Why You Should Talk To A Financial Planner Before Taking a 401(k) Loan

August 04, 2017

According to a report by EBRI, 20% of 401(k) plan participants have an outstanding loan against their retirement account — that is one out of every five employees. For this reason, many companies are now requiring employees who are taking out a 401(k) loan to talk with a financial planner first, to make sure that these people are making the best decision for themselves both today and for their financial future.

People take out loans for a variety of reasons, and when I talk to people who are in the process, I find that for most of them, it makes sense (they are buying a home or need it to pay tuition until their child’s financial aid check arrives). But sometimes there are better options, or often people don’t fully understand the implications of what they’re doing. Even if they end up taking the loan anyway, they are still better off having talked to us first.

Here are four ways that financial planners can help if you are thinking of taking a loan against your retirement.

Deal with financial stress. Many people who are taking a loan from their 401(k) are under a lot of financial stress — they either don’t have a cash reserve or any assets that they can sell for immediate liquidity or their credit cards could be close to maxed out and they have an immediate cash need. A financial planner can help with strategies to deal with the stress and also help you moving forward so that you don’t find yourself in this position again in the future.
Review options. Taking a 401(k) loan may be the best option, but a financial planner will help explore and evaluate possible alternatives that may be better.
Point out the pitfalls. 401(k) loans are paid back from your paychecks. If those paychecks stop for any reason (you quit, get fired or are laid off, etc.), your 401(k) loan could become a taxable distribution if you don’t continue to pay it back. (some employers allow you to continue payments after you’ve left, but others require you to pay it all back within a certain time frame after you leave). If you end up “defaulting” by not paying back any portion of the loan, you will have to pay taxes on the outstanding loan balance, plus a 10% early distribution penalty if you are younger than 59 1/2. There are also implications to the loss of investment growth that a planner can help you to better understand.
Solve the problem behind the problem. As people are in the process of taking out a 401(k) loan, they are very aware of the crisis that created the need for the loan — maybe it’s a failed transmission or an unexpected medical expense. And while the loan takes care of the immediate cash need, quite often that doesn’t address the root of the problem. It could be a lack of a spending plan (Easy Spending Plan) that has you living paycheck to paycheck, maybe it’s because you don’t yet have a plan to pay off your debt (DebtBlaster Calculator) or you haven’t been able to set up a cash reserve (Daily Savings Calculator) to address situations like this. Once the immediate need is taken care of, a financial planner can work with you going forward to help identify the cause of the crisis and develop a plan to help prevent this from happening again.

Unfortunately, a lot of us (myself included) don’t reach out for help until we are in a crisis. If you find yourself in that situation and are receptive to finding ways to avoid history repeating itself, reach out to a financial planner for help. We do it all the time.

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The Financial Services Industry Is Broken – Here’s How We Should Fix It

June 23, 2017

Along with being a financial planner here, each member of our team wears a bunch of different hats. Obviously, one of my other hats is a blogger. Another is being responsible for hiring new financial planners, where I have the opportunity to talk with incredibly talented CFP®’s from all over the country who want to work at Financial Finesse.

The reality of the situation is that even with a minimum of 10 years of industry experience and the CFP® designation, along with being wonderful human beings, only around 2% of those who apply for this role end up making it all the way through our hiring process. It’s astounding to me that I actually made it through the process and am working here.

Don’t tell anyone, but I regularly talk to planners who are smarter, harder working, more entertaining and much more photogenic than I am, and quite often they don’t get hired. There are lots of reasons for that, but that’s not the direction I want to take this post. Maybe another day…

What most financial planners do

The reason I talk about this is that the overwhelming majority of planners I talk to are in the business of giving world class advice to high net worth families when they apply to work at Financial Finesse, which is what I did prior to coming here. They are typically measured by the amount of assets or fees they collect and are tired of having to sell in order to also do financial planning.

