Is it time to Re-evaluate your Financial Plan?

By
Jeff Motske, CFP®
February 14, 2022
Share on:

Re-evaluating your plan and re-evaluating your opportunities is really important. According to Northwestern's 2020 Planning and progress study, 71% of Americans feel their financial plan could use some improvement. So maybe you have a plan, but you're saying, “Maybe I can use some improvement”. At Trilogy Financial we look at the work that's been done in the past. Remember that we're not judging what was done in the past, but we'll look at that and say, is there any way that we can make improvements upon what's been done in the past to help you plan for the future. Understanding that is really important. A plan is not static, it's a living, breathing document, and you want to make sure that you're updating and reevaluating your opportunities on a regular basis.

Another thing to think about is interest rates is we don't know what's going to be in the future. I think this is an interesting one as well. Many Americans for 2020 stayed at home a lot and a lot of them spent less money. Matter of fact, Northwestern Mutual did a study for 2020 on average, people say it's about 10% more money in their personal savings than they did in 2019. Well, why didn't they spend? Some of it was lifestyle – they didn't go out to dinner as much; they didn't go on their vacations- there’s a lot of things that were held back due to all the craziness that had gone on. But there were people that spent on home improvements in other areas as well. People were spending more on their houses because they were living in their houses more. There's a lot of people that saved more or in that period. You might want to evaluate what to do with that savings. Maybe that's the first step in building out a financial plan. Maybe that's the money that should be put towards the college plan. Maybe that's the money that should be put towards lowering your debt overall. Maybe that's money that you should use to increase your path to financial independence. Re-evaluating your opportunities, your long-term financial plan.

I would highly encourage you to re-evaluate those opportunities again. At Trilogy Financial, we do that all the time. We look at current plans and make sure they make sense. Then when you have extra money that's saved, we look at is it working hard for you and is it working hard for your financial why. Maybe you're in a place where you can refinance. Saving money, and refinancing is another really good tool to help create more cash flow and help you get on that path to financial independence.

I'm big on this thing called Financial date nights. Earlier, I talked about the fact that people argue about money, financial date nights once a month, get out of the house, go do something different. I've had people do financial date drives that live in big cities – go have a cup of coffee, have dinner, whatever it is. Get out of the house and talk about your financial whys, talk about your planning, and talk about your goals. Don't argue about them. This is an opportunity for big picture, global type discussions within the couple and then work through those things. And when you need help and more clarity, that's where a financial advisor can really jump in and help you jump-start whatever is going on in your financial plan.

Another thing is to be flexible and willing to adapt. I said this earlier but good financial plans are living breathing documents. In regard to this, all of our clients at Trilogy Financial have their own portal. Inside that financial portal is their financial plan that updates on a regular basis. We can put paperwork in there or documents in there and it's something that's living and breathing. You may need to be flexible with what's going on in your world. Timeframes constantly are getting adjusted. We've had people come in and say, “You know what? I'm thinking about retiring early” or “My companies offering me an early retirement package.”, or “I have to work a little bit longer” for whatever reason. That's just something you update in the plan. College scenarios too. Some kids are deferring going to college and I don't blame them. You didn't pay for online college, and you may want the experience. If that’s the case, you’d go in a different direction. Whatever those things are, be willing, flexible, and adjustable and in communication with your spouse, your partner, or business partner.

Meet and talk with your financial advisor regularly. They should be asking you those questions and they will be updating you on the markets and current events. what I would say are the unknowns or the instability side. The other thing about having that advisor is that joyful accountability. Have an advisor, have a coach, have a financial team – they'll help you stay accountable to do what you say. They're not going to be bugging you, they're going to be reminding you of the good things that you've said during those planning discussions. They're going to be reminding you where you are and they're also going to be praising you when you're doing what you said you were going to do. And when you do that, you make great progress, and when you make great progress, then the plan progresses year after year after year.

How much closer are we to financial independence, that's the conversations that happen over time. So, take action on what you can do, be in control of your knowns, and plan for the unknowns. Again, insurance is a great thing for that. Work with your advisor on the unknown, so you have less anxiety. Be flexible and will be willing to adapt and remember the financial planning documents and plans are living, breathing documents. Life happens, life events happen, and you've got to plan for those things. If you're not working with a trust or a financial advisor investment fiduciary, look to find one that can help you build your own personal plan.

 

You may also like:

By Trilogy Financial
March 6, 2018

Recent market volatility and nervousness of investors seems to make this a good time to re-evaluate our current time frames and allocations for our investment accounts. One of the most important reasons is that our time frames and risk tolerance often clarify and determine the type of investment and allocation we should consider for our money.

