San Diego Financial Advisors Network

Wall Street and big investment companies make investors think that the private market of products and services, that the average investor does not have access too, are the keys to financial success. While it is true that high net worth individuals can access more complex strategies, it does not mean that private offerings are the right fit for everyone. This is especially true if you are just starting out.

This misconception, that financial planning and investment advice is only as good as it is “sexy,” is not true. The truth is, you do need a fancy strategy or product to reach your financial goals. Here is how.

Don’t overthink your finances – work on the non-sexy basics and start building a foundation. 

Start with writing down your goals. What goals do you want to achieve and when do you want to achieve them? “…people who very vividly describe or picture their goals are anywhere from 1.2 to 1.4 times more likely to successfully accomplish their goals…” – Forbes. Once your goals are written, decide how you are going to keep yourself accountable. Start by setting a small goal and accomplishing it before you start on the next.

The simpler the strategies you employ, the more likely you are to continue doing them. It is much easier to control your financial destiny if you work on creating good habits and then consistently build wealth over time. It isn’t an exciting way to get rich, but it is the easiest way to make sure it happens. 

Financial planning and investing strategies are best when they are simple – not sexy. 

Simple planning and investing advice that is true:

1. Spend less than you earn.
2. Save 10-20% of your earnings.
3. Don’t try to keep up with the Joneses.
4. Set up automatic savings and debt payments.
5. Anything that sounds too good to be true – is.
6. Don’t make investing more complicated than it needs to be.

Investing in the stock market is confusing enough – don’t make it complicated.

“The number of mutual funds and ETFs in the U.S. now stands at more than 10,000, 10% higher than it was in 2013, according to the latest data from Morningstar…” – Forbes

A couple of low cost and diversified funds is all you really need.

The 3-fund portfolio theory is a strategy where you buy just three funds that account for most of the investable universe at a very low cost. The 3-fund portfolio would typically include these three funds: Total US Stock Market, Total International Stock Market, and Total US Bond Market. Each is diversified and covers a major market sector, and you can get them all for close to a 0% expense ratio. If you deploy this strategy, you will have to choose the percentage you want to invest in each of these funds based on your risk and time horizon and then rebalance them at least annually. 

Another simple option is a Target Date or Lifecycle fund.

These funds are great for many investors who want to pay a little more to have the fund completely manage itself – a set it and forget it option. These types of funds have a fixed or decreasing asset allocation, mix of stocks and bonds, to which the fund automatically rebalances. They also cover all the funds of the 3-fund portfolio, so they are very diversified. Target date and Lifecycle funds are a simple, 1 fund, option to get you started with investing at a very low cost.

You do not want to invest money that you will need in the short term. 

Before you invest any money, make sure you have an emergency fund and keep cash set aside for anything happening in the next 0-2 years.

Hiring a financial planner or investment manager becomes necessary as your life becomes more complicated. 

“A 2014 survey by Charles Schwab found that most of us spend twice as much time choosing a car as we do choosing investments that are supposed to support us for years.” – NYT

As life becomes more complicated, you end up having less time and brainpower to keep up with the growing complexities in your financial life. This is when you know it is time to outsource the job. 

While you can do many of the steps above on your own, at some point, you will need help.

Get an objective third party to review your plan and give you a financial roadmap. Significant life events or transitions are great times to have a CFP® confirm that you are covered for the future.

These are great reasons to reach out for help:

• Having kids
• Buying a home
• Move to a lower-paying job 
• Staying at home with a new child 
• Retiring or planning to retire
• Making a Life Insurance or Annuity purchase 
• Starting to feel like you’ve reached the limit of your knowledge

If you need help creating your financial strategy, or want someone to keep you accountable to your goals, we can help.

Alicia Butera, CFP® is a Financial Planner for Planning Within Reach, LLC (PWR) located in Scripps Ranch, San Diego, CA. She is the Director of Financial Planning and Marketing for PWR. Alicia manages the financial planning process from start to finish with her clients, answering their questions and providing them guidance. Alicia has 8 years of experience in wealth management and works virtually with clients all over the US.

