Monthly Archives: July 2016

Planner as Consultant

On my blog, one of the topics I like to cover is explaining how the personal financial advice industry works. Most people get financial advice from someone who is a salesman of insurance, annuities, mutual funds, and other products. You can also get help from someone whose main profession is something related like a CPA or lawyer who offer advice as a side business. The best way to get advice however, is from someone who functions as a consultant.

There are financial advisors out there that charge by the hour for financial advice. They often call themselves financial planners to distinguish themselves from financial advisors. You can find these financial planners through industry associations like the Garrett Planning Network and NAPFA.org.

I say it’s best to work with a consultant style of advisor because the consultant works only for you. Ask yourself what someone’s motivation is. A financial advisor employed by an insurance company or investment company (like Merrill Lynch, Morgan Stanley, Fidelity, Vanguard, etc.) has sales managers above them making sure they sell a certain number of contracts every month. You don’t want to be one of those sales targets. It may work out for you, and there are representatives who do look out for their clients, but ask yourself what their motivation is before signing anything.

By hiring a financial planner that charges fees only and no commissions, you are going to get an advisor who puts your best interest ahead of their own. Ask the advisor to sign the fiduciary oath. Advisors out to meet sales performance targets won’t put their fiduciary duty in writing. By going with a consultant style of advisor, not only will you get sound financial advice, you won’t wonder if the advisor recommended a product because his sales manager told him to.

Live the Life of Your Dreams Now

Many people view retirement as a 30-year vacation, full of leisure and travel. But new retirees often find that retirement isn’t the carefree life they expected. They miss having social interactions, a sense of achievement and daily structure — and as a result, some experience weight gain, marital discord, depression or substance abuse.

And many retirees, especially those who retire early, end up returning to the workforce.

Retirement often looks different today than it has in the past. And as you reconsider how you want to spend your golden years, it’s a good idea to contemplate big-picture life goals and current desires.

Maybe some of those dreams don’t have to wait until retirement.

Rethinking retirement

Rather than leave careers they enjoy, some baby boomers are working well beyond the traditional retirement age of 65 or phasing into retirement over time. Increasing longevity and improving health outcomes also relate to this decision.

But these boomers aren’t necessarily working 40-hour weeks. Companies are growing more receptive to employees’ desires for flexible schedules, including three- or four-day workweeks or remote work. These arrangements free pre-retirees to spend time on travel, hobbies and other goals — and lead to enhanced productivity and job satisfaction.

Work-life balance is the key ingredient to happiness. According to John Wasik’s New York Times article “Facing Retirement, but Easing Your Way Out the Door,” many workers enjoy their reduced schedules so much that they’re extending the arrangements for years longer than they planned.

Figuring out what you want now

In his book “The 4-Hour Workweek,” author Tim Ferriss argues that reduced workweeks are a growing trend for all workers, not just pre-retirees. Technology and the “Uberization” of the global economy allow workers to leverage overseas vendors and virtual assistants and focus on their “highest and best use” skills, in and out of the office. You don’t have to wait for that magical moment in time called retirement.

“Someday is a disease that will take your dreams to the grave with you,” Ferriss writes. “Lifestyle Design is not interested in creating an excess of idle time, which is poison, but the positive use of free time, defined simply as doing what you want as opposed to what you feel obligated to do.”

My favorite parts of the book are the exercises that help you identify what you want to have, be and do within the next six to 12 months. These are similar to the questions I pose to clients when I first meet them. Younger clients often have no problem identifying 10 or more things they want to achieve before they die, but clients who are in their late 50s and older tend to have a harder time completing these exercises and may even focus on their kids’ needs instead of their own.

Here’s a sample of the questions Ferriss uses to get people back in touch with the things that excite them and guide them through the goal identification process :

  • What are you good at?
  • What could you be best at?
  • What makes you happy?
  • What excites you?
  • What are you most proud of having accomplished in your life and how can you repeat this or develop it further?

 

Financial planners are life planners

Life planning creates the foundation for your financial plan. When I understand my clients’ goals, I can ensure that their money is allocated and prioritized to help them reach those goals. The financial plan then comes to life in a powerful way for clients. They can envision the future — whether it’s 12 months or 20 years from now.

Does your financial planner ask you questions like the ones above? Is he or she more interested in you or your money? Find a planner who provides holistic financial planning services and helps you start working through your bucket list. You don’t have to wait until retirement to start enjoying your time or your money.

Lessons from a Non Frugal

I’m usually pretty frugal. I’ll often do without something I want but don’t need, or I’ll find a cheaper alternative. It’s just my nature.

But just after the holidays, I decided to indulge. I bought a navy blue Brooks Brothers blazer I’ve had my eyes on for years, the kind of thing that never goes out of style and that I can wear in all kinds of situations.

As silly as it might sound, I’m really excited about it! It’s something I’ve wanted for a while and I can’t wait to wear it. But I’m also excited about the deal I got. Instead of paying the full $558.49 price tag, I was able to get it for $260.47.

Here’s how I saved the money, and how you could do the same on your next big purchase.

Step 1: I Waited

I didn’t buy the blazer as soon as I saw it. It probably sat on my wish list for a few years before I actually pulled the trigger. And that waiting did a couple of things for me.

First, it allowed me to find an opportunity to buy it for less. Instead of paying full price, I was able to get it for 50% off during the Brooks Brothers annual sale. That saved me $249 on the price of the blazer, and another $22.81 on sales tax.

Second, I benefited from delayed gratification. I got to spend a long time anticipating the purchase, which is actually a key part of enjoying something. And when I finally did buy it, it felt like a gift. I appreciated it more because I had been waiting for it.

Waiting helped me save money AND enjoy the experience more than if I had bought it immediately.

Step 2: I Looked for Alternative Savings Opportunities

With a little digging, I found that I could buy a $250 Brooks Brothers gift card for just $225. So I bought the gift card, used the card to buy the blazer, and saved myself another $25.

Whether it’s a gift card, a coupon code, or something else, it never hurts to look for alternative ways to save money before buying.

Step 3: I Used a Cash Back Credit Card

When I bought the gift card I used a credit card that earns 1% cash back, which saved me an extra $2.25. Certainly not a life-changing amount, but every little bit counts!

Step 4: I Bought Quality

This is a high-quality blazer I expect to use in many situations for many years to come.

When I spread the cost out over a number of years, it becomes a lot less expensive. Especially when compared to cheaper alternatives that might fall apart, or go out of style, a lot sooner.

Lessons Learned

Now let’s be clear: this was still NOT a frugal purchase. I spent a lot of money on something Iwanted, but didn’t really need.

But that’s okay from time to time. Nobody should feel like they always have to stick to the bare necessities or like they can never indulge.