Resolution Revolutions: Planning Your Goals for the Year (40:37)
We know that it is sometimes difficult to stick to those New Year’s resolutions, whether they be related to diet and exercise or saving and spending. So, we have invited George Fernandez and Andy Garrison of Mariner Wealth Advisors to have a conversation about what they are thinking about when planning financial goals for the year. Those planning topics include saving for your retirement, creating an appropriate spending plan, choosing the correct level of insurance coverage and selecting the right gym.
Brian Leitner: Welcome to Your Life, Simplified. My name is Brian Leitner, and I’ll be the host of this podcast. We’re still early in the new year, and we didn’t want to necessarily do a podcast that was talking about New Year’s resolutions and what your goals are, per se, but a few of us got together the other day, and we talked about a few different things that people should consider as it relates to the new year and their financial lives. Again, not necessarily resolutions, but things that we know some folks benefit from. And we just wanted to share that in a really conversational manner. And so today, I’m excited to have George Fernandez and Andy Garrison here from Mariner Wealth Advisors. Welcome to the show guys. Can you briefly introduce yourselves?
George Fernandez: Sure. So my name is George Fernandez, and I’m the vice president of practice management for Mariner Wealth Advisors. You know, one of the roles that I have is actually pretty exciting. I get to work with advisors each and every day and kind of help them walk through various situations or various consultations as it relates to working with their clients. I also work on developing resources that they can take use, whether it be an event or tools and technology, and so forth.
Brian: Thanks George.
Andy Garrison: I’m Andy Garrison. I’m a wealth advisor here at Mariner Wealth Advisors and every day, I get to work with clients. The New Year is always a fun time, because we’re always a lot more motivated for our financial lives and getting everything in order, so I’m excited to kind of continue this conversation.
Brian: Thanks for joining the show. Like I just mentioned, these are things that we see work for individuals and just some of the ideas that we’re sharing from the other day. We’ve come up with a couple of different topics we thought folks might benefit from. So just to kick us off here, let’s talk about cash flow. What are you guys having conversations with clients about right now in the new year or things to think about as it relates to one’s cash flow?
Andy: I think the number one thing in the new year is that a lot of people are getting raises, or just received a year-end bonus or maybe a bonus is getting paid at the turn of the new year, and it’s just understanding what do we do with that new cash flow. How do we make sure it’s ear-marked toward the things that are important to us prior to any expenses that might come up, and so we’ve got a good plan ahead of time for what to do with it so that we’re making the most of it.
Brian: Yeah, I think that’s a great one. One of the things that that I think about often is, a lot of folks will focus on the market and market returns. They say, “I want to make 6 percent, 10 percent, or a lot more than that, whatever that looks like, but what could be even more impactful is, what am I saving? It’s just like people talk about their salary. It’s great if you make a lot of money. But what’s really important is how much you’re saving. So just for the sake of this podcast, I interviewed three or four friends in 2019, and I asked them, “What are your savings goals for the new year?” And they looked at me like a deer in the headlights, each of them. They said, “What do you mean? Am I’m going to save to my 401(k) and maybe my IRA?” And I said, well, if you take a step back and you know what you make on an annual basis, and from a dollar perspective, do you have any idea how much you’re going to save in aggregate? What that looks like, even if it’s in the ballpark. And while they didn’t necessarily know off the top of their heads, I think they walked away from that conversation saying, “I should at least target a number.” So I thought that was an interesting conversation. I don’t know that many folks are thinking about that on a regular basis.
George: I would agree with that. In fact, I had a very similar conversation with my son and daughter-in-law. We were talking about how things were going with their companies, and things were moving along really well with their jobs. And I talked about something that happens to a lot of people, and that’s lifestyle creep, because they’re what we call dual income, no kids. So I asked, “How are you managing lifestyle creep?” And they looked at me like, I have no idea what you’re talking about. I said, that’s when you make more money, and you live up to that. And we talked about that, because they like their toys, and so forth. And we talked about how much they are saving. And they’re actually doing really well. They’re saving I think, over 10 percent individually. So they’re actually doing really well on that. But I think one really important thing is, especially when you think of the holidays, when you think of cash flow is, do you know how much you actually spend? You know, there are great tools out there. One of the tools that I work with advisors on is our tool MarinerGPS, and it has a really great budgeting tool capability. So, like it or not, I can go back and I can look at what happened over the holidays and say, oh my gosh, I spent x amount of dollars. But using tools like MarinerGPS budgeting tool will help me understand what percentage of that was my overall expenses. That’s really helpful.
