Financial Planning for the Ages – and Through the Stages – of Your Life
April 17, 2018
The path to financial success is a journey with many ups and downs. And, success means different things to various individuals based on your personal financial goals.
As you navigate the different ages − and stages − of your life, your financial plan must balance present day needs with long-term objectives.
In the following “Now to Next” podcast, Andrew Thompson, a Director with SC&H Financial Advisors, takes a deeper dive into the topic of financial planning for the ages, and through the different stages, of your life.
Audio Transcription
Q: What exactly does it mean to have a comprehensive financial plan?
The good news is that for most people, the phrase “comprehensive financial planning” simply means being intentional about how we’re going to run our financial lives.
Our role here at SC&H is to help clients figure out what’s important to them − what needs to be done today versus tomorrow, and then determining what they can do to put the odds in their favor.
Then, we simply map out a game plan for getting there while measuring progress and success along the way. When you’re intentional with your money, you’re going to find success comes a lot easier.
Q: Why is it crucial to think about the different ages and stages of your life as you create this comprehensive financial plan?
As the old saying goes, you don’t know what you don’t know. What we’re trying to do is help people recognize that with each decade in life comes important decisions that can be extremely impactful on the trajectory of their life.
So, if we can help a 20-something, for example, pay off student loan debt 10 years earlier, think about the impact that’s will have on their ability to do other things with their money down the road, versus paying all that back to a bank.
This can be life-changing for some people if we can get to them early. So, we want to outline some of those key areas that are unique to each decade of someone’s life, and give them some information that may help them make a more informed decision. Then, they can be more confident with those decisions as they go through those stages.
Q: You discussed student loan debt for someone in their 20s…what about someone in their 30s? What’s a big milestone that they should be thinking about as they plan for their financial future?
I think right now with tax season wrapping up, a lot of people have probably seen the results of their tax return. They’re looking at page one and seeing, “Well, I made a decent amount of money last year,” hopefully that’s what they’re thinking.
But unfortunately, maybe they’re also thinking, “where did it all go? what happened to it all?”
When we talk about being intentional, that’s what we mean. It’s telling your money what to do, and you can only do that if you have some sort of game plan that you can go back to each time.
So, someone in their 30s may be established, or getting established in their career, and may be making a little bit more money. It’s important to have a game plan for what to do with that income, right?
As a tax firm as well, we’re going to be looking at that from a tax angle. How can we most efficiently put those dollars to work? They may have some young kids. If you’re in your 30s, you may be thinking of starting a family. “Do I have the right kind of life insurance? If something happens to me is my family going be okay?” And there’s a lot of questions that go into that with life insurance, for instance, what type, how much, how long do I need it?
Q: Let’s take a minute to focus in on the comment that you made about tax planning and having taxes as an important component of your personal financial plan. Can you speak more to this?
We’re big believers that it’s not just about what you make, it’s about what you keep. And if all of my investment returns go out the window because I have to pay capital gain taxes on that, then what have I really accomplished?
And so we want to help people really understand there is a way to keep more of your gains. We can do that by sheltering that inside of a qualified retirement plan for instance. Sometimes that’s available through your employer, sometimes it’s not. If you’re self-employed, there are a lot of different options.
So navigating that landscape is tricky if you don’t have a partner to do that with you, someone who has experience specifically in that area. So that’s where we love to get involved in and show people the results. Here’s how…instead of it costing you $1 to put $1 in the account, it only costs just 70 cents to put $1 in the account because you’ve got a tax deduction for doing it. So that’s a very big component and makes a big difference in moving that needle in somebody’s favor.
Q: Can you talk to us a bit about how SC&H Financial Advisors really partners with clients to be there throughout all of the ages and phases of life?
Andrew: I think people feel comfortable working with us because they know we’re going to handle every aspect of their financial life, meaning we’re not just an investment firm.
That’s a component of the relationship, but that doesn’t drive any of our planning decisions. The planning drives the investments and that’s a bit unconventional in our industry. A lot of times the focus is solely on the investments. And so the reason we talk about planning a lot is because any decision we make should be based on what it is the person is trying to get accomplished, and that’s different for everybody, depending on what stage of life they’re at. So for somebody who’s in their 20s, they’re not really thinking about retirement.
