Tuesday, December 20, 2016

A Holiday Reminder: Harvest Your Tax Losses

Another year has come and (almost) gone. While your spirits may be full of holiday cheer (and egg nog), this is no time to forget about your financial goals. Depending on what part of the year you did your investing, you could have some losses in your taxable accounts that you can harvest for a tax break. (For related reading, see: Tax-Loss Harvesting: Reduce Investment Losses.)

Take Advantage of Tax-Loss Harvesting

When you sell a stock, bond or mutual fund, the difference between what you paid to purchase it and your net earnings is considered a gain if the amount is positive or a loss if the amount is negative. In most cases, you would certainly hope for gains, not losses. However, some investors strategically use losses to negate the effects of capital gains taxes. Capital gains are taxed at 15% on long-term gains (anything held over one year); short-term gains (held less than one year) are taxed at your ordinary income tax rate. (For related reading, see: What You Need to Know About Capital Gains and Taxes.)
Any gains realized during the year can be offset by selling losers. This is what we call tax-loss harvesting. Regardless of whether the gain is short-term or long-term, the loss will counteract the gain. What’s more, if you are able to realize more losses than gains this year, you are able to carry forward up to $3,000 of losses to next year, which can save you on taxes. Note: if you are planning on doing this, please consult your CPA or a tax professional to make sure this strategy makes sense in your specific situation.
During the year, perhaps you sold a security to have the extra cash to replace your hot water heater, for example. Often when the money is needed, capitals gains are disregarded, which is why the holidays are a perfect time to review all transactions from the year and see where you stand on gains taxes. Most brokerages offer a convenient way to view this: in your accounts, there should be a tab that shows “Realized Gains/Losses.” Make sure to look at the “Realized” tab rather than “Unrealized.” That ensures you’re looking at the investments you sold during the year instead the “what ifs.” (For related reading, see: How Are Realized Profits Different From Unrealized or So-Called "Paper" Profits?)
So, what do you do after you sell, you may be wondering?


Be Aware of the Wash Sale Rule

There are a few options, depending on whether you plan to re-deploy the capital elsewhere or hold it in cash. For example, it is possible to use the newly freed funds to re-balance back into underperforming funds according to your asset allocation. However, what you certainly want to keep in mind is something called the wash sale rule. If you sell securities at a loss, in order to get a tax benefit from that loss, you cannot invest in a substantially similar investment for at least 31 subsequent days. 
The keywords are "substantially similar." Arguably, there are funds that perform similarly, but are not exactly the same, where you can park the money for a bit. You don’t have to re-invest the money at all (you could leave it in cash), but some investors like to keep their money working for them in the market for as long as possible. Each situation is unique, and what’s important to know are the different options you have.
Regardless of what you decide, be aware of how you classify any tax-advantaged dividends, as reinvesting of any kind back into the fund you sold out of at a loss will flag it as a “wash sale.” It doesn’t matter if you sold VTSAX in your taxable account and accidentally had dividends reinvested in your VTSAX holding in your 401(k) within 30 days. That will negate the tax benefits of harvesting the loss.
At the end of the day, there are plenty of things to do around the holiday season. Most of them cost money. Why not add something to your list that could potentially save you money? (For related reading, see: Wash Sales and Substantially Identical Securities.)

As originally seen at http://www.investopedia.com/advisor-network/articles/121216/holiday-reminder-harvest-your-tax-losses/#ixzz4Swg1EgkO

