Economists compared the market meltdown to a nuclear accident – totally unpredictable and hugely devastating. Like many, (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, , released early this year. In it, Milevsky gives advice and tools (calculators at ) for 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 91ŃÇÉ« 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 91ŃÇÉ« 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 91ŃÇÉ« 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 91ŃÇÉ« Times, Barron's, Fortune and Money magazines and major Canadian media.

At 91ŃÇÉ«, Milevsky is executive director of the , a non-profit corporation affiliated with 91ŃÇɫ’s Schulich School of Business and devoted to research in strategic financial planning for individuals. He also heads the  (Quantative Wealth Management Analytics) Group, a propriety software company.

He is the founding co-editor of the . 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. Republished courtesy o f YFile – 91ŃÇɫ’s daily e-bulletin.

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Housing is not only a “completely undiversified” investment, in the words of Milevsky: it’s also a highly leveraged one, say other observers. While this aspect magnifies gains in house prices it also magnifies losses, so that relatively small fluctuations can wipe out all of the owner’s equity. Indeed, the value of the house could even fall below the value of the mortgage – as millions of US citizens have discovered since 2007. Renting reduces exposure to this scenario.

For all 11 reasons, click .

Republished courtesy of .

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