Financial Planning

Maybe nothing tests one’s self-discipline more than an unexpected bonanza of money. Hmm, what to do first? Buy the Tesla, fly to Europe? Oh, I know, I should invest in a horse! After all, horse people are rich, racing money must be easy money! In fact, a recent study found that adults who receive an inheritance save just half, while spending, donating or losing the rest.  And nearly 20% who received $100,000 or more spent their entire gift. Here are 4 tips what to do and 2 tips what not to do after receiving an inheritance.

Ever buy a “one size fits all” pair of pants? Me either. It’s no mystery why there’s no such thing. Boogie Cousins and I, for instance, can’t wear the same pair of jeans because he’s 7-feet tall and I’m 6-feet tall. Guess what? Boogie and I need different financial planning and investing strategies too. He’s going to earn a lot in a short period of time but, even if healthy, not for very long. That’s a much different situation than someone like me who has worked for more than 30 years and has one child graduating from college this year and another starting next fall.

When first learning to reading, my son would often read aloud restaurant signs through the car window that proclaimed, “World’s Best Fried Chicken!” or “Best Chocolate Ice Cream in Vermont!” When he was old enough for some level of critical thinking and those claims sunk in as audacious, he would ask, “Says who?” I was reminded of that recently when the Securities and Exchange Commission (the other SEC) issued new regulations that attempt to raise the level of conduct of Stock Brokers. The new rule allows brokers to claim they are acting in clients’ “best interests” – a level up from the current “advice that is suitable” standard. But, “Says who?” As it turns out, if the brokers say so.

Now, I’m guessing eyes started glazing when I mentioned the word regulation but, hang with me, here’s why you should care:

1. If you already work with a Registered Investment Adviser, like Moneywatch, then the SEC already requires us to act in your best interest. And that should matter to you.
2. If you work with another type of provider, however, or are shopping for financial advice, you should know not every firm or adviser adheres to that same standard.

While in Kansas City to visit family recently one of my cousins posed a question to the Byars boys at lunch, “I don’t want to retire – so what do I call that?” So, for context, here’s the backstory: My cousin is extremely bright with an MBA from Northwestern and is the CFO for a company headquartered in Omaha not called Berkshire-Hathaway. He already knows that accumulating enough money to support him and his family throughout their lives isn’t really his pertinent question but, what am I going to do with my life to challenge myself and make my mark, is. Essentially, he explained that he likes to work, doesn’t have hobbies that consume him and wanted to know what should he plan for if not retirement? My answer? Glance back at the title of this post for a hint – Financial Independence!

We traveled in March to Argentina to see our daughter who is there studying this semester. While in Cordoba, a city of 1 million boasting the country’s largest university with an enrollment of 100,000, we rented an apartment and tried to experience as much Argentina life as one can over a two-week span. One day, my son remarked how the lifestyles we saw seemed much less affluent than we’re used to seeing: fewer people own their own cars and houses and apartments are smaller and more modest, for instance. So, with an opportunity to teach a life lesson, I dove into the conversation that “all wealth is relative.”

The University of Kentucky added a high-deductible health insurance plan to its mix of options for the enrollment period that ends this Friday, May 10. UK continues to add benefit options for faculty and staff that provide arguably the best mix of benefits in central Kentucky. Choices, however, can be tricky. Here are some pros and cons on high-deductible plans and a link to a quite comprehensive, but understandable, article on Health Savings Accounts (HSAs).

I have a fond memory of my maternal Grandfather sitting me down before I graduated from college and telling me, “Steve, whatever you do, don’t borrow money.” While Grandpa John lived far from an easy life as a dairy farmer in Nebraska, there was no mortgage on the farm when he inherited it after his father died. Circumstances now, however, are just different and heading into retirement with a mortgage might be perfectly reasonable. Quick rule of thumb: Compare the interest rate on your mortgage with your projected investment returns and allocate your dollars to the higher number.

Last week I wrote about the excuses people sometimes have for not preparing for their financial futures. This week, let’s talk about the opposite – what inspires people to overcome the excuses and engage a professional to guide them toward their financial goals? No matter the trigger, people are looking to simplify their lives and for peace of mind. So, it is important to find a financial planning professional who has worked with people in circumstances similar to yours. Below are some of the issues our clients have faced that prompted them to seek our help:

Despite the fact David Letterman now looks like Santa Claus and sounds like Oprah, his Top 10 lists live on. Here are my Top 9 reasons – I don’t believe in extra if it’s not needed - why people procrastinate about planning for their financial futures. I’m sometimes asked who our strongest competition is and I always answer, “People’s own inertia.” Meaning, it can take energy to start anything new. But, it can be more nuanced than that. Here’s what I’ve seen:

As a Kentucky fan, think back to the end of last year’s Florida game and allow yourself to remember that feeling for a moment. That feeling of “what if” is what we’re trying to avoid in our investing. As a recap, we beat Florida like a rented mule through three quarters. Then, it happened. Florida scored not once, but twice, in the fourth quarter to erase a big lead. Two plays turned a 27-14 Kentucky lead into a 28-27 Kentucky loss. Not only did we lose the game but perhaps our best opportunity to beat the Gators in the last 31 years.

What does that have to do with investing? Always keep your focus on the wide receiver, I mean, your goals.