Keeping on Top of Your Financial Situation

This is a post I’ve been thinking about for a couple weeks.  It started with a personal experience.  My family purchased a life insurance policy on my grandfather about 15 years ago.  When we bought it (I say “we” although I was only 19 and had nothing to do with the purchase), the plan was for the policy to be in place through my grandfather’s 100th birthday (he was 71 at the time).  We have been paying the premiums, and have even increased the premiums in recent years.

A couple months ago, I decided to examine the policy (it was the first I even knew about it).  I realized that, as the policy was written, and with the happenings in the economy, the policy was now only projected to last through his 91st birthday.  My grandfather is now nearing 86 and is healthy as a horse.  Now we are left with decisions as to how to address this issue.  Do we wait until the policy gets close to expiration before deciding to extend it?  Do we just let it expire, and know all the money we put in is lost?  We are in the unfortunate situation of benefitting if he dies sooner than expected.

The reason this brings me to this post is that, if we had re-examined the policy 10, or even 5, years ago, we would be in a much better place to alter it to last longer.  We should have taken a look every year, or at least every 3 years, to make sure the goal of the policy matched our current situation, needs, and abilities.

This is the same for everyone.  I have spoken to so many people who purchased some insurance years ago, and have not talked to the person who sold it to them since.  Their situations have changed, and their coverage and savings vehicles no longer match their objectives.

I have also spoken with several people who think they have plenty of coverage through work.  I am always happy to evaluate their current benefits, and see if they match the objectives and needs for protection, growth, and tax reduction.

Of course, you will tell me that I am going to find some need just to sell something.  My response is that YOU are going to find a need, and I can help you solve your problem.  Most of the people in my field are really trying to help.  We’re acting like any other professional in that we’re evaluating your current situation and future needs, and developing a plan to get you to your goals in the most efficient way possible.  Usually our time is free, and you are free to take our advice or leave it.  However, please take advantage of our expertise, and help yourself to avoid a bad situation before it’s too late.

Why You Plan

I gave a workshop this week on Basic Financial Planning.  I talked about the foundations of a financial plan, and discussed some of the concepts and vehicles used in planning for your future.  Among these were Life Insurance, Disability Insurance, Retirement accounts, college savings plans, etc.

A few really good questions came out of the session that I wanted to share.

1.  Do I see lifetime employees or business owners saving more toward retirement? My answer was that I see that lifetime employees are much more likely to save a great amount toward retirement.  There is a kind of forced savings in that their employers usually offer some kind of retirement plan.  Entrepreneurs, on the other hand, tend to put as much of their money as they can back into the business.  While this is good when trying to establish the business, at some point they really need to start taking money out and saving it.  They can no longer count on selling their business to provide for retirement.

The irony is that there are so many more options available to small business owners to put more money away for retirement.  There are SEP, SIMPLE, 401k, 412, Keogh, etc.  The people that have the opportunity to put more away, in a more tax efficient manner, are the ones who aren’t taking advantage.

2.  Are people reluctant to buy insurance or do any planning right now? At first people are usually reluctant to talk to me.  They think I’m going to try to sell them something they don’t think they need.  However, we go through some processes, and talk about their present and future needs.  Almost every time I talk to a client, I ask how they feel about their planning so far.  I always get a grin, and they tell me they feel a sense of relief.  They feel good for doing some planning…for taking some control of their financial future.

3.  Can we stop calling it “retirement?” I’ll attribute this to Erica O’Grady.  She told me she has no intention of retiring, nor do most of her friends.  She’s really right.  So many in our generation aren’t going to go for the old school definition of retirement.  We’re not going to stop working completely, buy a condo, travel the country in an RV, etc.  We’re going to keep working, keep volunteering, keep active.  However, we need to make sure we’ve planned enough that we don’t HAVE TO work.  We’ll work because we want to.  That way, if we want to work on writing a novel, or fixing up cars, or running a non-profit, we can do so.

As per Erica’s suggestion, I’m going to start referring to it as Lifestyle Freedom.  Thanks Erica.

Thank you to those that attended and had great questions.

A week in the field

I had a full week of meetings to talk about my new products and services.  I had several appointments, all with friends.  I must admit, it was awkward.  Not only was I conscious of the fact that I was, in essence, trying to sell insurance, but I was asking friends to divulge some information about their personal finances.

I don’t feel like I pushed the insurance on them at all.  I told them why I chose this career, and why I chose the firm I did.  I then went into a description of building a financial plan.  I think I sufficiently explained why life and disability insurance are the basis, or foundation, for a financial plan.

The logic is that, if you have $500 to invest each month (you certainly don’t need that much to get coverage.  Also, do know this amount is NOT meant to be a quote for anyone in particular), you can either put it into an investment account and hope it appreciates, and hope, if you need it, the market doesn’t happen to be down 40% that year.  Or you can make sure you have enough life and disability income insurance to cover your home, family, income, debt, funeral costs, etc., should you die or become disabled prematurely.  If something bad were to happen, you get more bang for your buck with life and disability income insurance than you do in an investment account.  When you start making more money, you can start investing because your family is taken care of in the event of death or disability.

