Financial Planning. Dispelling Personal Finance Myths over Coffee.

The other day I was at the coffee shop with a friend of mine Johnny Kovalek. Johnny and I have done business together in the past. In fact Johnny is my Financial Planner. While we were sitting there and having a great cup of coffee I began to ask him what he thought were the major obstacles or myths about Financial Planners that he faced in his day to day operations. I know that personally I thought that Financial Planners only helped with things like stocks and bond purchases or major 401K investments before I entered into the Financial arena. For the next hour or so Johnny began to dispel many of the myths or obstacles we have when trying to get started with a planner. He made it clear to me that Comprehensive Financial Planning is less complicated than we make it out to be.

Me: Is it true that you need a certain amount of money to invest before working with a financial planner?

Johnny: Most people believe they need a lot of money or some amount of money to invest in order to work with a financial planner. While some advisors have a minimum requirement to work with them I do not. Many of my clients start with nothing, some have substantial assets and others are somewhere in between the two. Working with an advisor can help turn spenders into savers, savers into investors, and investors into wealth managers. It is about getting started somewhere. Investments are about 1/5 of what Financial Planning is about. There is Risk Management, Insurance, Income Tax Planning, Retirement Planning and Estate Planning. Reducing your insurance expenses and income taxes first and developing the discipline to save and fund your retirement must come so that you will have the ability to get advice regarding Investments.

Me:Is it true that there is no need to work with a planner until I am close to retirement.

Johnny: If you are waiting until retirement to make your plans you are making a classic mistake. Accumulating retirement is only half the game. Retirement income strategies or re-creating your paycheck is the other half. How you save for your retirement today will have a direct impact on how you can take your money out in retirement. Most common pitfall is how you are taxed based on the vehicles you chose up to retirement. The earlier the better.

Me: Do I need to pay off my debts before I start with a Financial Planner?

Johnny: That would be like waiting to get healthy before you go see the doctor. Financial Advisors who work in a comprehensive fashion can assist people with the strategies on the most efficient ways to pay down debts faster. This allows you to get to the saving part much quicker. If you have been trying to get out of debt for years then it is time to try something new and get a coach that can assist you in the how. The definition of insanity is doing the same thing over and over again expecting a different result.

Me: Do Financial Advisor’s only sell their own products?

Johnny: Maybe. It really depends on how your financial advisor is licensed. Some are licensed to have a fiduciary responsibility to hold your interests above their own. It also depends on company that they work with. Some advisors are licensed to look at several different investment options from multiple companies. Ask the advisor that you are working with how they are licensed and what they can offer.

Me: Some people think that they can beat the market in my business. Is that the same thing that you encounter in yours?

Johnny: In the short run there are advisors that make a handsome profit but that is solely based on luck. Over the long haul very few advisors beat the market. There would be more Warren Buffet’s and Peter Lynch’s if this were to be the case. No one can consistently predict the future or consistently beat the market. That would take consistent luck and I have not found that in my life. The role of the advisor is not to predict the future but to assist in planning for it and add some certainty to an uncertain future.

Me: What if someone already has an advisor, accountant, or they do everything on their own?

Johnny: There are no locks on the ideas and strategies in the Financial advise industry. There could be strategies or tools that you or your current advisor may not know about. Always keep an open mind. The fact is that as time goes by there is change that may be out of your control. These changes can be along the lines of tax change and rules around investments or savings goals. The problem exists when we think that we know everything and decide to stop learning. Make sure that you are reviewing your goals on a constant basis with your advisor and be proactive when changes are necessary.

Me: I have used the financial calculators on the Internet in the past. They have told me that I am saving enough for my retirement already. What are your thoughts on these tools?

Johnny:I think that a lot of people scan the Internet for this sort of a tool and these tools a rule of thumb for retirement calculations. A lot of the information is for the masses and they do not take into account your specific needs. Ask yourself a simple question. Exactly how much money do you need in your retirement account on the day of your retirement so that it will last a lifetime? Did you factor in taxes, inflation, realistic investment returns, increasing medical costs, etc.? Most people think that their expenses will dramatically decrease at the time of retirement. However the studies show that the expenses tend to increase as retired people pursue their hobbies and travel in the early years of retirement and then they level off. Make sure you planned for the possibility of tax law changes, rising medical costs, unforeseen circumstances and increasing life expectancy. A good financial advisor can help you calculate these numbers and make sure that you are on the right track.

Me: What if I already have a pension or I am covered through work?