Brian: And while people I think hate the word “budgeting,” they could appreciate an app that does that for them.
George: Oh yes. So much of it is automated, so it puts everything in nice, neat little categories, and you can customize your own, too. So it’s actually really nice to be able to see where all those pieces are.
Andy: I think the key to everything is awareness. Knowing what we’re spending and what we’re saving. A lot of times I’ll talk with folks, and it’s a function of knowing that savings amount, what are you saving and which dollars are going to that. And if you’re covering those goals, and you’re saving the percentage you need to be, you can kind of let the budgeting run itself, but it’s still great to have a tool keeping that awareness and keeping you on track everything. So at least, know where things are going and whether or not you’re restricting yourself by category or just overall.
George: That’s a really great point. You know, it’s that question, “Can I have my cake and eat it too? Can I go to the coffee shop and get my $4 cup of coffee each day? Well, maybe or maybe not. If you’re meeting your goals, and all the other things were taken care of, and you have your emergency fund and everything else in place. Then maybe those little splurges like that are really great because it helps us from that emotional standpoint. It’s not necessarily a bad thing, unless it’s in excess.
Brian: One of the other things I was thinking about over the holiday is that I had two different subscriptions due. They’re both internet subscriptions. And I have a relatively decent idea on what I spend on a daily and weekly basis. Let me add up all my subscriptions, such as Amazon music and the apps that I buy on apple every couple of months or subscription to Evernote. And then I started thinking about my utility bills and what all that looks like. And one of the other bills was my cable provider. And understanding that, I was on a promotional rate for the first 12 months, and then on month 13, it jumps up. Well, the jump was about $60, so I called up the cable provider. I let them know that I was likely to leave. They put me in touch with the retention department and, low and behold, they’re extending that promo for another 12 months without a contract. And just thinking about, as you said, awareness on what you spend. Being proactive on how much is actually going out the door and then rethinking, one, do I really need to take on that expense, or is there something I can do about that expense? And the cable providers are not calling me up saying, “Hey, your promo code has ended, do you want to do something else?’ Because obviously they are going to reap the benefits If I don’t do anything. Being proactive and spending 15 minutes at the beginning of the year, just thinking that through and just reviewing your expenses.
George: Yes, that’s a great point. Not a lot of people know that you can actually call your provider and say, “Here’s what I’m thinking – what can you do?”
Andy: I think what I took from that is just being proactive. People who have a plan always do better than people who don’t have a plan in any area of life. And I think part of a plan doesn’t have to be a really complicated, it’s just what do I need to do? And taking those initial steps to get it done. The first of the year, while we’re all feeling motivated is the time to do it.
Brian: One point that I wanted to mention as it relates to savings and knowing how much you’re saving on an annual basis, that’s really important. The other thing to think about is, when you put that money away and ultimately where it goes or how it gets invested. And so what I mean by that is, a lot of folks have a 401(k), and they’ll max out their 401(k). Well, one idea might be to fund your 401(k) as much as you possibly can early in the year. So you max out well before the end of the year. The benefit of doing so is you’ll get that growth. Assuming the market goes up, you’ll get that growth on those dollars earlier in the year, because it’s faster to compound. And that would work for a 401(k), an IRA, or frankly any type of investment, because you have that time on your side. So for folks who are thinking about doing this in their 401(k), reach out to your plan provider or your HR department and make sure that there’s a true-up provision inside of the 401(k) that enables you to do this. So just a couple of different things to be thinking about as it relates to cash flow.
George: Yes. And, along that line, too, if you are over 50 years old, remember that you have these catch-up provisions as well. So, you know, that’s one of the things that I can take advantage of now. So it’s like I’m taking advantage of that Roth and that 401k and you know, it adds a lot. Getting older has its benefits.
Andy: And maybe this dives a little bit more into the tax picture of things. But along the same lines as the catch-up contributions are health savings accounts and being able to maximize those upfront and contribute that catch-up contribution, because the contribution limit went up.
Brian: Andy, that’s a great way to transition to taxes, just as another topic. I think one of the things that people reviewed at the end of 2019 was year-end taxes. Hopefully they worked with their advisor for year-end planning. Now thinking about the location of your assets as it relates to, if you don’t need the money today, and you have income- producing assets that are taxable at your marginal tax rate, maybe you want to rethink those being in a taxable account, maybe having those in a tax-deferred account. We call that tax location of assets. It’s just one more type of diversification, if you will, that can improve your overall tax situation.