Thursday, December 15, 2016

6 Cash-Saving Tips for the Holiday Season

 It is beginning to look a lot like the holidays. Lights, parties, shopping, presents, family, credit card debt… 
Whether it’s student loans, credit card debt or a car loan, hopefully one of your goals is to pay off your debt in 2017. But why wait? There is still time to start on that goal in 2016. No need for a New Year’s resolution. Although it can be a useful Jedi mind-trick to pick an arbitrary day in the future to start working toward your goals (i.e., January 1), the truth behind debt is: the sooner you start, the better. So why not start today? Right now. Tomorrow never comes anyway, right?
Here are some tips to ramp up your debt payoff strategy during the holidays:
  • Make handmade Christmas gifts  Contrary to popular belief, the holidays don’t always have to be about spending money. Making your own Christmas gifts rather than buying them at the store can save you boatloads of cash. A lot of adults end up buying what they want for themselves anyway. There are plenty of recipes and craft ideas on Pinterest and Instagram. What’s more, a handmade gift can be even more meaningful to the recipient, since they know you took extra time and care in making their gift. (For related reading, see: Tips for Avoiding a Holiday Spending Hangover.)
  • Draw names from a hat – If you have a big family or a lot of friends that you typically buy present for, perhaps you can each pick a name from a hat and just get something for that person. It can be really expensive to buy things for everyone you know.
  • Find seasonal holiday jobs – Since most of America will be busy spending money, businesses will likely be hiring in order to keep up with the increased demand. Many retailers, customer service providers and gift shops will be looking for seasonal employees, which could be a great opportunity to make some extra money. You could even be a pet sitter for those who leave town over the holidays. (For related reading, see: Best Time of the Year to Look for a Job.) 
  • Have friends over for a potluck – For holiday get-togethers with friends, rather than meeting up at a restaurant, suggest a potluck instead. Everyone brings a dish to share, and the total cost for everyone is how much it costs to make their dish. Plus, an added benefit is you can stay as long as you’d like and nobody will think you are rude if you are being too loud!
  • Don’t pay for a gym membership – While it may be tempting to join a gym during their holiday promotional period, there is plenty of nature out there to explore without needing to pay money. The added benefit of working out outside is breathing fresh air and allowing nature to lift your spirits—things that can’t really be recreated inside a gym.
  • Focus on an experience instead of gifts – Experiences are some of the best gifts given and received. Start a new tradition this year with whomever you’re spending the holidays with. Family football game? Scavenger hunt? Check out the local arts/music scene? Volunteer? The time together will surely prompt some stories and save everyone money at the same time. It will also set a good example for the kids.
It is beginning to look a lot like the holidays. It can be a fun time of year if we don’t get distracted by all the shiny objects. There is no need to wait until after the holidays to start paying down debt. Remember, tomorrow never comes. Start today. Have fun. Be safe. (For related reading, see: A Holiday Reminder: Harvest Your Tax Losses.)

As originally seen at http://www.investopedia.com/advisor-network/articles/121316/6-cashsaving-tips-holiday-season/#ixzz4SwfRxkhR

