Kathleen Youngerman – Senior VP, Smith Barney

Kathleen Youngerman, Smith Barney’s top woman, shares success secrets on finance and Life/Work balance during tough times.

By Taylor Mallory

When it comes to managing finances for clients with assets ranging from $250,000 to $50 million or managing her Life/Work balance, for Kathleen Youngerman, a senior vice president of wealth management at Smith Barney, discipline seems to be the key.

So how does she balance her high-powered job and her life at home with three children? The “90-Day Rule.” “The ability to make a change or create a habit is a much-needed function of success,” Youngerman says. “If you commit to doing something for 90 days, it can become a habit. I keep an organized schedule and stick to it. If I want to make a change (i.e., start working out), I put it in my schedule for three months. After that, I’ll be doing it automatically.” The challenge? “Picking just one thing at a time! This rule only works if you focus on one very specific thing you want to change at a time and make it an obsession for 90 days.”

Here, she discusses how Smith Barney suggests you continue building wealth during tough economic times.

PINK: How are you getting new customers right now?
Kathleen Youngerman: The majority of our business comes through referrals. Word of mouth is our primary marketing tool. I find that, because of the personal nature of money, people want to work with someone they bond with, someone who understands them. Proper development and maintenance of a financial plan requires knowing a great deal about a person and her family. I often tell clients I approach planning by theoretically putting on their shoes and utilizing my financial background and experience to design a plan for them the way they would do it for themselves if they had the information, experience and time. Developing new clients, especially during times like this, is the result of my existing clients talking about the trust they place in me to their friends, family and acquaintances.

PINK: When have you failed?
K.Y.: That is a common experience in my profession on a daily basis.  No one can know with certainty what the performance or outcome of many investment may be, and we often face failures to meet expectations. If, for instance, it is appropriate for a client’s risk tolerance and financial plan to include more volatile investments, such as stocks, I will tell them during planning that they will most likely experience periods of disappointment with performance over the course of their financial life.

One key to helping manage these failures is diversification.  Although this does not insure against loss, it can reduce risk and volatility if the assets in your portfolio have little or no correlation to each other. A simple example would be a portfolio with stocks and bonds. I once heard it explained this way: Take a pencil, and you can break it in half fairly easily. Now take 50 pencils, bound together and you can’t break the bunch because there are so many of them. Diversifying works similarly. Have different investments in place with different companies and in different industries.

Youngerman’s Strategies for Taking Control of Your Finances

1. Budget, budget, budget. I have worked on financial plans with clients who have millions and – through my volunteer work – those who find themselves homeless. We always begin every planning process by writing down a budget.  Understanding how much income you have and how much money you are spending is the first step toward understanding your finances.

2. Define needs and prioritize wants. Lattes, cable television, a pet, newspaper delivery – for the average person those are wants, not needs. For successful business owners and executives, it might not occur to them that a second or third home is not a basic need – but actually a want. It doesn’t mean you do without fun! But starting with needs and working toward prioritizing wants in order of importance to you and your family will help you gain control over your finances.

3. Develop a written financial plan. I recommend a plan that addresses market volatility for investments you have in place already and those that you are considering.  Review and update on a regular basis to adjust for life changes and potential changes ahead.

4. Your plan should define your baseline requirement. Define the monetary point at which, if you achieve this goal, you will be able to focus on your work and life rather than worrying about money. Are you willing to sacrifice some wants now for future financial independence and achieving that baseline number? Is that baseline number realistic?

5. Figure out your odds. Many people find they have a low probability of reaching their retirement income goal. So, for example, if you want to retire at 55 but you’re spending 100 percent of what you earn and borrowing occasionally to purchase lifestyle items like vacations, it’s unlikely the math will work out in all but the very best of possible markets and economies. Align your budget and your goals so your odds of success are high – even if your financial future hits some difficult bumps in the road.

6. Build a cash reserve. Even investors who can deal with more risk and volatility need a backup for financial hurdles. Imagine both the best- and worst-case scenarios for your financial lifetime when building a reserve. The planning process in step three, four and five assists in really defining those ends of the spectrum for you and your family.

7. Understand your risk tolerance.  If you take more risks, you could have greater reward, but you may have to go through severe volatility in the market. The price you will most likely pay for higher returns over time is enduring periods when investments may be down substantially. Having a market-volatility plan will help you set realistic goals and appropriately manage your return expectations – and your ability to withstand challenging periods.  Ask yourself, “What is my personal ability to withstand volatility and periods of significant declines in the value of my investments?” The answer will vary depending on the person and must be implemented in your financial plan if you are likely to achieve your financial goals.

Suggested reading from Youngerman: She reads the Journal of Financial Planning and recommends this article “for those who want to read a more advanced version of our planning philosophy.”

NOTE FROM SMITH BARNEY: The views expressed herein are those of the author and do not necessarily reflect the views of Smith Barney or its affiliates. All opinions are subject to change without notice. Neither the information provided nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Past performance is no guarantee of future results.