What to Do Before You’re Gone

So recently I created a little template that I like to call the “Financial Contentment Letter”. And it is really a discussion starter and thought provoker for clients to start to take action on their estate planning.

Podcast Details:

Podcast Title:  What to Do Before You’re Gone
Podcast Series: Financial Literacy Boot Camp
(Video and illustrations available on our YouTube channel here.)

 

So recently I created a little template that I like to call the “Financial Contentment Letter“.  And it is really a discussion starter and thought provoker for clients to start to take action on their estate planning.  This is a good document to go over before you create a will, medical & health care directives, or power of attorney because it helps you think through the things necessary in all those documents.

So I wanted to take the time during this show just to walk through the rationale behind my creation of this document and some of the experiences I’ve had that point to its importance.

A document like this would have been really helpful when my wife’s father passed suddenly a week after I graduated college. One of the last things your family is going to want to do is endure during the grieving process is trying to figure out what bills need to be paid and where the bank accounts are and what the passwords are.  These are simple things that family “CFOs” take for granted.

Since this document is designed to be a conversation starter and thought provoker, it’s going to make you think of things like:

  • Does my spouse know the passwords to all the financial accounts?
  • Is there a safe or lockbox that my spouse doesn’t know about?
  • What are all the financial institutions and life insurance companies where we have accounts?
  • What are the phone numbers and/or the names of the representatives of those companies (e.g. agents, bankers, etc.)?
  • Who are the beneficiaries on the account(s) we have?  Anyone that shouldn’t be on there?
  • Who would handle my estate?  Are there any individuals I should have a conversation with about this?  (e.g. adult children, trusted friend)

#financialplanning #taxstrategy #investmentstrategy #retirement #educationalplanning #estatestrategy #taxsavings #finlit #finance #money #financialadvisor #financialtips #financialadvice

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About Me:
Dominique Henderson, CFP® is founder of DJH Capital Management, LLC., a fee-only, registered investment advisory firm specializing in comprehensive financial planning and wealth management.

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Decoding Our Money Messages – Part 2

What are the “untruths” we tell ourselves about money? This episode explores how to decode those money messages.

Podcast Details:

Podcast Title:  Decoding Our Money Messages – Part 2

Podcast Series: The Maven’s Keys to Financial Contentment

The Maven’s Keys to Financial Contentment is my idea that true financial contentment can be found when an overlap of money and beliefs occur.  Many people ask the question of how to be “financially content” and this is a discussion to uncover those answers.

(CHECK OUT OUR YOUTUBE CHANNEL FOR THE VIDEO VERSION)

Link to Show Episode

George Kinder from 7 Stages of Money Maturity – (2:30)

  • The Seven Stages of Money Maturity: Understanding the Spirit and Value of Money in Your LifeKinder
  • page 5…”Money Maturity helps resolve the troubling emotional conflicts around money that never seem to go away.  For many of us, money represents anything but peace.  If you answer yes to any of these questions…”

 

Addressing our subconscious message about money… (4:20)

  • Do you have a “Linus complex”?
  • There are only two natural, “unlearned fears”, so we have to realize what we are telling ourselves that is untrue in order to decode our money message.
    • What messages are you playing?  “I will never have enough”, “I need to hoard my money”

Practical tips to “reprogram” our money messages… (9:30)

  • Replace your “untruth” with a passion/purpose/dream
  • Don’t be money-motivated, be purpose-motivated
#finlit
#finance
#financialadvisor
#moneymindset
#behavioralfinance
#behavioraleconomics

Helpful Links:

Developing Our Money Mindsets Episode 8, Episode 9, Episode 10

About Me:
Dominique Henderson, CFP® is founder of DJH Capital Management, LLC., a fee-only, registered investment advisory firm specializing in comprehensive financial planning and wealth management.

#FinancialLiteracyBootCamp

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Strategies to Maximize Executive Compensation

In the parable of the two business executives, I reveal 3 strategies to maximize wealth with employer benefits.

Podcast Details:

Podcast Title:  Strategies to Maximize Executive Compensation
Podcast Series: Financial Literacy Boot Camp
(Video and illustrations available on our YouTube channel here.)

Powerpoint Slides

In my previous positions and just through a lot of reading on executive compensation, we’ve developed an expertise.  So any of you listening out there that have executive compensation like RSUs, restricted stock, NSOs or ISOs, you want to give us a call so we can evaluate whether not you are maximizing your wealth potential and saving yourself money in tax liability.  Today, I’m going to share a little parable that gives a high-level overview of how we help our clients.

