Transcript

Wiser Financial Advisor –Financial Decisions to Kickstart Your New Year

Hi, Everyone. Welcome to the Wiser Financial Advisor with Josh Nelson, where we get real, we get honest, and we get clear about the financial world and your money.

This is Josh Nelson, Certified Financial Planner and founder and CEO of Keystone Financial Services. We love feedback and we’d love it if you would pass it on to me directly: josh@keystonefinancial.com . Also please stay plugged in with us, get updates on episodes and help us promote the podcast. You can subscribe to us at Apple Podcasts, Spotify or your favorite podcast service.

Let the financial fun begin!

Happy New Year, if I haven’t had a chance to tell you that yet! Welcome to 2022! A new year is always a great opportunity to take another look at our lives—our financial lives in particular. Last week on the Wiser Financial Advisor, we talked about New Year’s resolutions and the ultimate success formula to getting what we want. We started with the fact that a lot of people have already gotten far enough into the year now to give up on their New Year’s resolutions. It’s possible they don’t even remember what resolutions they set.

It’s important to create some momentum going into the year. One of my mentors, Nick Murray, said the right time to do the right thing is always. And there are three financial decisions we’re going to talk about today kickstart your year.

You might not even be aware of some of the things that could be tripping you up financially and keeping you from getting what you want. It’s my job as a financial planner and fiduciary to look out for my clients. I care about my clients and about you, my listener, and I really care about the fact that you’re investing your time to make your financial life better. Really, that’s what this is all about: using wisdom gained from others’ past experience. I’ve been doing this 22 years now, and I’ve seen a lot of success and a lot of failure from different people.

As you can imagine, I’ve had thousands of different conversations over the years, so there are definitely some patterns I’ve noticed that I can share with you—things that tend to trip people up and keep them from getting what they really want. But first I want to step back for a second and talk about that ultimate success formula. When we think about what we want, it’s really not that complicated. I learned this from Tony Robbins, one of my mentors. This formula is proven to be one of the most effective ways to getting what you want and getting it quickly.

To review: Step one is knowing your outcome. Clarity is power. Be very clear on what it is that you want. Be specific and make sure you’ve come up with a timeframe. This can be applied to anything in your life—health, relationship, finances, anything—but ultimately it starts with knowing your outcome and getting that super clear. I can tell you from 22 years of experience, most people are not clear when they first come to me, which is fine. It’s better to just start with “I don’t know,” than to be vague, to be going through life unconsciously and getting to retirement by accident. That’s not a good way to go.

Once you’re clear on what you want, sit down with your Certified Financial Planner to make sure you’re both clear. And of course, if you’re married then you want to be on the same page with your spouse, even if you have to compromise.

Step two of the ultimate success formula is getting yourself to take action. Often, this is the trickiest one. It’s not just knowing what you want but also getting yourself to do something. Usually this means that you’re going to be making some kind of a change, and sometimes change seems a lot worse than it actually is. Taking action right away means you’re making a decision and following through. People don’t tend to make any kind of a change in life unless there is a strong enough reason why—so this is the point in time to get clear not only on what it is that you want but also why you want it, because if it isn’t a strong enough why, then you and I aren’t going to take action. It just won’t have enough juice for us to actually do something different than what we’ve always been doing.

Step three is to notice what you’re getting from your actions. You’ll need to have the acuity to understand what you’re seeing and to ask, “Is this actually working for me or not? Is it getting me closer to where I want to go, or is there no progress?” This includes checking to see whether there might even be motion going backwards. Often, we can’t see that without getting some help, which is, again, the reason I have a job. I’ve got a career and other financial advisors have careers built off of making sure we’re clear on what you want, why you want it, and on noticing if what we’re doing is working or not.

Step four is changing your approach if you’re not getting what you want. For example, if you fly from Denver to Hawaii, do you go there in one straight shot? No, there will be all kinds of course corrections along the way before ultimately landing on that airstrip in Hawaii.

That is the short version of the ultimate success formula, which I highly recommend you think about while listening today, because these items are pretty important. And speaking of resolutions, what I’m asking you to do today is to consider three commitments, three changes, three things to think about taking action on today. Consider doing something different, or maybe helping somebody else that you know, someone who needs to hear this as well.

Anyway, this show is brought to you by Keystone Financial Services, a wealth management firm based in the land of Love, Loveland, Colorado. At Keystone Financial Services, our mission is to bridge the gap between knowing and doing in the financial lives of our clients. We are here to provide unbiased advice and guidance. We are an independent fiduciary and all of our wealth advisors are Certified Financial Planners, the gold standard in the financial planning industry. Our goal is to replace uncertainty with confidence and clarity in your financial life by planning with somebody who has experience and has your best interests at heart. That is hard to come by these days with so much information out there and so much uncertainty in today’s world. Take the guesswork out of your financial future and contact us today by visiting www.keystonefinancial.com .