Friday, December 9, 2016

Asset Allocation Part 1


The financial services industry has done a great job of confusing just about everyone. There are no less than a million TLAs (three letter acronyms), not to mention thousands of research papers and enough noise from talking heads to make your own head spin. In previous series, we discussed basic investing and financial planning. Now we are going to build up the foundation of your financial literacy house a bit more and discuss asset allocation.
Why is asset allocation important?
Good question. Thanks for asking. It is important to understand why you should keep paying attention before learning about something. According to a 2010 research article from Morningstar (the premier research firm in the industry), nearly 100 percent of return levels come from asset allocation. Even after accounting for general market movements, the study determined that about half of return variations come from asset allocation decisions and about half come from how they are managed.
What does all that mean? Long story short, research shows that asset allocation has a significant impact on long-term returns.
What is asset allocation?
To start, asset allocation is a term mainly used by financial advisors. Often times, we make the mistake of assuming you understand what it means. Then we describe it by saying it is how you allocate your assets. (Um… rrrriiiiigggghhhhttttt… thanks for clearing that up.)
Asset allocation is simply the mix of your investments as they relate to your total portfolio. My grad school professor will roll his eyes when I say this, but the easiest way to think about it is with a pie chart. My professor hated pie charts, but in this case, it works. Your overall portfolio is the pie. Each of your investments – or assets (cash, bonds, stocks, funds…) – represents a piece of the pie, or an allocation.
Having a mix of various investments is a way to diversify your portfolio to ensure that you don’t have all your eggs in one basket. When done properly, it should give you exposure to a variety of industries and sizes of companies – some more conservative, and some more aggressive. At the end of the day, nobody knows which asset class inside which industry is going to perform best next year, over the next five years, or the next 10 years. Diversification helps reduce your risk by spreading your investments out, but still provides exposure to growth potential.
Ideally you would have a strategy to how you plan to allocate your assets based on your risk tolerance, time horizon, and goals. Finding the right mix for you between safer and riskier investments will help you (and your advisor) come up with a plan to achieve your goals. Everyone is different. What your neighbor does for his or her allocation should not impact how you allocate your investments. The ultimate goal is to minimize the impact of down markets and still participate in the upside.
It is also important to periodically keep up with your investment mix to ensure it is on track with your risk tolerance and goals, while still aligning with your strategy. Over time, allocations can drift from their targets, as investments will gain (and lose) at different rates. When you reallocate your investments to the target mix, it is called rebalancing.
What are some common asset allocation strategies?
It seems as though every time I turn around, there is an infomercial for the next great “sure-thing” investment strategy that will make me rich this afternoon. It can be mine for just $1999.99 if I order today! (Pause while Nick orders multiple copies.) I plan to invest the money I get from my long-lost cousin, the Nigerian prince.
What?! Dang! Those weren’t good strategies at all! I digress. Back to common (and real) asset allocation strategies…
There are a lot of different strategies out there. Picking the right one for you comes down to your personality, how involved you want to be, and finding a good advisor to guide you. The most common asset allocation strategies are:
  • Strategic asset allocation – This is a long-term approach that balances risk and reward. Boring, but pretty effective. More passive. Doesn’t change philosophy based on economic changes.
  • Dynamic asset allocation – While similar to strategic asset allocation, this strategy changes with economic conditions.
  • Tactical asset allocation – This is a more active approach. It is constantly evaluating positions and moving in and out based on what is believed to have the most short- or long-term potential. Use caution here. If you were really as good of a day trader as you think, you’d be managing a $5 billion hedge fund from your yacht in the Caymans.
  • Core-satellite asset allocation – This is a hybrid approach. There is a core strategic element that makes up the foundation of the portfolio with satellite tactical approaches to fill it out.
We will go into more detail about various asset allocation strategies in part two of our asset allocation 101 series. Remember, just because your neighbor is investing a certain way doesn’t mean it is a good fit for you. For now, hopefully you at least have an understanding of what asset allocation is and why it is important.
originally appeared on http://centsai.com/asset-allocation-101-part-1/

Friday, October 28, 2016

Financial Planning Part 4 (of 4): Retirement Strategies and Estate Planning


Welcome back to our financial planning series. This is the final piece of the puzzle in the series: retirement strategies and estate planning.
Let’s get started…
Many people think that retiring is the ultimate goal. It’s time to spike the ball and hit the showers. Not so fast, whether it is early retirement, late, or right on time there is still a lot the game left to play. Don’t get me wrong, a fancy end zone dance is certainly appropriate but just don’t get carried away and end up hurting yourself.
It is still worth doing some periodic preventative maintenance to ensure you don’t run out of money. It is a good idea to review a few things at least annually and whenever life events occur. After all, you’ve worked so hard to get here, you want your money to continue to work for you not against you. Some things worth review are: your annual withdrawal rate, health care, taxes, RMD, beneficiaries, and income sources.
The standard annual withdrawal goal in the industry is 4%. Some people are better suited for more and some less. Some people prefer a fixed rate and some prefer a variable rate of withdrawal based on various personal and economic decisions. It is a least worth reviewing so you know if you need to make changes.
Health care is a constant battle. Review your options. Review the costs. Roll with it until the next open enrollment period which are typically towards the end of the year. Rinse and repeat.
We discussed earlier how tax efficiency can save you lots of money. Each year things change with tax laws. Some will impact you and some won’t. Work with your CPA to keep up to date on the things that will impact you.
Some retirement accounts, such as 401ks, traditional IRAs SIMPLE, and SEP IRAs, have required minimum distributions, or RMD. The IRS says that when someone reaches 70 ½ they must withdrawal at least a minimum amount of money from the account. It is worth knowing what you need to do to avoid penalty.
Beneficiaries should be reviewed periodically and after life events. As things in life change you want to make sure you update beneficiary information to ease the process on your loved ones in the event something happens to you. The last thing anyone wants is for that stuff to be tied up in court.
I mentioned looking at other income sources earlier. This could be side jobs in things you’re interested in, pensions, social security, or just selling some of your stuff. Are there other sources of income that you could/should be looking at? Social Security is a tricky one because everyone is in a different situation. The earlier you take it, the less money you get per check. Before you take it, know what the options look like.
When it comes time to start working on your estate plan you’ll want to enlist the services of an estate attorney. A lot of people think estate planning is just for uber rich people. This isn’t the case. The goal of an estate plan is to ensure your wishes are carried out as efficiently and effectively as possible. Some are more complicated than others, but at a basic level everyone should have a will (which says how you’d like your assets distributed), a living will (which is your health care wishes), a power of attorney (which gives someone authority to make financial decisions on your behalf), and a health care power of attorney (which allows someone to make health care decisions on your behalf). Other elements of an estate plan could include trusts to hold assets, ensuring life insurance gets paid to beneficiaries, gifts, and tax exclusions.
Previously we talked about how there is not a one size fits all approach to investing. This is true as well with financial planning. To help you find the best approach for you it is important that you have a basic understanding of what is involved. This will help you build the proper team of financial advisors, CPAs, and attorneys.
Hopefully you now have a basic understanding of a financial plan. This concludes our financial planning 101 series. Have a great day!