In previous articles, we’ve have mentioned the importance of having a specific strategy to maximize your wealth building potential through executive compensation program.  In our practice, we notice many highly-skilled and hard-working professionals don’t maximize their executive compensation programs either due to lack of knowledge or lack of time.  This article will focus on some of the strategies that can be utilized in order to not incur unnecessarily high taxable income in any given year that awards are given, exercised or vested.  To illustrate a specific strategy we will use the parable of Ron Smith.

 

The Parable of the Two Business Executives (6:00)
Ron Smith is the vice president of sales for MegaPharma, Inc. a thriving pharmaceutical company based in the US.  Ron has been with the company for nearly fifteen years and has experienced great success.  Such success he is now contemplating hiring a financial professional to help him manage his finances.  Before this time he had managed pretty well he thought, at least according to his peers, but the events of the past six months have caught his attention.  About seven months ago, his close friend and fellow colleague, Bruce Davis, who works for AlphaBioTech was laid off after serving his company for ten consecutive years.  That was bad news indeed, but Bruce was a great saver and his wife works also so they would be fine financially.  The real problem was what Bruce shared with Ron during a pharma conference they attended together.

 

Ron’s Situation(10:15)
Several weeks go by and Ron meets with Bruce’s financial advisor.  The financial advisor uncovers several things.
Ron has 4 wealth building tools that are offered to create retirement income:
  1. Defined Contribution Profit Sharing Plan or “401(k)”; The company matches up to 6% dollar for dollar (see episode 42)
  2. Defined Benefit Cash Balance Pension Plan; The company contributes 7% of Ron’s salary to the plan annually
  3. Restricted Stock Units; These have a 3-year vesting schedule
  4. Non-Qualified Stock Options; These have a 3-year vesting schedule and 10-year expiry
Observations (16:00)
  • The Advisor has also noticed a high concentration in MegaPharma’s stock across these 4 accounts
  • Ron is currently in the 33% tax bracket and concerned with his new salary and bonus he will be in the highest bracket of 39.6%
Three Planning Strategies (17:22)
After review, the financial advisor advised Ron to employ these three strategies to help Ron.
1) He recommended that Ron avoids exercising his options until after he had earned enough income year-to-date to avoid paying social security taxes and thereby reducing his take home pay.  This will put 6.2% back into his pocket.
2) After creating a schedule of all Ron’s RSUs and NSOs, an exercise schedule was created to incorporate a system to “average-out” selling company shares to diversify his retirement portfolio.  This minimized taxes while taking into consideration historical company share performance, Ron’s risk tolerance, and his financial goals.
3) Transfer property out of his estate by donating to a charity and use the subsequent tax deduction received to offset some of the W-2 income tax generated at exercise.

 

Addidtional Resources:

 

#executivecompensation #restrictedstock #stockoptions #taxsavings #retirementplanning #finlit #finance #financialadvisor #money #financialtips #financialadvice

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About Me:
Dominique Henderson, CFP® is founder of DJH Capital Management, LLC., a fee-only, registered investment advisory firm specializing in comprehensive financial planning and wealth management.

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Decoding Our Money Messages – Part 1

What are the “untruths” we tell ourselves about money? This episode explores how to decode those money messages.

Podcast Details:

Podcast Title:  Decoding Our Money Messages – Part 1

Podcast Series: The Maven’s Keys to Financial Contentment

The Maven’s Keys to Financial Contentment is my idea that true financial contentment can be found when an overlap of money and beliefs occur.  Many people ask the question of how to be “financially content” and this is a discussion to uncover those answers.

(CHECK OUT OUR YOUTUBE CHANNEL FOR THE VIDEO VERSION)

Link to Show Episode

George Kinder from 7 Stages of Money Maturity – (3:30)

  • The Seven Stages of Money Maturity: Understanding the Spirit and Value of Money in Your LifeKinder
    • Financial Planning is a form of “Life Planning”
  • Page 6…”That most important money maturity offers the ease and success that come from letting go of old painful patterns around money and learning how to create your own life based on a deepened understanding of your power and purpose.
  • Page 6 …“As my clients and students came to terms with lifelong messages about money and let them go they discovered the clarity to take practical steps like building a budget creating an investment plan or redirecting the careers toward work they truly wanted.”

The lenses we wear (7:46)

  • Our BELIEF SYSTEMS around money start forming as early as CHILDHOOD EXPERIENCES.  We may have seen our parents or siblings act a certain way with money and we have been replaying that message in our minds (subconsciously or otherwise) for many years by the time we reach adulthood.
  • In an effort to “decode your money messages”, we inevitably go through several “progressions” with our money as we mature and evolve. Realizing our behaviors are based on beliefs that get us results, we have to make sure we always are progressing towards TRUTH.
  • To truly “decode your money message”, you have to begin to divorce yourself from your emotions around money.
#finlit
#finance
#financialadvisor
#moneymindset
#behavioralfinance
#behavioraleconomics

About Me:
Dominique Henderson, CFP® is founder of DJH Capital Management, LLC., a fee-only, registered investment advisory firm specializing in comprehensive financial planning and wealth management.