For me, when I was working on a high net worth planning team, there was always a piece of me that thought, “The people we are working with are going to be just fine for the rest of their lives, even if they develop a bad case of ‘the stupids,’ while the people who most need our help can’t afford it and don’t have access to it. There is something fundamentally wrong with this system!” I interviewed three planners today who said something very similar. And that thought is what is driving them to look at us as a potential final career stop.

Working with the other 99%

Most of the employees I talk to in my role as a financial planner will never become a client in a high net worth planning office. Most would be happy just paying off their debt and having enough income in retirement to live a modest lifestyle. My guess (because I’m too lazy to do the math!) is that over half of the people I meet with are there to discuss either how to get out of serious debt or how to stop living paycheck to paycheck and maybe prepare for retirement or put their kids through college. These are the people who wouldn’t normally have access to decent financial planning guidance. And this isn’t isolated to the people I talk to – my colleagues say the same.

A recent Fed “Report on the Economic Well-Being of U.S. Households” reported that just under 1/4 of households can’t pay their monthly bills and almost half of households wouldn’t be unable to cover, with cash, an emergency expense of $400 or more. This information doesn’t surprise me, but it does get my hackles up a little bit about how messed up our financial services industry is.

These are the people that need help from our best and brightest planners. These are the people that our current system is leaving behind. These are the people that I wanted to help when I made the decision to work here.

A new branch of the industry

The good news is that these are the people that I’m helping today. Financial Finesse was founded on the belief that all Americans, regardless of income or net worth, deserve access to excellent financial planning guidance. That’s the vision that guides us. And we are actually excited to see more competitors in our space. Employers are catching on that providing a workplace financial wellness benefit is good for employees and it’s good for the bottom line – if you don’t have a financial wellness benefit at work yet, chances are you will. And that’s a good thing. I firmly believe that our industry will revolutionize the way traditional financial services are offered in the future.

I only wish that every employer in the country would work with us so that I could help everyone. Since I can’t clone myself, I try to at least hire others who have that same burning passion to help those who need it the most. Our internal motto and rallying cry (what I like to say is our true mission), is that we are “changing f’ing lives.” And that’s what we’re doing – one person, one family at a time.

What’s in it for you

What does this have to do with your own personal financial situation? Well, if nothing else, know that we feel your pain – getting unbiased answers to your questions is truly a challenge in today’s world. But if you do have access to a financial wellness benefit at work, USE IT. It’s there to help you and it’s not just for people who are in crisis. In fact, the best time to use it is when you’re not, so we can help make sure you’re ready when the next crisis hits.

Here at Financial Finesse, we believe strongly in the importance of workplace culture and the power of doing well by doing good. This article is the fifth in our week-long series of posts where we highlight a specific part of our company culture that helps to make Financial Finesse one of America’s best places to work. This is just one part of our celebration of recent recognition by Inc., who listed us as one of the Best Workplaces in 2017 and Entrepreneur, who named us to the Small-Sized Companies: The Best Company Cultures in 2017 list.

Have Financial Secrets? Why You Should Just Let It All Out

March 10, 2017

One of my crazy theories of life is that talking to others about your financial life is more intimate and personal than talking about any other topic in life. I have been at holiday parties in the past and learned within minutes of meeting someone that they are unhappily married and having an affair. To test that theory, I have asked about that individual’s job, ballpark annual earnings and amount of debt – only to be told that those questions were far too personal. I explained that I wasn’t being a jerk. I was testing a theory about money being a more intimate subject than intimacy, and they laughed and agreed.

When I read this article about financial secrets women haven’t shared with their closest of friends, it didn’t surprise me. In my role here at Financial Finesse, I routinely hear people tell me that they are coming to me for guidance and direction before they admit their financial secrets to their spouse. In the article, one woman admits to being broke from divorce, one has $100k in student loans, another has a credit card problem, one has no savings, one says her credit score sucks, another says that childcare eats up everything she earns and the last one has been unemployed for two years. These are all issues that I’ve talked with people about over the course of time and helped them develop solutions, but without that initial conversation, the problem remains in the shadows and creates unnecessary tension and stress.

