Sep 03

FINANCIAL PLANNING OR FINANCIAL GUIDANCE: HOW DO THEY DIFFER?

 

FINANCIAL PLANNING OR FINANCIAL GUIDANCE: HOW DO THEY DIFFER?

Part of putting a financial plan in place means knowing what’s right for you – how much or how little planning you need, and how active you want to be in the planning process. While a CFP®  professional can help you create a plan and provide guidance, YOU ultimately have to be in charge of the decisions that impact your life and your financial situation. Taking control of those things you can control is an important first step.

 

One area that many people outside the investment industry struggle with is the jargon and terminology.  What’s the difference between planning and or guidance? There are advisers who are planners and planners who act as advisers. There are some who only provide planning for a fee, and some who do only the advisory work, leaving the planning piece for the investor to navigate.

 

As you decide what type of financial service will best meet your needs, there are a few things to understand about planning and guidance.

 

1.  Financial “Planning” is often a separately paid fee engagement that focuses on information gathering, understanding your goals and objectives, looking at the entire financial picture (not just investments, but insurance and long-term care, among other components), and then creating a plan that is customized for your situation. As part of this process, I believe the professional should go even deeper by looking at who you are as a person and why you care about what you do. This may lead to incorporating goals that are sometimes non-financial in nature.

 

2.  Financial “Guidance” is mostly focused on giving guidance and direction on which investments are best for your situation. There are two types of advice:Discretionary and non-discretionary. “Discretionary” means the adviser retains control, and while he or she may update the investor, the adviser makes the final investment decisions. “Non-discretionary” means the adviser offers the advice but the investor makes the final buy-and-sell decisions for their own portfolio. The advice most often focuses on risk tolerance and portfolio allocation, and may not take into account other aspects of the investor’s situation.

 

When both planning and guidance are combined, it is often called comprehensive wealth management. This is where the planning focus and discipline is brought together with the adviser’s investment acumen and expertise. Of course, understanding the investor, and listening to his or her needs and concerns, is a key element of the comprehensive approach.

 

So how do you decide which approach is right for you? Here are some questions you should ask yourself:

 

Are you clear on the “why?” behind the choices you have made to date – do you have a process for deciding which financial decisions will work best for you?

  • Are you saving enough to meet your goals such as retirement?
  • Should you contribute to a Roth IRA or a Traditional IRA?

 

Do you want to be actively involved in the investment process?

  • Do you like to “watch” the markets and direct investments?
  • Do you only want to know how to invest your money?

 

What services do you actually need? Investment management only? Planning only? Both, also known as comprehensive wealth management?

 

Is having a holistic view of your financial picture important?

 

If a holistic approach is indeed what you are looking for, a CFP® professional is uniquely qualified to help. They are trained comprehensively in six specialty areas to assist clients in pulling their whole financial lives together: retirement, estate planning, taxes, investments, budgeting and insurance. Use the “Find a CFP® Professional” tool to find a CFP® professional in your area.

Aug 25

Switching to the 24-Hour Workday: Financial Implications of Stay-at-Home Parenting

 

Switching to the 24-Hour Workday:  

Financial Implications of Stay-at-Home Parenting

 

Washington, D.C., August 25, 2014 – Choosing to transition from two incomes to stay-at-home parenting isn’t an easy decision, but is the right choice for many families. This decision should be made after careful consideration of the financial implications of leaving the workforce. While dropping expenses such as daycare, commuting and lunches helps, leaving a job means losing out on financial benefits that most parents don’t notice until they’ve already left their job.

 

Certified Financial Planner Board of Standards (CFP Board) Ambassador Paul Jarvis, CFP® shares ways parents can prepare for making the stay-at-home parenting decision.

 

Understanding the complete picture is critical when making big decisions such as stay-at-home parenting.  Make sure you evaluate both the personal costs as well as the financial costs before making the leap,” Jarvis says.

 

In the latest installment of “Let’s Talk Planning” blog (LetsMakeaPlan.org), CFP Board shares under-the-radar costs and benefits parents leaving the workforce may not be taking into account, to help them navigate this transition in a planned and financially responsible way:

 

  • Retirement contributions: Giving up employment means giving up the free, tax-deferred benefit of a retirement plan employer match.  It’s important that stay-at-home parents still fund their retirement via IRAs or with after-tax savings, but the amounts they can put aside are often less due to a tighter budget or IRS limitations.

