Everything changed for finance sage Moshe Milevsky – and every other investor – when the economy tanked in 2008. His financial net worth fell 50 per cent and he hadn’t seen it coming. What a shock for the author of advice books on smart investing and the three-time winner of The Globe and Mail’s annual 
stock-picking competition.
Economists compared the market meltdown to a nuclear accident – totally unpredictable and hugely devastating. Like many, Milevsky (MA '92, PhD '96) began to question the roulette-wheel approach – determining the odds – to investing. If nothing is predictable anymore, how do you decide what to invest in? he wondered.
The answers lie in the Schulich School of Business professor's latest book, Your Money Milestones: A Guide to Making the 9 Most Important Financial Decisions of Your Life, released early this year. In it, Milevsky gives advice and tools (calculators at QWeMA) for making good decisions when reaching life’s “money milestones” – going to school, getting married, having children, buying a home, buying insurance, filing your income tax each year, investing and managing your portfolio, planning for retirement, deciding on a pension.
To make good decisions, you need to understand the hidden assets and hidden liabilities on your holistic personal balance sheet, writes Milevsky in his introduction. That means factoring in your human capital, or ability to earn income, which most overlook. Yet human capital is “the most valuable asset class for most people during most of their working years,” he writes.
“One of the things that prompted me to write the book was the way we teach personal finance,” says Milevsky. “We present it as a collection of independent topics – Week 2 might be on retirement, Week 4 on income taxes, Week 5 on pensions – with no unifying theme.” In the book, he challenges readers to think about smoothing their income and their consumption over their entire life cycle.
Left: Moshe Milevsky
The 198-page book is full of simple, statistically sound, even controversial, advice – don’t let debt deter you from investing in an education, wait until you’re 50 to buy a house, realize children cost a lot of money ($180,000) but could be your pension plan, consolidate your debt, avoid trivial insurance such as extended warranties, buy a pension plan if you don’t already have one.
Critics might object to placing a monetary value on having children or getting married or going to university, acknowledges Milevsky. He’s not disregarding or disrespecting the non-financial reasons, but “ignoring the monetary implications of our decisions can lead to financial regret,” he writes.
“My point is,” he says, “you should think about things.”
Milevsky, 43, is the father of four daughters. He waited until he had tenure at York before buying a house, reluctantly, under pressure from his family. Otherwise, “I practise what I preach.”
He never planned on a career as a professor specializing in financial risk management and personal wealth management over the human life cycle – until he experienced a kind of seismic shift in his family life. Milevsky was a master’s student in mathematics and statistics at York when his father was diagnosed with colon cancer and died six months later. As the eldest, he suddenly became responsible for the family finances, and soon changed course. Instead of pursuing a PhD in mathematical physics, he pursued one in administration. However, his math and stats training has continued to guide his research – sometimes in collaboration with York faculty – ever since.
Your Money Milestones is Milevsky’s seventh book for the individual investor. His sixth book, Are You a Stock or A Bond? Create Your Own Pension Plan for a Secure Financial Future, came out in September 2008 (see YFile, July 14, 2008). Milevsky revisits its central message – if you have a secure job with benefits and pension plan, you can take investment risks, otherwise stick to a safer, more conservative portfolio – in Your Money Milestones.
Milevsky has written two books for finance specialists and five for individual investors on insurance, investments and retirement income planning, including the 1999 Canadian bestseller, Money Logic: Financial Strategies for the Smart Investor.
A speaker and consultant on retirement wealth management, he has been interviewed by BusinessWeek, The Wall Street Journal, The New York Times, Barron's, Fortune and Money magazines and major Canadian media.
At York, Milevsky is executive director of the Individual Finance & Insurance Decisions Centre, a non-profit corporation affiliated with York’s Schulich School of Business and devoted to research in strategic financial planning for individuals. He also heads the QWeMA (Quantative Wealth Management Analytics) Group, a propriety software company.
He is the founding co-editor of the Journal of Pension Economics and Finance. In 2003, he won a National Magazine Award for a series of articles he wrote for the National Post.
By Martha Tancock, YFile contributing writer