All Things Financial Planning Blog


2 Comments

Financial Planning for Entrepreneurs & Executives: Your Financial Plan as a Strategic Plan


I’ve worked with dozens of business owners and executives as clients who have a really solid grasp on the companies that they are responsible for, but unfortunately that control often ends when they leave the office. At home, they may feel that they don’t have the time, energy or resources to invest in steering the direction of their personal financial future, or they feel that since it is so closely tied to the financial success of the companies that they run, they are one in the same.

I’m here to tell you that’s just not the case.

When discussing financial planning with an owner or executive, I like to frame the discussion in terms of a strategic plan. Successful executives can usually articulate a vision of where they’d like their company to be in 5 to 10 years quite clearly, but they can rarely answer with the same clarity what they’d like their family situation to be like in that same time frame. I believe that the financial planning process can help clients clarify their strategic direction, and ultimately help them get more from their companies than just a paycheck or a dividend. It can be the vehicle with which they can create the future they want, but only if they take some time regularly to decide and review what they want that future to look like.

Strategic plans can include many different steps, but for our purposes I recommend 5 steps here.

  1. Mission & Vision. Everybody has an opinion about mission statements and their effectiveness. If you can, set this aside for a moment and think about what your vision for your personal future is. If you don’t want a mission statement for your family, how about a list of values? What things are truly important, that can help your family frame your decisions? If you have a hard time defining specifically what you want those to be, some people find it easier by starting first with defining what they know they DON’T want, and then taking things from there.
  2. Perform a strategic analysis. There are several different acronyms that can be used to perform a strategic analysis, but a commonly-recognized and simple one is the SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis. If you had to perform a quick SWOT analysis on your family’s financial situation, I bet you could come up with a few compelling points rather quickly. Maybe the business is young and saving for retirement is a weakness, but the growing value of your company is a strength. A year-end dividend due to good performance throughout the year is an opportunity, and the potential need to care for parents is a threat. Brainstorming on these four points about your personal financial situation for even 15 minutes can provide lots of insight with a very small investment of time.
  3. Set a direction. Nothing in business or life is certain, but you must have a direction to head in if your goal is to make progress and move forward towards achieving anything. Do you want to retire in 10 years and live on the beach? Maybe you do what you love and never want to retire, but you’d like to scale back the hours you put in over the next few years and hire somebody to manage the company. Maybe it’s finally time to take that two week vacation that you’ve been promising your spouse for years. Your unique goals can be accomplished, once they are clear enough.
  4. Determine action steps. Now that a direction is established, what are the next actions
    required to reach each goal along the way? If saving for retirement is a priority, contact your financial advisor or accountant for their recommendations. If you’re not clear on what you’re spending your money on at home, setting up a system to track your expenses one weekend, and then setting time aside every week to maintain the system, can improve your chances of success. Break each big project down into a smaller task list, and get to work on those tasks (or delegate when appropriate).
  5. Execute. Financial success or failure doesn’t happen overnight. As one of my mentors says, “life accumulates.” Reaching financial success is a series of making sound decisions on a daily and weekly basis. Those good weeks end up as good months, and then as good years. This is particularly daunting for those with many years before retirement, since the goal can seem so far away on the horizon. Small steps, over time, will start to show success over time and will lead to achieving your ultimate goals.

Going through the process outlined above can be done in less than an hour, but can have a tremendous impact on your financial future. Set aside an hour to think, dream, and plan for your family’s financial future this weekend.

judeBoudreauxJude Boudreaux, CFP®
Director of Financial Planning
Bellingrath Wealth Management
New Orleans, LA


108 Comments

10 Web Sites to Help You Save Money on Travel


In one of my earlier posts on this blog, I wrote about clarity and how important it was to making good financial decisions. The clearer you are on your goals, the easier it is to make good decisions with your money. This idea is what has allowed my wife and I to spend significant time and resources every year since our wedding pursuing our passion, which is travel. Below are 10 sites that I use to help us make good decisions and save money while planning our trips and later while on the road.

Finding a great deal (Farecompare, Kayak, Farecaster @ bing.com/travel)
Often, just finding a good deal is enough to get us out on the road. I once found a round-trip fare from New Orleans to Moscow for $424. Sadly we could not get our visas together in the short notice required, but it’s just an example of the deals that are out there. The silver lining in the weak economy is that there have never been greater bargains for travel. My three favorite tools are listed below.

