We're All Set.

Last week I met with a couple that got my name from another couple we’ve worked with for many years. For years, they’d been “all set” when it came to formal financial planning. They’d actually spoken with our clients about us years ago, but didn’t think they were in a position that warranted our services, until now.The impetus for their call to us was an increase in cash flow resulting from their youngest graduating from day care, coupled with a raise for one partner at work, and much appreciated urging by their friends, our clients.

After reviewing all their information in the context of the objectives and concerns they shared with me, I recommended the following.

• Stop making extra mortgage payments. I explained why they should not be in a hurry to pay off a loan that costs them almost nothing at the expense of developing investments and savings outside their employer sponsored retirement plans. The money in your walls earns 0%!
• Stop “maxing out” the employer-sponsored plans at the expense of… They have two kids and lots of mortgage interest to deduct right now. They will lose those two extra exemptions, and the benefit of the mortgage interest deduction, just in time to start pulling the money out of those plans to buy their groceries in retirement.
• Stop paying the company that manages that 401(k) an extra 1% per year for their investment guidance. I see this one more and more. I call it belt and suspenders. People are paying a money manager to manage the money managers (who cost another 1-1.5% per year!).
• Talk to an estate planning attorney about durable power of attorney, health care directives, and wills or a living trust. Of course, that will never happen to you. But it will happen to someone.
• Get some life and disability insurance that you own yourselves, rather than telling yourselves the group coverage you have at work is all you need. Of course, that will never happen to you, but it will happen to someone.
• Write a business plan! You cannot be a successful business owner without this. Period!
• And I prefaced this one with, “This is actually number one, but I didn’t want to start with something so boring”. Track your expenses! Use whatever method works, but do it! Once a month for an hour. I showed them how to do so using our eMoney Advisor tool, and said I’d ask them for the balance sheet every three months.

When all was said and done, the advice I gave them increased their monthly cash flow to twice what we charged them, reduced what they pay in their retirement plans to a level that could save them hundreds of thousands of dollars over their working and retirement lives, protected their family legally and financially in the event of illness injury or death, and set them on a path of personal financial righteousness. And this was just the low hanging fruit.

Who do you know that’s “all set” with advice from the representative for the company that manages your employer’s retirement plan?