Taking Out The Trash

Sometimes you just need to go through your financial life and take out the trash. Let’s talk about the things that might need to be thrown out…


John Stillman: Hello, and welcome to Wright Money Tips. I'm John Stillman alongside Isaac Wright, President of Financial Dynamics & Associates. He's a chartered financial consultant and the author of navigate your way to a secure retirement. You can find him online at financialandestateplanning.com, financialandestateplanning.com. You can call (804) 777-9999. You can also text that number if you'd like. Isaac, what's happening, man? It's a new year. You've made it back for another year on the podcast, resigned that endorsement deal, so good to have you back.

Isaac Wright: You know, and on top of that, I'm just curious to see how many play on words 2020 is going to get this year.

John Stillman: The year of clear vision.

Isaac Wright: Yes. Bringing a vision to the masses. But yeah, doing good. It was a great Christmas. Good overall holiday. Of course, I think everybody feels the same, it was a very compressed holiday compared to the time we had between Thanksgiving and Christmas. But, we had been talking about this before we came on air looking to shed some some financial weight, time for the new year financial resolutions, and yes, we will be going down that rabbit hole today.

John Stillman: Well, for a lot of people, getting the house cleaned up is something they do at the beginning of the year. Let's get some of the old stuff out. We have all this crap laying around from Christmas. Let's get that all cleaned up. Company's been here, family's been here. The house is a mess. Want to head into the new year with a clean house. A lot of that is going to involve taking out the trash, so we're going to do the same thing in our financial lives, Isaac. Let's talk about the things that we need to throw out, the trash we need to get rid of in our financial lives. One of those things, of course, being debt.

Isaac Wright: Yeah, I just want to remind people, I think a lot of times people are using credit cards. A lot of times people pay off their credit card at the end of each and every month and claim the points and that's great. However, please be careful as far as how much you're accumulating on your credit cards. People are still walking in our door from time to time that have a very high degree of interest being charged on their credit cards that they could either A) pay off, or re-establish money being pulled from, let's say, a savings account to take care of that debt. Also want to quickly say this, that a lot of times people revolve their credit card debt, so they will find those offers where they get 0% for six months or 12 months or whatever that is, but they're on this merry-go-round where the debt keeps increasing and they're thinking they're getting away with something because the interest rate is zero.

Isaac Wright: Eventually you have to pay the Piper, and I think people need to have more of a financial plan and a strategy around eliminating what I call the bad debt. I mean, there's certain debt that you can have, your mortgage. If you're in a situation where you have rental property and you're using that as a business, I mean, there are different things to be able to be considered, but I'm talking about your good old fashioned high interest rate credit card debt. And please, if you have any concerns about your overall finances as we talk today when it comes to either investments, how to manage money, putting yourself in a spot where you understand how your cash flow will look if you're going to have a life changing event, a.k.a. a retirement or other job change, let us know.

Isaac Wright: I mean, that's what we're here for. We've been having this radio show for years. I get a lot of people right here in the Richmond community and the surrounding counties to call me and that's what I'm offering. So it's (804) 777-9999. Financial Dynamics & Associates are right here at the intersection of 288 and also Powhite Parkway, so just want to let people know we're close, we're local, and sometimes it's nice to be able to talk to somebody about this.

John Stillman: Call or text that number, whichever you prefer, (804) 777-9999. The next piece of financial trash we need to eliminate from our lives, Isaac, is too much risk, and a lot of people are carrying too much risk in their investments right now and they don't even know it.

Isaac Wright: Well, that's because we have had just an outrageously good year, this previous year in 2019, and overall for the last roughly 10-plus years, we've had a great market, with the exception of maybe a couple of small blips. So a lot of times people are continuing to buy the same stocks, the same percentages. The stocks are obviously growing a lot faster than maybe some other asset classes, and all of a sudden you're at risk for losing a lot more money, potentially, than otherwise you would feel comfortable with. We call that your uncle point, and we really want people to understand what is your uncle point, because maybe you had one hundred or $200,000 in your investments 10 years ago, maybe now you have $500,000 or more in your investments, and losing 10% on $100,000 is $10,000.

Isaac Wright: That may be an uncle point for somebody, maybe not, but 10% on $500,000 is $50,000, and you also may be getting older where you need this money. Are you going to be okay with losing $50,000 or six figures or what have you if you're taking on too much risk? So, we can help you define how to manage a portfolio responsibly to minimize this level of risk. So yes, this is called taking out the trash and having too much risk in a portfolio with money that you know you're going to need to live on very well could be a ... let's call it an area that needs to be at least reviewed, if not improved.