Wednesday, October 26, 2016

The Milestone of Losing a Customer

Figure 1  Courtesy of http://thedoghousediaries.com/5468


We’ve all heard the term “If it were easy, then anyone could do it.”  That certainly applies to starting a business, running a business, figuring out what to do next in a business…well depending on the day it could apply to just about anything in a business.  Let’s face it, entrepreneurship is tough.

If you don’t find a way to celebrate the small victories it will make things even more difficult.  Celebrating the small victories gives you confidence and motivation to continue climbing the mountain.  The small victories provide a sense of optimism to build upon.

Over the years I’ve seen companies do many different things to celebrate wins and milestones.  In the military, every once in a while we would get an extended weekend (a 72 or a 96 if we were lucky).  In the corporate world I saw everything from ice cream socials to lavish parties.

One department in a lot of companies that does a good job of celebrating wins is sales.  Sure most organizations have some sort of “President’s Club” where they roll out the red carpet for the top reps, but people tend to rally around the individual sales as well.  It builds momentum across the team in the short term.

In the sales world, many organizations have a bell that reps ring when they close a deal. Each sale, big or small, leads the team closer to their goals. 

Here are a few bell-worthy moments from this month at Divvy Investments.

An individual signed up for service after my t-shirt peaked her interest.  RING THE BELL!
An advisor signed up for service to simplify his business.  RING THE BELL!
One of our early adopter clients decided not to renew his subscription.  RING THE BELL!  

Wait.  WHAT?!!??

That's right.  Ring it.  It is a milestone worth celebrating.  Don't get me wrong, I'm NOT encouraging all of our clients to cancel service.  The excitement from this milestone will soon pass...

He was the first client who decided not to renew service.  It didn't come as a surprise.  He told me to my face before it happened.  He was one of our first dozen or so clients, but he wasn't ever really the right fit for our service.  He mainly purchased it to support me, which was/is appreciated.  He provided insights, feedback, and encouragement.  He helped us get past proof of concept.  A valuable client, for sure.  A friend.  A mentor.  So why celebrate that he is not renewing?

It comes down to time.  It is hard to scale a business based on clients who just want to support the owner but aren't the right fit for the service.  Those people are important to get it off the ground, but they are hard to duplicate.  At the end of the day a business needs to focus its time on the clients and prospects that are right for its business.  That allows it to create efficiencies and find duplicable processes.  It allows the business to focus on serving a niche really well.  As business owners we naturally want to serve anyone and everyone.  However, we must resist this temptation because it will leave us scattered all over the place and disorganized.  The more focused your target market is, the better.  Ideally you’d be able to position yourself as an expert to your subset of the market.  And according to Susan Friedmann, “The Riches are in the Niches.”

Being an entrepreneur requires some level of creativity.  Whether it’s identifying a niche, thinking of a clever team building exercise for your next milestone, or turning a perceived negative into a positive, if you don’t find a way to celebrate the small victories it will make things even more difficult.  Entrepreneurship is tough.  FACT.  If it were easy, then anyone could do it.  Now if I could just convince my boss to give me a 96 for losing a client…

Friday, September 16, 2016

Financial Planning Part 3 (of 4): Death and Taxes

In my recent post in the financial planning elements series, I talked about preparing for emergencies, debt, and investing. In this post, we will look at a couple more elements that should be included in your overall plan.
People look forward to talking about death and disability about as much as they look forward to talking about taxes, so we decided to talk about both of them here! Both are incredibly important to address as part of your financial plan.