I even explained the difference between whole and term life insurance to some of my friends, and they were grateful for the education.

I definitely felt myself getting a little pushy.  However, I know it was not due to my desire for commissions.  I’m sure in the past the stigma of the pushy insurance salesman has been deserved because the agents un-ethically tried to sell products that were not best for the clients, but were best for the agent’s wallet.  This week, though, I felt my pushiness came from a desire to help.  The building of the plan made perfect sense to me, so why wouldn’t it make sense to my friends.  Why would they be adamant about wanting to keep finding good value stocks rather than protecting their families?

I got the “give me a few months and then we’ll take a look” responses.  What if something were to happen in those few months?  I know that seems like a sales ploy to try to get you to buy now.  However, it is exactly what these products are designed for…unforeseen circumstances.  If you know you need life or disability insurance, and you have the money to buy some (any is better than none at all), you should get it now.  It has nothing to do with my commissions…it just makes sense.

We can build the retirement planning, college planning, and investment accounts also, but let’s make sure we have your family, house, and ability to earn income covered first.

Am I wrong here?  Am I being too pushy?  Please let me know.

Many more appointments scheduled next week.  I’ll be back with more updates.

Learning the business

I’ve spent the last couple weeks learning the business of financial advising/financial planning.  The best part is that I am certain I made the right career choice.  This is definitely the way I would like to help people.

The main thing I’ve learned about so far is insurance – life, disability, long-term care – and how it fits into a financial plan.  I’m shocked at how easy it can be to protect your family, home, income, etc. from catastrophic circumstances, and how relatively inexpensive it can be.  If I’m a professional making $125,000 per year, why wouldn’t I want to spend a little every month to know that, if I were no longer able to work for some extended period of time, I would still receive an income.  However, most people look to put this money into an investment account first even though it will take decades to have enough in investments to provide the same protection as they would have from day one.

It was also a little sad to hear about long term care insurance, and to think of my grandparents.  My grandmother is now in a wheelchair, and can no longer bathe her self, get around, get dressed.  My grandfather has a nurse come to their house every day from the time she wakes up until she goes to bed.  If he had purchased long term care insurance, he would be receiving money every month to pay for the nurse, instead of depleting his savings.  I will be purchasing LTC for both my parents so my brother and I will be able to give them the best possible care if the time comes that they need full time assistance.

Making a Career Change

The career change starts today.  I’m going from the IT industry to the financial services industry.  Many people are asking why I would make the change, and, especially, why go into financial services now.

First, why leave IT.  To be honest, I was never a true “techie.”  I went to work for a startup application development company in 2000 when it was cool to do so.  From there I started a software company because I thought that software application would be a good one.  We migrated that company from IT management software to IT services because the business model was better.  I never learned programming, I didn’t learn how to configure a router or install a server.  I was the running attempting to run the business.  I was determining strategy, marketing, business development, partners, service offerings, employees, benefits, etc.

I decided to get out of the business partly because it was not my calling – I liked the business model, but I was never crazy about running a business where I knew I would never fully understand the services we offered.

I took quite a while to find a new profession, job, career, place to work.  I first thought I would be a small business consultant.  However, between the falling economy and the hurricane in Texas, spending on small business consulting seems to have fallen.

I decided to take a look at what I liked and did not like about running my business.  I loved the business development aspect more than anything.  I enjoyed getting to network, meet new people, identify issues they might have with their business that I can help.  I enjoyed the opportunity to build trust by finding someone in my network that might be able to provide some assistance also.

In the midst of all this soul searching, the economy was hurting and the market falling.  I had just purchased a house, and was going threw some financial budgeting issues while attempting to reconcile the credit cards, insurance, bank accounts, savings accounts, investment accounts, etc. that my wife and I both maintained.

I realized I could really use someone to help me make sense of my financial future.  I wanted to know how much to save, invest, and spend.  How much life and disability insurance I should have?  How do certain accounts affect my taxes?

Admittedly, I always a skeptical view of the industry.  There were life insurance salesmen, whom I would avoid at all costs.  Then there were stock brokers who were trying to get me to make more trades.

However, the more I talked to people I TRUSTED in the business, the more I realized they were doing the same things that I ENJOYED about my business.  They were meeting new people, and providing much needed solutions, advice, and guidance that impact people’s lives immensely.  I even have a financial background – it was my major in college, and I spent my first 4 years in financial roles.  Why wasn’t I pursuing this career?

So I started trying to find my way in, even during a downturn in the market.  I interviewed with several companies.  Some I liked, some liked me.  I decided on a place to call home based on the people on my team, the management, the perception of the organization, and the mix of products and services available. I will probably steer more toward investments than insurance, but I know insurance is a HUGE part of managing and protecting one’s family and wealth.

I am excited to start, not only a new job, but a new career.  I am looking forward to helping without being pushy.  I want to make certain my clients know I am always being mindful of their best interests.  I can’t wait to learn the ins and outs of the products and services.  Any advice will be welcome.

I’ll be attempting to document my growth, as regulations allow.  If you’d like to talk, email, meet, chat, etc., please feel free to contact me.