1.  Farecompare.com – My favorite feature by far of farecompare.com is the getaway map. With a quick click, I can see what the best deals are from my home airport to domestic locations, or international locations by continent. It’s a wonderful tool for getting a quick lay of the land.

2.  Kayak.com – While farecompare.com gives me the best flight information, I find that Kayak has the most user-friendly interface for finding deals on everything else. Cars to hotels, it’s simple and fast to search rates and get information. 

3.  Bing.com/travel - This site used to be farecaster.com, but it now integrates a flight search engine along with a prediction on whether fares will go up or down. Often it’s worth a quick search if a fare looks high to you, to check it out on farecaster and get its take on the rate. It’s not foolproof but it has been helpful a time or two and that has saved us money.

Learning from others (BootsNAll, TripAdvisor, FlyerTalk)
Once we have decided on a destination, we then invest some time in research. My three favorite research sites are listed here in no particular order, although each serves a unique purpose in my planning. These tools allow me to get information from those who live in, or have recently visited, destinations that we are considering. It takes some time but we’ve come upon special hidden places on our trips based on tips from these sites. You can pick up tips about which bargain lodging options are worth staying at, using public transit effectively, and what restaurants offer the best bang for your buck. 

4.  BootsNAll.com - This is a wealth of information for the independent traveler. The site features unique articles about locales and has a wealth of information on travelling inexpensively. If you’re looking into long-term travel they’re the source for planning tools and it hosts a very active community who is willing to answer your questions. They also seem to have the most comprehensive resource on Round The World (or RTW) trip planning. 

5.  TripAdvisor.com – I use TripAdvisor.com to find the top-rated tourist destinations along our path, along with traveler reviews and tips about them. Their seasonal travel guides offer bite sized information (with addresses and phone numbers included which can be a real lifesaver) and the forums offer a diverse range of opinions about restaurants, hotels, etc. My golden rule of forum participation – for every question I ask, I answer two about my home city or places we have been. It helps keep people involved and encourages others to add their opinions to the mix.

6.  Flyertalk.com – The participants on flyertalk.com are some of the most road-hardened business travelers I have run across. If you are a member of a frequent flyer program or hotel loyalty program and have questions about using points or miles, this is a wealth of information. Search the forums and quickly you can get answers to tricky questions. You can also browse the forums for innovative ideas on status-earning strategies. 

Staying Organized (TripIt, Award Wallet)

Now that you’ve got all of this information, you’ve got to have one source to keep it all organized. Below are two of the best I’ve found. 

7.  Tripit.com – Sign up for a free account at Tripit.com, and you then get the ability to forward your travel confirmations from hotels, airlines, rental cars, etc. to Tripit.com. It automatically pulls your reservation information from these emails and creates an itinerary for you. You can customize this itinerary with maps and directions, and share it with other travelling companions or family members. It’s a wonderful free tool. You can also manually add in other information about show tickets, dinner reservations, or the address of the church for the family wedding and have it all saved in one spot.

8.  AwardWallet.com – If you’re like us, finding the best fare is more important than flying one specific airline so we have airline miles scattered through several programs. AwardWallet.com allows you to create an account to track multiple programs in one place simply by entering your username and password. For an inexpensive six month subscription, you can also track your spouses’ airline miles so that you don’t end up having miles expire without having had the opportunity to use them.

Investing time in research (New York Times Travel, Local Library Web site)

One of my favorite quotes about travel is “To have an A+ trip, you need to do A+ research.” – Rick Steves.  Above, I mentioned three travel forums, but there’s still a place in my heart for traditional travel media.  My two favorites are listed below.

9.  travel.NYTimes.com – The New York Times’ travel articles are wonderful to read in print and the Web site does a great job of making stories relating to one location easy to find. Their 36-hour stories are a personal favorite, and often have tips for locations that might escape a traditional guidebook. 

10.  Your local library’s Web site – I love browsing traditional guidebooks before our trips, but I hate paying for them and carrying them around. Fortunately, our local library has lots of recent guidebooks for free. Typically we will check them out when doing our trip research and capture our notes, and then simply carry our notes on the trip, instead of the bulky guidebook. Even when we have wanted to carry a guidebook, we can usually just check it out in time for our trip and return it after we get back. 