Insurance

It is a good idea to review all of you policies, including auto- and home-owner’s (or renter’s) insurance to ensure that you are comfortable with the amount of coverage. In this section, we are going to specifically address disability, life, and long-term care insurance.
One of our greatest assets is our ability to work, earn, and save. It is something that should be protected.
Many people find a gap when evaluating their disability insurance. It is somewhat complicated. Some policies provide coverage if you can’t work inany occupation, whereas others cover you if you can’t work in your occupation. A lot of employers offer some form of disability insurance – in general, it covers about 60% of your income. When evaluating the potential gap in insurance, you need to think about how long you can go without income. It is worth reaching out to HR to get details if your employer has coverage, and then perhaps to an insurance specialist to explain your options.
Insurance in general is something that is often pushed to the side, but especially life insurance. Nobody wants to talk about our loved ones dying. It is a conversation that needs to happen sooner rather than later. Life is short and you never know when someone’s time is up. You want to ensure that your loved ones aren’t left without an income stream.
There are many types of life insurance out there, but they can mainly be broken down into term or permanent. One of the most popular and economical types is term life insurance. It is inexpensive and covers you for a certain amount and for a specified term. After the term, whether it is 10 or 20 years or something different, it either expires or can be converted into some form of permanent life insurance for a higher premium.
Permanent life insurance has several varieties, including whole-life, universal, and variable universal life. Due to various guarantees offered with permanent insurance and the ability to accrue cash value in the policy, these policies are more expensive.
Whether you go with term or permanent, it is important to determine the right amount for you. Try to think in terms of economics vs. emotion. That is easier said than done, but it’s worth mentioning.
Another type of insurance that people often consider is long-term care insurance. It is a way to mitigate the costs of extended medical care as we age. If you decide to go with long-term care insurance, it is probably worth adding an inflation rider to it to make sure the money goes as far as you need it to. As with most insurance, the younger and healthier you are, the lower the premiums.
There are a lot of moving parts in insurance. If you decide that you need help navigating insurance, then it is a good idea to interview a few agents to make sure you find one with the right knowledge and fit for you. As always, make sure you understand what you’re buying, the risks, and the fees associated with it.
One way you may be able to find extra money for your budgets and premiums is through effective tax planning.
Your tax strategy should be driven by your overall financial goals.
It is something that a CPA can help you with throughout the year. It is not a set it and forget type of thing. It can help you plan better by accurately predicting cash flow and potentially shifting current and future tax liabilities.
That’s all for this section of our financial planning series. In the last part of the series we are going to talk about retirement strategies and estate planning. Have a great day!

Monday, August 29, 2016

Detention Taught Me How to Sell


"Here's to the crazy ones, the misfits, the rebels, the troublemakers, the square pegs in the round holes... the ones who see things differently -- they're not fond of rules... You can quote them, disagree with them, glorify or vilify them, but the only thing you can't do is ignore them because they change things... they push the human race forward, and while some may see them as the crazy ones, we see genius, because the ones who are crazy enough to think that they can change the world, are the ones who do."  -Steve Jobs

I was a good kid growing up (my mom just rolled her eyes).  Seriously!  I got decent grades.  I didn't get in too much trouble (nothing major anyway).  But I spent A LOT of time in detention, mainly for skipping class.

A good friend of mine, Mike Penney, and I were chatting about this the other day.  He is a Marine veteran also and fellow entrepreneur.  He had just released his latest podcast about the Insecure Entrepreneur (check it out... listener discretion is advised... http://www.cigarsandseastories.com/114-insecure-entrepreneur/).  I loved the podcast because he talked about how the misfits and rebels who were bored at times in school, but good kids, ended up in detention, the military, and later started businesses.  The script wasn't a good fit for them.  They needed something different to get engaged.  There are certainly some parallels about throwing away the script.  Those of you who know me well know that I often go off script.

Penney and I reflected on our countless hours of detention.  As we were chatting I realized that I learned how to sell in detention!