That seems so far away. Well, in fact, for most it is. It’s probably 30 or 40 years away. And so for them, it may be getting out of student loan debt, and how do we best tackle that. They’ve got $100,000 student loan, “where do I start?”
And so that’s really where a lot of our initial conversations are going. For somebody who is 50, they might be thinking, “I’ve got 10 years between now and retirement to get prepared for that. Where do I start?” And so no matter what stage you’re in, we have a lot of experience getting involved in those different circumstances that are unique to each decade.
Q: What about someone closer to retirement age? What should they consider in terms of what’s next?
Andrew: That’s a big trigger for a lot of people that we meet, it’s they hit a certain milestone or a milestone event, whether it’s having a child, or starting a new job. In a lot of cases, it’s hitting a certain decade. For a lot of people thinking about retirement, it’s age 50. And they’ll contact us because they’re uncomfortable with where they are today and where they know they want to be at retirement. They’re not sure if they’ve done enough yet.
The first thing we do is say, “take a breath. It’s going to be okay. We can’t change yesterday, we can only focus on today.”
And so let’s look at what we have control over. Let’s not worry about what’s outside of our control. Where are we today? Where do we want to go? And what do we need to do to get from point A to point B?
We’re going to partner with them, and tell them, “Hey, this is realistic for you,” or, “it’s realistic with certain caveats, meaning you can do it but here’s what you’re going to have to do to put that into play.”
And sometimes if it’s not realistic, we need to be honest with them. My job is not to make everyone happy that walks out of the office. I hope that’s the result, but I have to also be giving them the truth because otherwise, it’s harmful.
Q: What are some of the areas that have the most impact on the success or, unfortunately, the failure of your financial future, regardless of your age?
I think a lot of people get too caught up in the numbers, whether that be performance or how much they have in savings. And they’re important, but I’d argue they’re far less important than our behavior and how we handle our emotions.
That’s what having a financial plan can do for you. It just puts the odds more in your favor that you’re not going to derail because of how you feel at the moment. Sometimes focusing on how much you have saved at any given moment can either make you overly optimistic or under-optimistic.
Sometimes people look at what’s on the news and say, “well, it doesn’t really matter anyway because such and such is in office and we’re going to be bankrupt as a country in 10 years.” Well, that’s completely out of our control to some extent.
So if we just focus on, “Hey, here are some things that we can do today” we can make sure we have some consistency with what we set out to originally achieve and focus on that and not the day-to-day noise that comes into play all the time.
Behavior and emotions tend to get in the way very easily. If we just have something that can sort of bring us back to square one and say, “let’s look at why we put this plan together and how our progress is tracking to that plan.” This outlook tends to make everything else sort of seem not so scary.
Q: Andrew, is there anything else that you’d like to add that we may not have covered today?
I think finance in general, money in general, especially for new couples or couples that haven’t historically talked about it much together, is something I want to speak to for a moment.
Maybe one person just handles everything. That whole concept is still taboo in our culture. I encourage people to work with somebody who has already worked with people for many, many years and seen some of the mistakes that are made and has the experience to have an unbiased opinion on someone’s current state.
If I was going to go out and build a house, and I had to get it built within the next, say, two years, the first thing I’d do is find somebody who builds houses for a living, right? Because they know what to do, what not to do. They know how to work with the local tax authorities. They know how to get the permits. They know what type of foundation to build, right? I could probably figure it out on my own eventually, but at what cost and at what amount of time?
And so I encourage people to find this in your financial advisor….people aren’t always gonna find us, right? But if you find certified financial planners, if you find people who act in your best interest, they’re called “fiduciaries,” which is a big buzz word these days. Find someone who can really be a partner with you…someone who has the training and experience to give you the answers that you need, not because they just make you happy like we talked about, but because they’re the right answers for you. I think you’ll find that, again, you’re putting the odds more in your favor, and you’re going to achieve the things that you set out to achieve.
If you would like to speak to Andrew about personal financial planning, or would like to learn more about SC&H Financial Advisors, please visit SCHAdvisors.com, or contact our team here to begin a discussion today.