I hope the above sites help you planning your next big adventure, and please let me know about some of your favorites in the comments.

judeBoudreauxJude Boudreaux, CFP®
Director of Financial Planning
Bellingrath Wealth Management
New Orleans, LA


1 Comment

The Hidden Costs of Home Ownership


As I work with young professionals a common goal is home ownership. Everybody’s heard the common refrains of “renting is throwing your money away” and “mortgage interest is deductible” but there is a lot that is often not considered when looking at what will likely be your single largest purchase.

  • Owning a house costs more than renting a house. This is somewhat intuitive, but I think that first time homeowners often miss out on this basic idea. In nearly every city in America, the pure cost of owning a house is greater than the cost of renting a similar house. 
  • What the bank will approve you for is probably more than you can really afford. If you go through the pre-qualification process, the bank will look at your savings, income, credit, and give you the total amount that they will approve you for. Take a look at what the monthly payment will be on that new mortgage, and I’d be surprised if you didn’t have to make some pretty major adjustments to your lifestyle to afford that monthly payment. They’re looking at some basic factors, but only you know your budget. Start with what you feel you could afford on a monthly basis, and use that to determine your top line.
    • One corollary to this – you don’t have to spend that top line figure. If you think you can afford $150,000, there’s nothing wrong with spending $125,000 on a home that you love that gives you some breathing room.
  • Transaction costs are high. When you buy a new home, there is an avalanche of fees and costs that are paid at closing, including filing and documentation fees with the local tax assessor, realtor commissions, appraisal fees, etc. These all add up and increase the acquisition costs of your new home.
  • Your monthly obligation is more than just your note. If you look at most “how much house can I afford” calculators on the internet, they will factor in your down payment, income and the monthly principal and interest payments. Some will even add in estimates of real estate taxes and homeowner’s insurance. There are other costs that are often overlooked such as:
    • Private Mortgage Insurance (PMI). If your equity in your home is less than 20%, you will need to make an extra PMI payment to cover the risk associated to the lender. This is a variable cost, but important to consider if you’re making a small down payment.
    • Association Dues. If you live in a condo or covenant community, you may have monthly or annual assessments for the upkeep of community assets. If your property suffers weather or storm damage not covered by insurance, you may also incur “special assessments” to repair the property.
    • Savings for future expenses. Sooner or later you’ll need to replace that air conditioner or roof, and if you’re not saving for those big ticket items now you can get squeezed in an emergency.
  • The upkeep/upgrade factor. While you can’t always put a dollar factor on it, owning a home will cost you more in time than renting will. Somebody has to clean the gutters, mow the grass, or paint the exterior. That either costs you money to have somebody do those chores, or it costs you time and effort. There’s also a natural desire to upgrade furniture and other accoutrements as you move into your new home.

I don’t write these things to dissuade you from purchasing a home, but I do hope that you go in with your eyes wide open. Run the numbers and check it out for yourself. You should be purchasing a home that you’ll be happy with for years, so you owe it to yourself to be sure you don’t end up in a home that costs you too much in terms of lifestyle.

judeBoudreauxJude Boudreaux, CFP®
Director of Financial Planning
Bellingrath Wealth Management
New Orleans, LA


2 Comments

Investing in Yourself for 2010


Whenever I begin to talk with new clients, inevitably they ask me about what my thoughts are for great investments in the coming months. I always tell them that I don’t have a crystal ball telling me which stocks or bonds are going to do well in the New Year. I do usually mention these strategies which usually produce great returns when you invest in yourself.

If you had a money-making machine, you’d probably take good care of it. You’d make sure you didn’t over work it; you’d put good fuel in it, and give it a good checkup on a regular basis. Well, you do have a money making machine, it’s you! When I look at many successful people, they’ve developed some poor habits with regard to maintaining their physical health, and some small investments here can pay huge returns. A few ideas on this are:

1) Get a full physical exam. Doctors always recommend getting an annual physical checkup, but most people just skip over them saying that they don’t feel sick, so they don’t need to go to the doctor. Just like your car, preventative maintenance is best so take the time to go in and get checked out. You’ll feel better for doing it. A few other strategies I’d suggest are:

  • Have a session or two with a nutritionist. I was in a training session last year where the presenter surprised us by asking us to write down a list of every item we had eaten for the past two days. Then, we had to go back through the list and circle the ones that were healthy. I had 11 items, and 1 was healthy — and it was water! My friend had 12, and 11 were healthy. Immediately after the session I asked him how he did it, and he said he was seeing a nutrionist. I had a few sessions with the nutrionist afterwards and I can’t tell you how helpful it has been. I learned so much about foods and how they affect our bodies that it was really invaluable. 
  • Invest in your fitness — or get and really use a gym membership. Find a way to exercise and make it easy. Whatever you can do to increase your fitness that you will do on a regular basis will pay huge dividends.  Whether that means getting a new pair of running shoes and committing to use them regularly — and not just as doorstops — or signing up for the gym near your office, do it. Then, schedule the times in your calendar that you’re going to exercise. Blocking the time in advance helps hold you to it. Chances are you’ll find your energy level going up and stress level going down after each workout. If you’re not sure what to do, a few sessions with a personal trainer go a long way.