George: That’s a really great point and, Andy, I don’t know when you work with clients – do you routinely go through an exercise where you look at, here’s where your taxes were last year, here’s what they look like now that the law has changed, and then here’s what they look like under the new laws?
Andy: Yes. For all of our clients, we’re running tax projections. So there’s tax preparation that we’re all familiar with. We do somewhere between early March and April 13 every year and that’s looking back really to the past year and saying, okay, what happened? How do I make sure we get all the deductions I’m entitled to, and so forth. But it’s even more important, especially with the changing tax bill and moving into a new year of projecting out and saying, “What did our tax picture look like in 2019 and every new year going forward? So it’s important to take a look at that. If you’re working with your advisor or CPA, have them work with you on that. If you’re not, there’s some resource and kind of piecemeal some of it together online, but ultimately, it’s really important to, to project out with the new tax bill, especially if a lot of your income comes from bonuses. And I think a lot of people filed taxes for the 2018 tax year. They may have had a few surprises around how the tax withholding for bonuses happened and so on. So being proactive, just again with taxes, you can’t beat it.
George: Exactly. You know, I remember talking to a few advisors even last year about the importance of making sure that you look at, not just the federal, but the state impact, too. I learned that some states are tied to the federal for your standard deduction. So if you take a standard deduction on your federal, you’re taking a standard deduction on your state. Whereas you might’ve been able to actually, if you were itemizing, you might actually have been able to itemize on your state. And so losing that might actually bump up your state tax and not even realizing it.
Brian: Something else folks could consider, especially if you’re working at a company is, which account you’re going to invest in, whether it be the Roth 401(k) or the traditional 401(k). I think the large majority of people just default into the traditional 401(k) where you get that tax-deferred growth where you’re able to receive that upfront tax deduction. And while that may be appropriate for a lot of individuals, I think it’d be an interesting time to sort of reflect on whether that strategy still makes sense for you for a couple of different reasons. One, based on the tax law, historically speaking, we’re in a very low tax environment. So even paying the tax today at a low tax rate might make sense. Especially if you think in the future, tax rates are going to go up, and most professionals will tell you that they believe it will. Well, no one has a crystal ball, I’m in that camp as well. And so that’s one thing to think about. The other thing to think about is, if you’ve been investing in a pre-tax type of account, a tax-deferred type of account for years and years, when you retire, we know that, unless it’s a Roth, you’re forced to make minimum distributions. So you have to take the money out at age 72 whether you want to or not. So what ends up happening is, they’ve socked away all this money and are effectively sitting on a tax bomb, if you will, they have all of this money in a tax-deferred vehicle. They’re forced to take that out, so when retirement hits, they thought they might be in a lower income tax bracket, the reality is they may be in the highest one, because they’re taking all of this out and paying ordinary income tax. So just considering the Roth option and foregoing that upfront deduction could enable you to potentially manipulate your taxes in an efficient and legal way, down the line. Something that, again, I don’t think a whole lot of people think through, because they want that upfront tax deduction today, and I think that may be shortsighted.
George: That’s a really great point because, and there’s other things that affect that too. So if you end up having all these dollars sitting in a deferred account and at age 72, that money has to start coming out at a certain pace and it’s going to be recorded as income you’re going to have to pay taxes at that point. Regardless of whether you actually need the distribution of income or not. That could impact your tax bill at that time. But not only that, just think about this. You’re 72, which means you’re on Medicare. That can also affect your Medicare because there’s Medicare sur taxes that are paid or surcharges that you have to pay. If your income is certain point, you have to pay higher amounts of premium for Medicare, right? And so if you artificially increase that income, then you inadvertently increase your, your Medicare costs too. And so that’s something really to think about before you get there, to think about the way that you can kind of build out some strategies.
Brian: And just to further that point without jumping into estate tax, but the other issue is, if all your money’s in tax deferred vehicles and ultimately is going to go to the children or somebody else, the issue is you’re not getting a step up in basis on that. So effectively you may be transferring that wealth, but it may not be the most efficient way to transfer that wealth, because you’re also transferring a significant tax liability where if it was in Roth or taxable accounts, you’re not sticking them with a large tax bill.