#FinancialLiteracyBootCamp

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What Do You Need to Know Before Working with a Financial Planner?

As an industry insider and one that has a concern for those that consume financial services, there are things you should know before working with a financial planner/advisor/professional. This episode will teach you what you need to know.

Podcast Details:

Podcast Title:  What Do You Need to Know Before Working with  a Financial Planner?
Podcast Series: Financial Literacy Boot Camp
(Video and illustrations available on our YouTube channel here.)

I really wanted to use this show as a way to update my article:  “Five Tips to Consider Before Choosing an Advisor”.  As an industry insider and one that has a concern for those that consume financial services, there are things you should know before working with a financial planner/advisor/professional.

Some of this has been covered previously through the above-referenced article and Episode 10-“Putting the Serve Back into Financial Services”, however, after recently giving a talk at a conference about this subject I felt I should update “the list”.

Questions/Issues We’ll Address on this Episode:

The 5 Areas of Greatest Concern:

Experience (Qualfications, Education, Specialty, Etc.) – (7:47)

Let’s talk experience.  Now I covered in a previous episode (“The Low Down on Financial Advisor Credentials”) some of the more popular professional designations.  I’m going to stick with what I’ve said before that you want someone that has been working with clients for at least 5 years especially if they have their own firm.  If it is a larger firm obviously the collective experience will probably exceed that.  But you may also want to look for a specific expertise.  What is your particular pain point?  Why do you want their help?  Ask them specifically how they have helped people in your shoes.  This will get them talking about their experience and their service offering which should give you some answers

Fiduciary Role (Ethics, Conflicts of Interest, Etc.) -(12:55)

I think the first and foremost is making sure your advisor is a fiduciary.  I actually spoke with a prospective client the other day and he actually referenced this term.  He asked about my pay structure and how I’m compensated.  I applauded his level of knowledge because most individuals working with an advisor don’t even know how their advisor is paid.  And if you don’t know how they’re paid you don’t know if his or hers interest are aligned with yours.  So make sure they adhere to a fiduciary standard and are looking to serve client interests before their own.

Method of Compensation (commission-based  vs fee-based) -(15:00)

Question them about their methods of compensation.  I’ve covered this before in episode 24 ” The ABCs of Financial Advisor Compensation”.  Does your advisor receive commissions as compensation by the selling of products to you?  If so, ask them what method they use to choose certain products and the incentive pay from the advice they give.  Other advisors may be compensated via some type of fee structure which can be fee-based or fee-only.  These are questions you should ask and have the advisor explain to you.

 

Method of Service Delivery (financial plan, IPS) – (18:45)
Next point is to have an investment policy statement (IPS for short).  But I want to expand that by saying that you should start with a financial plan.  A lot of people don’t agree with me here but anything that you do successfully in life usually starts with a plan, so why not your finances? When you focus only on investments how is the rest of your wealth to be managed?  What about tax planning?  Risk management?  Estate planning?  In sitting down with a financial planner, you should be focused on them taking a comprehensive view of your situation.

 

The “Sniff” Test – (21:25)
Passing the “sniff” test is another point I want to bring up.  I believe gone are the days where the advisor holds hostage all the information from the prospective client.  Especially if this leads to intimidation.  Nowadays, clients are looking for a collaborative experience and that means a sharing of information.  So if you are sitting with someone that does not seem they espouse that philosophy, you may want to keep looking.

 

#taxsavings #retirementplanning #finlit #finance #financialadvisor #money #financialtips #financialadvice

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About Me:
Dominique Henderson, CFP® is founder of DJH Capital Management, LLC., a fee-only, registered investment advisory firm specializing in comprehensive financial planning and wealth management.

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How to Unlearn Fear

The Maven’s Keys to Financial Contentment is my idea that true financial contentment can be found when an overlap of money and beliefs occur. Many people ask the question of how to be “financially content” and this is a discussion to uncover those answers.

Podcast Details:

Podcast Title:  How to Unlearn Fear

Podcast Series: The Maven’s Keys to Financial Contentment

The Maven’s Keys to Financial Contentment is my idea that true financial contentment can be found when an overlap of money and beliefs occur.  Many people ask the question of how to be “financially content” and this is a discussion to uncover those answers.