When I’ve had these conversations with people, the overwhelming emotion at the end of the conversation is relief. They feel like they’ve been able to unburden themselves in a safe environment with someone who won’t judge them and who will work with them to help find a way out of the situation. Often, the burden of carrying a secret is worse than the actual secret. Apparently, the old political phrase “the cover up is worse than the crime” has a financial corollary.

If you’re walking around with a secret in your financial life that makes you feel like you carry a heavy weight on your shoulders, do yourself the favor of talking to a financial professional about it. Getting the secret out is the first step. From there, a plan can be put in place – regardless of what your financial burden is – to make progress.

You will be surprised by how liberating it is to just share the secret. (One of my favorite art projects ever is Post Secret, where people share life secrets anonymously and countless suicides have been prevented). That’s the first step in resolving the issue. So get out there and ask for help – whether your issue is credit card debt or trying to figure out how to minimize the tax burden on the sale of a big block of Snapchat stock. It’s a sign of wisdom, not weakness, to get help where help is needed.

Why I Do What I Do

August 12, 2016

As my kids and friends are far too familiar with, I’m a bit of a news and political junkie. That’s why it’s so surprising to everyone I’ve shared this with that I didn’t watch a single minute of either the Republican or Democrat conventions this year. I saw some “highlights” the next day on the news and heard people talking about highs and lows from each convention (depending on which side of the aisle they most consider their political home). I just couldn’t do it this year.

So many people that I talk with (and judging by the scroll on my Facebook home page, most of America) will be upset with our next President regardless of who wins. Both candidates from the major parties have greater than 50% negative ratings. A recent poll had Clinton disliked by 55% of voters and Trump disliked by 63% so either way we slice it, over half of the country will be unhappy on the day after Election Day. The overwhelming sentiment on my Facebook scroll is “THIS is the best we can do???”

One of the other areas of life where there is overwhelming agreement that we need to do better is in the world of banking and financial services. There is a lot of distrust of the big banks. Wall Street is unpopular with Main Street and criminals like Bernie Madoff give the financial advisory world a big fat black eye. When I look at the world through the political lens right now or through the lens of how most of America feels about the overall financial industry (painting with a very broad brush here), it’s easy to feel like there isn’t much positive to hang on to. But then I get up every morning and do what I do for a living, and my soul gets restored. Here’s why:

I’ve spent the last 3 weeks on the road and have spent only a sparse few nights in my own bed in the month of July. I’ve been at our client company sites and at our home office in California for some internal meetings on how we can do what we do better. While the travel and hotel beds had me a bit out of my workout rhythm, I’ve been able to meet dozens of individuals in one-on-one settings at their employer and talk about their lives.

I wasn’t there to sell them anything, manage their money, or offer them a loan. I was there simply to talk to them, hear their story and suggest a few ways that they can get closer to their goals. Some have been in great shape financially, others on the verge of disaster. But the thread that weaves them all together is that they were all in search of progress.

In the last several weeks, I’ve heard about engagements that are about to happen (before the future fiancée is in the loop!) and have recently happened, weddings, births, job changes, promotions, significant pay increases, and happy retirement decisions. I’ve also heard about massive credit card debt, huge student loan burdens, ugly divorces, and layoffs. It’s been a time of highs and lows emotionally.

Regardless of the issue, it appeared to me that each person I met was truly happy that their employer offered a financial wellness benefit. The feedback I’ve gotten via email has made me realize how much they valued a person who was there to help them and not sell them anything. It’s also made me realize that I am doing exactly what I was meant to do. The ability to help people, see them change their lives for the better and be there along the way to coach them as they hit speed bumps is about as close to perfection in a role that I’ll ever find.

I usually like to close out a blog post with a bit of a financial lesson, so I’ll give you this: At different times in our lives, we are going to need help. Knowing where to go for that help before it’s a crisis situation can be incredibly valuable.

Line up your experts and trusted advisors now. If you don’t have access to a financial wellness program at your employer, ask them to investigate one. If you don’t have someone that you can trust to help you reach your goals and coach you along the way without their interests coming before yours, ask your family, friends and colleagues if they do. You can also search for a financial advisor through the CFP(R) Board, and here are some questions you can ask any prospective planner. Most importantly, find someone who loves what they do for the right reasons.

