5 Reasons You Need a Financial Planner

[INTRODUCTION] Welcome to “Christian Financial Perspectives”, where you’re invited to gain insight, wisdom and knowledge about how Christians integrate their faith, life and finances with a Biblical Worldview. Here’s your host Christian Investment Advisor, Financial Planner, and Coach, Bob Barber. [EPISODE] Bob: Five reasons you need a financial planner. You know what? It’s interesting. We’re only gonna cover five, but I would think there’s probably about 50 reasons you need a financial planner, but for time’s sake, we’re not gonna do that. Shawn: I think we’d go a little over our time budget. Bob: Yeah, exactly. We’re gonna spend about 10 to 15 minutes on this and we could easily spend two hours talking about the reasons that someone needs a financial planner. Shawn: Yep. And then we’re gonna do another one on five reasons. You need an investment manager. Bob: That’s right. Investment advisor. And then we’re gonna do one on five reasons you need a Christian financial advisor. Okay. So we’re in the fives. This is the first one of the five. So I call it the triple five, I guess. Shawn: Well, let’s start with a scripture. So Proverbs 15:22, “Plans fail for lack of counsel, but with many advisors they succeed.” Bob: That’s the truth. Isn’t it? Shawn: I love that verse. Bob: I do not like going it alone. I don’t know about you, but I don’t want to go it alone. Shawn: With a lot of stuff in life. We obviously talk mostly about finances and investments. But I know at church, whether it’s in your small group or when you’re listening to the pastor they’re talking about things. You just want to ask other people, other people who maybe have gone through what you’re going through, or maybe they are a little bit older than you. So they’ve had a little more experience with that. Bob: Seek the advice of experts? You think about medical. You don’t wanna just rely on one doctor you want. He relies on a team or she, they rely on a team to help them. Shawn: Or get a second opinion. Bob: Exactly. So, so now we’re gonna get into the first reason that I believe you need a financial planner, but before I do that, I wanna give you a little bit of a hint. So Shawn, back in the old days before there was Google maps. Shawn: Wow. Bob: There were those days we took out a map. Okay. Shawn: I was born in 86. So I remember when we didn’t have a smartphone and had a real map on paper. Bob: Well I was born in 62, so that tells my age. I hit the big 60 this year. But we when we would go to Colorado, and my family went to Colorado every summer, and we would always have a map. I even remember on the map when we’d be between towns, like how much farther till we get to this next town, I’d look at the map. But I had a map for knowing where we were going. It’s the same way a blueprint is. If you’re gonna build a home, you need a blueprint. So the reasons you need a financial planner is a financial roadmap. That’s my reason number one, a financial roadmap because a good planner’s gonna help you build that roadmap with the experience they have. And there’s something you’re gonna go through in life as you’re going along the road. You’re gonna have mine fields. Things are gonna change. Shawn: So you mean life doesn’t just go perfectly according to plan? Like obstacles come up? Difficulties or challenges? Bob: That’s just life. We know that life is not perfect. Bob: And you’re gonna go through a lot of minefields and a good financial roadmap is just not set in stone either. It’s gonna change through the years as your life changes. Because life is not perfect. Shawn: So a good financial planner helps you not just with that initial roadmap, but each year as things progress and things might change, you can adjust. Adjust those goals. Adjust the objectives. When the obstacle comes up, figure out how to find a detour. Bob: Yeah, that’s right. Shawn: To go around it like your phone does now. Like, oh, there’s a crash up ahead. Well, if you take this next exit before everyone else is exiting, it’ll get you past most of it. Bob: At least you hope it does. Shawn: You hope it does. Bob: So the second reason is saving and spending and that kind of goes with that roadmap because you’ll have those times where, well, you, maybe you wanna buy that new car, you want to buy that new home, or you have a health issue. Shawn: How much of an effect does that really have? Because you can have a savings goal and your estimated spending, but if you decide, well, we’re gonna take this big trip and it’s $5,000 take the whole family. Well, depending on how far along you are in your retirement and saving and getting ready for that, is that $10,000 in lost opportunity? Is that $60,000? Bob: Probably a good 20. Shawn: Over time, if you’ve got 10 years, 20 years, 30 years left and you’re spending that money, the future value of that can be a lot higher than people realize. Bob: The big one I se,e Shawn, is that when people wanna buy a car. Shawn: We gotta have the new one. Bob: And they’ve got a conservative or moderate portfolio. It’s averaging 3, 4, or 5%. And they go take $40,000 out to go buy that new car. And now that money’s not gonna compound. So, over the next 10 years, that 40 could grow to 80. In another 10 years, it could grow to 160k. But think about in 20 years, what’s that car gonna be worth? Shawn: Maybe 50% or less of what you paid for? Bob: No, in 20 years, it’s gonna be worth maybe 5,000 dollars. So a good financial planner can show you how present saving and present spending is going to affect your future. And today, with the technology, just like the Google maps we have now, you