I would skip class and go feed puppies at the humane society... or something like that.  I don't recall exactly what I did but I'm sure it was noble and trying to save the world somehow.  Then I would finally come to class and the Vice Principal would pull me out of class to send me to detention!  She was out to get me.  Nobody believed me until she targeted my cousin, who probably should been have granted Sainthood (if that's a thing), because she found out we were related.

The Veep called me into the office one day WITH MY PARENTS!!!  She threatened to kick me out if I didn't show up to school more.  Are you kidding me???  My grades were solid.  This was BS!  

I went off script.  I channeled my inner Perry Mason and told her how ridiculous it was to pull me out of class when I finally showed up.  BEST. ARGUMENT. EVER.  (mic drop).

She countered my epic rant by assigning me to 8 weeks of Saturday detention.  (GULP). Excuse me, did you say Saturday?  DOH!  Epic rant turned epic fail.

The first Saturday detention was a great learning experience.  It was a few hours long, maybe 8-12?  I quickly realized that nobody (including the teacher) wanted to be there.  I spent some time networking and getting to know the landscape.  The teacher had a night job too and slept in the extra bit instead of eating breakfast.  Bummer.  I got home around 12:30, having already missed the morning feedings at the humane society...

The following Saturdays I drove through McD's on my way into confinement.  As it turns out I was never as hungry as I thought I was when I ordered.  I'd usually get home around 8:45.  My mom was pretty excited to see me.

Moral of the story- sales is all about finding THEIR win first.

Raise a glass.  To the MISFITS (and the teacher who let me out of detention...)

Cheers!
Nick   


Wednesday, August 24, 2016

Financial Planning Part 2 (of 4)


William Shatner once said, “If saving money is wrong then I don’t want to be right!”
In part 1 of the financial planning series, I mentioned the beginning elements of a financial plan, coming up with a budget to help you hit your goals. Now it is time to walk a bit further down the path and put some of that “extra money” to work.
One place that people sometimes forget about focusing on is an emergency fund. I view it as a piece of the foundation in the road.
Things happen in life that are unpredictable and often expensive.
Note it is an emergency fund, not a vacation fund. That can be one of your goals. One thing to remember is if you have to use it, you need to prioritize replenishing it.
There are 5 questions to ask yourself as you build your emergency fund to replace income.
  1. How much time will it take to replace your income? The gold standard is 3-6 months. If you’re in a specialized field or high up in a company it may take longer to find a similar job.
  2. What could you do as a side hustle to offset the delta while you’re out of work? Side jobs, teaching skills you have, consulting, selling some of your stuff online… All of those could help bring in some money.
  3. How much flexibility do you have? In your lifestyle? In your career? In your location?
  4. What’s your plan for healthcare? What are your options?
  5. What resources are available to help? Use sound judgment when reaching out for help, but it is important to know where you can turn in a pinch (not just for money).
Once you have an emergency fund in place it is time to focus on removing debt and investing. There is a lot of debate about which should come first.
The best thing to do is to crunch the numbers for your individual situation to see where you can get the most for your money.
We will start by talking about debt. There are a few numbers to keep in mind when talking about debt. In general, the rule of thumb is try to keep your housing expenses, which includes mortgage, tax, and insurance, under 28% of your gross pay (before taxes). And your debt to income ratio should be less than 20% (excluding housing) of your take home pay. The other number to know is your credit score. Credit cards companies will provide it to you. There are also several companies out there that will monitor it for you. It is worth reviewing your credit report to ensure it is correct. If it is not, address it immediately. It is important to maintain good credit history because it directly impacts the rates you can borrow at if you need to.
If you do have too much debt, the first thing to do is assess the situation. Make a list of everything you owe and the terms. From there come up with a plan to tackle it. You can either pay off the lowest amount first or the highest interest rate first. The most important thing is to have a plan and go after it. Once you do, you will really be able to accelerate your investing towards your goals.
As I mentioned in the Investing 101 series (Basics of Investing and Investing Risk and Noise), there is no once size fits all approach to investing. Everyone comes at it from a different angle. Understanding what your objectives are and how much volatility you’re willing/able to stomach will help you determine the appropriate approach for you. There is a lot of information out there about investing… Too much in my opinion. It is easy to get confused. If you don’t understand what you’re investing in, the risks, and the fees it is probably not a good fit for you.
When talking about investment objectives, we focus our attention on a few buckets: preservation of money, current income, and growth. There are some variations within each bucket as well, but some things to consider when determining the appropriate bucket for your situation are age, how much time you have to reach your goal, your stage in life, your financial position, and your individual circumstances.
In general, it is a good idea to focus retirement investing on tax advantaged accounts such as 401k, IRA/Roth IRA before opening a standard brokerage account. Once you have your retirement investing plans in place you can start focusing on college funding, then paying down your mortgage. There are many people out there that can help you weave through this process. Finding an advisor that is a fiduciary, which means they have to act on your behalf, is strongly encouraged.
Remember the power of compound interest? The sooner you start paying down debt and investing the more power it has.
That’s enough to digest for now. In my next post, I’ll continue down the path of the elements of a financial plan and discuss insurance and taxes. Then I’ll conclude the elements of a financial plan series by discussing retirement strategies and estate planning. Have a great day!
As originally posted at http://centsai.com/financial-planning-part-two/