John Stillman: All right. How about, Isaac, again, we're talking about taking out the trash in our financial lives, hidden fees or just unnecessarily high fees. Again, something a lot of people have that they don't even know is there.

Isaac Wright: Mm-hmm (affirmative). I'm trying to remember here reading an article, and I don't remember the firm that did this, but John, you may have seen this in your readings. It may have been Fidelity or Vanguard, but it said that close to 30% of investors feel that they don't have a fee when it comes to their investments, and I guess because maybe they don't see an outright fee being charged on their statement. But let me be clear, under most circumstances, if you own any type of mutual fund, if you own any of the, let's say, other type of investment, you may still have transactional costs too. Most of the time you're going to have some level of fees. If you're going to be working with an advisor, absolutely you'll have a fee, and of course it's their job to bring value and offer you a value proposition in correlation to that fee, and if they're not doing that, then shame on you for having an advisor and also shame on the advisor for not trying to step up and do the right thing.

Isaac Wright: But I just want to be understanding of everybody today saying, "Listen, when we're talking about unnecessarily high fees, what I want to know is do you have a good value proposition? Are you aware of what your advisor is doing? Not just on your investments, but maybe, again, your financial plan?" Whether or not you're going to be taking income from a certain piece of your investments, looking at other situations, like I just covered earlier, maybe with debt or cashflow. Those are all things that an advisor maybe in the realm of having a financial professional should be doing for you. So please, if you don't know your fees, if you want to have a second opinion about your fees and your risk towards your investments, we're right here to help you. But I think these are all great things to talk about, John, right here at the first of the year.

John Stillman: So many things we need to eliminate from our financial lives. Some things are obvious. You would say, "Oh yeah, we definitely need to get rid of that." But you just don't know that it exists in your life, but it does. The other things you might not even realize are things that you need to get rid of. Like take for instance, Isaac, lazy money, money that isn't even growing enough to keep up with inflation. That's something that we don't want to have a whole heck of a lot of and our life, but a lot of people do right now.

Isaac Wright: Yeah, and I really like that term, because everybody needs to have an emergency fund, and we talk about that, actually help people plan for the money that they're going to have at the bank to be able to have quick access to if they need a car fix, a roof blows off or any other type of emergency. But to some degree, a lot of people have way too much money sitting in the bank making less than two percent. Quite honestly, sometimes less than one percent. Interest rates are not going up and don't appear to be going up anytime soon, and if they do, they certainly aren't going up fast. So you have to be aware that you may be able to utilize that money in a lot better fashion than just keeping it in a savings or money market account. Let that money, for every dollar that you have in your savings account that's over and above an emergency amount, let's call it ... we can help you determine this, by the way.

Isaac Wright: Think of that dollar as an employee and having that employee be working hard for you, creating additional investment income and creating additional growth potential long term. There is just a myriad of things that you need to be aware of. And sometimes we get a large bonus at the end of the year. We get a situation where we have cash come in and it's not necessarily you have it tucked away for a large one-time expense, it's just you don't know what to do with it, and therefore it accumulates, sits and we want to be, let's call it a little bit more mindful of where that money's going to be relative to longer term goals for you. So again, we're going to kind of wrap up here, but I just felt like it was quick to talk about taking out the trash and what I call things that you definitely can improve upon under most circumstances when it comes to your financial plan. (804) 777-9999.

John Stillman: Again, call or text that number, whichever you find easiest. We'll reach back out to you and help however we can. Maybe you'd like to come in for a visit, and maybe you just have a quick question about something. However we can serve you, we will. (804) 777-9999 is that number to call or text. You can also find out more online at financialandestateplanning.com, financialandestateplanning.com. Isaac, always a pleasure, my friend. We'll talk with you again soon.

Isaac Wright: Sounds great, John. Thank you, sir.

John Stillman: We'll all be taking out the trash. In the meantime, we'll talk with you next time. Right here, same place, on Wright Money Tips. Have a great day.

Announcer: Information is for illustrative purposes only and does not constitute tax, investment or legal advice. Always consult with a qualified investment, legal or tax professional before taking any action.

Announcer: Advisory services offered through J.W. Cole Advisors, Inc., JWCA. Financial Dynamics & Associates, Inc. and JWCA are unaffiliated entities.