So here we go with three commitments, three financial decisions to kickstart your year.

The first one is this: Starting today, I know where all my money goes. Have you ever gotten to the end of the month or the quarter or the year and wondered where all the money went? I’ve had this happen. My wife and I have often asked that question in the past.

When keeping track of where your money is going, use technology, for goodness sakes. There are so many great tools out there. If you are a client of Keystone Financial Services, you have access for free to the wealth management system, which will track your expenses and let you create categories. It will show you how much money is coming in and going out. It lets you run reports and explore all kinds of great features. Another program is Dave Ramsey’s “Every Dollar” program. We provide that one to all of our Keystone Financial staff. It’s a great program that does what it says it will do—it allows you to track every dollar and make sure you know where every dollar went during any given time.

There are free tools out there, but I do caution you because many of these are marketing engines trying to sell you stuff—usually debt, credit cards, and mortgages. And you and I work too hard to let our money disappear, so make sure you’re using one of the reputable tools and using it on a consistent basis. The nice thing about it is that once you set it up, it’s pretty automated. It just does its thing. And if you’re keeping track of it, maybe 10-15 minutes a week is all you would need to get into the program, change a couple of categories and see where the finances are for that particular week.

To repeat, we work too hard to have our money go away. It helps to take a look through some of the categories of expenditures. A lot of times we let things be automated and look at it from a high level standpoint but sometimes we do the deep dive where we look at every single transaction and you would be amazed by what you find out if you go through the process. Many of our clients have done this as well and they always learn something—not just how much money they’re spending but they discover things in their debit card history or checking account history, and they don’t even know what those things are. In fact, things pop up that people don’t even use anymore.

When my wife and I have gone through this exercise, we have found subscriptions we don’t use anymore; memberships; apps that are going unused. It’s important to know not only the amount of money that’s being spent but what it was for. For example, if Apple shows up on your debit card statement or your checking account statement, it doesn’t really tell you what the charge was for. Maybe it was for the renewal of an app that you don’t use anymore, or possibly for services you aren’t using. It’s common these days to offer a service for free or really cheap on a trial basis and then the fee automatically goes up at some point or they start charging you because you forgot about it and forgot to cancel it. So these programs help you understand how much money you’re spending and where it’s going from a granular standpoint.

Often, you are able to take out some low hanging fruit, find some things you can cut out that won’t cut into your day-to-day happiness. It’s also a great way to catch identity theft. When you have a debit card or a credit card or checking account, there is typically pretty good protection from your bank or credit union for fraudulent charges or identity theft. However, there are usually some time limits on reporting those things. If it’s months down the road, they may not go back and refund you. Sometimes you have as little as two days to inform them in order to avoid liability.

It’s important to recognize that it’s not possible to completely avoid identity theft. Most people that I’ve talked to have been victims at one time or another, even if only that someone got ahold of their debit card number and started using the card. If you catch it early, it’s a lot easier to fix when it comes to identity theft. We need to get our hands on it quickly instead of having our credit ruined and taking months or even years to recover. I always recommend that people carry some type of identity theft protection that has resolution services as part of it. If you don’t have that already, I highly recommend it. I don’t have any particular recommendation. LifeLock is one, but there are many good services out there.

The next thing on my list of changes to make is: Starting today, I’m going to swear off debt.

I’m not talking about mortgage debt here. We put that in a different category simply because most people can’t just go out and write a check for a house, and you could wait an awful long time to build up savings to be able to purchase a house. Also, generally speaking, real estate goes up in value over time.

Of course, location, location, location is a factor but in general, real estate goes up in value over time.

It tends to be a pretty good inflation hedge, so it’s different than other types of debt.

What we’re talking about today is debt from student loans, credit cards, personal loans, medical bills, the IRS, money owed to a family member or anybody else. Whatever is owed to anyone for anything other than a mortgage is the debt we’re talking about. So I’m recommending that you swear off that debt and if you have debt, use the debt snowball to get things paid off quickly. Numerous studies done by big institutions like Harvard have found that the debt snowball is the fastest way to eliminate debt.

We’re not going to do a deep dive on that today but go back and listen to episode 2 if you really want to drill down on the debt snowball and how that works. The short version: make a list of all debt, smallest to largest and then attack the smallest debt with all extra cash you’ve got each month. Once the smallest is paid off, move to the next, and you don’t pay attention to interest rates, you just focus on the smallest to largest and get rid of them one by one. The idea here is that you’re getting financially free and freeing up cash flow.