Johnny: This fact goes back to the previous question. People often make the mistake of thinking their retirement expenses will be lower and forget that their pension benefits will be taxed like a regular paycheck. Some companies might bring the 401K guy or a random advisor to you for free. Just remember you get what you pay for.

Me: The last question is about the cost of an advisor. I think that they are just way too expensive. Is that true?

Johnny: Maybe. There are plenty examples of advisors that are charging excessive fees and not providing the value. Every advisor has a different way of getting paid and it is important that you find this out. The bottom line is to determine whether or not you are getting the value that meets or exceeds the cost. A good financial advisor should be able to help clients save money and avoid costly mistakes. Making mistakes and procrastination are a few of the biggest reasons that people do not reach their financial goals. A good advisor can help assist you in overcoming the procrastination and avoid costly mistakes. Just remember that price is what you pay and value is what you get. Retiring with the same or greater paycheck than you were receiving while working is Priceless.

As we ended the conversation I did ask Johnny if someone wanted to meet with him and see if Financial Planning was a good thing for them at this time what costs would they have. The answer was quick and to the point. Johnny stated that it was Free to meet with him and determine whether they are a good fit for each other. Johnny stated that it is his goal to earn your business and if you don’t feel that he has done that then you part ways no harm no foul.

I also asked is there anything coming up where consumers can go listen to someone talk about the state of the market and why it may be a good time to invest even with the economy being on such a hard place?

What: “Understand Today, Own Your Tomorrow: A New Perspective on Your Finances.”

When: Thursday June 11th, 2009

5:30 PM Open House

6pm -7pm Presentation

Where: 1420 Rocky Ridge Drive, Suite 200 Roseville, Ca. 95661

Cost: Free

RSVP: Johnny Kovalek at 916-789-9393

Coffee shops offer more than just coffee. I encourage you to take the first step in solidifying your financial future. It is never too early to take a step in the right direction. Johnny and I have worked together to get consumers in position to buy a home. The key is making sure that we not only consider the home and the mortgage payment but also your total financial future. Give it a shot attend the event and give yourself the knowledge to make the choice is Financial planning is right for you.

 

Impressive Giving; Thank you for all your support.

Today, I wanted to take a brief break for the normal blog that I write to say THANK YOU.  The tremendous support that I receive from the referrals of people that I care about is amazing. I wanted to thank a couple groups that have been such a blessing in my families life.

My Clients, Friends, and Family – Clients are the backbone of my business. It is for them that I do the work that I do. I believein education, communication and support along the way. Sometimes that means that I have to listen my clients as they vent to me the frustration of providing the most intimate documentation. Thank you to all my clients. Seeing you in your home after we close. Seeing the look of relief that you have when we refinance into a more stable loan program.  Even the times that we do not complete a transaction but merely answer the question that eats at you. These are the most precious times to me and I cannot thank you enough for the opportunity to be part of that. May your home bring you memories that will last forever.

Strategic Business Partners – I have worked hard to build a team of business professionals that can assist my clients throughout their life. Your partnership and referrals are so deeply appreciated. Each one of you provide unparalleled service in your chosen profession. Victor Ham of Nationwide Insurance, Brian Qualls of Lang, Richert & Patch;  http://www.planyourestate.net/, Johnny Kovalek of Ameriprise Financial, Brandon Brooke of NY Life Insurance, Peter Bond of Remax Gold, Dayna Neuse of Remax Gold and several other Realtors, Sierra Friend of Core Development, Synthia Smith of Cherish the Possibilities, Nathan Novelo of Harris Appraisal, Lisa Lemmons of the Exchange Bank are just a few of you. Sorry to those that are not mentioned here but is not because I do not appreciate you. You all have been the heartbeat of my business. I had chosen from the beginning that I would not be a cold caller instead focusing on getting to know quality professional such as yourself. I am excited to meet many more of you in the coming years ahead.

Co-workers – Thank you for encouraging me when the times were tough to “keep swinging.” Thank you all for taking the time to teach me what I may not have known and to look at for the greater interest of our profession. Each of you has helped me in some capacity and for that I am grateful.

My wife and Kids – Where would I be without the smiles that lay on your faces when I get home from work. Each of you inspire me to press on and remind me that I have to be the same person at work that I am at home. In fact you call me to be better than that. You ask that I continue to grow each and everyday. You remind me that the most valuable thing I can give to anyone that I come in contact with is respect and love. You mean the world to me.

I will say in very bold print THANK YOU SO MUCH FOR all that you do for my family and I. I have the utmost respect for each and everyone of the groups above. You are all Impressive Givers and your support is awesome!