liquid assets, even taking the drastic measure to withdraw all funds from her retirement account before retirement eligibility age – 10% penalty and all.

Make A Change Before It’s Too Late

Many people in their lives will encounter a stressful financial period such as losing a job, or having a business in decline. But the key to coming out on the other end solvent is foreseeing when the problem may be prolonged and then taking action. That might force someone to make the painful decision to sell a beloved home, sell expensive artwork, or re-train to a different profession.

Part of the difficulty in convincing my client to make the necessary adjustments to her lifestyle was her consistently positive attitude that her “situation would improve soon.” Each day, she hoped that her finances would turn around. For anyone going through financial problems, this mentality is certain to help keep one’s spirits up and prevent a downward emotional spiral. But when it comes to keeping and building wealth, it is crucial that one is not blinded by optimism. Most importantly, confronting financial problems head on and making the necessary lifestyle adjustments gives one a chance at making a come-back some day and leaving a legacy that grandchildren may even talk about.

Mrs. Bourkoff graduated from Columbia University cum laude. In addition to her work as a financial advisor, Mrs. Bourkoff volunteers her time with the SIFMA Foundation dedicated to investment education for children. Lindsay can be reached at lindsay@shrierwealth.com.

Securities Offered Through LPL Financial, Member FINRA/SIPC

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments or strategies may be appropriate for you, consult your financial advisor prior to investing.

Is Expedia Stealing From Its Customers?

Is Expedia Stealing From Its Customers?This past weekend, Lauren and I took a trip to Las Vegas for a friend’s wedding (they live there, it was not a chapel wedding). We looked at a lot of hotels, trying to decide which would be best for us. We were not going to be having the normal gambling and a show experience as we were only there for one night (the night of the wedding), but we did want to sit by the pool and who can say no to a little craps?



We Got A Great Deal…I Thought

We found a great price on a hotel, which booking directly would have been about $200, and going through discount sites was $180. But through slickdeals, I found a $25 off coupon when booking with Expedia’s mobile app. I downloaded it to see what the price would be, and to my surprise, it included an additional discount, down to $164! I applied the coupon, which brought the price down to $139 and checked out. This was a great price, especially since it included all resort fees (which were $25 at this hotel). Our other options were around $110 (+$25 resort fee) for a much smaller room at a hotel that was not rated as highly. I was planning on using the $20 trick to get upgraded to a room that wouldn’t have even been as nice as the one we booked.

Expedia Charged Me an Extra $25 Without My Permission!

Expedia Checkout Screenshot

A few minutes after booking, I got an email confirmation, along with a receipt. To my surprise, it showed that my credit card had been charged $164! I knew something was wrong, so I immediately got back on my phone and recreated the purchase, and took screenshots along the way. It looked exactly the same, and I was pissed off! I think it’s awful (and maybe illegal?) for a company to quote you one price and charge you another without your permission. I authorized a charge of $139, the additional $25 was not something I was aware of. And of course, I booked a non-refundable deal, so my next step was to email and call Expedia.

I emailed the company, but got antsy, so gave them a call. It took awhile to get someone on the phone, but finally a woman got on the line and tried to help. The first person couldn’t really help me. First, she told me that the coupon wasn’t applied with my original order. As you can see from the screenshot below, that couldn’t be further from the truth. Then, she offered to cancel the purchase (I thought that couldn’t be done?) and re-book, but the lowest price (after the coupon was applied) she could get it to was $160. Um, no thanks. She transferred me to her supervisor, Autumn, which required a 20 minute wait. She told me that she could credit me the $25 that I shouldn’t have been charged, which was a good start.

creating a plan to get out of debt

Are Others Having Money Stolen From Them, too?

However, my concern isn’t just about the $25, it’s about the process and the fact that this was allowed to happen in the first place. If Expedia was able to charge me $25 more than I authorized, could they be doing something to other customers as well? Probably. So I started asking about that possibility, and they said if it was an issue for anyone else, they could call in and get their purchases refunded as well. But what if people didn’t notice? It’s totally not OK for a company to take customer’s money and only give it back if the customer calls in to complain (and waits on hold for an extended period of time)!

