Planning a Successful Future

Managing to Be Wealthy for Individuals and Their Advisors

John E. Sestina

• Publisher: Wiley
• Year: 2016
• Print ISBN: 9781119069126
• eBook ISBN: 9781119187974
• Edition: 1
• Topic: Negocios y empresa
• Subtopic: Gestión del patrimonio

A deeply insightful guide to goal-based financial planning and wealth management

Planning a Successful Future empowers advisors and clients to take control of their money and manage their income to achieve their financial goals. Written by the father of fee-only financial planning, this book features real-life stories and examples from over three decades in the industry to illustrate how financial planning works and the best way to create your strategy. You'll learn how to identify and prioritize your goals, and why they're important—and how to get where you need to be for retirement, education, home ownership, and more. Practical exercises get you started on the right track, and useful checklists keep you organized and focused along the way. You'll get expert insight on risk management, allocation, tax reduction, estate planning, and more, as you develop your strategy and put it into action.

The financial services industry undergoes frequent changes, and financial planning specifically is affected to a high degree. Keeping up with the latest news and distinguishing trend from legitimate methodology can itself be a fulltime job. This book gives you the background you need to create a plan, and make the smart choices that will help you grow and protect your wealth.

• Create a realistic and goal-based financial plan
• Take a more proactive approach to your finances
• Identify your goals and how to achieve them
• Allocate investments appropriately for your situation

Financial planning is complex, with many variables to analyze and outside forces that can derail even the best laid plans. Planning a Successful Future gives you the information, tools, strategies, and insight you need to make the best decisions for your financial future.

Chapter #1
What Do You Want?

When you dream, what do you dream about? Do you want to tour Europe or go fishing when you retire? Would you like your children to go to Harvard or to a state university? Do you want to leave millions to your favorite charity or give your stamp collection to your favorite nephew?

We all have different dreams, unique wish lists of what we want for ourselves and our families, for now and for later. In this chapter, I'll help you put your goals in writing, perhaps for the first time. Don't let my questions restrict you. If you want something that I haven't mentioned, write it down. This is your wish list.

Don't be afraid to dream big. We'll discuss the realities of how you'll get there. For now, focus on your wishes.

Put It in Writing

You're a busy person. Why take the time to write down things that you already know?

• Writing down your dreams is the first step toward making them a reality. By putting words on paper, you turn dreams into goals. That's why you should be as specific as possible. Don't write, “I want to retire with lots of money.” Define “lots of money” by assigning your goal a dollar amount: “I want to have an annual income of $50,000 in today's dollars when I retire.” Or list the things you'd like to do and the lifestyle you want to have, then assign a dollar value.
• Writing down your dreams brings to light any information gaps. How much insurance do you have? Where are your policies? What are the total annual costs today at the college your child might attend?
• Writing down your dreams and sharing them with your family opens communication and can keep everyone focused on the same goals. You may already have discussed your hopes for the future with your family. If not, you may be surprised to discover that your family members have goals that are different from yours. What if your spouse wants to retire near the ocean, far from your beloved mountains? It's better to discuss these things now than be unpleasantly surprised later.
• Writing down your dreams and informing your advisors helps them serve you better. The more they know about what you want, the more they can tailor their services to your specific needs. If you don't want to leave a large estate, for instance, your insurance agent shouldn't try to sell you extra life insurance. If you want your spouse to continue your business if you die first, your attorney should include that in your will and go over the paperwork with both partners.
• Writing down and regularly reviewing your dreams helps keep your goals current—and your other details up-to-date as well. Have you had more children since you last updated your wish list? Have some of your children become adults since you considered your overall financial affairs? Are your will and insurance coverage up to date? None of us is the same person today that we were five years ago. Our dreams change. Our financial plan should keep up, so those dreams can become reality.

Six Steps to Financial Freedom

Now that you've written down your financial wish list, it's time to introduce the six steps you'll use in preparing your financial plan. Working through these steps and using the explanations and advice in this book will put you on your way to financial independence.

That might sound complicated, but it's not. In fact, the steps may seem familiar. You follow a similar planning process every day without realizing it, whether you're painting the house or cooking a meal. Here are the six steps and two simple examples to show how they work.

Planning Process

1. What do you want? Identify your goal.
2. What do you have now? Collect information.
3. What's holding you back? Consider the obstacles standing between you and your goal. Brainstorm alternate solutions and ways to remove or work around your obstacles.
4. How can you get what you want? Develop written recommendations.
5. Choose a plan and put it into action.
6. Is your plan working? Review your goal and strategies for reaching it at least once a year.