2) Invest some time into tracking your personal finances. I know, this is a drag.  Everybody hates the idea of creating and sticking to a budget and tracking every penny that they spend in some system. What I’m saying is that it doesn’t have to be that bad. This is much like the space shuttle taking off. Eighty percent of the energy and effort in setting up and tracking your budget will be expended at the beginning, where you have to get your systems in place. Once it’s set up, maintaining it on a weekly basis is much easier. 

  • Get clear on what your long-term goals are. Without a crystal-clear picture of what your true goals are, it makes it difficult to make good day-to-day decisions about your money. I’ve got some ideas here that I find useful. Saying no to daily temptations is made much easier by having a bigger “yes” inside of you that is compelling.
  • Think about your budget in a different way. For a great overview on how to do this, please see my good friend Eric Kies, CFP®, on this blog. Thinking about your money as money past, present and future can have a powerful effect on the complexity of managing your cash flow on a daily basis.

3) Work on your personal development. There are a number of things that you can do to invest in your money-making machine. A few ideas are to:

  • Go back to school. If there is a program that you’ve been looking at to further your education, now is a great time to get to work on it. The Federal Government even provides some help in the form of the Hope and Lifetime Learning Tax Credits (See IRS publication 570 for more information). There are a lot of rules around these programs so you will want to consult your tax advisor, but they can make a big difference in your ability to pay for your education. 
  • Complete a professional designation or a certificate program. If you’ve been making progress toward a new professional designation or certificate, make 2010 your year to complete that program. With a little planning, you can accomplish a lot in the next 12 months so set out a plan and get to work. The knowledge you gain will be invaluable, and the designation or certification will make you more marketable.
  • Attend a professional conference. The best way I know to get new ideas and get fired up about what you do is to attend your professional conference. I do whatever I can to attend at least one national Financial Planning Association conference. The return on time and money invested is exponential in terms of new practices, ideas, and relationships with colleagues. 

I realize my suggestions above aren’t as sexy as the hot stock tip or sector that is going to blow up in 2010. I do think they are almost universally applicable and will pay regular dividends to you. Best of luck and make it a great 2010!

judeBoudreauxJude Boudreaux, CFP®
Director of Financial Planning
Bellingrath Wealth Management
New Orleans, LA


Leave a comment

You Have the Ability to Control Your Financial Future: Nobody is Coming to Your Rescue


I’m an avid reader.  I love reading about lots of different topics and the explosion of blogs on the internet have opened up that world even more.  A friend pointed me to the Rock Your Day blog and it triggered a memory for me that I think is pertinent for all of us and our financial futures.  In the beginning of this post, the author recalls a line from Brian Tracy’s book “Eat That Frog which states that “nobody is coming to your rescue.”  It really made me reflect on things in my life and my clients’ lives and I think it is applicable to our financial situations.

How often do we feel that we would make changes in our financial lives if only we would have something major come in and change our financial situation?  (Get a promotion; get a new job; win the lottery; Get a windfall from a long-lost relative?) A quick search shows dozens of stories about lottery winners filing for bankruptcy and inheritances that were spent within months of receipt.  Those are people who had their rescue fantasy come true and still ended up needing to be rescued again. 

Rescue yourself

There are very few families that I have ever met with who could not truly take their financial future in their own hands by making small changes and better decisions.  Below are a few nuggets that might be able to help you make better choices and take control of your financial future.   

You can’t earn your way out of a spending problem

There’s a principle that I have heard referred to as “Parkinson’s law” that states roughly that your expenses rise to your level of income, and maybe a bit more.  How much more are you earning now than you did in your first “real” job?  There are lots of good reasons that money has been spent, but now is your chance to take control of your financial situation.  I often ask families, if you needed to cut your monthly expenses, what would you do?  They can usually list several items that would make a real difference in their household.  What are those items for you?