George: Exactly. So you know, you have all these dollars sitting in a retirement account. The taxes have to be paid at some point, whether it’s by you or by your beneficiary, unless it goes to a charity—of course that’s a whole other conversation. But if it goes to your children, then that those taxes have to pay to that some point.
Andy: So, and one of the great things about looking at your taxes over your whole lifetime is you can really project this out, you can run different scenarios of taxes go up in the future if they don’t, and you can look and say, “Okay, based on my income this year, do I have room before I get into a higher tax bracket?” And if you do, there’s a lot of good planning around a Roth or regular 401k or IRA and how you earmark those so that you can really reduce the pain later in life. You can always describe it as traditional IRAs and 401ks—you’ll you’ll love it today, but you don’t like it so much in the future.
Brian: So guys, what about investments? Andy, you’re talking to clients on a daily basis—what are folks thinking about or what should they be thinking about as it relates to their portfolios here in the beginning of the year?
Andy: The beginning of the year is always neat cause you have a whole year ahead of yourself to kind of plan for things. So the big things that we sort of tackle every beginning of the year is, if we were holding off on selling certain things for taxable reasons at the end of the previous year, it’s a good opportunity to start with a fresh slate. If the market’s down, sometimes there’s good opportunities with that to do a rebalance of sorts and to buy into some of the things that we still feel really strongly about that are down now. But it’s also just a really good time to make sure you know where your investments stand, both from your comfort level with the ups and downs of the market. And then of course also with your goals and what you’re ultimately saving. If you know how much you’re saving, then you also need to make sure that your investments are designed to deliver that same type of return. And so at the beginning of the year, having a whole year in front of you to kind of map that out, it’s really good time to get started on it.
Brian: Yes, great points. I go back to the fundamentals too, just making sure that you have that emergency fund and there’s a lot of different information that’s out there on the internet as it relates to emergency funds. It’s nothing sexy, if you will. But if you do need those assets, should something come up. You should generally have somewhere between three to six to 12 months’ worth of your expenses sitting in cash or money markets, so it’s incredibly liquid. You can have access to those funds should you need it. And it also depends on what you do for a living. So if you were to lose your job and you were in a field in which was highly specialized and the ability for you to get a job right away in that same field was going to take a significant period of time, you might have more of an emergency fund then somebody else who has the ability to get a new job right away because of their overall skillset and other things impact that as well. Your dependence and, and all of those different types of things and what your expenses look like. But having that emergency fund is actually critical and making sure that it is as liquid as possible and as safe as possible.
George: Yes. And so, and I’m curious, Andy, from you working with clients and you talk to them about having this emergency fund, as Brian just mentioned, and then also resetting your goals at the beginning of the year. Do you have conversation about that cash reserve they have is because also the cast that could use or potential use during market volatility when they know they’re going to need to pull some money out, not rather than selling an investment that maybe not the best time. Is that a conversation you have?
Andy: Yes, it definitely is. I kind of always earmark, and in my clients, I think visually look at it this way too, that with our emergency fund and our cash reserves, there’s really two parts to it. There’s our, we don’t touch it no matter what. We only want to use those funds if something really bad is happening such as losing a job or a major medical event, or something with the house—those kinds of things. Then we always have a little excess on that cash reserve. That just adds a little bit of comfort, a little bit of peace of mind, and we do look at that and knowing that we have x dollars of excess in there. Part of the conversation a year ago, two years ago, three years ago, hey, when we get those market drops, when the markets are down, that all of a sudden becomes an opportunity fund that we can buy in.
George: Right. Opportunity fund to buy in or opportunity fund to use in the event that you need access to liquidity, and you don’t have to create liquidity out of a down market.
Andy: Exactly. One of the things that comes up a lot is it’s starting these a little bit more as interest rates go up, I don’t want to have more than I need to in cash, right? Because I’m not earning anything on it, and it feels like we’re missing out. But when you have the right amount in cash and you have enough to keep you comfortable and cover those needs where you need money, it allows you to be a little more long-term focused with your investments, right? You’re never putting yourself in position to have to sell something that you don’t want or need to sell because of the market environment, because you’ve got cash on the side. And so ultimately can actually allow you to have a more growth-focused, overall net worth, because you’ve got enough in safe assets to cover those types of things so that your investments can be geared a little bit more long-term.