Planning Within Reach, LLC (PWR) is a fee-only and fiduciary wealth management firm offering one-time comprehensive financial planning, ongoing impact-focused investment management and tax preparation services in San Diego, CA. PWR is a virtual firm that is woman-owned and serves busy families and impact investors. Planning Within Reach, LLC and their advisors never receive any type of commissions for sales and does not have any insurance licenses or brokerage relationships.

Individuals wanting to work with our company often call us and ask us for a reference. This makes sense. In almost every industry you want to know someone who has worked with a service provider before hiring them yourself. Though in the world of investment advice the answer is;

No, we can not give you a reference.

There has been this misconception that advisors can provide references, but this is not the case. While for us advisors, this makes our job of getting new clients harder, especially for those of us who pride ourselves on providing top notch service, this rule does come with a valid reason.

Let’s start with what the rule is.

The Securities and Exchange Commission (the “Commission” or “SEC”) regulates investment advisers, primarily under the Investment Advisers Act of 1940 (the “Advisers Act”). The Advisers Act “…generally defines an “investment adviser” as any person or firm that: (1) for compensation; (2) is engaged in the business of; (3) providing advice, making recommendations, issuing reports, or furnishing analyses on securities, either directly or through publications.” “Subsection (a)(1) of the Advertising Rule provides that it shall constitute a fraudulent, deceptive, or manipulative act, practice, or course of business to, directly or indirectly, publish, circulate or distribute any advertisement that refers, directly or indirectly, to any testimonial of any kind concerning the adviser or concerning any advice, analysis, report or other rendered service. . . . such advertisements are misleading; by their very nature they emphasize the comments and activities favorable to the investment adviser and ignore those which are unfavorable.”

Why is this in your best interest?

The SEC enforces this rule on investment advisors because they do not want one good experience of a client to be marketed as the sentiment of all the clients of that advisor. When you ask for a reference from an advisor, are they going to send you to someone who had a bad experience with them or a good one? Of course, they will give you the name of someone who is a cheerleader for them and their firm. The SEC does not want advisors to be able to tout their good experiences without advisors sharing the bad ones as well, so they do not allow advisors to use client referrals. A reference is considered a testimonial since the advisor would first be able to vet who the reference is, which allows them to choose someone who they know had a good experience and will say good things. Also, your advisor should not give out a reference because it breaks confidentiality with their client. Clients of advisory firms have a right to privacy and confidentiality and unless it is previously discussed with a client, an advisor should not share any contact information or details about their clients with anyone. Instead of asking for a reference you might want to ask your future advisor if they have had any complaints from previous clients and what they did to remedy their client. You can use the SEC search or BrokerCheck websites to find any discourse or suspensions for advisors you are currently looking to work with. If you find an advisor who is going to give you a reference, ask them how they do business and who they are regulated by. You might find out this is not someone you want to work with.

Finding and giving advisor referrals.

You can still find referrals for advisors in your general network, on Yelp, or other social media profiles. The SEC does allow clients to post their experiences on the internet as long as the advisor has no ability to edit, hide, or delete unfavorable posts. Advisors should have no control over the content that is posted about them on third-party independent websites. “An investment adviser’s or IAR’s own social media profile or account that is used for business purposes is not an “independent social media site.” So, if you would like to leave a review, do not post it on the personal social media pages of the advisor or they will likely have to take it down. Your advisor should not draft your review for you or post it on your behalf. If you would like to review your advisor it needs to solely come from you. Also, your advisor should never provide you compensation for giving them a review.

Trust in your own experience.