(CHECK OUT OUR YOUTUBE CHANNEL FOR THE VIDEO VERSION)

Today, we will be dealing with the subject of FEAR.  How does one unlearn fear?  What happens in between the stages of GOAL FORMATION and GOAL ACHIEVEMENT?  I’d argue that most people deal with different levels of “FEAR of the unknown” that may cause us to settle for not going after our dream.  If you don’t unlearn your fear it can grip you and cause you not to fulfill your dream.  The asked questions of:
What if I fail?
What if I make a mistake?
What if I’m not accepted?
What if my dream can’t happen?
My Concept
Here’s a concept I’ve developed for myself to help me “unlearn my fear”.  I use it to combat the notion of associating fear with a valid constraint.  These are two different things and so I will explain.  For example, if you want to open a services business after years of gaining experience and skills you’ve gathered during your career, some valid constraints would be:
  • Generating enough revenue in the business by attracting customers to support your lifestyle.
  • Competing with other services businesses that offer a similar service/product as you and finding customers
These valid constraints, if unchecked can lead to the following fear(s):
  I won’t have enough financial resources to sustain my lifestyle because I won’t attract enough customers because the competition is too great. Thereby causing the following fear:  [fill in the blank].
Here is the immediate “comeback” to use during this subconscious conversation in your mind:
If I saved enough before leaving my current job, I could build a cushion to support my lifestyle OR I could start my business part-time.  Although I’ll have to work/sacrifice more right now, I’ll have a better chance of achieving my goal and avoiding [fill in the blank].

 

There can be many other constraints that are valid like time away from relationships, regulatory and legal obligations, etc.  But the way our minds work against us to accomplish our goals and dreams is to insert [SOME FEAR] to which we have to have a COMEBACK.

 

Identify the valid constraint(s) and make sure you distinguish those from the fear(s) you have and then develop your comeback.  This can be done with anything including your personal finances.  If you fear you will run out of money before you die, or that you won’t be able to get out of debt, find your “comeback” to deal with the fear.  Can you overcome that fear by changing your habits?  What changes can you make? Can you hire someone to work with you to help you?

 

I recently read that the only natural fears we have are the fear of falling or the fear of loud noises.  All other fears are learned which mean that they can be unlearned.

 

#finlit
#finance
#financialadvisor
#moneymindset
#behavioralfinance

About Me:
Dominique Henderson, CFP® is founder of DJH Capital Management, LLC., a fee-only, registered investment advisory firm specializing in comprehensive financial planning and wealth management.

#FinancialLiteracyBootCamp

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The Power of Compound Interest Explained

Discover the power behind compound interest!

Podcast Details:

Podcast Title:  The Power of Compound Interest Explained
Podcast Series: Financial Literacy Boot Camp
Video and illustrations available on our YouTube channel here.

Today we’ll discuss a topic that almost all of us have heard of “Compound Interest“.  Over the past couple of weeks, I’ve had conversations with prospective clients and they mentioned finding a way to let “their money work for them”.  I realized they meant “compound interest”.  So today we’ll answer the questions of:

  • How does it work? (4:30)
  • Why is it so powerful? (8:50)
  • How do I take advantage of it? (14:10)

Questions/Issues We’ll Address on this Episode:

How does it work?

The concept where every dollar of earnings becomes a candidate for earning interest [after the original investment] now, allowing you to earn “interest on your interest”.

Why is it so powerful?

So I’ll walk you through the math of a simple example.  And you will quickly begin to see why there is such a “power” in this concept and that the most powerful component (“arguably”) is time and not really the interest rate you earn. This is corroborated by one of the most successful investors of all time:  Sir John Templeton who said

“The best time to invest is when you have money.  This is because history suggests it is not timing which matters, but time”. Sir John Templeton

Before we go to Excel let’s look at the actual mathematical formula and then I’ll show you on a financial calculator since financial advisors use this all time.
compound interest
How do I take advantage of it?
Ironically enough, look at your credit card statement and you will not that daily compounding is used to calculate the interest you will be charged by the credit card companies.  People wonder when they pay the minimums on their credit cards, why they will never get ahead.  Well, it is because your minimum payment does not cover all the interest that has accumulated (or compounded) since your last purchase.  And if you pay later in the month utilizing the grace period, the compounding just continues.

#taxsavings #retirementplanning #finlit #finance #financialadvisor #money #financialtips #financialadvice

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About Me:
Dominique Henderson, CFP® is founder of DJH Capital Management, LLC., a fee-only, registered investment advisory firm specializing in comprehensive financial planning and wealth management.