Wednesday, August 17, 2016

People Have to Know You, Not Just Your Product/Service

"People don't care how much you know until they know how much you care."  - Theodore Roosevelt


Combine that with the fact the people do business with those who they know, like, and trust.  And to top it all off, we live in a largely digital world that complicates things even more.  At the end of the day, it is hard to grow a business.


I talk to financial advisors every day about helping them grow their practice.  Many of them walk me through their process of meeting with prospective clients.  It is a fact finding mission and borderline interrogation!


When they do talk about themselves, it is typically about investments.  Many of them are missing the mark.  They are "getting to know their customer", but not allowing their customer to get to know them.  After all, their value to their clients is not the investment piece, it is in the relationship.  It is in the plan they create to help people achieve their goals.


Not everyone is looking for a comprehensive plan, but those who are should get help from a fee only CFP (ideally one that uses Divvy for the investment piece (insert your favorite smiley face emoji here...maybe even one with sunglasses)).  Find one you know, like, and trust.


You have to make your interactions with people meaningful.  You have to make your interactions count.  You have to be yourself and get to know each other.  


I read an article a couple weeks ago in Inc by Chris Heivly, managing director at The Startup Factory.  He knows a little bit about startups and meetings... Click here to read the article.


It talks about a friend of his who had a pretty intense meeting with General Wesley Clark.  According to Heivly, the interaction changed the way Chris looked at meetings... forever.  WOW!


That got me thinking about the most impactful meeting I've ever been on.  In sales/business we want to do an info dump to show how great we are.  We also know that we should ask questions to learn about our prospect and provide a solution to their problems...heck your product is so great it could probably solve the world's problems!


The most memorable meeting I've ever been in was about 10 years ago.  I was in sales for a large telecommunications company at the time and I managed all of the federal accounts in NC.


After several failed attempts, I FINALLY landed a meeting w/ the Commanding General (3 stars) at Camp Lejeune.  I was aware I only got the meeting because his current provider recently upset him.  It didn't hurt that I am a Marine veteran as well.  Either way, I had one shot with this guy.  He didn't like sales people.  And he certainly didn't like taking time out of his busy day to have a meeting with one of them.
He was cordial but firm at introduction.  He made it clear I had 20 mins.  I set my phone on the table (on silent) just to keep track of time.  About 5 mins into my song and dance, my phone rang (on silent but I saw it).  Then again.  And again.  My wife knew where I was and had just called me 3 times in a row.  NOT a good sign.  It is those moments when you have to make a decision and know where your priorities are.


To the General's disapproval I explained what I just saw on my phone and told him I had to take it.  I excused myself and called my wife.  As I came back in the room the General looked at his watch and asked if everything was ok.  I began to gather my stuff up (knowing that I just blew a REALLY BIG deal) and told him, "Yes, sir.  My wife just wanted to inform me that 2 bunnies were doing it in our back yard."  I apologized and told him to have a good day.  He burst into laughter!  We ended up going to lunch and chatted for another hour or so, mostly about how ridiculous our wives were.  We got the sale.  And I educated my wife on what constitutes an emergency regarding multiple calls.

Moral of the story.  People have to get to know you not just your product/service.
 