Brian: Yes, that’s excellent. Two thoughts came to mind. I mean, we used to say cash is trash, right? Because, for years, cash wasn’t paying anything and today it is. It’s paying a lot more than it used to, let’s put it that way. Right. The other thing was, interest rates as it relates to credit cards. So earlier we talked about reviewing your bills and those sorts of things. Well, what about reviewing your credit cards? You know, are you getting the benefits of some of the credit cards that are out there, whether it relates to miles, cash back, what’s your interest rate? I’m just calling up and figuring out what you could qualify for, versus what you’re doing today, because you’re on autopilot. So different things to think about from that perspective.
Hey, just a quick note to our listeners, if you have a topic that you want to hear on this podcast, or you have a question about your own personal financial situation, please don’t hesitate—go ahead and send us an email at: email@example.com and we’ll have an advisor reach out to you directly. And now back to the episode.
You know, the other to think about as it relates to what we just went through with year-end planning is, understanding of what we own, why we own it and if that still makes sense as it relates to our goals. One of the things that comes up quite a bit is looking at clients and their concentrated equity positions. And so maybe they work for a company and they have a lot of stock in that company or it could be that they inherited stock from someone and have a lot of exposure that one company. So just making sure from an asset allocation that you don’t have that concentrated risk, because if something should happen to that company, especially with volatility coming back into the marketplace, it’s just a nice time to sort of take a step back and reassess what that looks like.
George: Brian, you know, you just mentioned kind of all the risks associated with investments and so forth, but you know, there’s this other side of risks that we don’t necessarily talk about or don’t like to talk about. We can see the funny commercials on TV of course to talk about, are you insuring your home properly and that kind of thing. But how often do we actually review that stuff? I actually worked for a PNC agent for a couple of years, and we routinely worked with clients and had our clients come in and do annual reviews of what to expect. And so we talked to them about here’s what your insurance policy does, here’s how it works. If you have this situation, here’s who you call, here’s why you call, so we would just go over the policy. And, and so whenever our clients actually had a claim situation, they knew exactly what was going to happen and when. So there was no surprise. The worst thing you can have happen is when you have an emergency and not realize this is the way it works. You want to know beforehand so you can manage it.
Brian: You’re absolutely right. You think about the natural disasters that have taken place in the last few years and just making sure that you’ve taken the time to prepare. It’s funny, you know, I see the commercials during the football games all the time. None of them motivate me to actually review the policy. And thankfully I have an advisor who’s reviewing my policy, but the commercials are great, right? It’s just making sure that, as the house as appreciated, as the contents have appreciated and commercially depreciated. You know, if you’re getting older maybe you don’t have the assets you used to have, maybe you’re paying too much and what does that look like? So understanding that makes a ton of sense.
George: Yes, it really does. It’s so important. You should be reviewing, not just your property and casualty policies for your car and your home and your rental property. But you know, look at your health insurance, which you do every fall. Look at your disability insurance coverage, look at your life insurance coverage routinely. Did you buy them for one reason and that reason is gone? And do you need to repurpose it? Do you need to reallocate those dollars? I mean, there’s a lot of reasons why you need to review these things on a regular basis.
Brian: We talk about life events as it relates to insurance and making sure that, has something changed? One of the life events that we don’t necessarily talk about, because it’s not a birth or a divorce, is adding a child to the policy and, what does that look like? And does that warrant a discussion with a different company depending upon what rates look like and then what’s the activity? I think back, one of my first jobs when I got a car was delivering pizza and generally that’s not covered under your auto policy. And so, you know, those are things that I don’t think we knew about back in the day and never had to go through that process. But different things like this and having a conversation about them just makes a lot of sense.
George: Yes, it really does. You think stay-at-home parents who find themselves at some point taking care of other people’s kids for dollars in their home, you know, that might be considered a daycare. And if it is, do they have the right kind of insurance coverage? It’s not something that’s top of mind. It’s only one or two kids. I’m sure I’m fine, they are friends and family, but still you need to have a conversation with your property casualty agent to understand that that’s going to be impacting it. As well as when your kids turn 16, you know, one of the things that we routinely did at this agency I worked for is every child who came in and turned 16 and was getting their license, before they can be added to the policy, our general agent met with that that child and went through an entire review with them. Here’s what insurance is, here’s what safe driving is. And routinely went through this exercise with every single child and wouldn’t add them to the policy until he or she sat down and talked with him. And that became a lifelong lesson for that new driver and so something that can, consider talking to your kids about, maybe talk to your own agent about this.