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Goals, Goals, Goals – Part 3

How do you execute? Try this formula…

Podcast Details:

Podcast Title:  Goals, Goals, Goals – Part 3

Podcast Series: The Maven’s Keys to Financial Contentment

The Maven’s Keys to Financial Contentment is my idea that true financial contentment can be found when an overlap of money and beliefs occur.  Many people ask the question of how to be “financially content” and this is a discussion to uncover those answers.

(CHECK OUT OUR YOUTUBE CHANNEL FOR THE VIDEO VERSION)

GOAL EXECUTION

 

How do you execute?  Try this formula…

 

  1. Start with the end in mind
  2. Develop a strong “WHY” (in Goal articulation)
  3. Put one foot in front of the other…rinse and repeat.
  4. Revisit your why when times get tough (as often as necessary)
  5. Move on from defeats and learn your lessons from failures–“cut yourself some slack”
  6. Celebrate your victories
“Good business leaders create a vision, articulate the vision, passionately own the vision, and relentlessly drive it to completion.”
—Jack Welch

 

“It’s not enough to be busy, so are the ants. The question is, what are we busy about?”   —Henry David Thoreau

“Plans are only good intentions unless they immediately degenerate into hard work.”    —Peter Drucker

“However beautiful the strategy, you should occasionally look at the results.”   —Sir Winston Churchill

“Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat.”   —Sun Tzu

 

#truefinancialcontentment
#financialadvice
#financialplanning
#behavioraleconomics
#behavioralfinance

About Me:
Dominique Henderson, CFP® is founder of DJH Capital Management, LLC., a fee-only, registered investment advisory firm specializing in comprehensive financial planning and wealth management.

Where to Find Us:

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#FinancialLiteracyBootCamp

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Some Popular Questions and What They Mean

Some of the more popular questions about personal finance that I’ve seen.

Podcast Details:

Podcast Title:  Some Popular Questions and What They Mean
Podcast Series: Financial Literacy Boot Camp
Video and illustrations available on our YouTube channel here.

In episode 44, we discussed “Knowing Your Numbers” and this is a follow-up to that episode on some of the more popular questions I’ve come across.

Questions/Issues We’ll Address on this Episode:

Q) What is a good debt ratio and what is a bad debt ratio? (5:23)

    A) Most experts would say for every dollar of income you should have no more than 36 cents of debt.  This would be anything you have a payment on (house, car, etc.).  As I explained in episode 44 about knowing your numbers, underwriters will use 43% to give you a loan, but this is a really high number.  Now let’s talk about some reasons people may want to ask this question.  I think it centers around the concept of “delayed gratification”.  How much can I afford to consume and not have a negative consequence is essentially what someone is asking when they ask this?  So let’s just illustrate the concept of bringing your future consumption to the present.  A good example of this is when someone buys a home.  You buy the home and of course, you are financing that purchase over a long period of time (e.g. 15-30 years).  So you are bringing a considerable amount of your consumption forward into the present.  However, when you start to purchase additional items to furnish the house this is when you may tend to go overboard.  The level of consumption generally speaking far exceeds what needs to be brought into the present.  So try and keep this inside 33%–that would be good.  Above 43% would be bad.
Q)  Can an individual contribute to both a Roth and a Traditional IRA in the same year? (10:30)

 

A) Yes;  as long the total contribution doesn’t exceed the IRS limit of $5500 ($6500 if over 50) per person.  But why would you want to contribute to both versus one or the other?  In a lot of cases, the contribution to a Traditional IRA can be deducted from gross income in the tax year you make the contribution.  There are some rules around this based on income and whether you participate in your employer’s retirement plan.  For instance,  if you can’t make a deductible contribution to a Traditional IRA you may want to make the entire contribution to a Roth IRA if you qualify.  You also may want to split the contribution between the portion that is deductible since it phases out and contribute the remaining amount to a Roth.
Q)  How did the financial crisis affect the banking sector? (14:09)

 

A)  The short version is that lending was constrained because there was a lack of trust in the system.  In most cases, you never see a banking crisis because there is always a “lender of last resort”.  This is the bank or collection of banks that will always buy a security that is offered as collateral so that the seller can use the cash to continue whatever operation it has.  Can this happen again?  There is a lot more liquidity in the system because the FED has purchased a lot of treasuries from banks and that cash has been “put” into the system for lending and “cushion”.  However whenever a large enough fear can be built into the system because asset prices get too high and form a “bubble”, then you have the makings for uncertainty again.

#financialadvisor #financialplanner #financialquestions #finliteracy #finlit

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About Me:
Dominique Henderson, CFP® is founder of DJH Capital Management, LLC., a fee-only, registered investment advisory firm specializing in comprehensive financial planning and wealth management.

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