After a 30 minute wait, Kallie, a customer service supervisor in Las Vegas, took my call. When I expressed my concern that Expedia could be stealing from other customers, she said it would have to be sent over to the tech team. I asked that she do that, but there’s really no way for me to know if the issue is being addressed, so hopefully my twitter mentions and this post will be a kick in the pants for them.

Lessons Learned From Expedia

I learned a few lessons from this experience. One, if you have an issue with an Expedia order that can’t be refunded, try telling them that the price is wrong and a coupon was applied but did not count. Those magic words seemed to open a new possibility that was previously unavailable. Two, Expedia, while admitting to a mistake, doesn’t really care about their customers. They made an error, corrected it after 75 minutes, but did not acknowledge that this could have had worse effects on other people. Had I gone over my credit limit and been charged $35, they wouldn’t have done anything else (I asked). Even a $25 credit to my account would have been a nice gesture, even though I won’t be using Expedia again in the future.

Have you ever had such an experience with a company? Does it scare you that this could happen without our knowledge and never be corrected?

UPDATE: I called again to complain the day of the wedding, and after explaining the situation, was transferred to Freddy, who works for the corporate customer service. After threatening to report them to the Better Business Bureau, he issued me a $35 refund, which made all the phone calls worthwhile for me (but this post is still necessary).

What to Do With a Sudden Windfall

It may seem like an impossible dream, but the truth is most of us will come into a decent sum of money at some point in our lives. This can come from many sources. Some people inherit funds from deceased loved ones. Others may have a scenario where a parent or relative purchased bonds or stock to be given as a gift at some point during adulthood. Still others have the skill and fortune to rake in a huge payoff at the lottery or video poker games. Even if these eventualities seem far off or unlikely, you will probably find yourself in possession of a hefty sum within your lifetime. Probably more than once. What you do next is vitally important.

1) Take a breather. The thrill of a sudden financial acquisition can cloud your judgment. For this reason, we recommend setting the money aside for as long as six months. Just take the time it takes for the surprise to wear off. Now you can decide just how to use the money wisely so it doesn’t disappear on you. An estimated 70% of lottery winners go into bankruptcy in the years following their win. You may not have that much money to work with, but even a few thousand dollars shouldn’t be squandered. If you aren’t used to having money to spare, you may need to wrap your head around just what money like that can do. And what it can’t.

2) Pay off Debt and Taxes. Even if you were to invest your money directly into stocks and earn 10% back, you would still be losing money if you have credit card debt with interest rates of 17-25%. It’s best to pay taxes on your windfall, then focus on the debt you have. Once it’s gone, you can begin saving and spending in a meaningful way, without hemorrhaging money at every turn.

3) Talk to a Professional (and maybe no one else). A CPA (or Certified Public Accountant) can give you objective advice on how best to use your money. Make sure you ask your CPA if they sell financial products, just to make sure they aren’t trying to rope you in to any particular deal. I recommend a CPA because they are unlikely to take advantage of you, but any trustworthy financial professional will help. A financial professional like this can help you understand all the possibilities for your money. Maybe you want to start saving for retirement, a home, or your child’s future education. Learn about investment opportunities to make sure that this money isn’t here today, gone tomorrow.

Also think about keeping quiet about your sudden good fortune to family and friends. Those we love very frequently try to get a piece of the action when we experience sudden financial luck. Maybe your family will respect these boundaries, but it is good general practice to be judicious about how you announce your wealth. Better to keep it to yourself.

4) Stick to the Plan and Have Fun. Once you have an idea of what you are going to do with your money, stick to it. Maybe you have formed a plan where you will get a 5% payout every year. Maybe you want to spend 10% now and use the rest to grow with interest for the next 15 years or so. Whatever you have decided, don’t deviate from it once you have moved forward. Then enjoy your money!