The following is an interview I did with Joe Messinger of Capstone Wealth Partners. I wanted Joe's take on some financial stuff that was on my mind and probably yours too.
Why should someone consider engaging with a financial advisor?
There are 3 main reasons why people typically decide it is time to work with a financial advisor 1. They take very little interest in financial matters and they are intimidated by money 2. Their personal financial situation has become more complex than they are comfortable with and they know they are missing opportunities and 3. TIME!!! This is the biggest reason to consider working with a financial advisor. You simply don’t have time to stay up to date on all of the aspects of your personal financial plan, and it is much more valuable to delegate those matters to someone else that you trust to consolidate, coordinate and simplify your financial life. Pay someone else to worry about your financial matters so you can spend your TIME doing what you are best at, and doing the things you love to do with the people you love to do them with.
What are a few of the most common financial mistakes people make with their money?
They wing it. People don’t plan to fail, they fail to plan. A good financial plan should act as a guiding document to help you make smart choices with your money so you can achieve YOUR goals for the reasons that are important to you. An Easy exercise for planning retirement is to ask yourself 3 questions; By when would I like to retire? What amount of net spendable money do I need each month to fund a comfortable retirement? Now that I am there, what are 3 words that describe what I am thinking and how I am feeling now that I am there?
They procrastinate – everyone today knows they should be saving to fund retirement and/or college. Don’t wait! Get empowered and take action now.
They don’t seek advice when they know they need it. It is hard to know who to trust, so make sure to ask people that you trust who they work with and if they are loyal to them. If things sound to good to be true, they probably are. Use your spider man sense!
They don’t pay attention to interest rates. An interest rate is simply a lender telling you how much you need to pay them to use their money for a period of time. Obtaining a lower interest rate on your mortgage for example could mean tens of thousands of dollars over the life of the loan, and increase your current cash flow at the same time.
They don’t think it through. People often times get in over their heads with a payment, or run a massive amount of credit card debt. If they just thought it through and asked themselves “Can I really afford this? Do I really NEED this?” they would be much better off. Buy with your brain, not your heart.
It seems like we’ve got some major fiscal hurdles (higher taxes, inflationary pressures, market ups and downs, etc.) in front of us here in the U.S., what are some ways to protect and preserve the money we make?
So many families today are living paycheck to paycheck. One of the most important things you can do is set aside 6 months of your house hold expenses in an emergency cash reserves account. FYI – the family vacation to Florida is not an emergency! When times are good is the best time to plan for the uncertainty that will indefinitely come. Another important thing is to make sure that you are properly insured in case the unthinkable happens. Work with a professional to determine the proper amount and type of insurance for you and your family. The market will always have ups and downs and the most important thing with investing is to make sure that you are in a diversified portfolio that is appropriate for your age and time horizon. Understand the risks associated with investing and don’t let emotions drive your decisions for long term investing.
Saving and paying for college is getting a lot of attention right now. What are some practical things a person can do to brighten up this part of their financial picture?
The cost of a 4 year education at a state school has doubled in the last 10 years, and the costs continue to rise. There are 2 parts of the equation; 1. Saving for College and 2. Paying for college
Every little bit helps in saving for college. I would recommend that you start saving at least something into a 529 college savings plan, even if it is $25 a month. Also, ask grandparents to contribute to the plan. Perhaps instead of giving the kids money to blow, ask them to split it 50/50. Half they can see them enjoy now, and half can go to help fund college. As far as paying for college understand that there are a lot of ways to pay for college. Work to create a proactive plan, not a reactive plan to pay for college. Before you even apply to colleges, predetermine your Expected Family Contribution (EFC) as determined by the Free Application for Federal Student Aid (FAFSA). Also, determine your family’s college funding philosophy; How much of college will you pay for, for each child. For example “we are committed to paying for up to 50% of what an in state school would cost regardless where you go to college” or “we will pay for $10,000 per year for each of our kids”. Federal Financial aid, Education Tax incentives, Private Scholarships, scholarships and grants from the colleges and universities, and student loans will likely all contribute to paying for college. It is an elaborate process with a lot of moving parts, so start early and be an informed buyer of a college education.
Do you have a strategy you recommend for people that may have never put a dime into a mutual fund or a 401K?
START! Get educated on your options and go. If you work at a company with a 401(k) or other retirement plan, that is a great place to start. Request a meeting with a representative from the plan so that you are aware of your options. Many retirement plans now have what is called a target date fund option. These funds are a great way to get started. They essentially ask when you plan to retire, and professional money managers do all of the heavy lifting to select a portfolio of investments that is appropriate for you based on your time horizon and your risk profile. These types of funds are also available in self-directed Individual Retirement Accounts (IRA). If you are looking for one on one help, ask people that you trust if they work with an advisor that they are loyal to. Don’t be afraid to meet with 2 or 3 advisors to find one that is a good fit for you.
Joe Messinger began his financial planning career in 2001, and worked with industry-leading financial services firms. His successes as a financial advisor lead him to senior leadership roles where he had an opportunity to coach and mentor some of the top financial advisors in the country. After nearly a decade of working for some of the largest firms in the industry, Joe concluded; “The only way to deliver truly comprehensive, unbiased advice with no conflicts of interest is to operate as an independent fee only Registered Investment Advisor.” In 2009 Joe co-founded Capstone Wealth Partners to do just that