October is Financial Planning Month. I’ll bet you were highly anticipating it all year! When people ask me what I do for a living and I respond with “I’m a financial planner” the next question I typically get is “so what exactly does that mean?” Fair question, so I’m going to write down some things here that will hopefully help you understand a little better.
True financial planning involves a holistic process. It’s the impetus for the name of my company “Birds Eye.” If you think about the view you have from above, a good financial planner can keep you focused on the bigger picture (your total financial plan) and not get caught up in some of the minor distractions and/or bumps in the road along the way. To me a financial plan needs to incorporate all possible outcomes that you may encounter as you go through life. Financial planning would be simple as long as the stock market always went up, your children all got full rides to the college of their choosing, you never got sick, someone in your family never got sick, nobody died unexpectedly and there was no such thing as global pandemics. Those are the things that will truly test the strength of your plan. A plan that I typically put together will consist of the following areas:
Cash Management: This is a broad topic that can address many issues but one area that I focus on in particular, is ensuring the proper emergency fund is in place. Too often, this goes overlooked and is the number one cause of the credit card debt we see in the U.S. Cash management also can include looking at your sources and uses of money. Sometimes you can make a meaningful impact on your plan by moving something from your left pocket your right pocket. Lastly, you can never make too much money to have some semblance of a budget. When is the last time you went line by line through your bank statement? I know I’ve found some subscriptions on there that I forgot about!
Investment Management: When I’m reviewing or establishing an investment for someone, it's critical to consider a person's goals, time horizon, and risk tolerance. There is never a “magic bullet” investment that can be all things, to all people, for all goals. If a “planner” walks into your house with a pre-packaged presentation….RUN! One thing I’ll add to a successful investment management relationship is helping my clients navigate through the ups and downs of the market. There will always be scary days in the market and some months where we it feels like we are closing in the red daily. I’ve written about that before which you can check out here
Retirement Planning: One of the number one reasons people consult with a financial planner initially is to find out if they are on track for retirement. The retirement planning process reviews your current situation and helps you better understand your choices and the adjustments you need to make to achieve the goals we have set. Should you max out your 401K? Can you contribute to a ROTH IRA? When is the best time to take social security? Once people reach retirement, the number one question I hear is “Am I going to run out of money?” Your plan should involve multiple scenarios of stock market returns along with a combination of investment vehicles to ensure the plan is a success.
Insurance and Risk Management: Here we look at how well prepared you are for life's potential personal and financial risks. What is the right amount of life insurance to own? Do I need disability protection? What about Long Term Care? And what in the world is an umbrella policy? Financial plans should be self-completing. As I mentioned above, my job would be simple if I knew exactly what would happen to everyone at all times. Guess what? I don’t…and neither do you so we need to plan accordingly.
Tax Management: Do you feel comfortable with current tax laws? Are you confident about your approach to tax management? Tax laws are constantly changing, and there is no guarantee that the current landscape will remain the same in years ahead, particularly given the upcoming election. Are you harvesting losses throughout the year to be as efficient as possible in non-qualified accounts? I work in conjunction with tax and accounting professionals maximizing the after-tax return of your investments. It’s an often overlooked tactic that is extremely important to your plan’s success.
Estate Strategies: How well you prepare today may help determine how you distribute your assets after you are gone. Much like tax law, estate laws are continually changing, and now is no different with the upcoming election. Do you have the proper documents in place to ensure your assets will pass down correctly? Are you doing everything you can to avoid or minimize your state’s inheritance tax? I work with a variety of attorneys to make sure you have a proactive approach to your estate plan.
It can be a challenge to feel confident in all six key areas of creating a financial strategy. It can be even more challenging when life doesn’t go according to plan. That’s why my job is to be there when times are difficult for you and your family. If you think you may need help or simply have some questions, please don’t hesitate to reach out.
One last note, I waited until the end of the month on purpose to release this because the reality is, most of us wait until something goes wrong to discuss financial planning. Don’t wait.
Securities America and its representatives do not provide tax or legal advice; therefore it is important to coordinate with your tax or legal advisor regarding your specific situation.