Lose weight. Establish a regular exercise routine. Cut back on smoking/cursing/television/wine. These are some of the resolutions that many of us McKinney residents made a little over a month ago. If McKinney, TX holds to statistics, 36% of us have already given up on our New Year’s Resolutions, and a measly 8% of us will make it to the end of the year.
Creating a viable financial plan is one of those resolutions that sounds really good on December 31, but on January 1 it feels a tad overwhelming. So I’ve asked Lance Alston of New Dimensions Wealth Management to answer a few questions for Get McKinney about financial planning, and he was kind enough to oblige.
GM: What are the big holes you see in most financial plans?
LA: A few investments don’t equal a financial plan, but often that’s all most people have. Investments only make up one piece, a small piece, of the overall plan. A complete plan includes components such as life insurance, disability insurance, wills, and powers of attorney.
So insurance, wills, etc, these are often the pieces of the plan that are missing, and if the professional advice you are receiving only involves investments, you aren’t seeing a financial planner.
GM: What are the biggest misconceptions about financial planning?
LA: One common misconception is that you need to have all your ducks in a row before setting up a financial plan. But in reality, the earlier you start with a solid financial plan in place, the easier and more cost effective it is to achieve your goals. A little advice along the way can get you to those goals a lot faster.
The other big misconception is how much investing costs. Because the fees are typically pulled right out of investment accounts rather than being invoiced to the customer, people are often unaware of the actual amount of these fees. The reality is that a 1% difference in fees can be the difference between a successful and an unsuccessful financial plan over time. I urge everyone who invests to be sure that they understand the actual costs involved with investing.
GM: Why do you think people postpone setting up a financial plan?
LA: It’s hard for people to look way out into the future because it just doesn’t seem real. For a 30 year old, retirement is a lifetime away. It’s the same with long-term care planning for a 50 year old. The problem is that these things often involve more work and cost the longer you wait.
The other reason financial planning gets postponed is that it feels like there are a lot of difficult decisions that have to be made. Research shows that the more you have on your mind, the less likely you are to make decisions. So having these issues sitting in the back of your mind actually makes you less productive.
GM: Once someone has a financial plan in place, how often should it be reviewed?
LA: I recommend that my clients review their financial plan annually, as well as any time there is a change in financial situation such as job loss or inheritance. We won’t necessarily change things, but it helps you remind yourself to think of the future.
GM: When you are dealing with couples, do you recommend both partners be equally involved, or for one person to manage the planning process?
LA: By nature there is usually one spouse who spearheads the process, mainly because they have the higher level of interest. But it’s so important to have both partners involved because financial planning involves goal setting for the long term, and risks and consequences are borne by the entire family.
GM: What else would you like the Get McKinney readers to know about financial planning?
LA: It’s not that hard. Commit to it and go. I like to poll my clients, and virtually everyone of them feels stressed about the process before starting. But afterwards they always feel so much better. Financial planning is one of those things that suffers from inattention and neglect, but the process itself provides peace of mind.
Lance is a Certified Financial Planner (CFP®) designation with a MA in Economics from George Mason University, and a BA in International Business from the University of Texas, Austin. Lance has been helping families plan for their financial futures for over fifteen years and started New Dimensions Wealth Management in 2009. He lives in McKinney with his wife and two daughters.
Allen, Texas 75013
Do you have a question you would like answered by a McKinney expert? Are you a McKinney expert who would be willing to share your knowledge with the Get McKinney readers? Please get in touch!
Photo credit: Martin Wessely