 

  • Non-taxable or pretax tax benefits: Some employers reimburse employees for tuition expenses, and these reimbursements are not considered taxable income.  Similarly, workplace cafeteria plans allow for savings on certain expenses – such as eye care or dental – with pretax dollars. Leaving an employer means foregoing these benefits.
  • Social Security benefits:  Retirement benefits are calculated on the highest-paid 35 years of employment, and no credit is given to full-time parents. Time out of the workplace can mean receiving lower Social Security benefits. 

 

  • Insurance:  Leaving an employer may mean losing term life insurance benefits, health insurance benefits, and certain forms of disability insurance that are not available to those without workplace earnings.

 

  • Future employability:  A prolonged departure from the workplace makes rejoining the workforce at a later date harder, especially at an income or responsibility level comparable to that of a previous job. The amount of foregone future income and employment benefits can be considerable.

 

It is not a CFP® professional’s job to impose his or her opinions or choices on clients – they should do what’s best for their families, whether that’s two working parents or stay-at-home parenting. But talking with a CFP® professional will help families evaluate their goals, and get them to think about how the costs they may not be considering will affect their ability to reach those goals.

 

 

ABOUT CFP BOARD

The mission of Certified Financial Planner Board of Standards, Inc. is to benefit the public by granting the CFP® certification and upholding it as the recognized standard of excellence for competent and ethical personal financial planning. The Board of Directors, in furthering CFP Board’s mission, acts on behalf of the public, CFP® professionals and other stakeholders. CFP Board owns the certification marks CFP®, Certified Financial Planner™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.  CFP Board currently authorizes more than 70,000 individuals to use these marks in the U.S.

 

CONTACT: Dan Drummond, Director of External Relations P: 202-379-2252 M: 202-550-8259 E: ddrummond@cfpboard.org Twitter: @cfpboardmedia

 

 

The information in this article is not intended to be tax and/or legal advice and should not be treated as such. You should consult with your tax advisor and/or attorney to discuss your personal situation before making any decisions.

Additionally, If you are looking for additional help, seek help from a CERTIFIED FINANCIAL PLANNER™ Professional that can look at your individual situation holistically.

 

Jul 15

Squished! What to Do When Financially Supporting Two Generations

 

 

Washington, D.C., July 15, 2014 – Many middle-aged Americans are beginning to find themselves in a tight spot, financially “sandwiched” between caring for older and younger generations. While juggling their own financial needs and obligations, these pre-retirees are responsible for supporting adult children grounded by a tough economy and aging parents requiring care and assistance.

 

Certified Financial Planner Board of Standards (CFP Board) Ambassador Paul Jarvis, CFP® shares ways Americans can prepare for and navigate supporting children and parents while maintaining their own financial goals.

 

“It can be overwhelming simultaneously supporting aging parents and your own children.  A focused financial plan will help you balance your willingness to help with your own financial well-being,” Jarvis says.

 

In the latest installment of “Let’s Talk Planning” blog and its “Financial Planning is for Everyone” series, the CFP Board shares best practices to ensure that Americans in the “accumulation years” – the two decades before retirement – can help their family without hurting themselves financially:

 

  • Define expectations and set boundaries.  If a young adult can’t find a job and turns to the Bank of Mom and Dad, or checks into the Mom and Dad Hotel, it’s important to define some terms. Similarly, the type and amount of care for elderly adults should be clearly articulated and put in writing, especially for other siblings or family members. Make sure that aging parents have documents in place specifying wishes for advanced and end-of-life care, as well as designating power-of-attorney for medical care and financial matters. 

 

  • Do not compromise your capacity to earn a living Sometimes working while taking care of others becomes just too much, and it seems necessary or easier to quit.  Avoid this if at all possible, as retirement and Social Security benefits will be permanently reduced, and re-entry into the workforce at a comparable level can be extremely difficult. 

 

  • Learn what assistance is available from the government, community, and other resources.  In some cases, you may be eligible for payment for taking care of an aging relative on Medicaid.  Call your local Medicaid office and see if your state offers reimbursement to caretakers under the Cash & Counseling program. 

 

  • Talk to a CFP® professional.  Financial and physical caretaking has all sorts of ramifications, including in terms of taxes, cash flow, insurance coverage, and asset management.  Identifying and managing all these issues are what a CFP® professional does best. 

 

Being sandwiched between the needs of your parents and children should not come at the cost of your own financial goals. Reaching out to the people and organizations that can help you and taking some financially-wise steps – such as meeting with a CFP® professional – can transform the job of supporting family from a burden to an obligation of love and pride.

