Your Financial Wellness Check-Up

Plan With The Tax Man

Just like an annual checkup is important for maintaining good health, performing regular financial checkups is an essential part of planning for a healthy and successful retirement. By regularly assessing your budget, goals, and progress, you can make informed decisions to keep your finances on track. Although financial wellness is going to look different for everyone, we’ll share some areas you should be paying attention to in today’s episode.

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Transcript:

Marc Killian:

Just like an annual checkup is important for maintaining good health, performing regular financial checkups is essential part of the planning process for successful retirement health. So on this podcast of Plan With the Tax Man, Tony and I are going to talk about your financial wellness checkup.

Hey everybody, welcome into the podcast this week as Tony Mauro and myself talk about getting our finances, getting a little checkup, getting a little tuneup if you will, some things to think about to make sure that stuff is working the way it should because financial wellness is going to look different for everybody. We want to highlight a few areas where maybe we all should pay attention to various things on this week's episode.

So what's going on, Tony? How you doing, my friend?

Tony Mauro:

I'm doing well. Spring is here, and so I can't wait to talk about this because everybody wants to be outside here pretty quick. And I think besides having physical checkups, depending on where you're at, I think the financial checkup is always well in order.

Marc Killian:

Oh, yeah.

Tony Mauro:

So it's a good topic.

Marc Killian:

Definitely. I mean, you think about reviews that you do with your advisors or you do with your clients, it's kind of the same kind of thing. But we'll kind of tie it into the medical analogy just for fun as well.

But first and foremost, let's say you're trying to lose weight or you're trying to get healthy. So many of us are. You want to review your goals, so you want to discuss the importance of whatever your retirement goals are with your financial professional so that you guys can be on the same page.

Tony Mauro:

Exactly. And really every piece of this whole presentation we're going to talk about today is in essence, when we dig deep into it, it's the financial plan itself. We're only going to touch on a few topics and lightly, but one of the things we do with every client that wants to be a client of ours is we go through a plan with them.

Now a lot of them say, "Well, I don't really want that. I just need this." And I tell them, "You don't go to your doctor and just say, 'Well, I just need this, or this ailment.' I mean, they check you out. They ask you questions. They want to know what's wrong with you before they can diagnose something." And that's exactly what we're trying to do.

But the very first thing is trying to figure out what do you want? What are your goals? Because that's where we have to start and then see where everything else fits. Because without that, the whole thing really is useless.

So we start there in our plan, and we're going to go through some other steps here too, but it's so important because we go back to that at every meeting and visit that because goals change. And so we have to adjust our plan.

Marc Killian:

Yeah. So I mean, you got the outline if you will, which is the retirement goals and what you want to do and so on and so forth. But then you kind of dive into a little bit like you're going to check those vital signs, if you will, which typically is going to be the income and the outgoing, what's coming in, what's going out.

Tony Mauro:

Right. So once you know the goals, then we have to start working on the how do we get there? And much of it is dependent upon how much you're bringing in, how much you're spending. Maybe you have trouble spending maybe a little too much. We have to rein that in a little bit. Otherwise, these goals are never going to be met.

And so we work with them on trying to get them to track their expenses and their income and making sure that they have a little bit of money left at the end of each month. Living below their means is really what it comes down to because it doesn't matter how much you make if you're spending $1 more, then you're really not building any wealth. So that's second.

Marc Killian:

Right, yeah. Because you've got to make sure that you're keeping track of that. I know nobody likes the B word, but again, you've got to have an understanding of what's coming in and what's going out just so that you can make sure that you're staying within the grounds of the goals that you're trying to accomplish. You don't want to overspend, but you also don't want to not enjoy yourself and take advantage of the stuff that you've done. And other little things. I mean, I don't know, is it worthwhile to check your credit score often, Tony, or is there other little things to do in this kind of wellness checkup area?

Tony Mauro:

I would check your credit score once a year-ish I mean, at minimum. Some people I think maybe get a little too overboard with that, but I tend to tell them, "Check your credit score once a year." I tell them to monitor that.

I also tell them to pull when we get in to start talking about financial planning, is to pull their Social Security statement from the administration once a year. It's free. May take a look at it, see what your projected benefit is, and making sure that all your money or all your earnings have been credited and things like that. Just little things that should be on the calendar once a year when we're going through this exercise that you do.

Marc Killian:

Yeah, for sure.

The next piece here, so you got to build some financial immunity. So we're talking to keeping this health analogy, got to build up your tolerance, your immunity system, your immune system, if you will. And this is probably going to be in the form of having some liquidity, yeah?

Tony Mauro:

It is. And one of the things in the plans that we designed, and we're pretty adamant about this, we're pretty easy going on most things, but I'm pretty adamant that if you're going to work with us, we have to at least have you start what they call an emergency fund, we've talked about it before, to make sure that you are ready for the unexpected.

