The Need for Financial Planning

[INTRODUCTION] Bob: Welcome to Christian Financial Perspectives, a weekly podcast where we talk about ways to integrate your faith with your finances. This is Bob Barber. Mary Jo: And I’m Mary Jo Lyons. Bob: Are you ready to learn how to apply biblical wisdom to everyday financial decisions? Mary Jo: Join us as we look at integrating your faith with your finances. If it’s your first time listening, welcome to our podcast, and if you’re a returning listener, welcome back. [EPISODE] Bob: Proverbs 21:5, “Good planning and hard work lead to prosperity, but hasty shortcuts lead to poverty.” Does it seem like your financial life is spinning out of control at times? Well, you’re not alone. Financial planning to the rescue. In today’s episode, we’re going to discuss financial planning, what it is, how it helps, and why you need it. Mary Jo: Bob, I gotta ask you a question. Would you ever take a road trip without a map or a GPS? Bob: Well, you know, my wife says I would, but no. I wouldn’t. Mary Jo: You are a guy. You probably won’t stop and ask for directions, but that’s a whole different podcast. I say that because financial planning is a process of wisely managing your finances so that you can achieve your dreams and goals. Simply put, a map to get you to the financial future you desire. So, that’s what the financial planning process is. It’s basically just a map. Bob: I guess we’d say financial planning is really about bringing all the pieces of your financial life together, Mary Jo? Mary Jo: That’s true. Bob: It’s like a process to help you identify all your financial goals and develop a plan to achieve them in, what I say is, a systematic way. It’s a realistic, comprehensive plan that helps you meet your goals by addressing your financial weaknesses and building on those strengths. Mary Jo: Many advisors, in the scope of working with their clients, do elements of financial planning. However, most are not skilled or trained in looking at the entire picture all at once. They may provide guidance on individual topics as they arise, but much like a pharmacist may recommend a particular over-the-counter medicine to treat a symptom, they are not looking at the entire picture to figure out the cause of the symptom. They’re not doing a complete physical or a battery of tests to properly diagnose what is going on that could be contributing to the symptoms. As a result, many people make a financial decision in one area that could have a negative consequence in other areas of their financial lives. Does that make sense? Bob: It does, and that’s very well said. Christian Financial Advisors®, our approach to financial planning is a little different. We help our clients to use their God given resources to accomplish their God given dreams and goals. We have these, what we call, financial modules and what you can do is you can pick and choose what’s most appropriate to you now and in the future. We’ll customize each module to your personal situation. So, you can take individually or you can add it and put it all together as a full plan. Our financial advice here is always based on biblical principles so that you can confidently navigate through all those financial decisions as a faithful steward of what God’s given you for your family’s financial future. And I like the fact, Mary Jo, that you’re our CERTIFIED FINANCIAL PLANNER®. Most people think of all financial planners as certified, but that’s not true. Just about anyone can use a title “financial planner”, and I’ve seen this over the years, but only those that have fulfilled the CFP CERTIFIED FINANCIAL PLANNER® Board’s rigorous requirements can call themselves a CFP professional. Mary Jo: That’s true, Bob. As a CFP professional, we are held to a strict, ethical standard to ensure financial planning recommendations are always in the best interest of the client. What’s more, CFP professionals require several years of experience related to delivering financial planning services to clients, and pass the comprehensive CFP certification exam before we can even call ourself a CFP professional. So, not only do we have to have the academic rigor behind it, but we also have to have the years of experience before we can hold ourselves out as a CERTIFIED FINANCIAL PLANNER®. Bob: Would you not say financial planning is really a dynamic process, isn’t it? Mary Jo: It is. It’s an ongoing iterative, evolving process. I hate to think of it as just a book on a shelf. Bob: Those goals, they seem to evolve over the years. You’ll have different goals within your 20’s and your 30’s and then the children come along, and then the children go to college and the children leave. Then, you retire. So, over the years, it shifts depending upon your lifestyle, your circumstances, and your age. There’s a lot of things you look at with financial planning over the years, like career changes, marriage, maybe a loss of a spouse, an inheritance that you may receive, which a good supporting scripture I always like when it comes to inheritance is Proverbs 20:21, “An inheritance gained hurriedly at the beginning will not be blessed in the end,” which is really talking about being careful when we receive an inheritance or give an inheritance. How are we going to give it away or receive it, and just be careful that we’re not going to spend it all. Even things like a home purchase goes into financial planning or even a home sale, a growing family. A great scripture that I like to use with that one is from 1 Timothy 5:8 that we’ve used many times here on Christian Financial Perspectives, “If anyone does not provide for his relatives and especially for his immediate family, he has denied the faith and is even worse than an unbeliever.” Pretty tough scripture there, but it’s showing how important it is that we provide for our family and do it in a wise way. Mary Jo: That’s right, Bob, and I love the scripture.