 

 

ABOUT LET’S TALK PLANNING

“Let’s Talk Planning” is a blog by CFP Board Consumer Advocate Eleanor Blayney, CFP®, with posts each week with practical financial planning tips for consumers, as well as insights into the latest developments at CFP Board.  In addition to offering counsel on timely and evergreen financial planning topics, once a month Blayney will remind readers that “financial planning is for everyone,” with tips for consumers of all ages and life stages.

 

ABOUT CFP BOARD

The mission of Certified Financial Planner Board of Standards, Inc. is to benefit the public by granting the CFP® certification and upholding it as the recognized standard of excellence for competent and ethical personal financial planning. The Board of Directors, in furthering CFP Board’s mission, acts on behalf of the public, CFP® professionals and other stakeholders. CFP Board owns the certification marks CFP®,Certified Financial Planner™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.  CFP Board currently authorizes more than 70,000 individuals to use these marks in the U.S.

 

CONTACT: Jessica Lewis, Communications Specialist P: 202-379-2256 M:202-550-8259 E: jlewis@cfpboard.org Twitter: @cfpboardmedia

 

The information in this article is not intended to be tax and/or legal advice and should not be treated as such. You should consult with your tax advisor and/or attorney to discuss your personal situation before making any decisions.

Additionally, If you are looking for additional help, seek help from a CERTIFIED FINANCIAL PLANNER™ Professional that can look at your individual situation holistically.

 

May 20

The Selfless Job of Motherhood: Supporting Your Child’s Financial Future at Every Age

CFP Board Advises Mothers on Instilling Children with Financial Responsibility

 

Fargo, ND, May 20, 2014 – Mothers make all kinds of sacrifices for their families, including financial sacrifices to help and protect them, from covering countless childhood expenses to helping an older child during his or her own financial challenges. Mother’s Day is just one special day to honor her and recognize her willingness to make such financial sacrifices while also taking important steps to reduce their need.

 

Certified Financial Planner Board of Standards (CFP Board) Ambassador Paul Jarvis, CFP® shares ways in which mothers can improve their children’s financial situation and their own at the same time

 

“My mother kept me engaged with money very early on by teaching me to save with a goal in mind.  I still carry that engagement today and share that enthusiasm to improve my clients’ lives,” Jarvis says.

 

In the latest installment of “Let’s Talk Planning” blog and its “Financial Planning is for Everyone” series, the CFP Board provides advice for raising financially smart and prepared children of all ages:

 

  • Preschoolers: Cultivate the early awareness of money by giving your 4 or 5 year old a small allowance. Explain that money has various uses – for spending, saving, or giving – and reinforce this concept by designating three jars or piggy banks for these purposes.

 

  • Elementary school age and pre-teens: Open up a savings account for your child, making sure there are no account fees or minimum balances. Let your kids carry small amounts of cash so that they learn what things cost and master the mathematics of transactions.

 

  • Teenagers: Provide an allowance for personal items and teach teens to use a budget to manage these funds. If appropriate, it’s a great time to set up a Roth IRA as a first lesson in long-term, retirement savings.

 

  • College students and young adults: Introduce your children to your financial advisor and accountant, and ask these professionals to spend an hour or so providing some basic counsel on investing, money management, and taxes. Get your college-bound student fully engaged with the finances of higher education, including creating a contract with your child for expenses you will be financing, outlining expectations and any repayment terms.

 

  • Adult children with kids of their own: Respect their independence and financial choices. If you offer help, consider paying for a CFP® professional to guide them out of trouble, rather than you using your own resources to make things “all better.”

 

Teaching children about finances, no matter what age they are, involves a lot of effort and patience from already busy moms. Enlist the help of a CERTIFIED FINANCIAL PLANNER™ Professional who, through careful planning, can help position both mother and child for long-term financial success.

 

 

ABOUT LET’S TALK PLANNING

“Let’s Talk Planning” is a blog by CFP Board Consumer Advocate Eleanor Blayney, CFP®, with posts each week with practical financial planning tips for consumers, as well as insights into the latest developments at CFP Board.  In addition to offering counsel on timely and evergreen financial planning topics, once a month Blayney will remind readers that “financial planning is for everyone,” with tips for consumers of all ages and life stages.

 

ABOUT CFP BOARD

The mission of Certified Financial Planner Board of Standards, Inc. is to benefit the public by granting the CFP® certification and upholding it as the recognized standard of excellence for competent and ethical personal financial planning. The Board of Directors, in furthering CFP Board’s mission, acts on behalf of the public, CFP® professionals and other stakeholders. CFP Board owns the certification marks CFP®, Certified Financial Planner™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.  CFP Board currently authorizes more than 69,000 individuals to use these marks in the U.S.