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Thursday, August 11, 2016

Getting Started with Financial Planning

Financial planning. We’ve all heard the term before but what does it really mean? Aren’t financial plans just for the uber rich? Well, I’m here to explain that you don’t need to have a 100 foot yacht with a helicopter landing pad on it to start thinking about putting together a financial plan.
Some financial plans are more complicated than others and can range in cost from a hundred to tens of thousands of dollars when completed by an industry professional, depending on the complexity.
A good place to begin is to note that a financial plan is something just about anyone could use. It is essentially a road map for you, which details where you are now and gives you action items to get where you want to be. Also worth noting is that it should not just be a tool used by an advisor to find ways to sell you more stuff. If you use an advisor to help you with your plan make sure you understand how they get compensated before you begin. I’d recommend looking for someone who is a fiduciary, which means they have to act in your best interests.
My goal is to help you to understand what a financial plan is and shed some light on the some of topics which should be included in it.  Let’s get started…
What is a financial plan?
A financial plan is an evaluation of your current financial state compared to your desired future financial state with action items to help you fill in any gaps.
It is something that should not be rigid. It is a fluid document that should be reviewed annually and whenever an important life event occurs.
What a financial plan is NOT? As I mentioned earlier, it shouldn’t just be used as a tool to sell you stuff. It is also not set in stone.
Why do you need a financial plan? A financial plan is something that will help you clarify your goals and give you action items to help you achieve them. It will also help you be better prepared for life events.
General Patton once said “A good plan executed now is better than the perfect plan executed later.” I like that quote a lot. To me it means: have a plan, take action, and adjust as needed.
Earlier we talked a bit about a financial plan being a road map to help you achieve your goals.
The real value in the plan comes from the actions you take to get to where you want to go.
A general process in working through a financial plan begins with figuring out your goals, then looking at where you are now. After that you should assess the gaps, come up with strategies to overcome them, and specific action items to help you along the way.
Goals- This is fun part! These are financial goals. There could be many. You should assess each one separately. Start general and work your way into more specific goals. As you get more specific make sure you have a definitive way to measure your progress. You can adjust it as you go. Remember it is a fluid document after all. Each goal should have its own time frame as to how long you have to save for it and potentially how long it will take to spend the money saved.
Now that you have some goals in place, it’s time to assess your current situation. The most important thing to do here is be honest. Take a solid inventory of where you are now. From there you can make some assumptions as to where you will be if you continue the current trends. I recommend being conservative with your assumptions. It will only help you make better decisions as you go. Some questions to ask as you’re working through the assumptions include: How much will you be able to save with future income? Raises? Inflation? Benefits? Investment earnings?
So far we’ve figured out goals and assessed our current situation. Next we need to address any potential gaps between where we are and where we want to be. With each goal come up with a strategy or approach to filling the gaps with specific action items to help you do it. There are several tools out there that can help you with some “what ifs”.
Part of figuring out specific actions items to help fill the gaps involves sticking to a budget. I know. I know. I said the dreaded B word. A lot of people think of budgeting like dieting. When times are tough they tighten the belt and when money is flowing a bit more they forget all about where the money is going. I refer to that as yo yo budgeting. It’s similar to yo yo dieting where people lose weight while on a new fad diet then gain it back as soon as they stop. It we just eat balanced meals, focus on moderation, and exercise we’d probably be better off than bouncing around to a bunch of different diets. It doesn’t mean we can’t ever eat chocolate. The same goes with budgeting. Budgeting does not mean you can’t have fun. It just means that you allot for where all your money goes. It is important to make sure you allot some for entertainment each month.
There are several tools out there to help you track your budget. Starting out I recommend doing it the old fashioned way, with a pen and paper. Every day for a month, write down everything you spend money on. You may be surprised when you see the results.
After you have a solid log of spending, it is time to see where the opportunities are. Check all of your fixed expenses. Are there any areas that could be scaled back? You never know until you ask. Check the variable expense. Are there any area that could be scaled back there? Once you find the opportunities to save, you make a budget for the next month. You can reallocate the savings towards your goals. Remember to make sure you continue to allot some for entertainment. Rinse and repeat.
Hopefully you now have a basic understanding of the first few elements of a financial plan, which focus on awareness. In a future post we will talk about saving, investing, and debt. Have a great day!
As originally posted at http://centsai.com/getting-started-with-financial-planning/