This is a real phone call.
Caller: Can you help develop residual income? Make the right investments etc.?
Me: Sure, but first you need to develop a plan so we will know what steps to take to reach your long term financial goals.
Caller: Well, I wasn’t sure if I have enough money to work with your firm.
Me: Well if you look at our web site, you’ll see we offer a Fiscal Checkup™ to get you started in the right direction at a minimal cost. We want to help you grow into a very good client.
Caller: I’m not sure. What kinds of investments can I make?
Me: Look, investments are neither good nor bad. What matters is that they help you reach your long term goals. You need to know where you’re going before we can talk about investments. How old are you?
Caller: I’m 33.
Me: I guess you have a job?
Caller: Yes, I work at xxxxx
Me: Do you have a 401k?
Caller: Yes
Me: Have you maxed out your contributions to your 401k plan?
Caller: No.
Me: Well at least you are contributing enough to get all the matching funds, right?
Caller: No.
Me: Well that’s someplace to start.
Caller: Look I know I should be contributing more to my 401k to capture that free money.
Me: And yet you are not doing it.
Caller: Yeah
Me: You have a wife and two kids. Do you have life insurance?
Caller: Yeah, I get all that through work.
Me: Do you know if it’s enough?
Caller: I have $300,000 of protection.
Me: Well that will replace about $15,000 of income. Do you make more than $15,000 a year?
Caller: Oh yes! I got enough to pay off the mortgage.
Me: Wow, two kids, college, that is not enough. How about your 401k plan? How did you choose those investments?
Caller: Just a guess.
Me: You know college is expensive. How do you plan to pay for that?
Caller: I guess I’ll just have to tell the kids they are on their own there.
Okay, you should be able to see where this is going. Most of the people I work with do not have a plan when they begin working with me. They call thinking this is about investments. It is not! It is about achieving the important financial goals in your life. It is about identifying your needs, prioritizing those needs, and developing a strategy to meet those needs. Investing comes in at the very end.
Many younger people need financial coaching to help them pay off debts, develop a budget, learn to save, understand their employee benefits, and protect their family. They really don’t need “investments”.
If you see yourself here, I encourage you to seek help. Sure there are financial firms that don’t care about planning and will be happy to sell you an investment and there are firms that have high minimums to open an account, but there are also firms that believe in growing their own great clients who will be happy to help you get started the right way. Find one that will help you!