Andy: Yes. I think when I think about all this stuff, I mean insurance isn’t always the most exciting things to talk about, right? But to me, when the beginning of the year, when we’re looking at it, it is so we can check that box, right? That we’ve done it, we know you don’t have to have it on the front of our mind for the rest of the year, because we’re not looking at it, we’re not reviewing it. It just creeps into our head as we go through the year. And kind of the four areas I classify it with clients is what could happen to you and what could happen to your home, what could happen to what you drive and then what could happen to your neighbor’s foot, right? And so we want to make sure that, just like George, you were saying or health is protected we’re properly insured there and Brian you mentioned life protection or income’s protection, those kinds of things. But also just reviewing, making sure that we’ve got the right coverage on our home and our cars, and then of course the right liability coverage if we do accidentally run over someone’s foot or someone slips on the front porch, whatever it may be. The biggest thing I’ve noticed this year, is that a lot of folks who live in the coastal areas or live some place where there’s been appreciation of homes over the last eight or 10 years and they’ve lived there that whole time. They’re actually a little bit underinsured on their homes, because their insurance policy standard increases have not kept up with the real estate prices and interest, and so it’s something that you just want to make sure you’re aware of, because you don’t want to wake up and find out you have 78% of your home insured if something happens.
George: You know, what’s interesting is the flip side of that, too, for areas where pricing hasn’t gone up. Maybe you live in an older neighborhood and to actually rebuild your house would be really expensive compared to where it was then. So your house costs to rebuild it may actually be more than the value of your house, but you still need to insure it for the value of replacing the house. So that’s another thing, especially when you think of this whole custom craftsmen for homes from the early 1900s that are 80, 90 or 100 years old, they actually cost more to rebuild if you had to rebuild them.
Brian: So a few other things maybe to think about as it relates to homes and real estate and those sorts of things is getting your house inspected by a home inspector. I’d like to think that the home inspectors can come into your house for a fee and tell you the state of your house and things that you should be thinking about. So as you think about your overall spending plans for the next few years, for example, that deck outside, it’s becoming really weakened. The next couple of years you’re going to need to do fix it.
The furnace, this is what’s going to happen here. So it might be an interesting way to get in front of some of those expenses and do some minor repairs now. So it’s nothing major later. You know, the other thing is, I was having a conversation with my wife about this recently—we have young kids and we think about protecting assets and obviously protecting family, right? People. So, if there was a fire in the house, do we have a game plan? Candidly, we don’t have one. And so that is sparking another conversation right now on, what is the game plan going to be? What is the ladder that we need, what is the protocol, where are the kids going to be after they get out of the house? Something that everybody should have. And again, we don’t have one today, so we are going to work on it this weekend.
And the other thing I thought I’d share is that I read an article over the weekend and it talks a little bit about checking your credit score and what that looks like. And what I thought was interesting is that there was a study out there by a company called Javelin Strategy and Research. They found that more than 1 million children were victims of identity theft in 2017, and two-thirds of those kids were under the age of eight. It’s incredible. And the reality is, because they are kids, this information is not going to show up for years. So it might make sense if you have kids to consider freezing their credit to protect themselves from this type of fraud. Obviously they’re so young, it’s not like they’re opening accounts today. So maybe something that they want to think about related to a credit check. Your credit is important for everybody. So again, beginning of the year, don’t know the last time you did it but maybe doing that on some sort of regular basis, not too often, but making sure that there aren’t errors there that are impacting you and your overall financial situation.
George: And you know, it’s really easy to check. Most credit cards today have some type of FICO score monitoring or FICO score availability. Two or three that I have all send me notes saying, Hey, have you checked your credit score? Click here. So it’s all there, and it’s very easy to get. And I know it’s pretty close to where they are, even when you go out and borrow. We actually just bought a car not too long ago and the score on my credit card was the FICO score there was virtually the same as it was recorded from the car loan.
Andy: And another thought is at the holiday season and gift giving season, depending on how you look at it, a lot of folks are getting collectibles. I’ve had clients get it really nice jewelry. I’ve had clients get firearms and another types of collectibles and, a lot of times, I think it gets missed that the limits that most homeowner policies on that are really low, generally less than $2,000. So if you’ve got more jewelry and more collectibles than that, it’s always a good time to get them appraised. A lot of those appraiser businesses are really slow in January, because they just finished the big holiday season. So they’re able to work you in and help you get a little bit better deals on the appraisals and such. And then it’s important just to let your insurance person know or your advisor know and make sure we get those covered and insured.
