You Don’t Need a “Sexy” Financial or Investment Plan.

October 14, 2019 Alicia Butera Uncategorized Tags: , , ,

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.