“The best time to review your financial plan was before the Coronavirus, the second-best time is today.”
Financial Planning Proverb
OK. I made that up, but it's true. Without a plan (no matter what area of life), you (and I) are subject to emotional decision making. When you have a plan for spending, saving, investing and protecting, you know what to do when the unexpected (like the Coronavirus) becomes reality.
I want to share why today is the second-best day to review your financial plan. If you agree it is time to review your financial plan, I have an offer for you.
Review your financial plan
You may have noticed I used the word "review" rather than "create" your financial plan. I use the phrase review because you have an existing plan. If you have a financial plan, you are reviewing it, not creating it.
At its core, your financial plan is the summary of what you earn, spend, save, invest and protect. Your plan may not be formalized or be in writing, but you have a plan. The question is not whether you have a plan, the question is whether your plan provides the guidance needed to navigate changes in the markets and your life. Reviewing your plan will answer any questions you might have and provide guidance going forward.
Formalizing your Financial Plan shouldn’t lead to this…
If you think a financial plan will lead to a ‘sales pitch’, you are not alone. Sad to say, but I hear this all the time. “I had a plan done before. The plan came to the conclusion I needed to buy commissioned annuities.” But of course, the plan was “free.” That's not a plan. It is a long winded (written) sales pitch.
Your Financial Plan should lead to…CLARITY!
Your desired outcome should be a clear, easy to understand road map that reviews your current scenario, considers your future goals and measures the likelihood of the two matching. A well-constructed financial plan creates an opportunity to make informed, logic-based choices. Financial decisions made without a financial plan are often subject to emotions. Commission based financial advisors prey on emotions.
Today is the second-best day
You may think having a financial plan sounds like a good idea. You might think you missed your opportunity. You should have reviewed your plan before the current market confusion. For those who had a plan, the financial aspect of this pandemic was easy (at least easier). Finding toilet paper...that is a different story!
Unfortunately, there will be future market boons and busts. Having a plan going forward will help you navigate both. If you’ve been meaning to formalize your financial/retirement plan but haven’t gotten around to it, today is the second-best day.
Before I go any further, you may be wondering who I am and why I am writing about financial plans. My name is Bob Burger. I am the owner of Disciplined Money, LLC. I created the company over four years ago. I became frustrated with firms who restricted their financial advice to those with $1,000,000 or more of invested assets. They often charged 1% annually to manage the assets ($10,000 annually).
I believe financial planning advice should be delivered via an Hourly Fee-Only Model. This approach allows me to work with a diverse group of people. You do not need to have a million dollars to qualify. You don’t have to hand over your assets for management (no matter what your account balance) and you don’t need to buy a commissioned product.
Over the past twenty years of working in the financial planning industry, I’ve learned people want financial planning and investment advice geared to their specific needs and situation without conflict. There was a day when prospective clients didn’t know what a Fiduciary was. Today it is often the first question asked… “Are you a Fiduciary?” Yes, I follow a Fiduciary Standard. A plan based on hours ensures your needs come first. While we are practicing ‘social distancing’, I want to test whether financial plans can be properly reviewed 100% electronically.
If you’ve read this far, you are probably at least curious, so let me share what the process will look like.
The process and the cost
We’ll complete the plan in three simple steps. First, I’ll grant you access to one of the most popular financial planning software programs in the industry. You’ll enter your information (nothing privacy related). You’ll enter birth dates, expectations, concerns, assets, liabilities, investments, and insurance. In other words, you'll summarize where you are today.
Next, you'll start putting together a picture of what you hope the future looks like. You'll include your expected living expense in retirement (probably what you spend today adjusted for inflation). You'll add additional goals like travel or additional purchases. You might include items you wish for in retirement, but they aren't must haves. If this sounds overwhelming...don't worry, we'll review and share what is included in most plans during our first call.
After you’ve entered your information, we’ll schedule a time to review...together (via phone or Zoom). We’ll review any questions and measure your probability of success. This will likely raise questions which we’ll cover. Now, you get some homework.
After seeing your results, I want you to take a break. This may be the first time you’ve seen your financial future laid out in front of you. As you digest, I want you to answer a simple question. What would you do differently?