Let’s agree that we might feel the market is efficient over a long period of time. With this kind of long-term perspective, should this recent volatility send us into a panic when evaluating our 401k and Roth IRA; investment accounts that possibly will be utilized 10, 15, or even 25 years from now? I anticipate you can come to my same conclusion…no. Let’s take this idea one step further. I would argue that panic should not be the response, but an excitement to save more, invest more, and watch our money possibly work more efficiently for us than if it was sitting in a safe, under the mattress, or at the bank. Market volatility and “correction” is healthy for long-term investors.

Now, I just alluded to two long-term retirement accounts. What if we have a 12-month goal to renovate the kitchen? That is a different time frame. That would result in a different level of risk. In fact, oftentimes, if the assets invested are to be purposed for a capital expense within the next twelve to twenty-four months, I then recommend holding on to cash and savings. The risks and costs of investing might be too high for our level of comfort for that short of a time-frame. Then, when we know the basement is set to be finished, the birth of a child is coming, or a rental property down payment are in sight, then we may want additional funds in the bank outside of our traditional three to six months of savings, especially if the time frame is tight.

And finally, what if we have additional cash that we don’t have a specific priority in mind for, and we have a comfortable amount in our bank savings, and we don’t want to wrap additional money into a retirement account and then not have access to it until after age 59 ½? This idea, this solution, is often unknown to investors. We are taught that we need to save into retirement accounts and make sure we have three to six months of emergency savings…but that’s not all we should consider. A non-retirement investment account helps us be more efficient with our excess cash or monthly cash flow, yet these invested assets are still accessible within 2-7 business days. In the 5, 10, or even 20 years until retirement, do we anticipate having a few non-retirement priorities? I’m confident the answer is “yes” for just about everyone. Or, maybe we run into a few unexpected things, too. Let me name a few examples…anniversary trip, home remodel, broken furnace, family vacation, new car, next down payment, adoption, or caring for our parents. Until we have a time frame, let’s believe in the market, invest our money in an efficient, cost-efficient, diversified portfolio, set to our level of risk and based on our anticipated time frame.

When a priority shows up, or even a BIG emergency, if we have been saving all along, it might make us better prepared. Just like a 401k, we can establish this type of investment account, determine a monthly contribution amount, and we can save and invest on a monthly basis. This could be incredibly impactful, because if we stick to the alternative of trying to over-save into our bank savings account, what might happen? Just prior to the end of the month, we might be too tempted to “slide to transfer” our “extra” funds right back into our bank checking. By establishing this additional, more efficient savings vehicle, funds that are earmarked for a future priority, outside of two years from now, will help us to be better prepared when that priority shows up, AND, hopefully having a stronger earning potential than what is available as interest at the bank.

This last example addresses an intermediate level of planning that tends to get lost in the emergency savings/retirement planning conversation. One consideration, please be aware that since these funds may not be in tax-deferred type of accounts, there may be various kinds of taxation on the growth and trading of holdings within these accounts. You would need to discuss taxation with your tax professional. Short- and long-term capital gains taxes are to be considered. But again, one of the biggest benefits of this type of account is that these funds tend to be more readily accessible. The flexibility of these types of non-retirement investment accounts are considered to be incredibly instrumental.

To summarize, if you are funding your 401k, and you have an adequate level of savings in the bank, and still have additional cash flow that could be used for future priorities, then I encourage you to establish an individual or joint non-retirement investment account for those exact goals. But first, please schedule time to meet with a Certified Financial Planner to help craft a strategy for your financial plan. He/she will help you better understand your time frames, your priorities, which will then determine your allocation, your level of risk, your investment, and the titling of the accounts.

So, despite the market volatility, the encouragement is the same: spend less, save more, start today.

By
Steve Hartel, MBA, AIF®
April 24, 2018

Congratulations. You’ve decided to work with a financial professional to help improve your financial situation. How do you find a good one? Unfortunately, that’s harder than it sounds. There is a huge barrier between people seeking good financial advice and professionals offering it. Advisors can be found in the yellow pages (Millennials, you might have to Google that), on various online sites, by answering incoming phone calls, by asking your friends and neighbors, or any number of other ways. Personally, I believe a referral or introduction from an existing client is the best way, but that could be another entire article. Here are some suggested questions you should ask a prospective advisor.

