Broker Check


March 24, 2022

Have you ever noticed there are a lot of things in life where we think, either, or?  For instance, you’re a Democrat or a Republican.  You’re a boy or a girl.  You’re either for something or against it.  You watch Fox News or MSNBC. 

In the financial planning world, I see the same things.  Do you buy term or whole life?  Do you invest in index funds or active management?  Should you buy a house or rent?  Do you lease a car or buy one?  Should you invest in a Roth or a traditional IRA?  Should I pay off my debt or invest?  The list goes on and on.

You Should


I also see a lot of you should articles and ideas.  You should have 6 months in an emergency fund.  You should make sure you are getting the full match on your 401k plan.  You should only buy term insurance.  You should pay off your high interest credit cards before you invest.

While these might be great ideas, they aren’t perfect for every situation.  I know a lot of the articles that are written are trying to appeal to a vast audience but sometimes they sound more like preaching.  With all of this type of information out there, what is a person supposed to do?

What Do You Want and Why Do You Want It?


Most people have no idea what they really want for their future.  A lot of my job involves asking people what they want?  When do you want to retire?  How much money do you want to have every month to spend?  Where do you want to live?  Do you want to travel?  What would you want your family’s financial picture to look like if you weren’t around? 

A lot of times I get very vague answers.  Around 65.  Oh, I don’t know.  We could get by on 5 or 10 thousand per month.  I want to stay in my house or maybe move to Colorado.  If she had the house paid off, she’d be okay.  Okay.  Let’s put those answers in the financial plan and see what we come up with!

One of the great things about working with an advisor is they usually don’t let you get away with wishy washy answers like the ones above.  It’s really difficult to plan if you don’t know what you want and where you’re going.  75 is around 65 compared to 50.  It takes well over a million dollars to generate an extra $5000.00 per month of income.  How much does a house in Colorado cost? 

When you are able to clearly articulate what you want and when you want it, not only is it easier to plan, it also creates a vision in your mind.  Have you ever gone looking for a car?  Let’s say you go to the Acura store and drive an MDX.  After that, you start seeing MDXs all over the place.  There aren’t any more Acuras than there were before you started looking at them, but that car is in your mind, and you notice them more often.  The same thing happens when you have goals, and you write them down.  Your subconscious mind focuses on what you want and you start making changes and seeing things that move you towards your goals. 

Back to the Either/Or


In financial planning I don’t think you have to be either or.  Often times the answer is, it depends.  A lot of the products and ideas like index funds, actively managed funds, term insurance and Roth IRAs are tools.  They’re not a religion.  You don’t have to register for the index funds only party.  You don’t have to attend Our Lady of Term Life Insurance.  Even a lot of the shoulds are up for debate.

When you know what you want for your future, the particular tools that will work become clearer.  Many times, it makes sense to use a combination of products and ideas.  A lot of my 401k plan participants invest in the Roth option as well as the traditional option.  Many of my clients own both whole life and term insurance.  I personally have group as well as individual disability insurance.  Some asset classes work great through an index while others perform better with active managers. 

Financial Planning


With my financial planning software, eMoney, I have the ability to test out a lot of the ideas and questions that people have.  The other day I was running a plan with some clients, and we ran a couple of scenarios.  One involved paying extra towards their mortgage and the other showed taking the extra mortgage payments and investing them.  We could see the difference it made from a financial standpoint down the road.  With that information we could discuss which option made the most sense for them.  Maybe they would have more money if they invested the money, but the relief they would feel from being debt free was worth it.  When we ran the numbers, they could see what was best for their situation.  Not just what they should do.

Lots of Things Work


My dad used to say, there’s more than one way to skin a cat.  There’s also more than one way to reach your financial goals.  That being said, if you don’t know where you’re going, you probably won’t get there.  But if you have a clear picture of what you want, write it down and work towards your goals, it will become clear what you should do for your own situation. 

When you work with an advisor who isn’t trying to sell you something or doesn’t work for a company that pressures them to sell certain products, the choice of the tools gets a little easier as well.  In some situations, life insurance is the best tool for the job.  In other situations there could be several different tools that will work for the job and you have to decide which one feels best to you.  The idea is to let what you want, and the financial plan be the guide.  If this is something you would like to explore, feel free to reach out to me HERE.  As always, thanks for reading.  KB