can put this information in our system, which we use eMoney and you can put that system in it. Immediately, it will show you how it’s affecting your future. Immediately. Shawn: You can see with somewhat, it’s not perfect, obviously because you are assuming, making some assumptions on that. The spending stays the same and the savings stays the same. But if your funding is meeting your goals and you add in that decision to spend however much it is now, then we can quickly show someone, are you still going to have enough? And obviously you’re not gonna have as much, but are you still gonna have enough for the projected spending needs during retirement? Bob: Yeah. Boy, it’s amazing how much it affects it. And when people see how much that car or that kitchen remodel is because you don’t like the color of your countertops, or you want new appliances, but the present ones are working fine. Shawn: Well, it’s all about that time too. How long do you have until retirement or if you’re in retirement, average mortality rate is 90. I know some people live longer, but when your average expectation is say 90, and you’re taking out $10,000 for that kitchen for just maybe the countertops, but you’ve got 30 years left of potential life, that can still make a huge difference. Bob: That’s right. The third reason that we see, and remember these are just five reasons, right? But there’s many, many others, but one of the third main reasons you need a good financial planner is a good estate plan. A good financial planner is gonna help you organize that. The reason you need a good estate plan is a premature death or disability or a disease like cancer or heart disease or mental incapacity. That’s where you do the planning, like dementia can come on in later years, and you need to do that planning while you can. And we work with an attorney to put all that legal documentation together. And those documents are like a trust, a medical power of attorney, a durable power of attorney, financial power of attorney. So, those documents need to be there for when you need them. That’s in the case of an emergency, and there there’s always gonna be that time. You need to think about it before, not during. Shawn: And that estate plan, having the financial planner help you think about all those different areas can also be a lot more valuable in the long run because if you have the attorney to figure out all of that stuff for you. Well, they tend to bill pretty high, by the hour. So that could be one of the things that helps you. If you’re already working with a good financial planner, we can help you walk through it. Have you thought about this? Have you thought about that? Do you have something for disability? Whether it’s mental or physical, there’s all those things to think of. Get all that organized. And then the attorney is just drawing up documents, but they’ve already got all the stuff to fill in the blanks, more or less, and that can save you a lot of money. And especially the taxes, people are like, oh, I’m gonna set all this stuff up. And they wait, they wait, and they wait, and then something happens. And now it’s too late to set up the estate, and the government will happily take 50%. Bob: If you get over a certain amount. That is correct. Shawn: So don’t pay the government any more taxes than you have to. Bob: So, let’s get into the fourth reason now. So, which one we have there? Shawn: Risk. Bob: You gotta think about risk. Shawn: Is there risk in investments and finances? Bob: Big time. And we’re gonna cover that on looking for a good registered investment advisor. We’re gonna cover the part of the five reasons for that and the risk. But here for financial planning, the reason for risk is because of an accident, hospitalization, lawsuit, and that has to do with properly structuring the assets for the most protection. That’s where financial planner will help you there. And this is all, again, done in good partnership with an attorney and a good insurance advisor. Shawn: Right. Well, as we said earlier, plans fail for lack of counsel, but with many advisors they succeed. So the financial planner in this situation, to an extent, is really kind of helping someone with figuring all this out, where they need to go, and then helping to coordinate with the attorney, with an insurance advisor, on filling in those gaps. Bob: You should never buy insurance in isolation. I want to tell you that. It is a mistake to go out and buy an auto insurance policy and buy a completely separate policy with another advisor and another company for your home insurance and then your liability coverage. So that should all be done together in insurance. I’m gonna say this and I’m looking right at you. You should never buy insurance based on price. You should buy it based on coverage. So, be careful of all these online, silly commercials that don’t take it seriously and use an ostrich or a monkey or something like that. I mean, it’s an insult to the insurance business that they do this. Shawn: Well, insurance is all about managing your risk. So, there’s nothing wrong with price shopping, but what you wanna make sure you’re doing, which I think is what you’re alluding to, is it’s not just about getting the cheapest price. It’s about getting the best price for the right coverage. Make sure you’re properly managing the risk that you have, because that’s what insurance is for. Bob: When it comes to that need, you’re not gonna wish you had the cheapest price. Shawn: Exactly. Bob: You need the right amount to cover you. I saw this with my youngest daughter and she bought a policy from some company out in California. But