` Not only do we need to think about a growing family, but something that’s hitting us now, more than ever, is providing for our elderly parents and making sure that they have a plan and are covered. Sometimes, that falls to us. I wanted to be sure that we think about that as part of the financial planning process. Like most people, you have hopes and dreams and life goals for yourself and your family. Without a plan and a strategy, there can be a lot of unnecessary risks in achieving these goals, risk that can cause emotional stress and financial distress if not managed properly. And, Bob, marital unity is so important when talking about our finances. Financial distress is probably one of the biggest things that is a stumbling block in most marriages. So making sure that you have shared financial goals, that you’re on the same page, and that you agree on your process to get there, that is so helpful in making sure to maintain harmony within a marriage, wouldn’t you say? Bob: I would say that, and it’s so important that you have someone come alongside you, possibly, and help you with that, which is what we’re emphasizing today. Because like in Proverbs 15:22, you always hear me quoting that one, “Plans fell from lack of counsel, but with many advisors they succeed.” As you begin to consider how to manage your financial future, you should feel confident knowing you’re working with someone committed to providing you with the highest standard of financial planning. This truly begins with a process. We’re going to walk you through what the financial planning process looks like. First, let’s talk about when you might need financial planning. Mary Jo: You might want to take control of your financial future, but you don’t know where to start. You have retirement plans from previous employers and don’t know what your options are. You don’t have time to do it yourself. A great supporting scripture is from Ecclesiastes 4:9-10, “Two are better than one because they have a good return for their labor. If either of them falls down, one can help the other up, but pity anyone who falls and has no one to help them up.” Maybe you don’t have the expertise in all the areas such as investments, insurance, taxes, or retirement income strategies. In Proverbs chapter 15:22, another great scripture, “Plans fail for lack of counsel, but with many advisors they succeed.” Bob: Maybe you’ve done some initial planning, but want to work with a professional and get a second opinion. You want to develop a strategy for giving, but you don’t want to put your own financial needs at risk. You have an unexpected life event or immediate need, like a layoff, illness, or disaster. I like to look at Proverbs six through eight. This is one of my favorite scriptures. It talks about go to the ant, “Consider his ways and be wise. It has no commander, no overseer, or ruler, yet it stores its provision in summer and gathers his food at harvest.” I think it’s a really great scripture to go with that unexpected life event that you plan in advance. And next, as you are approaching retirement and need to generate replacement income, but you just aren’t sure about things like tax implications. Mary Jo: Without prior planning, funding these events can result in additional debt, creating financial hardship. Anticipating the events in advance, developing and implementing a saving strategy, can help reduce the risk and make financial burdens more manageable. Having a solid financial plan in place can help you weather these storms without putting your financial future at risk. We talked about the financial planning process awhile ago, and there’s actually six steps. So Bob, what is the first step in the process? Bob: Well, how about this one? Agree on how to work together first. Mary Jo: That’s a good one. Bob: You want to identify what the scope of the relationship is gonna look like. Like at Christian Financial Advisors®, we have a financial planning agreement. Then, you want to talk about the fees involved and how much time is going to be involved in putting that plan together. How well are you going to work together? Mary Jo: Then the next step is what I call the discovery process. It’s where you gather the information about your finances and set your financial goals. We’ll have you initially complete a confidential client profile where you share with us all the moving pieces and parts of your money life, – all of your income sources, all your liabilities, all your debts. We’ll establish some