Who’s Managing Your Financial Affairs

I have an important financial question for you to consider today. Who is in charge of your money? Now I’m sure you’ve got a CPA, a stockbroker or two, a couple of insurance agents, and an attorney that does work for you from time to time, but who is really in charge of your financial affairs?  I began to consider the importance of this question after I started thinking about how time-consuming taking care of my own financial affairs can be. And I know what I’m doing, I’ve got employees to work on it, I’ve got good software, and I’ve got access to support. I don’t know that my affairs are any more complicated than yours, but I’m currently managing eight houses, a rental condo in Florida, a couple of commercial buildings, and I manage my father’s financial affairs, taking care of everything for him, like many of us aging Baby Boomers do. I also manage a stock portfolio that has done very well, and I have some private equity investments. I’m the co-founder of a community bank, and I serve on the board there. So, you know, that takes up a lot of my time, and sometimes I even wonder if I ought to spend even more time on it. So anyway, that makes me wonder what you’re doing.  In your busy life as a lawyer, doctor, or entrepreneur or whatever, I wonder who is coordinating your financial and wealth issues.

I also wonder if your financial affairs on the top of those people’s lists or if you’re just one of 100, 200, or 500 clients that they respond to when you bring them something? For years I worked as a CPA like that, and I have nothing against those folks. I mean, people would bring me their tax returns, and I would consistently give them good results.  But that’s a transactional relationship. What I’m wondering is who’s actually managing that for you. I think you need to do it, or at least be in charge of it. I don’t think there’s any question, no matter who else is helping you; you should be in charge because it’s more important to you than to them.

Now some people are very concerned with what you do, but you may not like the reason for their concern. The reason is that what you do is how they get paid! If they can get you to do something like buy this or sell that, they make more money.  And that’s okay, but you need to be aware of their motivation. You need to be aware of how your various folks get paid, why they get paid paid, and when they get paid. Are they paid when they add value for you, when they do things that make them money, or do they just get a percentage of your invested assets year after year?  Those are questions that you need to be thinking about.

Another element to consider when determining who controls your finances is second opinions. Are you getting those?  You need outside, unbiased advice from somebody that doesn’t make money depending on their answer to your question. You know, if you ask people whether you should pay off your house or invest your money with them, that’s a pretty easy answer for them.  The answer’s not a lot different than the answer you might get if you ask your barber if you need a haircut. Warren Buffett says, “Never ask your barber if you need a haircut,” meaning that people who stand to benefit financially from one of your options will urge you to pick that option. So it’s important that you see where you’re getting your advice. And maybe that isn’t very important on the smallest decisions, but on the big decisions it’s vital that you have outside, unbiased advice.

How much are your investments costing you? What are the fees on your investment? And what percentage of your return or your net worth are those fees?  You know, in a year, it doesn’t affect you too much if the fees are too high.  But in 20, 40, or 60 years, those fees have cost you an enormous amount.  I find that very few people can tell me what they’re really paying. You need to figure that out and be aware of that.

If you’re in any sort of bond fund, you might find that up to one-third or one-half of your return is going to other folks.  And right now, as you well know, you don’t have much return. And when those interest rates go up, bonds and bond funds are going to really decline in value.  If you know that and you’re properly positioned for that, you may be all right.  But if you’re not, you probably won’t be. What worries me is that a lot of people don’t know that. They think bonds are safe and stocks are risky, and that is not the entire truth. In fact, right now I think that stocks and bonds are even in market risk. But there are other risks that you should be considering, such as the risk of inflation and the risk of outliving your money.

You’ve also got to consider the big picture. What is the tax cost of your investments? Is somebody aware of your tax cost when you buy things or sell things or where you put which asset? Is anyone considering that? You’ve got a CPA and a few brokers, but probably none of them are seeing the big picture.  Some of them may be doing a good job, but unless they’re seeing the big picture, how do they know? Instead of diversifying, they may be making things worse.

So that brings me to the next question, do your investments fit you? I’m not asking if they fit the average person on the street. I always tell my clients to ignore financial noise, whether it’s in Money magazine, on CNBC, or in what the broker is trying to push you to do. My premise is that most of those things don’t fit you.  They might fit somebody, but that somebody isn’t necessarily you. Maybe they fit the 80-year-old widow. If that’s you, well that’s great. But if you’re 40 years old and trying to acquire assets, that advice doesn’t fit, and vice versa.

The last thing I want you to consider is whether you understand your investments and why you have them.  If you don’t, my premise is that you shouldn’t have them. And if it’s an acronym that neither you nor your broker can explain, then that’s probably an investment that made your broker and the people packaging that investment lots of money.  My bet is that investment may be good for them, but it isn’t very good for you. You know, I have people ask me all the time about this acronym or that acronym. The truth is, I usually don’t know what they’re talking about! That used to bother me, but now what bothers me is that they’re about to get ripped off by some packaged investment. There’s no need to package investments like that, except for the fact that it benefits the people doing the packaging and selling.  I don’t know of any benefit it provides to the client, but I know of millions of dollars of benefit that it provides to the folks doing it.

So that’s just a few questions for you to consider as you’re beginning the year and gathering your tax information. I hope you’ll consider these questions and ensure that you are the one in control of your finances. I invite you to go to and get my free report: “The Five Steps to Financial Independence.” I’ve also got some other tips on my site concerning investment and building net worth that may be of benefit to you. Here’s to you as you begin building your independence!

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