If you use a credit card, understand that you’re playing with fire. I know I could get into a big debate with everybody about this. Some say, “No, I always pay off my credit card balance every month. I never pay interest and never pay fees. There’s no fee on that card, so there’s no harm.” You can do whatever you want with your money, understand. That’s up to you, but the statistics don’t lie. The banks issuing credit cards aren’t stupid. They sell debt and that’s how they make money. How do you think they get their names on buildings and stadiums? Using credit cards is kind of like gambling and expecting that you will always beat the house. And if you go to Vegas, it can be a fun experience, but just know going in that the house always wins given enough time. Even if you’re very skilled and have great strategy, statistically they always win. That’s why they have these fancy casinos and all-you-can-eat buffets and things like that, right? That’s not free. The house always wins over time.

I know a lot of you are saying right now, “Josh, you’re crazy. I’m not one of those people.” You are one unexpected expense away from paying 20% or more interest on a credit card balance. That’s because of Murphy’s law, which informs us that if something can go wrong, it will. For many of us, something else goes wrong after that and then something else. And all of a sudden, the well-meaning points-gatherer has credit card debt that they can’t pay off. Even if it’s just for a month or two, when you’re talking about that kind of an interest rate, it can easily negate any kind of benefit you were getting from miles or cash-back points. Studies also show there are multitudes of miles and points that never get claimed. So, in a lot of cases, people think they’re benefiting and they don’t actually end up benefiting. Also, be aware that many of these reward cards do have annual fees or might institute an annual fee. Maybe it was an introductory deal where there was no annual fee the first year. These things are sneaky. They could throw in conditions that make it more difficult to use miles or points. But again, it’s your money, so you get to make your own decisions. But if you decide to use credit cards, that’s up to you.

Just be aware of what you’re doing and at the end of the day, if you’re spending time at this and worrying about it, maybe it’s not even worth it. Your time and your peace of mind from having no debt might be worth just not using them at all. Maybe you’ll be a Dave Ramsey fan and cut up your credit cards and go back to using a debit card or cash. The liability protection is nearly always the same whether you’re using a debit card or credit card. This used to be different, but these days almost every institution will give you the same protection on a debit or credit card. The key here again, is making sure that you’re letting them know very quickly if you think you’ve been a victim of identity theft with charges on your card. Or if your card gets stolen, it’s important to let them know right away. Almost every credit union or bank is going to be accommodative because they want to keep your business and so they have insurance for this. Believe me, their business model accounts for stuff that ends up happening. Every time I’ve had this happen or had it happen with a client, they’ve been reimbursed.

I do recommend that you consider swearing off credit cards because in the end, for most people it’s just not worth it, and often people end up going backwards. One other note on this: You might be saying, “Well, I’ve got a different situation. I did the zero percent same as cash deal at Home Depot or Lowe’s, Josh. Zero % for six months, 12 months, 18 months, whatever it is, to buy this washer and dryer or refrigerator or whatever it is. Shouldn’t I just leave the money in the stock market and make money that way and then I’m basically beating the bank?”

People like the idea that they’re beating the system, beating the bank in the end. But again, these institutions are not stupid. Murphy comes along at the end of the 18 month 0% introductory period and all of a sudden the person can’t pay off the balance like they planned. And again, only a couple of months’ interest at those rates could easily eat up any benefit you would have gotten by getting a zero percent rate. Okay, enough of that. 😊

Last of the three things to change: Starting today. I’m going to take decisive, immediate action to make sure my family is taken care of. I’m finally going to get my estate documents done. And I say this because 70% of the US population doesn’t have estate documents. They don’t have a will. A will is a basic letter to the court judge that decides who’s in charge of your stuff and how your things get administered. It takes care of who’s going to be the guardian of your minor children, which is pretty darn important. That’s reason enough if you’ve got minor children. It’s so important that you’ve got a guardian named and maybe even a backup guardian named in your estate documents. This isn’t that difficult, but a lot of people clearly haven’t done it because in a lot of cases when it comes to stuff like this, we make it bigger in our mind, maybe unintentionally, than it actually is. You can knock out your estate documents in thirty minutes using some kind of an online service like legalzoom.com. We don’t have any sponsorship from legalzoom.com, but we have had a lot of clients use it. That doesn’t replace an attorney. This is not legal advice. It doesn’t replace sitting down with an attorney, but 70% of the US population have no will or estate documents and the other 30% may not have current estate documents. We often find estate documents that are 10, 20, sometimes 30 years old, and people don’t remember what they say anymore. They go through them and say, “Oh my gosh, this is so out of date!”

