How Not to Let Your Family Squeeze

There may be plenty of factors outside of your control that impact your financial situation, such as the markets, the economy as a whole, or an unexpected illness. But those circumstances may not play as critical of a role in your financial life as you might think. The real dangers to your financial future are the lies you tell yourself when it comes to financial planning. Here are some ways you could be undermining your financial success and some ideas on how to change course.

Lie #1: I Don't Need Help. I Know What I'm Doing

Let’s say you read a plethora of financial planning books, stay up-to-date on the markets, and know all about budgeting software. That may put you ahead of a lot of other people, but there are certain aspects of financial planning that often go ignored even by the most knowledgeable people. Let’s look at a couple of hypothetical examples.

How Often Do You Review?

How often do you refresh your goals, adjust your plan, and determine how and when to make changes? A financial planner does more than just monitor your portfolio. They act as your coach, motivating and guiding you when things get tough. They bring an objective perspective to the table and develop a customized strategy based on your financial priorities. The end result is increased confidence in your financial strategies and decision-making. You don’t want to suffer a financial setback just because you were too busy or too forgetful to keep up with your financial plan.

In Case of Emergency

What if the unthinkable were to happen and you couldn’t make financial decisions? Will your family be able to handle the details and figure out your financial plan? An advisor can offer a holistic overview of your net worth and determine what elements need to be in place to protect your family and your wealth. These are often things you may not be aware of, such as life insurance or a living trust.

Market Research

Investing is tricky business on a good day. Can you manage the emotions, anxiety, and possible second-guessing of your investment choices if you were living on a fixed income and the market were to face a correction? An advisor has tools to evaluate cash flow to help you determine the probability of your money lasting through your retirement years. They can also keep you accountable and committed to your long-term strategy in the midst of market ups and downs.

Lie #2: I Can Always Get Help When I Need It

If you were going on vacation, would you rather have everything packed ahead of time and enjoy your restful break? Or would you prefer to be disorganized and arrive without essential items, forced to then spend your time off running around shopping for things you forgot? When it comes to money, it’s the same idea. When you really need the help, you may have lost your most valuable resource – time. Instead of thoughtfully researching your options and making decisions with a clear head, waiting until you need help will result in a frantic scramble to just get things done.

Whatever it is you experience in life, having a financial planner on your team will help you stay on top of your money and prepare in advance for future milestones and events.

Lie #3: I Don't Need An Advisor, I Have Financial Technology

Financial planning has evolved. Years ago, it was about who had the most up to date information on a company to buy a stock, and the planning industry was mostly concerned with buying and selling stocks and bonds rather than portfolio management. Today, financial planning is more about what’s missing in your overall strategy, what have you not thought of, and what could you be doing that you’re not. On top of that, the financial planning process helps you emotionally connect with your goals so you can get on the right track. Technology, at the present time, can’t do that.

Technology has many good points, but several drawbacks as well. For example, you can find more information than you’ll ever need, but you’ll also come across plenty of misinformation which could lead you astray. It’s not uncommon for someone to research something on the Internet and find just as many pros as there are cons. If you want to save for your child’s college education, you’ll find articles touting the value of using a 529, a Roth IRA, or a Roth 401(k). How do you figure out which one is truly right for you? The abundance of information has created so much noise that in many cases, people don’t do anything at all.

While technology should be used in financial planning, it should not replace the role of an advisor. The importance of what advisors do from a human aspect is help clients sift through the noise and misinformation and encourage them to move forward in taking action.

A Change In Perspective?

Have you ever believed one of these lies? It’s easy to do, but the consequences are real. Don’t take a gamble with your money. Join forces with a financial advisor who can help you make the most of what you have, where you are, and get you positioned for a bright financial future. Call my office at (949) 221-8105 x 2128, or email me at michael.loo@lpl.com for a no-strings-attached meeting to discuss your situation.

There have been countless news stories about how Millennials are different than previous generations, including their relationship with debt. The principles on debt – the difference between good and bad debt and how to make sure your money works for you – haven’t changed. What has changed are the ways to prepare for retirement and the mountains of student debt that many millennials are struggling under. This large debt slows down their ability to build toward their financial independence, which is a road that many have to pave on their own.

First off, preparing for financial independence has changed. One’s golden years are no longer secured by a pension. More and more people are accepting that preparing for retirement rests solely on their shoulders. The look of retirement has changed as well, with some expecting to continue working because they want to, not because they need to, as well as some embracing the FIRE movement and planning to retire well before 65. For many, the financial landscape that people are planning for has changed.

One of the things that hasn’t changed is what we have historically considered “bad debt”. Credit card debt, high car payments and other depreciating assets, can be harmful to your bottom line. These expenses don’t increase your net worth and often simply distract you from your long-term goals of financial independence. It’s a good idea to keep expenses in this category to a minimum.

Good debt, on the other hand, is money you borrow to ultimately increase your wealth. Historically, student loans for higher education and real estate have fallen under this category as they were seen to be investments that would bring sizable returns in the future. As with any investment, though, you need to critically examine your likely return to make the right decisions. If you are looking at taking student loans for higher education, the goal is for that education to secure a position that will provide you a greater salary. However, if you take out a $100,000 loan to enter a profession that generally generates an annual $40,000 salary, which doesn’t seem to be the best return on your investment. This is the lesson Millennials are laboring under. With $1.5 trillion in outstanding student loan debt[i], Millennials are struggling to make ends meet, let alone build for the future.

Like a series of dominoes, consequences of financial decisions can be far-reaching. Yes, real estate can be a building block to your financial freedom. Yet, many Millennials are delaying buying a home due to their significant outstanding student loan debt[ii]. Additionally, if you’re looking to buy a house that requires a mortgage that leaves you with little funds to contribute to savings or other investments, it may no longer be a good debt option.

In the end, everyone should be looking for ways to invest in their future. You need to be mindful about your money and how it’s working for you. While it’s good to make sure that you’re not throwing your money away, you also want to make sure that your debt is worth the expected rate of return. Everyone has multiple goals, both short-term and long-term. If you plan the right way, you can make sure that the money you have today can work for your dreams for tomorrow.

[i] https://www.cbsnews.com/news/student-loan-debt-i-had-a-panic-attack-millennials-struggle-under-the-burden-of-student-loan-debt/

[ii] https://www.forbes.com/sites/ellenparis/2019/03/31/student-loan-debt-still-impacting-millennial-homebuyers/#6a8ff1073e78

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine what is appropriate for you, consult a qualified professional.