 

CONTACT: Dan Drummond, Director of External Relations P: 202-379-2252 M: 202-550-4372 E: ddrummond@cfpboard.org Twitter: @cfpboardmedia

 

The information in this article is not intended to be tax and/or legal advice and should not be treated as such. You should consult with your tax advisor and/or attorney to discuss your personal situation before making any decisions.

Additionally, If you are looking for additional help, seek help from a CERTIFIED FINANCIAL PLANNER™ Professional that can look at your individual situation holistically.

 

Apr 22

There’s No Place Like Home: Steps to Take When Buying Your First Home

 

 

Washington, D.C., April 22, 2014 –Preparing to buy your first home is one of life’s most monumental steps. As with other milestones, such as getting married or having a baby, new homeowners must face the financial realities that come with investing in a home of their own.

 Certified Financial Planner Board of Standards (“CFP Board”) Ambassador Paul Jarvis, CFP® provides guidance on the “realty realities” that all new homeowners should be prepared to address.

 “Buying your first home is a wonderful endeavor but requires thoughtfulness and planning.  Taking the time to adequately budget, title, and protect your investment allows you to have a home you own not a home that owns you,” says Jarvis.

 In the latest installment of CFP Board’s “Let’s Talk Planning” blog and its “Financial Planning is for Everyone” series, the CFP Board shares three aspects of home ownership to consider when you close on and get the keys to your new home.

 

  1. Titling your home: There are several ways to own a house. What’s best for you depends on several factors:  For example, are you the sole purchaser, or are you buying it with another individual? If it’s just you, make sure you have a will to direct where the house should go in the event of your death. If you will be a co-owner, the important question is whether you want the home to automatically transfer to the other individual at your death.

 

  1. Insuring your home: If you have a mortgage, you must have insurance, but you do have choices about the kind of protection you buy. Homeowner’s policies differ with respect to the types of perils they cover, such as whether they include what’s inside your home and the monetary benefit you would receive if your home is destroyed.

 

  1. Maintaining your home: No more calling the landlord when there’s a water leak or the dishwasher dies. You need to plan for these events by setting up a “repair” account and funding it monthly. Once you move into your new home, get the names of some reputable contractors who do good work at reasonable costs.

 

Homeownership comes with more than enough new responsibilities. But there are two options new homeowners need not consider: mortgage insurance and bimonthly payment plans offered by the mortgage servicer. Mortgage insurance only makes sense it you cannot qualify for traditional life insurance because of health issues.  And you can increase your monthly payments on your own, shortening the duration of your mortgage and lowering your interest costs, without incurring bank service fees.

 If the homeownership process seems complicated, talk to a CFP® professional to prepare and plan. A Certified Financial Planner™ professional can help you focus on the important issues of owning a home: protection, preservation, and a plan for transfer. A home is an investment that needs your constant attention; enlist the help of a professional to take care of it.

  

ABOUT LET’S TALK PLANNING

“Let’s Talk Planning” is a blog by CFP Board Consumer Advocate Eleanor Blayney, CFP®, with posts each week with practical financial planning tips for consumers, as well as insights into the latest developments at CFP Board.  In addition to offering counsel on timely and evergreen financial planning topics, once a month Blayney will remind readers that “financial planning is for everyone,” with tips for consumers of all ages and life stages.

 

ABOUT CFP BOARD

The mission of Certified Financial Planner Board of Standards, Inc. is to benefit the public by granting the CFP® certification and upholding it as the recognized standard of excellence for competent and ethical personal financial planning. The Board of Directors, in furthering CFP Board’s mission, acts on behalf of the public, CFP® professionals and other stakeholders. CFP Board owns the certification marks CFP®, Certified Financial Planner™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.  CFP Board currently authorizes more than 69,000 individuals to use these marks in the U.S.

 

CONTACT: Paul Jarvis, CFP Board Ambassador P: 701-451-3059 E: pjarvis@cfpboardambassador.org

 

The information in this article is not intended to be tax and/or legal advice and should not be treated as such. You should consult with your tax advisor and/or attorney to discuss your personal situation before making any decisions.

Additionally, If you are looking for additional help, seek help from a CERTIFIED FINANCIAL PLANNER™ Professional that can look at your individual situation holistically.

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