Underrated Items In Financial Planning

This topic is simple. Things related to your money, finances, and retirement that should get way more attention and excitement. Let’s give them the love they deserve on this episode.


John's Stillman: Hello and welcome to Wright Money Tips. I'm John's Stillman, alongside Isaac Wright, the guy that the show is named after, the author of Navigate Your Way to a Secure Retirement, the president of Financial Dynamics & Associates, and chartered financial consultant. You can find Isaac and the team online at financialandestateplanning.com. You can also call (804) 777-9999 if you'd like to get in touch with them that way. You can even text that number: (804) 777-9999.

John's Stillman: Isaac, always a pleasure to talk with you. Today we're going to have a bit of a discussion about underrated things in the financial world. I'm sure everybody has movies that they feel are underrated, or actors they feel are underrated, or sports teams, or athletes that are underrated. Well we're going to take that same mindset and apply it to the financial world.

Isaac Wright: You know, as I sit here listening to you too, I'm thinking this could be maybe our simplest conversation we've ever had on a podcast. But I just think that the three things that we're going to talk about today sometimes get lost in the shuffle of trying to make things glitzy and glamorous.

John's Stillman: Well one of those things that's a bit underrated, in our opinion, is the concept of liquidity. So when it comes to your financial plan, why is liquidity important?

Isaac Wright: Well I think the context of talking about liquidity, when it comes to your investments, you just need to understand there's pros and cons obviously to any investment, any product, any tool that you're going to use to build a portfolio. But I think when it comes to, let's say, 401ks, IRAs, annuities, cash value, life insurance, they can all have their place in many financial plans. But they all come with some liquidity challenges, either by the nature of the investment where it may have tax consequences of withdrawing money, or may have other restrictions in terms of surrender periods, or charges that you have to satisfy before you can have full access to your money. And again, it does not mean that you don't have these products in a portfolio. And again, it can be very advantageous to have this, but you have to first be comfortable with the overall amount of liquidity that you're going to have with your total amount of money that you saved for any goal, whether it's retirement, whether it's just general savings for a rainy day, and then you can start branching out from there.

Isaac Wright: So really the common denominator I think that sometimes gets overlooked, and people start going into fancy investments or products, is number one: don't forget about the amount of money that you need to keep liquid and that you personally may be feel needs to stay liquid relative to your situation. You may have a business. You may have things that you need large cash deposits for and you may want to consider maybe investments that, granted, on the range of risk, may be varied from conservative to aggressive. But you know that that money would be available to you in short notice without taking on too big of, hopefully, a tax or another type of penalty.

John's Stillman: Very important that you understand how liquidity works and where you need it with your money.

John's Stillman: All right. Another word that ends in the same three letters: predictability. Isaac, all these end in I-T-Y, now that I think about it. So liquidity and predictability, why do we need predictability? Why is that so great?

Isaac Wright: Well again, sometimes we talk about chasing returns. We talk about again with the market being so great and how it was in 2019 thinking that, "Hey, am I missing the boat? Do I need to sit here and be more aggressive? Do I need to put myself in a place that maybe puts and exposes me to a lot more risk?"

Isaac Wright: I think some level of predictability ... And what I mean here is this, is investments can ... You can own certain types of investments, certain types of insurance and investment products, that can provide a predictable manner, maybe not very exciting, but predicting in terms of having a high correlation to knowing what to expect from a monthly check in the future. Also maybe just having a very ho-hum fixed interest rate, maybe having the ability to keep those range of returns in a tight correlation so you don't have to worry about making 30% one year, then losing 30% the next.

Isaac Wright: Predictability. And I'm not saying guarantees, I'm just talking about the predictability of having a highly probable scenario play out with an investment, whether it's for income or for growth. And there's various ways to be able to do this. So I just want to be clear that liquidity is a very important topic that gets overlooked. I think predictability, in terms of your range of reality and the range of the investments that you choose, sometimes especially as you get closer to retirement, having a tighter range of predictability, let's call it, does matter and becomes very important.

John's Stillman: So liquidity, predictability. The final one in our rhyming trio of underrated financial terms is simplicity. Why is that so underrated?

Isaac Wright: Well that could be the most important one to end with. I think some financial professionals, quite frankly, are taught to make things sound as complex as possible to convince people that they're helpless without their advice. And I think the exact opposite holds true. Of course, you may want to be able to have the technical conversations. But you have to be able to communicate well enough to make the complex look, feel, and understand the overall simplicity of what you're trying to accomplish. And it takes really, I think, a gifted person. Whether it's an advisor ... I mean, of course if you're working with somebody and if not we can help you, but just simply being able to take complex matters and simplifying them down into understandable bits and understandable ways of how that's going to help you, it's a very important trait. And I think sometimes people get so busy with other aspect of their life that if when it comes to their money, if they can be able to understand things in short order, obviously creates lower stress, maybe creates a lower risk of making a bad decision.

Isaac Wright: So those are three things, John. Again, quick, short, but very powerful ways. If you don't have any, let's call it any understanding of the three topics, I really want to make sure that you have a portfolio that's addressing some of these things that we've covered today. Reach out, give us a call: (804) 777-9999. You can also visit our website, financialandestateplanning.com, and you can see the litany of things that we do here, right in our office in Richmond, to help families plan and prepare for their future.

John's Stillman: It's (804) 777-9999. Call or text that number: (804) 777-9999. Also online at financialandestateplanning.com.

John's Stillman: Isaac, one point that I'll make on this idea of simplicity. I was talking to a guy years ago. He was a financial advisor; I think he was in Tennessee. And I was listening to him talk and explain different financial concepts, and I thought, "I don't think this guy actually knows that much about the financial world," like, "He's just talking about really basic stuff. How does he have so many clients? I'm not convinced he knows anything."

John's Stillman: But then as I came to know him more, I realized he knows the financial world really well. But he was a master at being able to take complex subjects and really simplify them and just spoonfeed them to people. And that's why people loved him, because they understood what was going on with their money. And it really is, like you said, a gift. It takes a gifted person to be able to do that.

Isaac Wright: Well John, I think our show ... And I'm hoping every couple of weeks when we do our podcast that people are taking away one or two tidbits, and that's really the goal. So I look forward to doing this again in a couple of weeks. Hope you all have a good fortnight until we speak again.

John's Stillman: Did not anticipate the use of "fortnight" on this program, but well done. And we will talk with you again soon, right here on Wright Money Tips. Have a great fortnight.

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.