My So-Called Financial Life and What I have Learned So Far!

Financial Life

I found that there are a lot of financial planners out there who are giving advice but not letting you look into their financial world.

How do you know if they practice what they preach?

Wouldn’t you want to work with those who eat their own cooking?

This post opens you up to my financial world and what I have learned so far. It is not about what I have learned from being a financial planner, but all about what I have learned from my personal dealings with money.

“The financial decisions we make every day will have long term effects.”

So be smart and learn from my experiences.

Setting the Stage

Right out of college I started my financial advisor career. After about 8 weeks of getting a salary from my first Broker/Dealer, MetLife, I transitioned to full advisor status earning 100% commission.

That’s right, 100%. No base salary. It was all on me.

My first 2 years in the business I earned about $40,000 in total. It was a stressful and difficult to see my friends start their entry level jobs with salary and benefits earning about $40,000 per year!

But I was hooked on financial planning. So I kept plowing forward. Thankfully my parents allowed me to live at home, which kept my bills/overhead to a minimum. I would not have been able to survive any other way.

Today, there are many more opportunities for young planners to join larger teams, earn salaries, work in the back office for years, before transitioning to client facing with a salary plus commission structure.

For me, it was 8 weeks.

I do not recommend a young college graduate take a job earning 100% commission. The risk/reward ratio is not skewed in their favor.-way too high risk in the beginning and not enough reward. If you eventually have to make a switch, you will have to start at an entry level position but be a couple years behind…

I experienced success at the expense of stability and while in the long run I feel I have a better work/life balance than my peers in the corporate world, the climb was brutal and more people will fail than succeed.

Check out The Art of Financial Planning Resources

Personal life

I am married with 1 child. Hopefully at least one more child is in our future.

Cash flow

I pay attention to our household cash flow more closely than my wife. Many clients ask me if they should combine all of their checking/savings accounts with their spouse and run everything through joint accounts. I am not against that at all, as long as it works for them.

It didn’t work for us for 2 reasons.

1) All of my income is paid to me directly, not my business. There is a lot of incoming and outgoing transactions. Because of that, I did not want my wife pulling from those accounts as well. It became too much to manage and we were always worried about bouncing checks. Not because of lack of funds, but because of timing of transactions. So, she has her checking account, I have my checking account and we have joint saving accounts.

2) Because I keep track of spending and saving very closely, my wife was feeling guilty/stressed every time she wanted to buy herself something. That was not fair to her. So, we decided what bills she would be responsible for, as her financial contribution to the house. We left her surplus money to buy or save whatever amount she wants. Now, when the packages arrive at the house, it does not bother me at all. She contributes/saves first, spends 2nd.

Keeping this separate works really well for us.

FYI- even though I am a financial planner, YES, we do go out for dinner and take vacations. I am not against spending money, I just prefer experiences over possessions and I might keep a watchful eye over the cash a little more than average Joe.

Cash Reserves

We try to maintain an emergency reserve equal to 3–4 months of expenses at all times in an online savings account. We have dipped into it while my wife was on maternity leave and to buy our home. Over time with smart cash flow management we have built it back up every time it had to be used. Knowing we have money in the bank at is huge life line.

Real Estate

Real estate ownership is not for everyone. Just like any other personal investment, everyone needs to evaluate their personal situation before buying a piece of property.

So far, I have bought and sold condo’s, undeveloped land, and a single family home. Some have made money, some have lost money.

I have learned that owning real estate takes a lot of work. From the mortgage application to fixing broken things, owning real estate is a big decision that you should not take lightly.

Stocks

Like real estate, making a personal investment into stocks or funds is a decision that needs to be evaluated properly.

For us our portfolios are invested in asset allocation models based on our risk tolerance and time horizon. Because we have different goals, our portfolio’s are set up differently and not all in 1 big pot.

I pay a lot of attention to cost and believe in buying the steak, not the sizzle!

Retirement Planning

We currently save 12% of our income for retirement. We increase this by 1% every 6 months. My wife is employed by the NJ public school system so she also has a pension accruing. All of the pieces of our retirement planning are important and we hope to reach financial independence be age 66.

College Planning

We have a 529 plan for our son’s education. We contribute small dollars to this account on a monthly basis and add all monetary gifts for him from birthday’s and holidays into this account. In addition,we also have cash value building life insurance that if available we plan on using for his college education.

At this point we have prioritized retirement savings above college and those accounts get our extra dollars.

Insurance

I believe life and disability insurance are important pieces of a sound financial plan. I know most people hate to pay for something they may never use. But the peace of mind it provides us, is priceless.

Most of our life insurance is term insurance designed to pay off the mortgage, cover college expenses and provide a small income if something devastating were to happen. We also each own small variable life policies to supplement our college savings for our son.

In addition to the life policies, we also have disability insurance, protecting our incomes. We didn’t go overboard here, but feel that something is better than nothing.

Cars

Right now, we are a “leasing” family. I don’t think we will be that way forever. But for now it works for us. We get to rotate out of a vehicle as the warranty ends and no major maintenance has to be done. The cars we drive are economical and get very good gas mileage. I don’t believe a car is a status symbol of any kind. Just because you pull up in a Mercedes doesn’t mean you have any money in the bank — and to me that is most important!

Mistake

When I was 26 I did invest in a short term loan program that turned out to be a ponzi scheme. It was a tremendous life lesson that when things are to good be true, they probably are. I learned not to believe in the hype and to stick to bonafide strategies to reach financial success. There is no get rich quick scheme. If someone is promising you one, run away!

Estate Planning

After our son was born, we had our will, living will, health care proxy and power of attorney completed. If there are people you want to KEEP AWAY from inheriting your stuff or becoming guardian of your children, you need to have in writing who you WANT to take control. Do not leave it up to the courts to decide.

Final Words

It’s important for to me that my readers know that I practice what I preach. In my field there is plenty of competition from robots, to bloggers who don’t manage any money and everything in between. The last thing you want to do is take advice from someone who does not have any skin in the game.

Well, as you can see above, my whole body is in the game.

Hopefully you can learn from my experiences and achieve financial success.

As always, you can consult with me to discuss any of the topics above.

Look for future posts on the best ways maximize your social security income and check out my recent post on finances and marriage.

Lastly click here to sign up for all great stuff The Art of Financial Planning has to offer!

Thanks for stopping by and I hope you achieve financial success!

Previously posted on The Art of Financial Planning.

— Jared Friedman Independent Certified Financial Planner in NJ

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