The Fifteen Minute Financial Advisor is a place where you can find answers to your personal finance questions, with descriptions of the topic or question, why it's an important consideration and action steps you can take to address your concerns.
This week, we're going to get a little more philosophical than strategic. We'll talk about the way things are framed, and what impact that has on the way we make decisions. We'll look at the Framing Effect, and Dr. Walter Mischel's Stanford Marshmallow test on delaying gratification. And of course, we will have some action steps you can take to answer the question: How does money support what you want from life?
Spending money is a part of life in a developed economy. It's not bad to spend money. We save money so that we can spend it! In fact, I encourage people to spend money when they have a plan for how much they can spend and still be on track to accomplishing their goals. In this episode, we cover a few little tricks to help get your savings on track and maybe reign in your spending (or maybe not).
This week's episode comes from recent conversations with a few new clients. When I explain why I left the wirehouse (big-bank brokerage firms), it's because I WANTED to hold myself to a higher standard as an advisor. One that has a legal obligation to put the interests of my clients first. The biggest question to me is: Why do advisors stay at the name-brand companies and consciously DECIDE to NOT put their clients' best interests first?
As we wrap up the Five Steps to Starting Your Own Financial Plan, we cover my favorite topic: Investment Planning. It's truly important to know what you own, and the unique characteristics that come along with it. Having the other four steps taken care of will allow you to focus on creating the investment plan that you can stick with for the long-term.
December 2017, new tax laws for 2018 filings are enacted, February 2019, we cover Tax Planning in the fourth step of the Five Steps to Starting Your Own Financial Plan. It covers a few topics that seem to keep coming up in conversations and can make a meaningful difference with your tax returns. As you'll hear in the episode, none of this is tax advice, and you really should consult a tax professional before taking any action.
This week we focus on how to think about your needs, goals and priorities. Needs are going to be the basics that you have to have to survive. Goals are the things that you want to have to make your retirement, or life-after your work-for-money career is complete. And then you have to prioritize them.
As we continue into Step Two of Five Steps to Starting Your Own Financial Plan, we get into the topic of risk management and insurance. To keep the episode short, we only cover life insurance, and focus on when you need it, and things to think about when determining how much you need. We don't get into topics like Disability Insurance, Long-Term Care Insurance, or Personal Liability Umbrella Insurance. All of these are important considerations when building your financial plan.
A few weeks ago, we did an episode called Five Steps to Start Your Financial Plan. Well, this episode covers the first topic in those 5 steps in further detail. Cash flow planning is the solution to the budgeting problems that people face when trying to get a better idea of where their money goes. It's all about creating a plan that works for you, that you can stick to. It's not a budget, it's a cash flow plan.
Typically, we encourage people to get started investing as soon as possible. But it's important to cover the basic elements of financial planning. It's really simple, but not always easy. There are always exceptions, of course, but once you've met your most basic financial planning needs of spending less than you make, getting out of debt, and having some extra cash for emergencies, you can invest fearlessly.
Echoing last week's encouragement to get started planning, the follow-up this week is all about having a strategy. The two go hand-in-hand. When you look at your retirement savings, are you excited? Are you stressed? When you think of all the things you'll have to pay for in the future, do you get anxiety or lose sleep? The antidote is a strategy that works for YOU. It's all about doing what is right for you, and nobody else.