At 10-years-old life is simpler. “Going fishing” at that age means finding a pole, some line, a hook, and some worms. It works perfectly. At 20-years-old one’s vision has expanded. Going fishing involves multiple choices: lake or stream, large fish or small, which rod, what weight of line (floating or sinking), what tippet dimensions, dry flies or nymphs… one never achieves perfection because there is always something else to learn. At 40-years-old it pays to hire a guide, once you can answer “lake” or “stream.” You can learn more in an afternoon with an experienced guide than you have learned in the last 20 years.
At 10-years-old you don’t need a financial plan. At 20-years old it’s time to start working on one. At 40-years-old it pays to hire a professional advisor. Promise. Just be sure to hire an experienced one. How you proceed at 40 determines what you can be doing at 80. Go for the trophy: get a guide.
Find an 8-1/2″ X 11″ sheet of paper, fold it in half, then look at the smaller rectangle you just formed. If you divide the long side length by the short side length the result will be a number like 1.545, a “nice” proportion but not perfect. In a perfect world, the ratio would be 1.618… a very satisfying proportion to us humans. If we are designing a floor plan, the façade of a building, or the shape of a bottle, chances are we will employ a 1.618 ratio for the rectangular image. Humans have been doing this for two thousand years, surrounding us with rectangular projects that conform to this ratio. We’re crazy about it… just search for “Golden Ratio” on your computer and you’ll see. You will recognize the perfect floor plan when you see one, or a favorite classic painting, or even your own financial plan, simply because “it just fits.” In each case, chances are fair to good there is a 1.618 ratio somewhere in the construction. Leave the numbers for competent professionals to fuss with, and task them to build you satisfying dimensions you can enjoy the rest of your life.
We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.
We have strayed from the intent of these words, starting with form a more perfect Union. We have let ourselves become a divided nation no longer focused upon a more perfect union, or the shape of a future that can accommodate our politics, our social values, our general welfare, our military, our finances, and our changing weather patterns. Competent financial planners always start their fact-finding sessions with personal questions about people like us who want to become clients: we the people …who we are and who we want to become during the years left to us, and what strategies we can agree to pursue together. Our nation’s original architects started their operating manual at the very same place. If we take a fresh look at their work, we might be inspired to tune up our national mechanism to run a bit smoother.
In our glee at discovering how easy it is to buy things we cannot afford, we tend to overlook a workable strategy for incorporating debt into our financial behavior. When we are young and employed, we can support debt to buy a house, buy a car, or grow a business. When we are old and retired, continuing to support debt closes the doors to more pleasant possibilities. In return for tax deductions of present contributions to our IRA and 401k plans, all withdrawals —principal, interest and capital gains— are fully taxable on our state and federal income tax returns. At age 70, plan owners must begin annual minimum required distributions the rest of their lives. Like debt, this pushes the inevitable cost of a present benefit into the hazy future. For many of us, coupling debt payments to the tax cost on retirement plan withdrawals can become unbearable. In our younger years we tend to assume such things will just work out when the time comes. The real glee is available to people who work this out now, well enough to enter retirement debt free with minimal taxes on investment income… for the rest of their lives.
”Pool. It starts with ‘P’ which rhymes with ’T’ that stands for Trouble, right here in River City…” is Professor Harold Hill’s trumped-up but thought-provoking claim in The Music Man. Imagine all 16 billiard balls lying across the surface of a pool table, scattered by the initial “break.” The shots that follow involve aiming a ball to collide with another, imparting the right momentum into the targeted ball to make it drop it into a chosen pocket. Skilled players understand how to plan out multiple collisions to roll the right ball into the right pocket. Sometimes a strategy works out, sometimes it doesn’t. That’s life. The more balls in play, the more options there are available to players. Getting ahead in life is similar: options increase with the number of possible collisions we call experiences. In both games, players need to know the rules and where the pockets are… their goals, if you will. Both are games of skill, and with some study and some practice both can be really, really fun. In either adventure, the right coach can help players to improve their enjoyment of the game… and their scores. Even in River City.
As any shopper knows, stores offer different brands that serve similar purposes but in different ways. Which item we choose depends, ultimately, upon which one makes us feel it will be a “good fit.” While financial advisors do not come in different geometric shapes and brilliant colors, they do offer similar services but in different ways… The search for making a good choice starts with a few basic questions, such as “What can an advisor do for me that I cannot already do for myself?” And, “Will the advisor be paid by his or her company’s commissions on insurance or investments I will be asked to buy, or by an agreed-upon periodic professional fee?” And, “Am I looking for financial planning advice to enhance the fullness of my life, or do I just want guidance with my investments… or both?” Based on your answers, your search for a “good fit” advisor can focus quickly on comparisons of age, experience and suitability among the candidates. If you attend Yoga class or take voice lessons or hire a fishing guide, you know such encounters can turn into lasting, satisfying relationships. Keep that in mind when the time comes to seek advice from a financial planner.