anyway, I couldn’t believe the low amount. Well, if you were to hit another car, you’re not covered, but it got by the bare minimum for the liability. So we got her hooked up with a major company and made sure that she’s covered. And then the fifth and the last one for today is… Shawn: Tax savings, which I kind of started to get into a little bit earlier. But different, from the state planning side of things. Bob: I don’t think anybody. Shawn, when I meet somebody that pays just $5,000 in income tax, they don’t like it. Because to me, $5,000 is a little bit, but not much, because I work with a lot of people that pay $50,000 in income tax per year or a $100,000. But it doesn’t matter where you fall in there, a financial planner can give you many tax strategies for lowering that tax. Some of this, right off the bat, just max out your 401k. Do things like lumping your property taxes in one year. What I mean by that is at the end of the year, pay your property taxes for that year and then pay the next year in that same year and then don’t pay the next year so that your property taxes, so it’ll be a deduction for you. Because you gotta get over the exemption that you get as a single or married couple, which is around $12-13,000 or $25-26,000 for a married couple now. Shawn: So, if you’re working and say the job that you had, you had really good year. Maybe you had like a big bonus or if you’re working in sales and you had more of a good commission year, something like that, then that real estate tax could be, or your property tax, that could be one of the ways for you to kind of reduce that in that year. Just go ahead and pay both this year and next year, all at the same time. Bob: Another tax planning thing we do is like when somebody, maybe they have a lot of gains in their portfolio, but we can look at losses. Where could we take losses to offset gains, right? Or could we use a charitable remainder trust if you had a large capital gain and a big piece of property. Maybe you were selling a property for $2 million plus, and you have gains of $800,000 or $900,000. You could use a charitable remainder trust to offset those gains. Or, you can also do do pre-giving. Our audience is a Christian audience. So, they’re givers. And maybe you have a year where you have a lot of income where you can advance your giving through the use of donor advised funds. So, there’s a lot of strategies there that I can sit down as a financial planner with someone, and it’ll more than cover my fee for financial planning. Shawn: And obviously, we were just kind of scratching the surface on that for even the tax savings, because it depends on the situation. That’s why you tend to need that one-on-one for a situation like this is because not everybody is it gonna make sense for them. Oh, I’ll pay the property taxes or I’ll do whatever. Bob: They don’t understand. They don’t know all those strategies. Shawn: Yeah, exactly. Bob: And you know what, a lot of times CPAs will not share those strategies with you, too. A lot of times CPAs are just at the end counting what you owe. Shawn: Well, especially depending on when you’re talking to them. So, if you work with a financial planner to then coordinate with your CPA, then you can kind of maximize those potential tax savings because – I’m sure you’ve run across this – people are talking to a CPA asking, well, how can I save money? And they’re talking to them in like March of the following year that they’re trying to advice for. Bob: Like for the last year. Shawn: If you talked to me six months ago, there might have been some stuff I could tell you. Bob: Well, you’ve heard my CPA even say, Bob, you sure you shouldn’t have been a CPA because I think so much about taxes. So, there are five of – just five – of the many reasons you need a good financial planner. I could have easily gone 20, but I’m not gonna do that for time’s sake. We could take a few hours to go over this subject. The main thing is, is don’t go it alone. You don’t need to go this alone. Two are better than one, and scripture speaks of that. Ecclesiastes 4:9-10 says, “Two are better than one because they have a good return for their labor. If either one of them falls down, one can help the other one up. But pity anyone who falls and has no one to help them up.” Shawn: Amen. All right. Well, thanks for joining us today. That’s it. God bless. [CONCLUSION] That’s all for now. We invite you to listen to all of our past episodes covering many financial topics from a Christian Perspective. To make sure you don’t miss any of Bob’s upcoming episodes you can subscribe to Christian Financial Perspectives on iTunes, Google Play Music, Spotify, or Stitcher. To learn more about integrating your faith with your finances, visit ciswealth.com or call 830-609-6986. [DISCLOSURES] Investment advisory services offered through Christian Investment Advisors Inc dba Christian Financial Advisors®, a registered investment advisor registered with the SEC. Registration as an investment advisor does not imply a certain level of skill or training. Comments from today’s show are for informational purposes only and not to be considered investment advice or recommendations to buy or sell any company that may have been mentioned or discussed. The opinions expressed are solely those of the hosts, Bob Barber and Shawn Peters, and their guests. Bob and Shawn do not provide tax advice and encourage you to seek guidance from a tax professional. While Christian Financial Advisors® believes the information to be accurate and reliable, we do not claim or have responsibility for its completeness, accuracy, or reliability.