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If I could boil the objective down of a one hundred page, three thousand dollar financial plan it would be this: Use the entirety of one’s static pool of resources in a tax efficient and optimal manner, the effect being that the client has a lifestyle sustaining income beyond their life expectancy. This would take into account factors like markets, inflation, survivor-ship, withdraw rates, taxes, estate and charitable planning, and the list goes on.

Our firm does not sell three thousand dollar financial plans, because this sort of planning is much easier than people make it sound. Perhaps making it sound esoteric and complicated justifies the costs? Here are a few simple steps that anyone can take that can lead you in the right direction without having to shell out mega dollars for a gold leaf, leather bound financial plan/book that goes on your shelf and then later has to have the dust blown off when it gets pulled down.

  • Get your Will done by a qualified Texas attorney. Half of the people that I meet do not have a Will. Don’t use just any bozo attorney; get it done by a Board Certified Estate Planning Attorney. Trust me on that!

  • Calculate your income needs at retirement.

  • Make sure that you have your family budget/spending under control.

  • Establish a cash reserve account close to home.

  • Carry the right and adequate amount of insurance coverages.

  • Evaluate how much income you will be able to count on from Social Security, pensions, rental property, part-time work, or any other reliable source.

  • Determine if you have a shortfall that must be made up from your savings. For example, if you have an $80K year income need and you have $50K of income you can count on from Social Security and pensions, then you’re going to need $30K per year from your savings/portfolio.

  • Make sure that you do not withdrawal more than 4% of your portfolio. Statistics show if you draw down more than 4% you have a likelihood of running out of money before your life expectancy.

  • Use NQFs (Non-Qualified Funds) for income first and allow your QRPs (Qualified Retirement Plans) to grow tax deferred.

  • Meet with a qualified CPA, who is a tax planner, to run projections and make sure you are not missing any tax threshold opportunities that could lower your bracket while keeping your plan in place.

  • Observe the rule of 100 regarding risk versus safety.

  • Build a risk adjusted portfolio of asset categories that have broad and global diversification, negative correlation, and rebalance to target regularly.

  • Avoid stock picking, market timing and track record investing. This can be tough as these flawed ideas are the basic tenants of most mutual funds.

  • Control your investment costs and maintain sufficient liquidity.

  • Source as much income as possible from guaranteed sources, but make sure you have adequate exposure to equities to be in a position to fight off inflation.

  • Create a model to illustrate to yourself the projections/effects of your plan. Find credible sources to validate your assumptions used in your model for inflation, portfolio growth, etc.

  • Develop a plan to monitor your progress.

  • Find a trusted person to provide you with oversight and accountability.

You see, it really is simple. Is it not? Don’t confuse simple with easy, after all losing weight is simple (eat less move more), but many people struggle with losing weight. Someone can accomplish planning like this themselves, but many people prefer to work with a trusted guide. I know that there are some people who cut their own hair and others who would defend themselves if wrongly accused in a murder case, but don’t let that be you. You’re smarter than that!

This material is for general information and education purposes only.  Information is based on data gathered from what we believe are reliable sources.  It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions.  It should also not be construed as advice meeting the particular investment needs of nay investor.

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