A: Getting back on track

Client A was feeling anxious about making a series of unproductive financial choices and wanted to figure out how to get back on track.

The problem: Even though he made a good income and had good benefits, he was not tracking his income or expenses in any regular way or being effective in managing his investments. He had not made the kind of financial progress that he would have liked in the past five years, and wanted to know how to feel more proactive and focused about his money.

Our approach: We discussed what his history with money had been and discussed what was getting in his way of being a good steward of his finances. We created a clear inventory of assets and liabilities, as well as income and expenses and discovered that his expenses far exceeded his high income on a monthly and annual basis. From there, we identified places where he could cut back and what strategies he could implement going forward that would help him to not only stay within his budget, but grow his net worth in the next 2 to 5 years.

B: Path to retirement

Couple B wanted to know whether they were on the right path for retiring in five years.

The problem: Even though couple B made a good income, and tracked their income and expenses diligently, they worked very hard, didn’t have much time for themselves - for exercising, or playing. They came to SFP wanting to know whether they were on the right path for retiring in five years, so that they could “start enjoying their life” then.

Our approach: We performed a shortfall risk analysis to determine whether their current financial path was sustainable and suggested a low probability for running out of money at the end of their life. We determined that they were on the right path financially. Their savings was sufficient, but discovered that the income assumptions were critical in this case. We also discussed what their financial and life goals were. We discussed whether this mentality of putting things off until retirement was a healthy way of living or relating to their money, or whether they had other options. Through this process of working with SFP, they realized that they could start doing things today that they enjoyed and not wait until retirement to travel, exercise, and play.

C: Clarity about finances

Client C was having difficulty being clear about her finances.

The problem: Client C had trouble figuring out what her income and expenses were. The expenses seemed to fluctuate all over the place from month to month. She and her spouse had no system for staying within any kind of budget. On top of this, they could not communicate effectively with one another about money. Each time they attempted to have a conversation about money, it would escalate to blame and anger. Neither were they effective in communicating with their bookkeeper to get the information that they needed.

Our approach: In the process of figuring out their income and expenses over the past two years, we were confronted with some very emotional moments, in which feelings of inadequacy, blame and anger came up. We could see, through the pattern of behavior that emerged, that the problem around money had deeper roots that stemmed from an ineffectual communication style. By addressing this, not only was Client C able to become more clear about her finances, but she was able to bring these new found skills to her life, and it resulted in an improved relationship with her spouse, bookkeeper and children.

D: Housing decision

Client D wanted to know whether to sell her current house and buy a new one.

The problem: The wife wanted to move and the husband wanted to stay. She was convinced that they needed to change neighborhoods for the sake of the children and better schools. He liked the neighborhood and thought the schools were fine. They also couldn’t figure out how a potential house change would impact them financially. It seemed like they would save money on the mortgage, but they also knew they would have to do some upgrades and remodeling if they bought a new house. They did not know how to balance all these various factors to figure out whether they would be better off making a move.

Our approach: We outlined all the costs of the current house, made some assumptions about the price increase, maintenance costs, rental savings and tax savings from living in the current house going forward. Then we compared that to the costs and benefits of the potential new house, and figured out a weigh to compare the upfront downpayment and remodeling costs and lower mortgage payments against the costs and benefits of the current house. From there, we discussed some emotional and psychological issues around changing homes. Ultimately, the client decided it would make sense to move.

E: Managing investments

Client E no longer wanted to work with a stock broker, but needed some guidance and teaching to help her learn how to manage her investments on her own.

The problem: Client E had worked with a stock broker for several years. Her stock broker managed to get her to buy a variable annuity and various load funds. She didn’t feel like the service was very good, or that her returns were worth the fees, and was frustrated that making a change in her investments would cost her surrender fees and various exit fees. She started to feel more taken-advantage of over time, and wanted to find a better way. She felt the time was right to make a move, but did not know where to turn for help. Her husband and her both were not very knowledgeable about investments or economics and did not feel very confident going out on their own without some support and guidance.

Our approach: First we reviewed her existing investments. We calculated the implicit fees she was paying and also compared the returns of her existing investments to average market returns over the past three years. Because the performance was sub par, we then needed to determine whether leaving these investments would payoff going forward. We calculated that even factoring in the surrender charges and exit fees, it would pay to leave these investments and reposition them in some diversified, no-load, index funds going forward. Next we engaged in a three month long process of educating them about the general world of finance and investments so that they could leave this process feeling confident and empowered to make decisions on their own. We outlined a strategy for transitioning into some new funds and they were able to implement this new strategy in a 4 month time frame. They are now feeling like good stewards of their money and confident that they will meet their financial goals over time.