Broker Check
March 2021 Newsletter - Goals!!

March 2021 Newsletter - Goals!!

March 10, 2021

"You have exactly one life in which to do everything you will ever do. Act accordingly." - Colin Wright 

Dear First Mates,

We are goal-focused, planning driven investors. As such, we know our portfolio is the servant of the plan. But what exactly is “the plan?” The plan refers to your goals – i.e. your lifelong dreams, visions, and aspirations. The word “goals” crops up so often, it almost loses all meaning. So, for this month, I’d like to dive deeper on the most common goals. You know - to make it more tangible. To motivate you. After all, isn’t achieving our goals the entire purpose of investing? 

First, the starting point of a solid financial plan is eliminating all credit card debts and building an ample emergency fund. With an average interest rate of 16%, paying off those cards is the best investment you could make. Your emergency fund should contain at least 3 months of living expenses. I cannot stress the importance of creating this safety net. We all need liquidity – and the rub is you never know when you’ll need it. 

Second, the foundation of your financial house is risk management – i.e. using insurance policies to protect you against large financial losses. The common types of insurance protect your loved ones in the event of a premature death (life insurance), protect your income in the event of a disability (disability insurance), protect you against ridiculously high medical bills (health insurance), and protect you against damage to your home or auto (P&C insurance).

Third, consider the twin pillars of college and retirement planning. I always say that out of those two – retirement should be the priority. Kids can always borrow for college, but you can’t borrow for retirement. It’s like when the airplane crew tells you to put your oxygen mask on first, then the kiddos. No parent wants to be a burden on their adult children, yet many people find themselves taking care of both their children and their parents – an expensive proposition.

Fourth, tax planning of your financial plan should be considered. The goal is to use the tax code (all 70,000 pages) fully to minimize your tax liability. Tax preparers will often only consider what already took place. Compare this to tax planning, which will include advice that is forward looking. When working with your accountant or CPA, ensure you are receiving advice that is forward looking.  It is well worth the time and additional cost.

Finally, ensure that the assets accumulated during life go to their intended recipients upon death with as little friction as possible. This is known as your estate plan which consists of a will, power of attorney, health care proxy, and, in some cases, establishment of a trust(s). For those with larger estates, it is imperative to create an asset protection plan – both from the taxman as well against the rising costs of nursing and home care costs. To protect against these costs being felt by you or your family, a solid long-term care insurance policy may make sense.

Ultimately, personal finance is more personal than finance. We want to live life day to day with as little aggravation as possible. We want to buy what we want to buy, without worrying it will break the bank. Each of us has a unique situation so I will include here a more comprehensive master goal list as well The Year Ahead document that is a helpful exercise to perform. So – what are your current goals right now? What is incredibly important for you to accomplish this year? Whatever it is, don’t get overwhelmed. Take one thing at a time. And celebrate your accomplishments - no matter how small. Go get ‘em!

“One’s purposes provide the foundation upon which a financial plan is built. A good financial plan is designed to provide a means and the funding for living out one’s life…on purpose.” – Bob Seawright

 P.S. Here is my YouTube vid o’ the month!

With gratitude,

David Warshaw, CFP®