So it’s really important to just get this done. And if you have to hit the easy button and use an online service like LegalZoom, com, that’s great. Maybe you start there because you can get these documents knocked out quickly. Follow the process. They have a whole process and they’ll show you if you need to have a notary or a witness or something like after the fact. Of course, if you’re a client of ours, we want to get copies of those documents, and we’ve had clients that have done this and then later on when they have the time or inclination, take those documents to an attorney for review. And that’s fine too.

Be aware that it doesn’t replace an attorney, but it might be the easy button that gets this done quickly, gets it in place so you know that your family is taken care of.

If you haven’t gotten this done, you need to do it. You need to do it now. You have to go under the assumption that something is going to happen to you tomorrow. So when it comes to decisions, sometimes we find that people get started in this process and get hung up on a question they’re not sure how to answer. They’re not sure how to decide on a certain thing, and then let the whole process get hung up. One of the best pieces of advice I got from an estate attorney that I worked with years ago is that when it comes to legal documents, estate documents, make a decision as if something is going to happen to you tomorrow. As if you’re under the gun. Make a decision because you can always change it if you’re still alive tomorrow or next week or next month. You can change it as often as you want to, but you need to have the documents in place because those are your instructions when you’re not around.

That’s not just your will, that’s also other legal documents like powers of attorney or a living will, or medical directive. It doesn’t need to be perfect to just get something in place. You can always change it down the road.

So while we’re on this one, if you aren’t financially free, meaning that you have debt, a mortgage and not enough investments that would support you and your family for the rest of their lives, then you need life insurance and maybe a lot of it. We recommend that you buy term life insurance as opposed to cash value insurance like whole life or universal life. That’s because it’s a lot cheaper and you can get a lot more death benefit for the same money. Life insurance is there to fill that gap. You probably don’t need it forever. Once you have all your debt paid off, mortgage paid off, enough investments piled up that you could live on them for the rest of your life, you probably don’t need life insurance.

Other coverage that you should at least consider is health insurance umbrella coverage, liability coverage, disability coverage and long term care insurance. This is a topic that we could spend hours on but review your insurance coverage at least annually with your Certified Financial Planner or your insurance agent, because this stuff is important. And of course things change over time, so we need to make sure that everything is covered. If something were to happen, your family is counting on you and my family is counting on me. We need to make sure they’re taken care of if we’re not around. Imagine what would happen right now if you died. Is your family taken care of? Is your stuff organized? Put yourself in that place. I don’t want you to stay in that place because that means you’re living in fear.

But sometimes we’ve got to do that to ourselves just to get ourselves to take action.

The bottom line is that our lives don’t go exactly like we think they will. I have seen plenty of both types of situations. I’ve seen when things are just a complete mess and people are trying to pick up the pieces and figure out how to make the finances work. And I’ve seen when things are beautifully designed financial plans and people have been well taken care of and organized. When I sit with these spouses or these kids, they say, “I’m just so glad that they took care of me. I’m so glad they had things organized. This has been a really hard emotional process but going through the business end of things and the financial end of things has not been that hard.” That’s because we did the work up front. Ideally when working with us or another great Certified Financial Planner, families benefit from our experience while going through this process.

Tony Robbins once said, “Never leave the site of setting a goal without taking immediate action that will commit you and create momentum toward attainment.” It’s important to be thinking about that now, because it’s very tempting to consume content like this and nod our heads and say, “Yeah,” without following through. It’s important to take action or it’s meaningless.

So take some immediate action today. That might just be sending an email to my team. It’s our job to look out for your best interest and your family’s best interest and to help you all get what you want. So if any of this is resonating with you, just send us an email, go out to our website www.keystonefinancial.com . We want to be here as a resource for you, and to make sure that you’re taken care of.

If you are enjoying the Wiser Financial Advisor and finding what we talk about helpful, please hit subscribe on your favorite podcast service, and tell others about us, whether it’s friends, kids, parents, coworkers. We’re getting good feedback and have just hit 4500 downloads here recently, so thank you all for helping us build the Wiser Financial Advisor. It’s really been a blessing to be able to do this and have this platform to help people, not just our existing clients, but getting this message out there to a broader audience that needs our help. There are people are out there financially struggling, and it’s often because they just don’t know what to do. They need somebody to be able to guide them and help them along the way.

With that, I hope you have a wonderful week. Thank you so much for your support of the Wiser Financial Advisor and Keystone Financial Services. Have an outstanding week and God bless.

This episode has been prepared for informational purposes only and is not intended to provide and should not be relied upon for tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors. Investment advisory services offered through Keystone Financial Services, an SEC registered investment advisor.