Our Money: What Successful Couples Do

You would not expect a business to succeed unless the owners established short and long-term goals, and took the time to track expenses and income. When it comes to couples and money, the same expectations hold true. Setting goals and tracking financials can make all the difference to a lifetime of financial success.

But as you know, not all couples experience financial success. What stands in the way? First, couples are often unsure how to collaborate with one another to make good financial decisions. Second, money is personal and each partner brings his or her own values, desires, habits, and baggage from the past into the conversation. However, as you are about to see with the story of Eva and Brian, the past does not have to present an obstacle course to financial bliss within relationships.

Eva, aged forty-two, works for a local university and was never married. Brian, aged fifty, is a partner at a large law firm and has two children from his first marriage. You can imagine how different their incomes, savings, and lifestyle choices were before they met. They decided to contact Entrust due to their uncertainty about how to fairly join their diverse finances and investments, a goal they wished to achieve prior to their upcoming marriage.

While there is no magic formula because financial success in marriage is a journey, not an end-game, the following steps helped Eva and Brian to get on track:

  1. Put all your cards on the table. Before you marry, be honest about where you are today financially––review your current situation, including your income, expenses, debt, savings, and financial goals. Not surprisingly, this type of truth party takes courage. In our illustration, Eva was ashamed that she still had some student loan debt to re-pay; Brian was embarrassed that his investments had been in cash since 2008.
  2. Determine your income and expenses. With a clear understanding of the pieces of their financial puzzle, Eva and Brian were then able to collaborate regarding expenses. They now use mint.com to make it easy to monitor their cash-flow, and report how reassuring it feels to know how much money comes in, how much goes out, and to have a firm grasp on where their money is spent.
  3. Create and work toward precise goals, and specify timelines for achieving them. Brian and Eva are excited to be aiming toward achieving retirement goals as well as planning to provide for an elderly parent and special needs child. They conduct monthly financial check-ups and find creative ways to celebrate when their progress reports are right on track.

Today, Eva and Brian feel a revitalized sense of financial security because they know that they are on track–collaborating and sharing responsibility for achieving everything they need for a lifetime of financial success. If you need help fine-tuning the financial bliss in your relationship, contact us right now: info@entrustfinancial.com or 610-687-3515.

Recipe for Success

Middle Aged WomanWhen we hear the word “recipe,” most of us think of food. And now that the summer season is here, foods with fresh ingredients are abundant–a welcome and nutritious change. But we can also apply the friendly term “recipe” to our portfolio asset allocation, recognizing that our portfolio ingredients are likely to be stocks, bonds and real estate. Fortunately, when we get the proportions right, these investment ingredients may deliver welcome results and keep us financially healthy.

Sue’s experience provides a perfect illustration. Sue is a meticulous and successful entrepreneur with a strong commitment to preserving what she has accumulated. Before we met, she had not paid much attention to the ingredients in her portfolio. She assumed that her long-time advisor, whom she inherited ten years ago along with the money from her father, was doing just that for her. Furthermore, because she recognized the names of the companies in her portfolio as “good companies,” she figured she did not have to worry about a loss in value.

However, Sue decided to talk to a different advisor about her most important financial goals, especially her primary goal of “making work optional” for herself and for her partner. Therefore, she scheduled a meeting with our Entrust team: 1) to discuss her financial goals, and 2) for a second opinion about whether her current portfolio of investments was on track to help her achieve them.

None too soon! Analysis of her investments revealed that over the years, Sue’s portfolio had become concentrated in just a few stocks. Not only did this concentration increase her risk, but the fact that the stock positions she held were all in just one sector of the market also resulted in greater risk than she had intended. Sue now realized that if she continued to hold concentrated positions going forward, her portfolio would have little chance to deliver the consistent and reliable appreciation she needed to achieve her primary goal, that of making work optional.

As an alternative, we introduced Sue to the risk-management strategy of allocating her money across a variety of ingredients (assets), such as stocks, bonds and real estate. She agreed to the diversification recipe we presented and her decision was soon validated. Not long after the implementation of her new portfolio asset allocation was completed, one of her former technology stocks plummeted in value. She is thrilled to have escaped the volatility of single-sector investing before the worst occurred!

Selection of the right portfolio ingredients can serve as a recipe for success and result in the achievement of investors’ most important goals. Contact us today for a second opinion about the health of the asset allocation recipe for your portfolio of investments.

Financial Security Throughout Retirement

Couple saving for retirementWe spend most of our lives working and saving so that at some point we will have the financial freedom to step away from the grind and do something else.  Do you know if you are on track for financial security throughout retirement?

Just posing this question reminds me of our clients Brent and Wanda. When we began working together in 2005, they were about forty years old. As small business owners, their demanding schedules prompted them to aspire to retire early–preferably before turning sixty years of age. Their rationale was that since they devoted almost every waking hour to their business, they wanted the option to step away sooner rather than later, and start enjoying the money they were accumulating from all their effort.

When we met initially, Brent and Wanda were worried. They could easily identify their primary goal: retire, and when they wanted to reach it: before the age of sixty, but they had no idea what steps to take to accomplish it. Preparing financially to have enough income during retirement felt like an insurmountable task to them.

To fulfill their goal within the timelines they preferred, we began by creating a retirement game plan with three major steps:

  1. Identify their “number.”
  2. Implement a savings plan to attain their number.
  3. Design an investment portfolio.

Having agreed upon the strategic steps to take, it was time to dig into the details for each step. Read on!

Step 1: Identify their “number.” Brent and Wanda were diligent savers but had no idea how much to save to fully fund their retirement; in other words, their number. We began by establishing where they were financially, and followed that analysis by making projections for future income needs. To replace the income for their current style of living, aiming for financial security throughout retirement, we discovered that a minimum of $4.5 million would need to be accumulated in their retirement accounts.

Step 2: Implement a savings plan to attain their number. Once we identified their number, $4.5 million, it was time to calculate how much Brent and Wanda would need to save annually and in what type(s) of accounts. For instance, it is typical to maximize tax-deferred accounts for annual retirement savings. Business owners have a variety of such accounts, or retirement plans, to choose from. We recommended that this couple utilize a 401k and Profit Sharing Plan because these plans permit maximum savings for the future, in part by reducing current income tax liabilities.

Step 3: Design an investment portfolio. The right portfolio of investments makes all the difference in whether investors achieve their retirement portfolio goals, and achieve them on time! Disciplined asset allocation has been proven time and again to be the effective choice for achieving the results required to attain those all-important retirement numbers.

Follow the fantastic and successful example of Brent and Wanda. Contact us today to confirm that you are on track for financial security throughout retirement.