Hi Rich By Thirty Readers,
I’m often asked about what types of relationships are important to have in order to achieve financial freedom. So, this post is specifically about who/what you should consider bringing into your life. I like to think that choosing people to handle your money is like deciding who you want to date.
For example – I had a terrible date a few years ago. Dinner was fine, and we went for a nice walk, but the conversation was brutal. By the end of the evening I knew he wasn’t for me. He was a sweet guy, but noticing the romantic red flags, I ended the date. No big deal. But then as I went to leave he attempted the Goodnight Kiss. I pulled the Swoop-and-Hug. Not getting the hint, he tried again. This time, I took a step backwards and tumbled down his porch steps, ploughing through a row of flowerpots, scraping my wrists and ripping my pants wide open. Bleeding, I made a break for the car and didn’t look back. I’d made a decision about who I wanted – or, rather, didn’t want – on my team, and it was good for my personal well-being.
These are the kinds of decisions that reverberate through your life and will potentially turn out to be good financial decisions, too. Like your personal relationships, who you build financial relationships with have lasting economic impact. Teaming up with the right people, asking the right questions, learning what characteristics to look for and knowing where to find them are as important when building a financial dream team as they are when you’re building a personal relationship. Some people will wait in the wings, only entering your life occasionally. A mortgage broker and realtor, for instance, can assist with the nitty gritty in real estate contracts and save you money while they’re at it. Others should be front and centre. It’s a little like creating the lineup for a basketball game. Here are a few positions you’ll want to have on your side:
Your Michael Jordan: Your top draft pick is an investment advisor, or shooting guard, to help you focus on building a realistic financial plan based on growing your long-term net worth. Ensure they have their Certified Financial Planner (CFP) designation. As with any financial expert, always get a referral from someone you trust and then interview a few, to 1: – see if you like them and 2: – figure out if they’re being honest and realistic. Ask each candidate to prepare a proposal of a financial plan. This will help you select the advisor most aligned with your goals – you’ll instantly be able to tell who was listening well.
Your Steve Nash: An insurance agent (a.k.a. the point guard), whether it’s a Chartered Insurance Professional (CIP) or Chartered Life Underwriter (CLU), can advise you on protecting your assets and family if something such as property damage, illness or death derails your plans. A good agent will direct you towards insuring for big things (life, home, loan and auto), not small things, and help you buy the right insurance to protect your assets. Ask candidates to prepare a proposal to address your needs. One more thing: Many investment advisors and insurance agents work on commission; a good one will always be upfront about the costs and benefits of doing business.
Your LeBron James: A small forward, or chartered accountant (CA) focuses on tax aversion (though not the highly illegal tax evasion), helping you structure your finances to avoid paying unnecessary dollars to the government. Their role is to advise you on how manage your net worth growth in the most tax efficient way possible, along with ensuring you pay the right amount of tax – not too much or too little. Make an appointment at least once per year to ensure you’re finances are properly structured.
Your Wilt Chamberlin: You won’t need their services of a lawyer (your center) often, but they’re critical when you need to do fun things like buy a house, draw up a will, handle estates or assist with property transactions. Accountants and lawyers charge by the hour, so make sure you’re organized before your appointments to make meetings more efficient.
Your Tim Duncan: The last person is, naturally, your romantic partner, a kind of power forward. Be clear – this also goes for people who are single – about your views on debt, investments, spending, budgets, family, lifestyle expectations, and future goals. As uncomfortable as these topics seem, do not pass go until you’ve discussed your views on debt, investments, spending, budgets, family, lifestyle expectations and future goals. Try the “who, what, where, when, why and how” approach: Do you have a budget? Who taught you how to budget? What are your top budget priorities? Do you budget for the unexpected? When do you evaluate your budget? How successful are you at keeping within your budget? Unlike “dating” your financial advisors, however, this is best done over a bottle of good wine.
Whatever you do, choose your financial dream team wisely. These people will have a big impact on your life and your pocket book.
Lesley Scorgie
Lesley@richbythirty.com
***Also posted on www.unlimitedmagazine.com