Financial Planning

When you are responsible for the financial well-being of others, it gives you much to think about.  In fact, when others are depending on you, financial decisions can become more complex because of the ripple effect.  This condition presents a financial planning opportunity.

A well-designed financial plan is the cornerstone of wealth management.  What is financial planning?  Is it a fancy leather-bound book replete with statistics and colorful charts?  A project in which you invest time and money to create a game plan only to then place it on the shelf until the next crisis?  It certainly should not be a pretext for purchasing financial products.

The correct answer is that financial planning should be a highly personalized, interactive process working with a trained professional like a Certified Financial Planner®.  The process should delve deep and wide, defining your goals, framing challenges, identifying resources and developing the behaviors and sacrifices to realize those goals.

We know from experience that most everyone could improve some aspect of their financial plan.  It is difficult, however, to self-diagnose and correct these deficiencies, so a trained unemotional professional can provide the objectivity to force a change.

A well-designed financial plan is often not easy to construct.  It can be work, involving an investment of time, money, and even discomfort sometimes.  On the other hand, the yield can be much better financial decisions, more flexibility, clarity, less financial risk, a better investment strategy, problem resolution and more confidence about the future. Talk about a return on investment!


The word budget can be a four-letter word because it connotes sacrifice, but effective budgeting is a misunderstood planning construct.  A budget can be a useful tool that fosters financial discipline and measure success towards your achieving goals over time.

A budget can help you visualize and understand the concept of matching the timing and amount of your cash flows.  It is less likely to work, however, if prepared outside the context of your overall wealth plan.  When a budget inevitably gets tight and tested, the discipline to stay on budget comes from the greater purpose you are working to achieve as defined in your plan.

There are various budget techniques, simple and sophisticated to suit your financial personality.  Some take a historical approach, reconciling what was spent while some are forward looking to alert you before you spend.  Others create an artificial budget, using automatic deductions from paychecks and bank account to fund goals and debt repayments and then consuming the rest with a clear conscious. 

Our experience has proven that good financial discipline is the single biggest difference in financial success or failure.  If you design a realistic financial budget connected to your financial plan, you will gain control your finances instead of them controlling you.

Debt Management

Debt is a double-edged financial sword.  On the positive side, debt is a good of source of capital to acquire long-lived assets, especially those that may appreciate in value over time.  If used appropriately, debt can create wealth through the leveraged return on assets.

Likewise, a cash windfall may be better employed as an investment rather than paying down existing debt if the expected return on the investment opportunity is higher than the after-tax cost of the existing debt.  Simply put, prepaying debt is an investment decision.

On the negative side, debt can become a devastating burden when used to finance the consumption of stuff, the purchase of depreciating assets or to fund a lifestyle.  This is especially true when home equity is used as a piggy bank to fund frivolous spending.

The ability to borrow when appropriate to achieve your goals or take advantage of financial or business opportunities is a privilege earned by carefully managing your debt and creditworthiness.

Tax Planning

A successful financial plan is incomplete without a well-developed tax plan.  Maximizing after-tax wealth can be essential to achieving your long-term financial goals. We work closely with your tax professional to wring out as much after-tax wealth creation  / preservation as possible.

For example, the wealth creation advantages from investing inside an IRA or retirement plan over investing in a taxable account is compelling.  However, the taxation of IRA/plan distributions can be tricky and could result in giving back some of the tax advantages if not executed properly.

Higher income taxpayers must be cautious when executing their investment plan to maximize after-tax returns.  Cash value life insurance can be a valuable investment asset class for high income earners by creating tax-free wealth in the form of policy cash value – like a super Roth IRA.

For business owners, there is no shortage of tax planning opportunities to generate tax savings for themselves and employees.  The form of business can impact the degree of income tax planning available to the business owner and income tax considerations are an important factor when selecting the right business entity.


A comedian once joked that he had been married and divorced so many times that the next time he was going to find a woman he didn't like and just give her a house.  Divorce is no laughing matter however for families trying to cope with the emotional and financial issues it can create.

The U.S. divorce rate is significant and, in general, men recover financially from divorce much more rapidly than do women.  Better financial planning before the divorce settlement would improve the financial fortunes of more women post-divorce.

Divorce law varies by state and your most important advisor is a competent divorce attorney to protect your legal rights in the settlement process.  A financial planner can also be a valuable team member, helping with income, investment, taxation and cash flow decisions.

Divorce planning involves negotiating equitable division of assets, income and debt - but also sources of future cash flow.  A common mistake in many divorces is demanding ownership of the family home in the settlement, mainly due to emotional reasons.  Home ownership costs can overcome a single income and lead to financial stress post divorce. 

Often, selling the family home as part of the divorce settlement is the difficult yet most appropriate, unemotional planning decision to make for both parties.

Home Equity

Your home is often your most valuable asset and your mortgage payment your largest obligation.  With so much of your net worth tied up in one asset, it is important to use this asset prudently. 

Generous income tax rules has turned your home a tax-advantaged financing source that can be used to fund higher education goals, provide emergency cash and even to make strategic investments.

However, home equity financing is fraught with financial risks for the undisciplined homeowner.  It is not a good source of funds to pay for vacations, new cars or other consumption behavior.   Furthermore,  if you choose to use home equity financing, even for constructive purposes, consider a longer-term primary mortgage loan term over a shorter term to maintain more repayment flexibility in the future.

Home equity has retirement planning implications as well.  A future downsizing to a smaller dwelling can produce a nice source of retirement capital plus the gain on the sale of your residence is often untaxed.  If home equity is part of your retirement capital, plan to have your mortgage debt paid down significantly by the time you reach your target retirement date.

If you are emotionally attached to your home, a reverse mortgage can create a steady stream of retirement income over your lifetime.  Once the homeowner reaches a certain age, a percentage of the home equity can be tapped as retirement income without any loan repayment due until death, at which time the real estate is sold and the loan repaid.  In general, a reverse mortgage is an expensive source of retirement capital and is best used as a financial safety net.