If your plan projects leaving a large balance at "the end", would you retire sooner? Spend more now? Spend more later? Travel more in retirement? What would you change? Maybe nothing.
I'll ask you to make a list of what you might want to change and then we'll test how each change impacts your plan's results. For example, you may want to see the impact of saving an additional $500 per month now or spending an additional $500 per month in retirement. You might want to add a travel goal when you retire. You might want to see how retiring one year earlier (or later) impacts your plan’s success. We’ll test your various scenarios and create your ‘base plan.’ From there we’ll take the next step.
After finding your ‘base plan’ we’ll test what could go wrong. We'll test what would happen to your plan if you or your spouse died sooner than expected. We'll test what would happen if you were no longer able to work. We'll discuss and test medical and long term care costs. If applicable we'll discuss college expenses or other large expenses. We’ll review, discuss and offer guidance on all of your questions (without selling you products). When we’ve discussed what is within your control (at least partially), we'll shift our focus to investments.
When considering investments, we don’t incorporate useless risk questionnaires. We won’t ask you… “on a scale of 1 to 10 how risk tolerant are you?” First of all, we don't know what that means, and your risk score may have changed significantly over the past couple of weeks!
We'll compare how various portfolios affect YOUR PLAN. We’ll test outcomes using an “Average Return” (actually we prefer to use a more conservative estimate). We’ll also test what would happen if you retired into 2008...we call that “Bad Timing.” Finally, we’ll let the program measure how many trials would be successful. This is referred to as a Monte Carlo scenario. If this sounds confusing, don’t worry, it will make sense when we get there.
Along the way, we’ll discuss potential insurance needs (we don’t sell insurance, just provide guidance). We’ll talk about and share why we might choose a Roth IRA over a Traditional IRA (or 401k). We’ll consider choices surrounding Social Security and share how we came to our decision. if you are close to retirement, we'll discuss and prepare for upcoming cash withdrawals as you leave the workforce.
Finally, we’ll provide you a written plan (delivered via pdf) that summarizes our discussions. We include a written summary (words written in English) if you enjoy a simple plan of what to do (8 pages or so). We'll also provide a detailed output from the program (about 35 pages) with all the specifics if you enjoy digging through the numbers. Ultimately, our goal is to provide you with a clear informed road map of your financial future.
We typically charge between $1,200 to $1,500 for this service. This is based on 8 to 10 hours of work. But I want to see if completing a plan fully online is a viable solution going forward. In other words, can I complete a plan from the beach (OK maybe too hard to focus on the beach but you get the idea). I will also ask for your feedback. I want to know if this is a service I should add going forward.
Rather than charge $1,200 or $1,500, I am going to charge $700 for a short period of time and a limited number of plans. I’ll collect half upfront and half at the end. Because this is a new process, I'll add a guarantee.
I know people feel more confident with a formalized financial plan. They have a clear list of what to do and more importantly, why they are doing it. In most cases, they automate the steps and stop questioning whether they are doing the right things. An unexpected benefit is they enjoy life more without questioning every purchase. We’ll discuss this as we review your plan.
But maybe this isn’t for you, so I’ll accept the risk. If you complete the process and you don’t have a better understanding of your financial future, simply share what you expected when you first read this, and I’ll refund the initial $350 (and not collect the second half).
The next few weeks
You can sit home binge-watching Netflix over the next few weeks (hopefully not longer) or you can review your financial plan. The next market event probably won’t be a coronavirus (at least I hope not), but as you navigate life, you’ll have both personal and financial changes. When they arrive, you'll have a plan.
If you want to get started or have questions, simply send me your name and let me know you want to review your plan and mention the coronavirus offer. I’ll create your access and send you details for getting started. You can get started entering your information immediately. I’ll collect your initial payment at the first meeting.
One last thing. This is a limited time offer. You’ll need to get started by April 1, 2020 and complete the process by June 30, 2020. After that, we’ll return to normal pricing. I am also limiting this offer to 10 people. So, if you think this might be something worth considering, let me know today.
Bob Burger, CFP®