A Simple Financial Plan Uncomplicates Your Life

Posted On September 9, 2018

Sage Advice from the Money Coach

By Fran Halloran, The Money Coach

Recently on my radio show, I said that life is simply too complicated. We are often our own worst enemies because most of the complicated situations we face are of our own making. 

Our personal lives can become convoluted because we make poor decisions that adversely affect our family and ourselves. Our health can become problematic when we make poor choices regarding what we eat and whether or not we exercise. Our businesses might suffer because instead of looking for a simple and effective way to provide a product or service, we complicate matters by adopting practices that are outdated or are “me-centric.”

Suffice it to say, over-complicating anything in life is a recipe for failure. More often than not, I tend to see this behavior manifest in people’s financial lives and their financial plans. 

I’ve had quite a few potential new clients visit with me in the last few months for one reason and one reason only: they simply do not understand the rhyme and reason behind their financial plan. One woman carried three very large three-ring binders into my office with page after page of documents tucked therein. I was totally impressed by her organization! But when I asked her if she understood what was inside the binders, she looked at me and said, “I haven’t a clue as to what’s going on. I look at the balance in my accounts month to month and that’s about it.” Wow.

Most folks don’t understand why they have a particular type of life insurance policy, trust or annuity. All they remember is the advisor said this product was a good thing to have. As a rule, the general population may not have a clue as to how to interpret the quarterly performance of their retirement or investment account. For many, that document may as well be written in Egyptian hieroglyphics. It’s simply too confusing and complicated to even bother, so it’s filed away, never to be seen again.

This lack of understanding is a problem, one purposefully created by the financial industry to make people believe a complicated financial plan is necessary. A simple plan is something to be laughed at and summarily dismissed by those of us who know better.

Some of you may doubt what I’m saying. For those of you who fall into this category, let me ask one simple question: Tell me the last time anything profitable in your business was made better by making things more complicated? Good luck trying to think of something, because we all know – simple is best.

Here’s a simple financial plan that could work for just about all of us:

Term Life Insurance: that’s right, term life insurance. The idea that you need permanent life insurance is just not true unless you are perhaps trying to transfer your wealth tax-free to your heirs (I fully expect some of you to challenge me on this point).
Last Will and Testament (to include your healthcare and financial power of attorney): if you need anything more than a basic will, your attorney will explain to you why that’s necessary. And if you don’t understand it when the attorney is done explaining it, tell said attorney to explain it again (without charging you for the time. A good attorney should be able to make it very clear why you need a trust).
A Budget: I realize some folks are so well off they think they don’t need a budget. I also realize some people are so frugal they, too, think a budget is not necessary. WRONG! Everyone needs to track his or her spending.
Emergency Savings: Let’s call it Grandma’s rainy day account. I like to see three to six months of living expenses in this type of account.
Live Debt Free: Some of our country’s greatest business people have built their businesses and personal wealth on leveraged money. These individuals are the exception and not the rule. When you eliminate debt, you essentially eliminate a significant amount of risk.
Save for Retirement: 15% is the target amount, but save more if you can. Can’t save 15% at the moment? Work towards the goal by getting out of debt.
Pay Off Your Home: Think about how much money you could invest monthly if you didn’t have a mortgage.
Start a College Savings Plan for Your Kids: Give them a head start so they don’t have to start life in debt.
Build Wealth: Buy a rental property for cash or buy a business for cash that has a strong track record of residual income. Invest! By the time you get here, you will have developed such an acute sense of value, you will have no problem discerning what makes sense.

Finally, have a team by your side! You’re going to need an attorney, a CPA and an advisor (think financial coach) who will educate and empower you every step of the way without charging you an arm and a leg for services. And don’t worry; guys and gals who can join your team are out there, you just have to know where to find them.

Footnote: Fran Halloran is the host of the Fran Halloran Show, which airs every Thursday at 9am on 100.7 FM and 1470AM. He is a principal with Higgins and Halloran Financial Group in Lexington.