What If You Won the Powerball Lottery?

January 15, 2016

As I type this, the Powerball lottery jackpot stands at $1.1 billion. Yes…that’s BILLION with a B: 1,000,000,000 – nine zeroes. As a CERTIFIED FINANCIAL PLANNER(TM) professional, I can attest to the fact that that’s a whole bunch of money! It’s fun to listen to the radio and hear what people would do with that kind of windfall. As with almost everything, there is both good and bad to what could be viewed by most people as an all good scenario. Continue reading “What If You Won the Powerball Lottery?”

Meet Brian Kelly, Money Coach

November 23, 2015

I recently had the chance to sit down with Brian Kelly, CFP®, an expert “money coach” and one of our more recent additions to the financial planner team and the Think Tank at Financial Finesse. I asked him a series of questions designed to find out more about how he became interested in joining our group of financial planning professionals who are committed to providing unbiased financial guidance to employees in the workforce. Here is a summary of our discussion with some unique insights about how an experienced financial planner uses an unbiased perspective to help others learn how to take control of their financial future: Continue reading “Meet Brian Kelly, Money Coach”

Why I Came To Financial Finesse

October 02, 2015

As a financial planner at Financial Finesse, I do a lot more than just financial planning. I write blog posts here, contribute to Forbes, participate in our Think Tank, am involved in recruiting and interviewing, and lots of other things. Our plates are always full. Continue reading “Why I Came To Financial Finesse”

Unbiased Financial Guidance: Q&A With Kelley Long

June 22, 2015

I consider it a privilege to be a part of such an amazing team here at Financial Finesse.It has now officially been four years since I made the decision to leave my financial planning practice to join the financial wellness movement and I couldn’t be happier with that decision. I’m also pretty stoked to always have a group of CERTIFIED FINANCIAL PLANNER™ professionals available to provide me with a second opinion on my own financial decisions or to just help me validate that I am on the right path with my personal financial life plan. Continue reading “Unbiased Financial Guidance: Q&A With Kelley Long”

Conflating and Misremembering

February 13, 2015

It’s been hard to not pay attention to what is going on in the news business lately.Jon Stewart is leaving the Daily Show. Brian Williams has stopped reporting the news and has become the news. Continue reading “Conflating and Misremembering”

A Time Tested Approach to Financial Advisors

February 10, 2015

Years ago, I had a brilliant WWII veteran as a client, one of the smartest women I had ever met. She told me that she was so glad that women were finally advisors because it took her almost a decade to find the right advisor when she started looking in the 1950s and I asked her why. Her answer was that her due diligence saved her from many “Bernie Maddoffs” over the years. Her process can be almost a textbook case for how to look for and work with an advisor: Continue reading “A Time Tested Approach to Financial Advisors”

The Nine Core Values of Financial Advice

January 05, 2015

What does the game of golf have in common with the financial planning profession? According to my colleague Paul Wannemacher, there are many parallels between the two. The financial planning process is all about aligning your money and wealth with your life goals and personal values. As Paul explores below, professional financial advisors have an important role in this process and your financial future should be treated with the highest levels of professionalism and integrity: Continue reading “The Nine Core Values of Financial Advice”

Do You Have The Right Life Insurance Coverage?

December 08, 2014

Yeah, I know what you’re probably thinking. This is not the most exciting topic to think about and other areas of the financial life planning process such as money management, paying off debt, and investing for retirement tend to get more of our attention. Still, it’s worth a quick review on why life insurance is necessary and who should buy it. In fact, this part of the discussion should come before getting to specific amounts that you should own. Continue reading “Do You Have The Right Life Insurance Coverage?”