I mean, it could be an emergency. It could be your car completely dies, whatever that emergency is. You lose your job is the biggest one. And then making sure that you're ... even if we only are doing $50 a month, putting something into that emergency fund until we get it to a certain level. Because if you don't, it's a recipe for disaster. It derails everything we're talking about. If you've got all of a sudden shift and allow one minor mishap in life, ruin everything. And so that's what we want to do there.

Marc Killian:

Well, so we're talking determining the appropriate size of the emergency fund. Maybe automate some savings to help get you there. That could be another way to do it. And then of course, just to your point, replenish it as take stuff out as situations come up that you access it. And taking a cruise at the last minute, pulling it from the emergency fund is not really an emergency. That's stuff you should-

Tony Mauro:

That's not an emergency.

Marc Killian:

That's stuff you should be planning for, right?

Tony Mauro:

Yeah, you should have a vacation fund for that.

Marc Killian:

Right, right, in fact.

Tony Mauro:

So we get into some of these funds and different things so that you can start allocating money for things that you want to do. Absolutely.

Marc Killian:

Okay. Well, let's give our portfolio a good screening here, doc, if you will, so make sure that the investments are doing what they're supposed to be doing.

Tony Mauro:

They are. We take people through. We ask them to bring us everything that they have in terms of statements. Let's see where you're at now and see how you're invested because we've got to make sure after we kind of know a little bit about your risk tolerance, about how you're diversified and your goals is what you're doing now, what you have, is it going to get you there or not? Or maybe you just took something off the TV and it sounded good and maybe it's too aggressive for you or something like that.

This is probably where the rubber meets the road is. Obviously we're trying to get you to save some money, but then we have to make it earn as much as you're comfortable with. And that's the investment strategy.

Marc Killian:

Exactly. You got to make sure that that strategy is going to fit the risk level that you're comfortable with and all those pieces that we've talked about a bunch of times. But if you're talking about just keeping this and this fun little analogy here, you got to have that screening, that review of the portfolio to make sure that you're adjusting it along the way.

And then you might want to take a look at diagnosing the debt that you've got clearly. So if we're thinking about debt, obviously there's these schools of thought of don't have any, it's okay to have some, blah, blah, blah, blah, blah. Right?

Tony Mauro:

It is. And debt is the biggest thing that stands in people's way because most people have what I consider too much. I'm kind of in the camp of let's try to work towards eliminating all your debt eventually, not living real skinny to do it and not having any fun, but let's work that into the plan to make sure that we can get the highest debt paid down. Then other things and maybe the car and then maybe even the home. Because once you do that and you're debt free, I mean you could really free up a lot of cash flow. Hopefully you can either save or have some fun with along the way. That's a big issue in the plan.

Marc Killian:

Yeah, I mean, are you making progress and getting those debts paid off or are you not? Are you kind of trying to avoid some things? Have you explored other consolidation strategies if that's on the docket? Have you talked with an advisor and said, "Okay, here's what I got. Can you help me? Or if not, point me in the direction of someone that maybe can help me." Because obviously debt can be a huge piece to this whole equation. So make sure that you're absolutely diagnosing that for sure.

Preventative measures. So now we're talking about getting a little more proactive. If we're kind of moving through this as stages, you got to discuss the proactive, you got to discuss the future stuff. It's not all just about what do I have today and what am I doing? It's also what's this going to look like through the next number of years, 10, 15, 20, and the various pieces that come with that.

Tony Mauro:

Yeah. And some of the most important pieces of that looking towards the future, and you can kind of guess what these are. It's the rising cost of healthcare. Where will taxes be in 15 years? I mean, right now we don't seem to be paying our bills as a nation. Taxes I would say could be up. And then of course you've got the infamous we're all living a lot longer and you potentially could need some care toward the end of life, long-term care, assisted living, things like that.

So are you factoring these into the overall plan and just as contingencies, especially healthcare and long-term care? I mean, you can say what you want about taxes. I always say that I think they're going up and somehow I'm wrong completely because they keep going down, but I don't know how they can keep doing this. But I guess what we're trying to do in this stage of the plan for us is we're planning for the worst. And then if that doesn't happen, then we're well protected in our plan.

Marc Killian:

Right. I mean, because you've got to have the conversations about potentially healthcare expenses in the future. They're obviously going to go up. What's the plan and the long-term financial impacts of that? And clearly obviously Tony, what you do with what taxes. I mean, it's the end of April here, so hopefully you're all done with the tax season. You can have some stragglers here and there, but tax efficiency, man, I mean that can really make or break it.

Tony Mauro:

It can. Tax efficiency is backing up to the investment strategy really is where we fit in, trying to make sure that your portfolio is as tax-efficient as possible. A lot of people don't really take that into account and they think, "Ah, that's not really real." It really is real once you start showing people what the tax effect on some things are.