  1. Start by asking yourself what kind of help you think you want and/or need

Are you just seeking help with your investments? How about someone who will be the “quarterback” of your entire team of professionals (tax preparer, estate attorney, bookkeeper, banker, investment manager, etc.)? Are you looking for someone who simply suggests things for you to go do by yourself (what I call the “travel agent” model), or someone who will give you advice and then help you carry it out (what I call the “Sherpa” model)?

The answers to these questions will determine what kind of professional to seek out. I know some of you are thinking, “Wait—aren’t they all the same?” Trust me; the answer is an emphatic “NO”! One of the best ways to determine what type of professional someone is, is by asking about their credentials.

  1. What are your credentials and what do they mean?

Anyone can call themselves a financial advisor. A stockbroker, a life insurance agent, a mutual fund sales rep, an annuity salesperson, a banker, a mortgage broker. Seriously, there are no rules for the title Financial Advisor. The title Financial Planner, on the other hand, has very definitive rules. There are only two kinds of people who can legally call themselves a planner. One group took classes, passed some exams given by an industry group, and received the Certified Financial Planner (CFP®) designation. The other group took classes, passed some exams by a governmental group, and received their Series 65 or Series 66 registration. These folks are called Registered Financial Planners, although that moniker hasn’t caught on yet the same way the CFP® has. Both of these groups can legally charge you a fee for giving you advice.

You might also encounter professionals who received a Series 6 registration (this allows them to sell you a mutual fund) and/or their Series 7 registration (commonly called the stockbroker license). You will also encounter people who have some combination of these.

Someone who only has a CFP® can give you advice but can’t help you execute it. These are the “travel agents” I referred to. This might be a good choice if you want to pay for advice but then go do everything yourself. Another example might be people who hire a personal trainer at the gym one time to teach them the right exercises to do; then they go do them by themselves.

Someone who only has a Series 6 or 7 registration can sell you products for a commission, but they can’t give you any advice. Let’s call them “luggage salespeople.” This might be good for people who don’t want professional advice, make their own decisions, and simply need to buy financial products in a transactional relationship with a salesperson.

Someone who has their Series 65/66, or has their Series 6/7 and 65/66, or who has their CFP® and Series 6/7 and/or 65/66 can perform the “Sherpa” function of going on the journey with you and helping you implement the advice. These are good choices for someone who recognizes the value of professional advice and knows they need a little extra help with actually getting things done (or want that extra accountability). Think people who hire a personal trainer at the gym and see them week after week. In my experience, clients of these professionals make the most consistent progress toward their long-term goals.

  1. How will I be charged? How do you get compensated?

Sometimes those are the same question and sometimes not. Does the professional make a commission when you buy a product? If so, how much is it? Do they charge an hourly fee, a monthly fee, or a one-time flat fee? Is the professional paid a fee based on the size of your invested assets? What is that fee?

If you are buying products, are there any fees built into the products themselves? How much? Are the fees for the product clearly spelled out or are they buried internally?

Will ALL of your fees be clearly itemized on your statements? Ask to see an example.

  1. What services do you provide?

This should line up with your answers to Question #1. Don’t make any assumptions here. Make sure the service you are seeking is actually provided by the professional you are interviewing. The professional might want to sound like they can do everything for you. For example, a stockbroker can open an IRA for you, but that’s not the same thing as doing retirement planning for you. Be clear.

  1. Are you a Fiduciary?

Due to a recent regulatory change, this is the new industry buzzword. There are multiple standards of care in the financial services industry. One is the “suitability” standard. Professionals who do not give advice are held to this standard. They need to show that the product is appropriate for someone in your situation, but they don’t have to disclose their compensation or prove that the product they recommended is actually in your best interest. If there were two products that both accomplished the same thing, but one resulted in the professional receiving higher compensation, the professional doesn’t have to tell you that.

The other standard is the “best interest” standard. People held to this standard are fiduciaries. They must always act in the client’s best interest. If they sell you a product, they must demonstrate that it is in your best interest rather than their own.

Conclusion

I’m a Sherpa, so I naturally believe that’s a better choice for most people seeking professional help with their finances. My fees are very clear and, they appear right on the statement or contract signed by the client. I think hidden fees should be avoided at almost any cost. My clients hire me on an annual basis to be their DecisionCoach. I give them advice, I help them make better financial decisions over time, and I help them implement the advice. Depending on the client, I might be helping with organization, cash flow, investment management, budgeting, retirement planning, college planning, income planning, tax mitigation, asset protection, insurance, advanced medical expense planning, estate planning, and much more. Are you looking for a professional like me?

Get Started on Your Financial Life Plan Today