Diligence by Who? You or Your Financial Advisor?

It’s graduation season, and there’s an excitement in the air about starting a new chapter. Mixed in with this excitement is an element of stress to make the right decisions: decisions on how things should be done, when they should be done and where they should be done. All these decisions are common, but they often distract from the purpose of what comes after high school.

We need to remember that higher education has a purpose. It’s more than an experience. The purpose of a college degree is employment. It is an investment, and as with any other investment, you should be calculating the return on that investment.  Spending $100,000 for a degree that secures a job with an annual salary of $40,000 is not the best rate of return.

There are plenty of creative ways to get a great college education without breaking the bank. Parents can start a 529 plan, the earlier the better, to help cover costs. Students can begin their higher education at a community college or secure college credit via Advance Placement (AP) exams. Additionally, students need to be sure that the field they are spending their time and energy on is going to reciprocate by providing solid career opportunities.

Making the wrong decision is not simply an unwise financial move. It can have lasting implications. Recent figures show that outstanding student loan debt has reached $1.5 trillion[i]. Our younger generation is not only struggling under this debt, they are also pushing off other personal and financial milestones, such as purchasing a house[ii], getting married or starting a family[iii]. These decisions can have long-lasting and far-reaching consequences.

Lastly, let’s not forget the countless parents who put their path to financial independence on hold to financially assist their struggling children. While wanting to financially help your loved ones is admirable, it helps no one to offer assistance at the expense of your own security. Just like when traveling by airplane, you need to put your own oxygen mask on and secure your safety first before aiding others. There are no scholarships for retirement, and you won’t have a financial safety net for the future if you don’t work towards creating it now.

College is truly an exciting time. Our young adults are learning who they are, where they want to go and how they intend to get there. At the same time, we cannot forget that college is a fleeting moment, one that is meant to arm the student with the tools needed to create a brighter and more successful future. Be sure to chat with your students to ensure that this experience does just that, rather than straddle these students with debt and stress.

[i] https://www.marketwatch.com/story/student-debt-just-hit-15-trillion-2018-05-08

[ii] https://www.businessinsider.com/student-debt-preventing-the-us-from-having-normal-housing-market-2019-5

[iii] https://www.bankrate.com/loans/student-loans/student-loans-survey-february-2019/

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Prior to investing in a 529 Plan investors should consider whether the investor's or designated beneficiary's home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state's qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Prior to investing in a 529 Plan investors should consider whether the investor's or designated beneficiary's home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state's qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.

Disclaimer:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Stock investing involves risk including loss of principal.

Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

Investing in mutual funds involves risk, including possible loss of principal.

The principal value of a target fund is not guaranteed at any time, including at the target date. The target date is the approximate date when investors plan to start withdrawing their money.

No strategy assures success or protects against loss.

Here’s a tip: Review your spending habits. It's really hard to mitigate or manage financial anxiety if you don't have a clear sense of your spending.

When talking with clients, questions that come up all the time are “Where's my money going? I don't know where all of our dollars go, we’re making a good income, but I don't know where it's going?”. To get cash flow will start answering that question. It will start reducing the anxiety in those particulars because we can't continue this path of “how do I fix this?”. That's what we do as Advisors – we train, and we help people fix and solve those particular problems. I always ask this question, where's my money going? But more importantly, is your money in sync with your financial why? And your financial why is customized, it's, what do you want it to be? And that could be financial independence.

I can tell you in the course of my 30 plus years I’ve sat down with many couples, individuals, and businesses and I've said, “Hey, congratulations, you now have financial independence”. In other words, you don't have to go to work anymore, work is now an option. You can still choose to go to work – you could change jobs, you can do whatever, but you don't need to anymore. You've built up enough that you can replace the income, enjoy the lifestyle that you want to enjoy, spend the time with family, friends, and loved ones that you want to do. And that comes from good planning on the front end and understanding that you can get there much faster if you work with a coach or work with an advisor and understand your cash flow.

It will be liberating once you go through that process, but it does require taking action. Here's some take actions on what you can do. There are the knowns and the unknowns.

In the knowns, we control whether we want to have a plan or not, we control whether we want to do cash flow and budget analysis, we control that reduction. If that's really your number one goal is to get debt-free well, then let's build a plan that makes you debt-free. We control how much is in our emergency fund; so that if we lose a job or income drops, maybe we've got adjustable income or we want to change jobs, we've got this money set aside so we don't have anxiety during that period. We control all those things. We control how much protection we have against risks; you know how much life insurance that we have if we have state documents that are there those are all known things. Now, here's an unknown, you don't what day you will leave this world. Do you have plans in place that make sure that loved ones are protected the way you'd like them protected? Again, you control these areas, these are all things that are in your control.

The one thing I'll say is even though we don't have control over the unknown, we always want to stay informed, especially around new laws and new rules. This is what Advisors do for a living. For instance, if you take money out and the market's down or maybe you took it out and it's taxable- now it bumped your taxes up.  It’s important to meet with your Advisor and to have a coach to help interpret these known rules that are probably unknown to most Americans.  It's probable these types of things will come up and once you pick a strategy, whatever that strategy is, you can't change it.

But you have to always ask yourself “Maybe this impacts me, and if I don't know about it, I'm not going to do anything prudent to help myself get on to financial independence”. If you do know about it and your Advisor knows about it, they're going to help you make good decisions that will work well for you in those areas. It's important to understand that there are unknowns out there, and you can plan your best for those unknowns, but it's important to accept that you never have full control of the unknown. So. think about what you do have control of, and make sure that you are making the best decisions for yourself, your family and your loved ones.