How to Make the Financial Planning Process Work for You

March 10, 2014

I get the unique opportunity to speak with employees taking part in our Ask-A-Planner consultation service offered through their employer as a financial wellness benefit. Every session is unique and last week was no exception. One moment I was meeting with a recent college grad feeling overwhelmed with student loan debt and a few minutes later, I was talking with a parent trying to save for their kid’s college without overlooking their own retirement savings. A conversation about establishing an income plan for retirement quickly transitioned to an emotional discussion about the death of a loved one and concerns about protecting one’s family through a well-crafted estate plan. Continue reading “How to Make the Financial Planning Process Work for You”

Being Married to the “Money Doc”

December 16, 2013

This week, I will begin a series of blog posts about money and relationships. My wife, Heather (and the real brains of our family), had the idea to start off this series by exposing some lessons that we have learned along the way. Heather is self-employed full-time as an occupational therapist and specializes in working with incredible children who have developmental challenges. Despite occasionally minimizing the role she plays in managing our household finances, the reality is that Heather is also a co-financial planner in our household. Continue reading “Being Married to the “Money Doc””

How I Became a Financial Educator

October 10, 2013

For the past week, each of us has been writing about our careers as financial educators and how we got here. My interest in personal finance started at a really young age when my father, who was a stockbroker at the time, gave me the “Dean Witter Guide to Personal Investing” in the 4^th grade and I actually read it. (Linda, you’re not the only finance geek.) I can’t say that I understood all of it but I got the importance of saving as much of my measly allowance as I could and starting the magic of compound interest as early as possible. Continue reading “How I Became a Financial Educator”

My Second Career as a Financial Educator

October 09, 2013

If you would have told me in 1994 that I could make a living helping people with their finances without the pressure to sell financial products, I would have thought you were joking. Back then, there was a certain esteem associated with financial professionals, and as the stock market began to rise to records levels, the idea of NOT being an investment sales professional seemed silly. So attractive was the prospect of being successful as a financial advisor that I left my first job as a 401(k) enroller after six years to pursue a life as a personal financial advisor. Continue reading “My Second Career as a Financial Educator”

What’s SUP With Your Budget?

September 09, 2013

A few months ago, I wrote about my own retirement planning journey and a list of things that I plan to do along the way. The ultimate purpose was to find some balance between living in the moment and planning for the future. I’ve made some progress over the past few months and thanks to a friend who lives on a tidal creek, I was able to check a long awaited paddle boarding trip off my list. Continue reading “What’s SUP With Your Budget?”

Introducing Our Newest Planner: Doug Spencer

August 19, 2013

When it comes to choosing a financial advisor to help get you closer to your financial goals, it’s important to ask some tough questions. We have a pretty rigorous hiring process here at Financial Finesse and only about 2% of potential candidates make it on board our team of unbiased financial educators. Recently, I had the chance to sit down with Doug Spencer, CFP®, one of the resident financial planners and a recent addition to the Think Tank at Financial Finesse. I asked him a series of questions trying to pick his brain and find out more about how he became interested in joining a growing group of financial planning professionals who are committed to providing unbiased financial guidance to employees in the workforce. Here is a summary of our discussion with some important resources included for anyone seeking an unbiased perspective on how to take control of their financial future: Continue reading “Introducing Our Newest Planner: Doug Spencer”

Perception vs. Reality

August 02, 2013

I read this article about how we are working fewer hours now than prior generations and we have more “leisure time” than prior generations too. At first, I was thinking that the article was absolutely wrong. I know that I spend way more than the 33.7 average hours per week in this report. Most of my friends do as well. With our smartphones receiving emails and text messages from coworkers, along with the other technological tethers that many of us live with, it seems like we work all the time. Continue reading “Perception vs. Reality”

How to Get Out of the Divorce Sinkhole

March 15, 2013

Having spent many afternoons on a golf course and being of very limited ability in that sport, I have had had my ball land in some very interesting places. None of them would be as interesting, though, as the golfer in this story. His ball, along with his body, ended up in an 18-foot deep sinkhole. And, he got a separated shoulder in the fall. I’ve had bad days on the golf course, but never THAT bad! The good news is that he was pulled from the hole and his shoulder will heal very quickly! Continue reading “How to Get Out of the Divorce Sinkhole”