Marc Killian:

Yeah, I mean again, taxes are going to make or break it. So make sure that you're definitely having that as part of the conversation. And reach out to Tony, of course, if you need some help at yourplanningpros.com.

Tony, insurance coverage I guess could be another place to talk about this. There's lots of schools of thought. Do you need it? Is it adequate for you? But I mean, insurance products in general have changed, so there could be some useful things here. So certainly doing a review of this is not a bad idea.

Tony Mauro:

Definitely not a bad idea. No. And again, part of the plan that we do, a lot of people don't like to talk about insurance because they think you're going to talk to them into maybe a lot of life insurance or something like that. But I think it goes a lot deeper than that. It's the health. It's your auto and home. Of course, life fits in there. Liability insurance may be an umbrella, certainly disability insurance, the long-term care aspect of it, all that fits into the plan because boy, if you're not adequately insured, something bad happens, that could destroy you completely.

Marc Killian:

Do you find that people are more interested in talking about it as an option than they used to be because they have made so many changes? I mean, there's a lot of ways where insurance could play a really pivotal role or an insurance product, I suppose I should say, of some kind in your overall strategy.

Tony Mauro:

I think so. If we're keeping it to the investment/retirement strategy, it definitely can. I still like some of the whole life type of policies are issued that build up some cash value. Yes, they have gotten a bad name because I believe been sold where they weren't needed. But in certain instances I think that's very good.

I think annuities still have a place in certain situations. I mean, it's technically an insurance project, but I consider it more of an investment product. But things like that definitely could help in certain situations.

You hear on TV, of course with the insurance, if you're talking to like the whole old, I don't know who coined that. Was that ... I can't think of the company.

Marc Killian:

Prudential?

Tony Mauro:

Who was buy term and invest the difference, that was that ...

Marc Killian:

Oh yeah.

Tony Mauro:

Way back when.

Marc Killian:

Yeah, I'm not sure who that was, buy term, invest the rest or something like that.

Tony Mauro:

Yeah, something like that, which that has its place too. But I do think cash value products do have, depending on, because it's a permanent type of policy, a place in people's plan if it fits.

Marc Killian:

Yeah, if it fits. That's the key word right there. So again, and being open. We talked on a prior podcast about just being open to the fact, especially if you're having retirement stress, open to suggestions or ideas or things because sometimes people will definitely walk in and say, "I don't want to talk about X, Y, or Z" when X, Y, or Z might be the thing that actually helps you get accomplish what you're after. So make sure you go through a plan and then also follow up with that plan.

We'll kind of finish it there. Just like any wellness check, you want to kind of check back in, whether you're losing weight or dieting or whatever, you want to kind of keep track of this stuff and set some goals and then see how you're tracking, see how you're doing.

Tony Mauro:

Yeah, you're doing, yeah. And with today's technology in the planning process, all of this, a client's plan is basically out there for them 24/7. In other words, they see what I see. And as their investment products change, that's reflected, but their overall goals and plan are out there. And so it isn't like it's a surprise when we visit. They have an idea of what we're going to talk about and what we're going to go over, and then we make changes and then it's instantly updated.

So I think that that is one of really the cornerstones of why you're paying an advisor is really what we talked about. Obviously much more in depth when you're in an advisory meeting, but this is what you want out of the relationship is right here.

Marc Killian:

Yeah, for sure. So have yourself a financial wellness plan and kind of go through and find that relationship as Tony was just kind of finishing that up. The whole point is to find someone that resonates with you.

That's why it's important to come in and kind of get started with that complementary review that advisors offer, Tony certainly does the same thing, to see if it's the right fit all the way around. There's usually no cost or obligation for these things, and it's just a good chance to see, hey, does your philosophy match my philosophy? Can we work together? Because you've got to be able to hear the advice and be able to work that plan, but at the same time, the advisor's got to know that you're receptive to that as well. Otherwise, you guys are just banging your head against the wall.

So you want to make sure that you've got a good strategy with a good person that works well for you and a good team, and that's what Tony and his team strive to do. So if you need some help, reach out to him.

Don't forget to subscribe to the podcast on Apple or Google or YouTube or ... I say Google, but it's YouTube or Spotify or whatever. You can find all the information at yourplanningpros.com. That's yourplanningpros.com. Tony is a CPA, a CFP, and an EA with 30 plus years of experience in the industry. So a great resource for you to reach out to at Tax Doctor Inc, again at Tax Doctor Inc, but the website is yourplanningpros.com.

Tony, my friend, thanks for hanging out and I always appreciate your time and I'm glad that tax season is behind you. Looking forward to talking to you in May.

Tony Mauro:

All right, sounds good. Take care. Until next time.

Marc Killian:

We'll see you next time right here on Plan With the Tax Man.

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