So, when you call an advisor and directly ask for a referral, they should not give you one, but you can still find them on your own. Just remember, this rule was instituted to benefit the consumer, not the advisor. The SEC’s goal was to help the consumers to not get sold bad advice based on one client’s favorable experience. Consider this when you are looking for reviews of an advisor. There are so many different types of advisors who sell different products, have different services, charge differently, and work differently. You have to find the best fit for you which might not be the best fit for someone else. In the end, you should always make sure you trust your advisor and poke holes in any good reviews you find. You should not trust a testimonial or one client’s good comments but instead, trust your own experience. There are many questionnaires you can find online that will help you ask potential advisors why you should work with them, which can act as a guide to making your own judgment. You should always look for someone who is a CFP®, fee-only and a fiduciary. Let your own opinions, not the opinions of others, direct who you want to work with. Sources: https://www.sec.gov/divisions/investment/iaregulation/memoia.htm  https://www.sec.gov/investment/im-guidance-2014-04.pdf  Alicia Butera, CFP® is a Financial Planner for Planning Within Reach, LLC (PWR) located in Scripps Ranch, San Diego, CA. She is the Director of Financial Planning and Marketing for PWR. Alicia manages the financial planning process from start to finish with her clients, answering their questions and providing them guidance. Alicia has 8 years of experience in wealth management and works virtually with clients all over the US. Planning Within Reach, LLC (PWR) is a fee-only and fiduciary wealth management firm offering one-time comprehensive financial planning, ongoing impact-focused investment management and tax preparation services in San Diego, CA. PWR is a virtual firm that is woman-owned and serves busy families and impact investors. Planning Within Reach, LLC and their advisors never receive any type of commissions for sales and does not have any insurance licenses or brokerage relationships.

It is tax season and the common misconception is that getting a tax refund is a good thing.

As per the New York Times, “Americans generally prefer to have too much withheld … Typically, three-quarters of tax filers receive refunds — including last year [2018], when more than 102 million tax filers got money back.” Here is why you need to rewire your thinking and start dreading a tax refund.

What is a tax refund?

A tax refund means that you prepaid more taxes than you owe.

What is a withholding?

Withholding means that money is sent directly from your paycheck, or in the form of estimated payments, to the federal and state government to pay a portion of your tax bill. In a perfect world, you want your withholding to be exactly the same as the amount of taxes you owe.

Getting a refund is a bad deal financially.

You are giving away your money as a free loan to the government. When you get a refund, the government is essentially giving you back money that you have loaned them. Also, they do not pay you any interest on this loan. When you overpay your taxes, you lose out on the opportunity to keep the money that is yours and grow it throughout the year. Do you really want to be loaning the government your money and get no interest in doing it? They keep your money until you file your taxes. You can not get your money back until you file your taxes, proving you are owed a refund, and they deposit or send you a check. You could be waiting over a year to get your money back. The IRS and states assume that you are sending them the right amount until you let them know with your tax return. You could have used this money all year. We have been wired to think that getting a refund is getting free money, but it is not. The refund you get is your money, and you should have had in your pocket all year to save, spend or invest.

Don’t Expect an Excessive Tax Refund for 2018.

This year with the promised “tax cuts” to most of the middle class; many individuals are assuming they will be getting a large refund. What wasn’t publicized is that you most likely have been receiving this “tax benefit” all year long, as paycheck withholding rates were updated to match the new tax brackets. So, you effectively have been receiving your tax benefits all year in the form of more money in each paycheck. Therefore, don’t expect a large refund when you go to file.

Make sure your withholding is correct.

Use the IRS Withholding Calculator  Follow the easy instructions on the withholding calculator to estimate your tax liability for 2019 and get tips on how to fill out your W-4. (See my example below.) You will need to have a paycheck handy to fill out this calculator.   Fill out a new W-4 and send it to your payroll department Based on the results of the calculator, use form W-4 to update your withholdings. In the example I did above, you can see that I should fill out a W-4 as “single” and with “1 allowance”. Have a tax preparer run a projection for you If you feel overwhelmed, confused or your situation is more complicated than what the calculator can handle, contact a tax preparer. A tax preparer (CPA or EA) can run a tax projection for you and help you plan your withholdings and tax strategies to implement for 2019 and beyond.

Why withhold at all?

The opposite end of the spectrum has consequences as well. You will be subject to penalties and fees if you do not withhold enough taxes from your pay. You are required to have “paid withholding and estimated tax of at least 90% of the tax for the current year or 100% of the tax shown on the return for the prior year, whichever is smaller” to not get hit with a penalty. The rules are different if you earned a very high income or are in specialty fields of work. You can determine how much you will owe in penalties and fees by using form 2210.