goals. It’s a very complex form, not complex, but it’s a very comprehensive form that we have you complete. And then, we schedule a series of meetings to go over that. Typically, there’s one where we meet to kind of go over that and get the big nuggets, but then there’s going to usually be another followup meeting so that I can clarify any of those unanswered questions that come up as I begin the analysis process. But again, this could be a series of meetings and here we define your personal financial goals. We determine your risk tolerance and what your timeframes are for those goals. And then we can appropriately begin to identify solutions. Bob: Mary Jo, I have got to say that when you were talking about the confidential profile, one of the things I’ve noticed is it’s pretty difficult and it’s taken years and years of research to put together our confidential client profile. But if you’ll fill that out, I’ve noticed that it helps our clients as much as it helps us because they identify needs and things that they had never thought about while they’re filling out the confidential profile. Have you noticed that too? Mary Jo: Well, yes. There are so many elements of that that maybe they haven’t given thought to. And if they sit down, if it’s a married couple ,and they do it together, then they’re both kind of seeing the whole picture. I have this little saying that I use in this part of the process, and it’s open the kimono. You have got to expose it all. And so in order to really have a good quality outcome, we need good quality information coming in at the front of the plan. And that’s what this helps with. Bob: Okay. So this is going to take us to our third step of the financial planning process. Again, the first one’s agreeing to work together. The second one’s gathering information, and this third one is analyzing all that information that you’ve given us and then coming up with a strategy. So, we call it an analyze and strategize. This is where we consider all the options, the pros and the cons and the risk and the outcomes of all that information that we’ve gathered. We work with you to analyze your assets, liabilities, expenses, cashflow, current insurance coverage, investments, and tax strategies. We identify potential gaps and the appropriate solutions, and then we go into the fourth area of financial planning. We develop those recommendations, and this is where we actually present our findings, and we review the recommendations and the rationale behind them. Mary Jo: And Bob, one of the things that as we go through this step in the process, we have wonderful software that we use and it allows us to do “what if” scenarios and that’s part of what the beauty of this planning process is. If you tell me that your plan is to live in the current house throughout retirement, but we find out that you’re very well funded and you go, “Well, Mary Jo, what happens if we buy a vacation home?” Well, we can model that in. Or you say, “Well, Mary Jo, well, what happens if we spend more or we spend less?” And so we’re constantly tweaking those levers, and you can see what options you have, but then you say, “Well, okay, if I spend a little bit more in a month, do I still have enough to do the giving that’s on my heart?” I just love to see all the different scenarios that we can come up with and model for clients, and we’ll do that as part of a comprehensive plan. And then, we want to put the plan into motion. We will agree on next steps. How will the recommendations be carried out? As the planner, what am I responsible for? But then as the client, you’ll have certain responsibilities to help carry out and implement your goals. And as the planner, what do you want my role to be? Do you want me to serve as a coach or help you coordinate the process with other key players in your financial life? A lot of times, we’ll meet with an attorney and a CPA and help put those pieces in place and make sure that all the players are on the same page. And then, we can tweak and adjust as these experts give us guidance, additional guidance. So, we agree on action items from both the planner and the client. Bob: Then we get to this last part of the financial process, which is extremely important, just as important as these first five. And that is that we monitor the progress and stay on track because things are going to change in life. Kids are going to be born. Grandkids are going to be born. Sometimes, a disease comes along. So, there’s all kinds of things that are constantly changing. You’ve gotta look at financial planning and approach it as a living, breathing, evolving process. Make shifts and updates as necessary, and monitor that progress to ensure you’re staying on track because it’s like a vehicle you can’t just change the oil one time in the entire lifespan of it. You’ve got to change the oil. You’ve got to get new tires every once in a while. I mean, things change. So, life’s constantly changing, and that is such an important part of the financial planning process. You don’t just do it one time and forget about it. Mary Jo: I think that’s exactly right, Bob. In this day and age, we start our planning typically in our forties. And then, you still have your