As with most big decisions in life, there is seldom a “perfect time” to start planning for your financial future. Maybe you feel you still don’t have enough saved up yet, maybe you’re focused on other life goals like having kids or buying a house, or maybe you’re just too overwhelmed by a job search to think about finances. All of these are common reasons people put off engaging a financial advisor, but the reality is that an advisor can be a huge help during any one of those times (the key to large financial decisions is understanding their impact before you make them).
It’s human nature for people to wait to do what’s best for them. (Ever heard “my diet starts tomorrow”? Same premise.) Often, people wait for a life milestone to occur, which they think will spur them into action. In reality, if all financial planning waited on a life event, the only financial plan would be an estate plan.
And in some cases, people wait to take action until something bad happens. Why? Because we’re willing to put off a lot until we feel pain acutely. But by then, we often have fewer options for good outcomes, much like the selection of summer houses available for 4th of July week if you’re trying to book at the end of June. You’ll end up either overpaying, getting something suboptimal, or missing out altogether.
That’s why planning for your financial future is much better done over a long period of time rather than rushing at the last minute prior to an immediate cash influx (either for a big purchase or for retirement). That’s because almost all financial goals are big. After all, if they were fast and easy they would be part of your day to day life already. Starting late means working even harder to get to the same place, by definition, since you have less time to get there.
Here are three lesser-known considerations to inspire you to get started:
Advisory fees don’t need to be paid out of pocket - Something that few people realize is that when working with an investment advisor fees are often NOT an out of pocket expense. This is because fees can be directly deducted from your account on the advisor’s platform. For many people, this nuance makes getting started feel less daunting as it doesn’t affect your monthly budget.
A fiduciary does well when you do well, and a fee-only advisor isn’t paid to do anything else - Investment advisors (fiduciaries) often have a compensation structure that is tied to your situation. In other words, fees based on the assets under management. Among large financial decisions, this is a rare circumstance where your financial interests are aligned with your service provider. At Paceline, we choose to operate as a fee-only advisor because we believe it makes sense to work with someone who isn’t paid to do anything but provide financial advice (i.e. we don’t accept sales commissions).
Inflation means doing nothing isn’t standing still. It’s going backward - Most people don’t realize that earning anything less than the current rate of inflation on your financial assets means they’re slowly shrinking. Why? Because as the cost of goods and services rise, your money (if not growing at (at least) the same rate) will buy you less and less. This loss of purchasing power is problematic over the long term.
So, even though you could start tomorrow, why not start today? Contact Paceline for a free portfolio review.
This blog was written by Jeremy Bohne, Principal & Founder of Paceline Wealth Management. Paceline is a fee-only investment advisor serving clients in the Boston area, and on a remote basis throughout the country. Paceline specializes in helping tech and biotech executives, physicians, and those seeking financial planning services.