George: Yes, that’s a really great point. You could probably segue that into a conversation about estate planning or legacy planning, because how often do you get gifts or items or heirlooms from your parents or grandparents like jewelry or firearms you mentioned, or whatever it happens to be, these family heirlooms that may have a lot of value to them. You may not even realize that again, would not necessarily be covered. So as you do those insurance reviews, looking at, did I inherit property in this last year that might not be insured.
Brian: Yes, that’s a great point. And as it does relate to estate planning, you mentioned the holidays and you’re spending a lot of time with loved ones and family and you get to think through the people whom you’re closest to. You may have named them inside of your documents, right? They could be, maybe there’s some of your beneficiaries, but maybe they’re also the executor of your estate or the trustee of a future trust or something of that nature. Maybe just re-examining as you look around the room over the holidays, is this person really qualified to have this position? Do they understand what their responsibilities will be, when called upon to do so and maybe just reexamining where they are with that. I think that’s just, again, beginning of the year, it’s a good time to be thinking about something like that.
Andy: And you know, on the dollars and cents side too, if you are looking at giving during the holidays, we have a lot of folks both at the end of the year but also the beginning of year looking to give gifts just to start off the year. And one of the things to be thinking about as you’re doing that is considering giving, if it’s not a collectible, some type of appreciated assets. If you have stocks that have gone up in value or mutual funds that have gone up in value, a lot of times those are good things to gift, especially if the person you’re giving them to is in a lower tax bracket and as the family, you can end up with the higher overall net worth having done it that way.
Brian: Yeah. One of the other things that we do as a family, my wife and I, even though it pains her to do this, we run a fire drill every year. So if I don’t come home, if she doesn’t come home, I may be the primary person that works on our finances. But it’s important for both of us to make sure she has an understanding of exactly what this looks like and she has a game plan on who to call and what to do. A real action plan. Should I not be able to make it home. I mean, in my opinion, if a surviving spouse or loved one can’t access all the necessary paperwork and the game plan within about 30 minutes of receiving this news, if you will, that’s a problem. And it’s one of those things that you want to make sure you take care of well before you’re dealing with the grieving process and those sorts of things.
George: You should also routinely asked yourself, if I had to come up with my tax returns for the last two or three years in the next 30 minutes, could I? if I had to come up with my power of attorneys in the next five minutes, could I? And you know, one of the tools that I work with advisors on routinely is I mentioned MarinerGPS a little bit earlier from just from the cash management perspective or from a document storage perspective. It’s beautiful for that, because what it allows advisors and clients to do is actually hold information electronically—the powers of attorney, the trust documents, the wills—all of these documents you are talking about. Also, you can generate reports that list all the professionals that you work with. I actually have one of these that I created when I went and spoke to my attorney, my estate planning attorney, and I handed it to him and he said, here’s all the people that if something happens to me that we need to contact. So now he’s got it in his record, and I just need to make sure that I update that every year, just in case somebody drops off the list or gets added to the list. But it’s a really great tool that we can use on a regular basis, and I can access it anywhere in the world 24 hours a day.
Brian: Yes, it is. It’s terrific. You know, also this time of year, it’s a great idea just to review all of the designated beneficiaries that you have within your own financial plan. And, even if they are accurate, talk to your advisor or wherever it is that you may hold those assets, because, forms tend to change every couple of years. I’d like to think that a form that’s five, six, maybe 10 years old will still be respected, but at the same time, why risk it? So just making sure that you have the latest and greatest every couple of years just makes sense. And as it relates to estate planning as well, I think one of the things that slips through the cracks on a regular basis is digital assets. And we live in a more technology-driven world today. A lot of us have social media, but a lot of us also have online banking and online brokerage and all of those sorts of things. So making sure that the family has access to passwords and logins, I think is really important.
Andy: I think all this is really fantastic. We’re talking about a lot of this end of life stuff and things that come up. What happens if you don’t die? Some of the other things that come up, and one of the things that I’ve heard a colleague say quite a bit is, line up all your doctor’s appointments in the first few months of the year. Just get everything out of the way. We talked about front-loading your 401(k) so you have the benefit of the whole year, and we all know life gets in the way. So let’s get these things lined up. Get your health appointments lined up out of the way early in the beginning so that you can enjoy the rest of the year.
