Financial Planning

Below are a few random thoughts from my own experience interspersed with some from friends. What about you?

Last year I wrote what I called a “practice” graduation letter to my daughter. Now that she has officially graduated, sans in-person commencement, I reviewed what I wrote and decided the advice is still pertinent. Here goes:

Friends of ours are in the process of downsizing and would like to move to a different, hipper, part of town. (Not in Lexington) As they grapple with the details of freeing up cash for necessary work on their current home, look for a new house to purchase, attempt to decipher mortgage details and, maybe most of all, try to assemble all the moving parts in a sequence that avoids living in an apartment between houses, it can be quite stressful. Amid all of this I asked if they had ever considered renting rather than buying a new place.

What have you learned about yourself during the pandemic?

Recently, a friend of mine told me she used to dream of being at home all day during retirement…until the pandemic forced her to work from home. Although busy, she is nonetheless bored. She now believes that dream was premature and maybe she needs a more thorough plan for when retirement arrives. Her story reminds me of the importance of planning for your post-career purpose, not just for your financial future.

I realize that I don’t dream anymore. I don’t mean the “being chased by a creepy guy and my legs won’t work” kind of dream. I have more of those than ever. But, ever since the pandemic lockdown started, I don’t daydream about the future anymore. No more dreams about traveling to London, Paris and Tuscany; no plans to show Iceland to my wife and wondering whether we should visit the Faroe Islands while we’re in the neighborhood; and no thoughts of a 275-yard bomb off the tee box on the 18th. Quite frankly, I’m not sure what to dream about now and I really miss it. And that’s a shame because dreaming is the fun, first step toward doing.

I remember my freshman year of college when some buddies and I faced the first exam of our post-secondary experience. Despite being a mid-semester test in a rather inconsequential class, we decided it would be prudent – and fun – to “pull an all-nighter” studying. Well, we were partially right, it was fun - although our friends who simply studied a couple of hours and then got a regular night’s sleep did much better than we did. Ironically, until recently, it actually DID pay off to prepare your credit history by cramming right before you needed your score. Not anymore.

Have you ever lay in bed dreaming what you would do with a sudden financial windfall? Would you buy a new house or travel around the world or buy a ridiculously expensive car? Would you quit your job? Or would you create a plan to segment your newfound wealth into buckets in a reasoned, thoughtful way? Maybe 1/3 to your future, 1/3 to charity and 1/3 to the blow it out, crazy, can’t remember where that came from fun bucket?

Recently I came across separate articles of two different athletes who earned a lot of money in a short time but approached their new financial standing in completely different ways. Here are their stories:

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.