For the average taxpayer, the withholding rates do a good job.

• If you have a second job, get untaxed bonuses, are self-employed, have large deductions, etc. your actual tax bill could differ significantly from the standard withholding tables.
• When life changes your W-4 should change. Don’t forget that when you get married or have children, you should also review and update your W-4.

Check your withholdings each year to make sure you will not have a surprise refund or a substantial underpayment penalty. Tax refunds are not a good thing and are not free money. Rewire your thinking. Keep your withholdings accurate and updated to make sure that you are on track to only pay the taxes you will actually owe. Get help from a tax preparer or fee-only financial planner if you need help.

Sources: https://www.nytimes.com/2019/01/27/us/politics/tax-refund-code-shutdown.html https://www.huffpost.com/entry/tax-withholding-calculator_n_5a999cfee4b0479c0252390b

Alicia Butera, CFP® is a Financial Planner for Planning Within Reach, LLC (PWR) located in Scripps Ranch, San Diego, CA. She is the Director of Financial Planning and Marketing for PWR. Alicia manages the financial planning process from start to finish with her clients, answering their questions and providing them guidance. Alicia has 8 years of experience in wealth management and works virtually with clients all over the US. Planning Within Reach, LLC (PWR) is a fee-only and fiduciary wealth management firm offering one-time comprehensive financial planning, ongoing impact-focused investment management and tax preparation services in San Diego, CA. PWR is a virtual firm that is woman-owned and serves busy families and impact investors. Planning Within Reach, LLC and their advisors never receive any type of commissions for sales and does not have any insurance licenses or brokerage relationships.

Are you wondering what it looks like to do financial planning with a fee-only and fiduciary financial planner?

While each planning firm does things differently, here is how we at Planning Within Reach walk our clients through creating and developing a financial plan.

An Initial Call

We start by understanding your desire to have planning done now and what questions you need answers to. Here we can determine if we are a good fit for each other and if we would work well together. We give you a quote for the cost of your plan on the call.

Financial Goal Discovery

Once you move forward, the planning process starts with a discussion about your financial goals. Everyone’s goals are different and that’s why each plan is customized to the client’s particular situation. Examples of goals are; home purchases, planning for babies, saving for retirement, saving money on taxes or even taking a less stressful, but lower paying job, to name a few. We want to know your goals so we make sure your plan incorporates guidance on how to reach them.

Gathering Data

We send a checklist of financial information to collect, that helps us build your comprehensive plan. Things like; insurance declarations, pay-stubs, expenses, estate planning documents, beneficiary designations and more help us to review your entire financial life as a whole and build a plan that encompasses it all.

Creating the Plan Recommendations

PWR does the heavy lifting to crunch numbers and organize your financial data to come up with plan recommendations for you. When we present your plan, we discuss the multiple options you have for achieving your goals and let you decide what feels like the best route to take. Once that route has been set, we give you a one-page prioritized action list of items for you to tackle.

Implementing the Plan

Our clients are responsible for implementing the recommendations we give them. We give help and encouragement along the way to keep you accountable and on track with the plan’s action steps. We check in with our clients every four months and throughout the year we are available for any clarifying questions on the advice given in the plan.

Revisiting the Plan

Life is constantly changing, so you need your plan to change with you. We recommend reviewing your plan every year or sooner if there is a large life event or change such as an inheritance, job change, or an unexpected bonus. While all of our financial plans follow the same process, no one plan is exactly the same. Financial planning is not a “one-size-fits-all” approach and your financial planner should plan for your specific situation. The best plan is one that you are committed to sticking with, which is why we recommend you work with a fee-only and fiduciary professional to create a custom plan for you. Take action today and contact a planner to help you go through the process of documenting your financial goals and how to achieve them.   Alicia Butera, CFP® is a Financial Planner for Planning Within Reach, LLC (PWR) located in Scripps Ranch, San Diego, CA. She is the Director of Financial Planning and Marketing for PWR. Alicia manages the financial planning process from start to finish with her clients, answering their questions and providing them guidance. Alicia has 8 years of experience in wealth management and works virtually with clients all over the US. Planning Within Reach, LLC (PWR) is a fee-only and fiduciary wealth management firm offering one-time comprehensive financial planning, ongoing impact-focused investment management and tax preparation services in San Diego, CA. PWR is a virtual firm that is woman-owned and serves busy families and impact investors. Planning Within Reach, LLC and their advisors never receive any type of commissions for sales and does not have any insurance licenses or brokerage relationships.

