The Right Tools


When my wife and I started looking for houses last spring, we met our friend and realtor for coffee to talk about our list of preferred areas and must-haves for the house. As we were wrapping up, Laura remembered one thing that we’d failed to tell him, which was pretty high on our list: big, old trees.

A few weeks later, we ended up finding a house that we both loved, and one of the biggest draws to it was the picturesque, monster oak tree situated right in front of the house, which provided a perfect canopy of shade.

Then summer turned to fall, and that canopy started thinning. Turns out those big, old, beautiful trees drop a lot of dead, ugly leaves. Of course, I always knew this. But as an excited first time homebuyer, it conveniently slipped my mind.

The first year we struggled through leaf season with rakes and handheld blowers. It was brutal. As soon as we made a little progress, it was covered up with more falling leaves. We succumbed to the leaves around early December and just waited until spring to clean them all at once.

This wasn’t an option for year 2. Enter the Stihl backpack blower.

I blew leaves for three hours this past weekend and enjoyed every minute of it. It’s amazing how making actual progress on something can completely change your outlook about it. No longer are the leaves an insurmountable chore, but now they are just another weekend homeowner activity. Having the right tool has made all the difference.

The same is true with your finances.

I can’t tell you how many times I’ve seen people overwhelmed with different parts of their financial lives. Whether it’s accumulating multiple types of debt, employee benefits they don’t understand, or a hodgepodge of random investment accounts, it can be easy to throw your hands in the air and just give up. Fortunately, we can apply the right tools” to knock out many of these issues too.

A few examples of financial tools

No one likes budgeting,” but managing cash flow is the backbone of any decent financial plan. Building an automated process for your bills that need to be paid and goals that need to be saved for is an easy way to save time and headaches each month. It also relieves you from the guilt of spending throughout the month, because you know your past and future obligations are already being funded. YNAB is a great tool for this type of cash flow management.

Early in your career, as you switch jobs more frequently, it’s easy to accumulate old 401k’s and other investment accounts, which may not contain the best investment choices available. Consolidating these accounts can provide a much clearer picture of how your money is invested and how much you should be saving. Using a robo-advisor like Betterment makes this easy.

One of the most pressing financial issues for many families is getting some life insurance in place. If you are young and healthy, there’s a good chance that you need a lot of term insurance for the next 20 to 30 years. Haven Life makes the process of getting this type of insurance quick and painless.

If you have kids, the idea of saving for college can be overwhelming. Setting up a 529 plan with automatic monthly contributions is a simple way to get started. To take it one step further, you can even provide charitable family members with the information needed to contribute to the plan whenever they’d like.

When one tool isn’t enough

For a lot of people, however, there comes a tipping point when several key financial issues start to hit at once. When this happens, there isn’t a single tool” that helps put your entire financial life into perspective.

Take a young dual-income family for instance. There’s a good chance that within a two to three year period they will navigate buying a house, having children, getting new jobs with new benefits, and paying back significant student loans - all at the same time. That doesn’t leave a lot of time for researching things like backdoor ROTH contributions” or estate planning documents for young families” or how to get Public Service Loan Forgiveness.”

So, what Swiss Army Knife-like tool can help this family? Most rely on one of two options. The first is the DIY route. Just like people do their own yard work and maintenance on their own car, many chose to do the research and implement a financial plan on their own. While time consuming, this option is entirely reasonable and many DIYers are quite successful.

The second option, however, is more dangerous…apathy. Many people simply choose to ignore these financial roadblocks as they pop up. If you’ve ever wondered how two people can have identical jobs/​income/​family size over a long period of time, yet be in drastically different financial positions later in life, this is it (aside from unforeseen financial hardships of course). The negative compounding effects of these early financial decisions (or indecisions) are catastrophic.

Of course, there is a third option. It can make a lot of sense to hire professional help to make sure nothing falls through the cracks as your financial stakes increase.

At the risk of being self-serving, this role of financial quarterback” is typically best played by a CFP® that always works in your best interest. A good financial planner will help prioritize your financial issues as they arise and keep you focused on the most important tasks at hand. They will also have a team of referrals ready to help in areas such as taxes, estate planning, and insurance.

While addressing the technical side of these issues is important, it’s equally necessary for a financial planner to cover the softer side of money as well. Providing accountability, managing client behavior, and simply being a sounding board for financial and life conversations are just as impactful on long-term financial success as choosing the right savings rate and investment account.

Even with all the tools and professional help available, financial planning is still hard. We can’t let that be our excuse for inaction. As FDR said, There are many ways of going forward, but only one way of standing still.”

Tagged under Thoughts, a collection of observations on money and life.

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