Recently we had a new client who we’ll call John. He is a mid-career attorney who, despite massive career success, constantly felt he was playing catch-up, and had no vision for himself 15 years from now. This isn’t far off from how thousands of other’s are currently feeling.
Without a clear plan, he faced uncertainty about his long-term financial goals, month-to-month budget, as well as increasing his net worth.
John was done guessing, playing catch-up, and feeling behind the ball. He figured it wouldn’t hurt to speak to someone who might be able to provide some guidance, so here’s what we did for John:
1. Clarified Qualitative Aspirations: As we go to know John, we came to understand his family loves to travel to Europe every couple of years, they’d like to improve their back-yard for their kids in the next couple of years, and they’re also big sporting event people (Go Phil’s!) John didn’t want to stop doing these things, but wanted to feel more confident when he actually does them.
2. Budgeting and Cash Flow Management: As John’s income increased over the years, so did his lifestyle expenses. The Europe trips got more lavish, and they began buying better tickets for the games they went to. However, as his income increased, so did their expenses. Constantly, they couldn’t figure out how they were making more, but weren’t increasing their net worth. They couldn’t see past the year they were in, every year.
3. Investment Strategy: First off, we had to identify some of the time horizons. Because John’s family wanted to do things in the short(er) term, we put together a “Bucketed” approach to his savings, coupled with accounts that are diverse amongst their allocations, but also are diverse from a liquidity + tax standpoint. Our goal was to add confidence in their short term spending by having accounts specified for this, but also in their long-term spending. Now that they’re saving tactically each month, their next Europe trip will come with no guilt, or worry.
4. Spending: John started saving monthly as referenced above, but he shifted his mind-set towards making his family’s monthly savings a “Bill,” rather than “Something we’ll do if money is left over.” Now if money is left over, the family can go to a game with good tickets, as they know they’ve already paid their bills + saved this month, adding significant confidence every time they enjoyed themselves. Anything left over is for fun.
5. Retirement Planning: One of John’s primary concerns was ensuring a comfortable retirement, all the while having some fun in the 20 years leading up to it. Because John is fairly young, we incorporated an allocation that’ll enjoy more upside growth, coupled with his short-term investments in the interim. Because of this incorporation into the plan, John also is saving on his annual income taxes with some of these contributions.
6. Insurance and Risk Management: To protect everything he’s working for, he simply transferred any potential personal risks to an insurance company (Within reason). Home & auto, umbrella coverages, life + disability insurance, etc. Our goal was to dig a moat around the plan, but also not be overpaying on any of these coverages, allowing for more investable money as part of John’s plan.
7. Estate Planning: John also addressed his estate planning needs, with a basic will, trust, Health-Care Directive, etc. This can be a blog in of itself, so keeping this piece brief!
Benefits Realized:
- Increased Confidence: John knows exactly where he is saving, the time horizon for each bucket, and now feels guilt-free in his short-term spending.
- Reduced Stress: With a structured plan in place, John feels less overwhelmed by financial uncertainties, and can now see himself, and his family, 20, 30, 40 years down the line.
- Net Worth: One of his main concerns originally was even though his income steadily increases, his net worth remained stagnant. Since adding the monthly savings plan, John will begin to see his net worth climb year-by-year moving forward.
John’s story is an example of how financial-planning can not only bring confidence to an individual, but also how someone can start. There are hundreds of thousands of Americans who ignore this piece of their life on a daily basis, even though aside from health & family, there are few things less important than one’s financial situation.
If you’re feeling like John, let’s get together and see if we can add confidence to YOUR plan.