You use the same steps to paint a house:

1. Identify your goal. Spruce up the house with a new coat of paint.
2. Collect information. How many square feet need to be painted? Are there any spots that need primer? How many square feet?
3. Consider the obstacles between you and your goal. Perhaps you don't like painting houses, or don't have time to do the job.
4. Brainstorm possible solutions. You could put on primer, then paint. You could also paint next year, hire someone else to do the work, or install siding.
5. You choose the first option. Overcome your distaste for the job. You buy primer, put it on, and then paint the house.
6. The house looks great! Six months later, it still looks good. Pat yourself on the back.

The same process works as you prepare a meal:

1. Your goal. Prepare lunch for four people.
2. Gather information. What ingredients do you have?
3. Identify obstacles. You have only one pound of ground beef.
4. Brainstorm potential solutions. You could make small hamburgers and add side dishes to complete the meal, go to the store and buy more ground beef, make something else with the ingredients you have on hand, or go out for lunch.
5. You go out to eat.
6. Lunch was not that good. You might decide to go out for lunch again but at a different restaurant.

Obviously, preparing your financial plan will take a little more thought. Here is a description of each of the financial planning steps and how they will help you build your financial plan.

1. By now, you know that you should write down your goals.
2. What do you have now?
   Collect information in the form of all your important financial data. Finding these documents may be a treasure hunt, and doing a thorough job will probably take some time. The following chapter has a document checklist, to ensure that you don't miss anything.
3. What's holding you back?
   Consider the problem areas in your finances. What is preventing you from achieving financial independence? You probably have struggled with one or more of these common problems:
   • High taxes
   • Too little or too much insurance
   • Inadequate cash flow
   • Poor liquidity
   • High debt
   • Low rate of return
   This book will help you tackle these problems and find workable solutions.
4. How will you get what you want?
   After you've documented your wishes and know what you have now, you must analyze your situation and develop specific ways to meet your financial goals. If your investment rate of return is too low to meet your goals, for instance, you might want to raise your rate of return. This book will teach you several ways to do that.
5. Put Your Plan into Action
   A good financial plan only works if you put it into action. If you want to raise your rate of return on investments, to continue the previous example, you must choose a particular investment that meets your need for a better return and then invest in it.
   That sounds simple, but isn't for everyone. Many people are great at planning but put off taking action. (Others want to take action immediately, without putting a plan into place.)
6. Review the plan. Is it working?
   No financial plan should be carved in stone. Review it annually, being honest with yourself, your spouse, and your financial planner. You should also review your plan and its execution in unusual circumstances: a birth or a death in the family, an inheritance, a substantial professional shift, or a significant change in your or your spouse's health.

Start Planning

Now that you understand the planning process, let's get started. Get out a pencil and at least five sheets of paper. Label the five sheets with the following headings:

1. Retirement plan
2. Education plan
3. Estate plan
4. Disability plan
5. Other needs

Here are some questions to get you started in each area. Remember to be as specific as you can. However, if you don't know how much something will cost, put down a guess and go on. Don't get too bogged down in details at this point. Later on you will fill in more details about each wish.

Your Retirement Plan

1. How old are you now and at what age do you want to retire? How about your spouse? You may want to retire at 40, but realistically expect to retire at 55. Go ahead and write down both numbers. As you prepare your financial plan, you will find out which age is better for you. (Do you think you're too young to be planning your retirement? If you're 21, prepare your plan according to the steps in this book, and put that plan into action, you probably can retire at age 40. It's never too early or too late to start your financial plan. Any planning for retirement, even if you have just retired, is better than no financial planning.)
2. Do you want to retire all at once or gradually cut back your work hours? If you retire from one...

Table of contents

• Cover
• Title Page
• Copyright
• Table of Contents
• Dedication
• Acknowledgments
• Preface
• Introduction
• Chapter #1: What Do You Want?
• Chapter #2: What Do You Have Now?
• Chapter #3: Retirement: Planning for Financial Independence
• Chapter #4: Planning to Send Your Children to College
• Chapter #5: A House Is Not Always a Good Investment
• Chapter #6: Insurance
• Chapter #7: Liabilities
• Chapter #8: Taxes
• Chapter #9: Investments
• Chapter #10: How to Find and Work with a Financial Planner
• Chapter #11: Financial Planning for Women
• Chapter #12: Financial Planning for Business Owners
• Chapter #13: Financial Planning for Physicians
• Chapter #14: Learning from Professional Athletes' Mistakes
• About the Contributors
• About the Author
• Index
• End User License Agreement