fifties to work through. We used to stay with one employer for the majority of our career, but that doesn’t happen anymore. They say now that most people stay with one employer, on average, about seven years. So that means that you’re going to have retirement plans to roll over or to move into a current employer’s plan. So, there’s going to be changes and there may be periods of unemployment. You’ll have to adjust all those levers as you move through your years in your life. That’s why we don’t look at it as just a book that we’re going to create one time and put on a shelf. That’s old school financial planning. Bob: Now, Mary Jo, I see here at the very end, you’ve got some really good tips for success. So, I’m going to let you start off on this because you put this together and I’ll chime right along. Mary Jo: Okay. First, you want to set measurable, financial goals. If you’ll recall, that was one of our recent podcasts that we had, setting measurable financial goals, and putting those in writing and how important that is. So, you want to create specific targets that you want to achieve and when you want to see those results. Bob: Oh, I like this second one. Understand the effects of each and every financial decision you make. Financial life is much like a puzzle, Mary Jo, did you ever see the little puzzle pieces that we had here from a long time ago? Mary Jo: I did, and it works beautifully. I think it’s the perfect image. Another image that I have, and I always like to talk in visuals, it’s like a crazy quilt. You have all these different pieces of fabric that don’t go together, but when you put them all together, it makes a beautiful piece that will keep you warm when these cold, chilly days. Bob: You’ll have competing financial goals all along the way, too. The investment decisions you make along the way, what are the tax consequences that might be of those college funding decisions for your children or grandchildren? So, there’s all different decisions that have to be made along the way that you’ve got to put into your financial plan. Mary Jo: You want to periodically reevaluate. We mentioned it being a dynamic process. Goals may change, and certainly unforeseen issues may arise. Aging parents. That’s a big realism in today’s world, so they may need help. It could be, for example, if the spouse has to be in the caregiver’s role, maybe he or she has to step out of the workforce for awhile to make that happen. So, that could be a real hiccup in your financial plan. Bob: And Mary Jo, this last tip for success that I see you’ve got in here, which goes along with the program that we did about procrastination, is start planning now. The number one reason for failure is procrastination. You never know what tomorrow may bring, and by developing good habits now, good saving habits, budgeting and investing habits, you’ll be better prepared to handle those emergencies in life’s challenges when they come along. As Christians, most of us strive to give generously, but you may be afraid that you may not have enough. If you aren’t sure how much is enough, the financial planning process can help you decide. We want to help you decide that prayerfully, taking in God’s word in consideration of that, that all your spiritual goals align with your financial goals and vice versa. We want to help you to discover the joy of generosity and create a plan to live a more generous life. That is so fun because it’s more blessed to give than receive, and expand God’s kingdom while achieving the dreams and goals of your family. To end up today’s program on financial planning, we’ve shared a lot with you. Mary Jo has a great scripture to share with you here at the end of the today’s podcast. Mary Jo: This is from Romans 12 – A Living Sacrifice to God. “Don’t copy the behavior and customs of this world, but let God transform you into a new person by changing the way you think, then you will learn to know God’s will for you, which is good and pleasing and perfect. Because of the privilege and authority God has given me, I give each of you this warning. Don’t think you are better than you really are. Be honest in your evaluation of yourselves, measuring yourselves by the faith God has given us. In his grace, God has given us different gifts for doing certain things well. So if God has given you the ability to prophesy, speak out with as much faith as God has given you. If your gift is serving others, serve them well. If you are a teacher, teach well. If your gift is to encourage others, be encouraging. If it is giving, give generously. If God has given you leadership ability, take the responsibility seriously. And if you have a gift for showing kindness to others, do it gladly.” We all have a gift. For some of you, it’s knowing what you don’t know. So, plan today for a financially fit future. Let’s make a plan together. That’s all for now. [DISCLOSURES] 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 Mary Jo Lyons. Bob and Mary Jo do not provide tax advice and encourage you to seek guidance from a tax professional. Investment advisory services offered through Christian Investment Advisors Inc. DBA Christian Financial Advisors®, a registered investment advisor.