Can you believe it is already the end of June 2017? Where did the first half of the year go?

Summertime is now in the air. Sun, fun and the sand between your toes have you dreaming of strawberry daiquiris and boating (or maybe that’s just me). However, before you get comfortable in that lounge chair and jump straight into the second half of the year let’s stop and take a minute to reflect.

Halfway through the year is a great time to think about what you have and have not accomplished towards your financial goals. Then, re-plan for the next six months to come. Below I have questions to help you get your financials back in tune.

Think back to when we started 2017

• • What were your financial goals in January?
  • Are you on track? Have you made progress?
  • Did you stick to your savings or a debt-payoff goal?
  • Do you have more or less discretionary income than you thought? (Building up a balance in your checking account?)
  • How do you feel you did these first six months? Positive? Negative?

After writing the answers to these questions down, think about where you are now versus where you thought you would be today.

Now is a great time to readjust. In the last six months, if you haven’t met your goals, review why not. Have things just come up, out of your control, that ate away at your cash? Did you spend more than you budgeted? What can you do differently?

One idea is, try having “FREE” days. At least once a week. What is a free day you ask? As it sounds, it is a day where you spend no money! For me, when I schedule free days, it helps me to limit my unnecessary purchases. Which in turn, helps me realize how many times I buy silly things that I want in the moment but don’t need. Some months I look back at my credit card I have 10 or more $1-20 purchases, and they add up very quickly. We want to eliminate the unnecessary and unfulfilling random splurges. Put that money towards something satisfying that will bring you long-term joy. The goal on free days is to help yourself realize what you need vs. what you want. It is a one day exercise and challenge I highly recommend.

Now that you have written down what happened in the last six months, and have some ideas on how to financially challenge yourself, let’s plan how you will reach your financial goals in the next six months to come.

Adjustments for the next six months

• • Can you increase savings towards the goals you had? How will you?
  • Do you have a new goal you need to save too? What is it?
  • Is there anything causing you financial stress you can look at reducing in some way?
  • What would make you feel financially successful by year end?
  • Imagine yourself at the end of 2017, what is your mental picture of financial success?

Now, can you commit to making these changes happen? It is essential that you choose small and bite-size goals at first in this process. Make sure that your goals are not too overwhelming as it defeats the purpose. If you are too strict, you will burn yourself out in a few months, and it won’t last the full six.

Building successful financial habits is like being on a diet. When you are trying to eat healthily, it is always a balance of good food and enough indulgence where eating the good food, most of the time isn’t so bad. Then, after a while, you don’t even want the bad food anymore. That is what we want to accomplish. We want to take small strides to create successful financial habits in the next six months that will hopefully last you a lifetime.

The Key
The greatest habit of all is always to be mindful of your money. If you are conscious and aware of your financial situation, you will have full control. It is when you don’t want to think about it or when it isn’t top-of-mind that the train will fall off the tracks. Knowing where you are now and what your goals are, and keeping them top-of-mind, will ultimately make you successful. Awareness and will-power are the true keys to success.

Keep Being Aware
Make a note in your calendar to review our goals every month for the rest of the year. Each month review how you are doing. It might sound like a lot of work, but if you want to make significant progress on your goals it is essential to keep them a priority, so you can make quick adjustments if your plan goes awry.

Also, if you share your goals with others or make them known, you are more likely to stay on track. Try this exercise with a friend or significant other. Keep each other accountable for reaching your version of financial success by the end of 2017.

At the end of 2017, look back at the whole year. How much better did you do in the second half of the year planning versus in the first half?

If writing down and visualizing your goals helped you stick to them, make it an annual plan!