By Drew Hefflefinger, CFP®
Knowing when to seek professional help is not always clear. If we break our leg, it is pretty obvious we should see a doctor immediately. However, knowing when to engage with a competent and professional advisor can be a little vague —
At its core it is all about transitions. When we make transitions we are typically faced with major financial decisions. Some decisions appear straight forward — larger mortgage payments decease discretionary income today — but what about its implications on longer-term goals like retirement? Others are vaguer and can often fly under the radar — if the breadwinner becomes disabled will the family still be able to accomplish their financial goals (college, retirement, etc.)? The following are major transitions where the consideration of a professional advisor (financial, accountant, attorney, etc.) is prudent and to be considered:
- First Full-Time Job
A young professional’s greatest asset is their ability to generate income, it is also a time to develop strong financial habits than can be carried for a lifetime.
- Develop an effective debt reduction strategy.
- Build emergency cash reserves.
- Develop strong saving and spending habits.
- Protect your greatest asset. Assessing current disability coverage and other potential losses of income.
Marriage presents the opportunity to combine finances with a loved one. This is an opportunity to define joint goals, assess each other’s financial behavior, and learn to be reliant on each other, not only spiritually, but financially.
- Define financial goals based on what is important to you as a couple. Define personal goals that may be exclusive to one spouse.
- Define how monthly cash inflows and outflows are managed.
- Define how monthly expenses and saving be allocated per spouse. 50:50? Weighted per income?
- Develop protective strategies in the event of loss (disability, life, loss of income, etc.).
They cost money, and a lot of it. The average “cost” to raise a child for a family earning over $100,000 per year is about $550,000 over an 18-year period — college NOT included!
- Decide whether income will come from one or both spouses. If two income, understand the additional child care costs of a nanny, extended hours at school, etc.
- Define whether a one-income household is feasible and in-sync with long-term goals.
- Assess coverage should a spouse expectantly pass away or become disabled.
- Define a college funding strategy. How much will parents cover? Define savings strategy.
- Business Ownership
Owning and operating a business can be a most rewarding career. With it comes autonomy, freedom, and control — it also exposes a business owner to inconsistent income, lawsuits, and a rollercoaster of emotions and hours.
- Define a risk management plan considering every potential exposure.
- Define a succession plan that walks step-by-step with personal financial goals.
- Developing a team of accountants, attorneys, and financial professionals to assist in management of the business and personal finances.
- Define how to work and use the business to get what you want out of life.
Nobody enjoys the loss of a loved one but it is an absolute in life. Upon passing the deceased estate may distribute wealth to the next generation often adding an additional level of complexity. How the wealth is distributed and then used is an important consideration for the heir.
- Define how the estate is to be distributed, lump-sum, periodic, etc.
- Define how the inheritance is best utilized in achieving your own goals.
- Determine what assets (home, cars, investments, etc.) you want to keep or sell.
- Opportunity to define how you would like to be remembered.
The definition of retirement is in the eye of the beholder. Everybody has the power to define retirement however they would like, it is like a fresh ball of clay. Some continue earning, just in another capacity. Others, dedicate more time to loved ones. As its core, retirement is an opportunity to define you.
- Define who you want to be and how you want to be remembered.
- Confirm today’s resources and strategies enable you to accomplish your goals.
- Explore new worlds, hobbies, careers, etc.
- Explore how to spend quality time with the ones you love.
This is a lot to consider, and when approaching any of these important life transitions I recommend working with a professional advisor who can look at every decision, from every possible angle. When we have all the necessary information and can understand the short and long-term implications we are best able to make smart and informed decisions that align with our goals.
Drew Hefflefinger is a CERTIFIED FINANCIAL PLANNER™ at Private Client Wealth Advisors, LLC in Denver, Colorado. Drew specializes in working with families by helping them preserve and grow wealth while achieving life goals. Drew can be contacted at firstname.lastname@example.org.