Brian: I think that’s a great point. We said early on that this podcast was not going to be about news resolutions such as losing weight and all those types of things, but I can’t help myself, one of the things that we’ve talked about on the show in the past is health and making sure that you’re doing everything you can to live the life that you want to live, that you are living a healthy life. And so I know people are making new year’s resolutions and potentially aggressive, in the beginning of the year it’s, I’m going to eat nothing but vegetables. I’m going to drink tons of water. I’m going to stick to this really healthy diet. I’m going to go to the gym every day. Maybe before you take that plunge and sign up for a long-term contract at a gym or something of that nature. Think about what your options may be. Think about what you might like. I mean there are a lot of people who love to lift a lot of weights, but there are other folks who want to get into yoga. Other folks who want to get into spinning and there are options that are out there that will give you the ability to sort of test drive different types of facilities. Whether that be yoga or whether that be a Crossfit or something like that. So maybe before you sign up, see if you can get a trial membership at a variety of different places and maybe you give yourself until March to decide, okay, this is the one that’s going to suit me or feel comfortable. And there are some apps out there that will let you test drive gyms in your area. So again, just something else to consider and think about as it relates to your overall health. So guys, when we wrap up every show we ask, what’s the worst financial mistake you’ve ever made? And George, that you’ve been on the show before and your worst financial decision was that you had fired your advisor back in the day.
George: Back in the day when I became an adviser, I fired my adviser thinking that I was all of that now.
Brian: Andy, what’s the worst financial mistake you’ve ever made?
Andy: Okay. I think my real kind of core financial mistake that I’ve made over time, and every year I tried to rectify this and it’s funny that it just so happens around New Year’s time as I get, I always get a case of what I call, “I’ll do it tomorrow itis” in the sense of I just put things off, things that could be done and I’ll let them weigh on my mind. Sometimes that hurt productivity elsewhere. Sometimes they get in the way of doing fun things with family. And so every year I kind of make it start to figure out what’s one or two things I can do to make sure I don’t get “tomorrow itis” in those areas.
Brian: Yes, I think we all suffer in some sort of fashion from procrastinating and let’s face it, a lot of these things, they’re not sexy. It’s not exactly what we want to do. We can book a vacation a lot faster than we can create that to do list of things that we know we should do, but don’t necessarily want to go through that process. Right. So I think that makes a lot of sense. Hey guys, so we talked about a couple of action items or things that people should consider as it relates to their overall financial situation. It is a new year, is there something on this list or even off this list, is there one thing that you guys plan on using as a takeaway in your own financial situation that somebody can benefit from?
Andy: For me, I’m going to get ahead of the lifestyle creep that George talked about and as the first paycheck of the year is the time we’re recording. This is going to roll around in the next couple of weeks or so. I’m going to make sure that I earmark at least half that toward savings to boost that savings number and that way, it doesn’t get caught up in the everyday growth of life and lifestyle.
George: That’s a good one you want to think we talked about today that I hadn’t really thought of is because one of the things I struggled with is you know, exercise and finding that right thing to do and hadn’t really thought about the approach that you were just talking about using that app as far as getting that trial membership or like me experiencing variety of different places before you kind of settle in on one particular one. So I think that’s one of the thing, I’m just going to really look at closely because I’ve struggled with finding the right one. I’ll do one for six or seven months and, I don’t really like that now and maybe moving forward so, that was a great takeaway for me.
Brian: I think what I’m going to work on is, it’s not necessarily on this list, but you know, sitting down with my wife and going over what we think our major expenses are going to be over the next three to five years. Just so we can get on the same page. I mean you, you read about the, the stress that comes to the marriage and it’s generally cause you’re not on the same page as it relates to spending or savings. So I want to get ahead of that and have that conversation. I think is going to work out well.
So guys that wraps up another episode of Your Life,Simplified. We really do appreciate you spending the time to listen to this and hopefully you’ve benefited from some of the ideas that are here. If you have questions about your own financial situation and want to hear those on the air or you have ideas for a show topic, please don’t hesitate. Go ahead and email us at: firstname.lastname@example.org. We know that your time is incredibly valuable and we hope you find this podcast a worthwhile investment of your time. Thank you for listening.
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