Is what you’re spending your money on truly your priority?

A mentor of mine likes to say that “people spend their fortunes five dollars at a time.”  That was certainly the case for me.  I used to love getting coffee, going out to lunch, and spending my money in mindless ways and it was getting me nowhere.  When I heard this for the first time, it really caught something inside of me and I started to make changes in my behavior.  If you spend $2 every work day on something that you don’t really need, that $500 in a year.  Forty dollars a week on a dinner out because you just don’t feel up to cooking?  That’s $2,000 a year.  Life accumulates, and the small decisions add up. 

A focus on what really matters makes daily decisions easier

I’ve lived in Louisiana for almost my entire life.  Hurricanes are a fact of life down here, but Hurricane Katrina was (with hope) a once in a lifetime kind of storm.  My then-fiancé (our wedding took place five weeks after Katrina) and I were fortunate to not have the property losses that many of our friends did.  The aftermath of Katrina forced everybody here to focus for a time on what was really important.  Afterwards, saying no to an afternoon coffee was much easier for me because I could see that I wasn’t denying myself by saying no to a treat in the afternoon.  I was saying yes to our bigger priorities and decisions. 

“A journey of a thousand miles begins with a single step.”  — Lao-Tzu

With hope you won’t need a major natural disaster to take a harder look at what your financial goals are, and to take steps now to improve your situation.  Take a look at your financial situation and determine what changes could be made.  Keep an eye on your daily spending and your progress to your long-term goals.  Take small steps and they will help you rescue yourself and your financial future.

judeBoudreauxJude Boudreaux, CFP®
Director of Financial Planning
Bellingrath Wealth Management
New Orleans, LA


1 Comment

Homebuyer’s Tax Credit – Don’t Rush into a Decision This Important


Every year I see stories at the end of the year touting the latest tax strategies that consumers should take advantage of before the end of the year.  Due to the volume and complexity of the tax code and the constant changes, it’s important to be aware of the new wrinkles.  I think it’s important for consumers to be tax-aware, but being tax-driven can often lead to shortsighted decisions that may cost you in the long run. 

This year, the tax credit program designed to encourage first-time homebuyers seems to be the one getting the most press.  This is a great program for those homebuyers who were already in the market but I would have great concerns about those who are new to the homebuying process trying to close prior to the November 30, 2009, deadline.  If you’re going to try to beat the deadline, seek the advice of a tax professional and keep these thoughts in mind. (Of note, a deal struck in the Senate this week would continue the $8,000 credit for first-time buyers into April and add a $6,500 credit for repeat buyers who have lived in their current home for at least five years, according to published reports. In addition, members of the Obama administration, including Treasury Secretary Timothy Geithner, came out in support of an extension for the first-time home-buyer tax credit.) That said,

Don’t rush big decisions:  For many families the largest single purchase they will ever make is buying their home.  Rushing big decisions can lead to bad decisions, and to regret.  Your home can provide you with years of joy if you make a great decision, or a feeling of regret every day you walk through the front door.

Think about how long you plan to be in the home:  Homes are difficult to buy and sell, and transaction costs are high when you add up commissions, taxes, and filing fees.  If you rush a purchase and finding yourself needing to sell within a few months or years, it could cost a pretty penny. 

Owning a home costs more than your mortgage payment.  If you find a rent vs. buy calculator on the Internet, often you’ll make some assumptions about the purchase price of your home, the interest rate, and what you’d pay for rent over time.  These calculators can do a good job of weighing the financial costs of owning a home but they may overlook things such as

  • Maintenance:  When the hot water heater goes out, it’s no longer the landlord’s responsibility to replace
  • Insurance:  Homeowners and flood insurance cost substantially more for homeowners than renters
  • Property Taxes
  • Time & upkeep:  Cutting the grass, clearing out the gutters, and putting a fresh coat of paint on the exterior can eat away at your leisure time or at your pocketbook if you must pay somebody else to perform these tasks.

For many homeowners, they view their purchase decision as one of the best financial decision they’ve ever made.  Be sure to take your time and make the right decision for you and your family so that you can look back and say the same thing. 

References:  IRS FAQ

judeBoudreauxJude Boudreaux, CFP®
Director of Financial Planning
Bellingrath Wealth Management
New Orleans, LA

Follow

Get every new post delivered to your Inbox.

Join 6,865 other followers