Advised Podcast Ep 006: Financial Advice in your 30’s & 40’s

In Today's episode I discuss the impact of financial advice before age 50. Why it should be very different than the advice your parents receive, and some things to consider when getting started. Somewhere along the way, Financial Planning became synonymous with Retirement Planning. The truth is, Financial Planning is comprehensive financial advice for all ages, not just for the rich and the soon to be retired. If you're in your 30's or 40's, you are making financial decisions every day that will impact your greatly down the road. Now might be the time to start taking it serious, and get your financial house in order.

Listen above or read the transcript below, and let us know what you think of the episode!

Rick Luchini (00:00):

It never fails. Anytime I deliver observations and recommendations for the first time to a new client, they always say the same thing. I wish we would have done this sooner, so why didn't they do it sooner? Why do most people only start taking their finances serious when retirement seems imminent? And what might the impact be if they would've started in their thirties and forties? In today's episode, I'm going to give my thoughts on financial advice for those of us under 50, why it cannot be the same as the advice that our parents get and some simple things that can make a huge difference over time. And don't forget to subscribe, follow, add to library so you can stay up to date on all future episodes. Let's get started.

Intro (01:02):

You are listening to advise with Rick Luchini.

Rick Luchini (01:06):

I know what you're thinking. Financial planning wolf sounds like something rich people do in a conference room with Mahogany table and a bunch of big leather chairs. Or maybe your parents did that thing that one time right before they retired. They wanted you to take a look at that huge three ring binder that had hundreds of pages of charts and graphs and explanations in it. After all, they paid a lot of money for it and they were excited. Planning for retirement, how much money to spend, tax planning, all that sort of stuff. How could that really translate to you in your thirties and forties or your adult kids if you're listening to this in your older, really doesn't, planning in your thirties and forties should be completely different mindset than that of a pre or post retiree. Focusing solely on retirement can be a waste of time at this age. The amount of assumptions that need to be made in order to get an output that far down the road leaves you with maybe some ballpark guesses, but nothing really accurate enough to make decisions on. Unfortunately, financial planning has become synonymous with retirement planning.

(02:37):

I have some thoughts on why that is. I believe it's because most of our industry charges based on the amount of money people have, and let's face it, our parents have more money than us, so they're are a better target market. Financial planning isn't retirement planning, not for 30 and 40 year olds. So what should you be doing? Where can comprehensive advice make an impact? Well, let's take a look at your employee benefits to start. Your biggest asset likely will be, if not already, is your 401K. Do you know if you're putting enough in it? How about how it's invested? Is it allocated correctly? That seems important enough, right? You know that thing that you're going to be depending on from 60 till death to pay all of your bills and support your lifestyle, how that thing is invested, it's pretty important, but I bet you're not paying a whole lot of attention to it. How much of an impact might that make? I can tell you it's a pretty damn big one. Choosing the right health insurance, life insurance, guidance on trust and wills, savings for your kids', college, secondary education, future endeavors, whatever they might do. Do you have any debt? Do you have a clear path on how to get out of it?

(04:19):

Which credit card or student loan should you pay first based on the current situations right now, should you buy your next car or lease it, refinance the mortgage, take a home equity loan. All these financial decisions you are making or not making every single day are dramatically affecting your short, medium, and long-term financial health, yet you're not really paying a whole lot of attention to it because it's not retirement planning. Okay? It's very important, and I believe the only reason you're not paying a lot of attention to it is because big companies aren't soliciting you to do so. You don't have a million dollar portfolio that they can charge you 1% fee on and then give you that advice so they ignore you, but these decisions make a huge impact down the road, bigger than the decisions that your parents make, and I'm going to tell you why time. You have a lot of time for these minor decisions to compound and make a huge impact. Lemme give you an example that's relevant right now. For me, it's October just starting to get into the full swing of my passion, which is archery hunting, and something that I notice when I'm tuning my bow in the backyard

(06:06):

Is that if I move my sight one 16th of an inch and I shoot my bow up close at 20 yards, there's really no difference. You can't tell the difference. Now, if I step back to 50 or 60 yards, that arrow is going to hit off-center a good five or six inches at least. Why might that be? Because of time. The amount of time that that change has to affect the arrow is significantly longer at 50 or 60 yards than at 20. It's in flight longer on that trajectory longer, and that is the same effect that decisions you make today are going to have on your finances in the future. So what's retirement planning for thirties and 40 year olds? It's getting your finances locked down in your thirties and forties, not focusing on your sixties and seventies because those proper decisions today, the extra quarter of a percent fee that you save over the next 30 years, the extra half a percent or 1% saved, putting the same dollar that you're saving right now in the right account and saving on taxes over the next 30 years, paying a little bit less on interest on your debt, whatever the minor thing or things are,

(07:57):

Make a huge impact when they compound year after year after year. So they might not seem like a big deal over the next five years, but they're going to make a big difference over the next 30 or 40. Here's a couple things that you should be confident in as it relates to your finances, cashflow, your savings rate, the investment allocation, and I will say not just the allocation, but the overall investment philosophy. What is your investment philosophy? What do you believe in? It's going to help you through the tough times. Stay invested.

(08:43):

Investment fees. Do you know what you're paying? Not just in your Roth that you make a contribution to every year, but in your 4 0 1 k? Did you know that each fund that you choose, your 4 0 1 k has a different fee, different expense ratio, and that can actually be changed based on how you're invested, your employee benefits. How do your stock options work? Your health insurance just changed. Which ones best for your family right now and did that change from last year to next year? All those other things. Tax planning, funding, vacations, and major purchases in the near term and in the future. Most importantly, maximizing today while not leveraging tomorrow. The most important thing to remember when you start taking your finances serious is today deserves as much attention as tomorrow already gets.

(09:46):

Think about that. That means you should be planning for your short and medium term goals, not just retirement. If you start having conversations with a professional and they're talking to you about when you're 70, they're missing the mark. They're projecting what they care about and what they likely do. How about planning for Disney? How about the new car you care about? How about the kitchen remodel you care about? There are financial decisions to make there, although some of them might seem obvious. Like I said, half a percent here, quarter of a percent there, a couple thousand bucks there over and over and over and over again. Makes a huge difference down the road. Plan ahead, but make sure you live for today. Don't be living for retirement. Here's another thought before I wrap this up. For folks our age in a digital world where we're working remotely, maybe have side gigs, social media, all these different things available to us, don't be so sure that your retirement has to look like your parents where you work the same job until you don't do anything anymore.

(11:20):

I'm already seeing this with the folks in their fifties where we're starting to plan for a phase out rather than a cold Turkey retirement. If you're a professional, you have value, you have intellectual value, and maybe you're going hard now, but when you're ready to start slowing down, there might be a position that allows you to slow down and still generate an income. Maybe it's at the same company, maybe it's a different one. Maybe it's in a different industry. Maybe it's part-time consulting. Maybe it's something that you actually have a passion for but didn't want to risk making a living on. Now you do it in your quote, retirement. There's a lot of things to consider down the road and focusing a hundred percent on your retirement and your thirties and forties. You risk missing a lot of the things that you can and should be doing today. I'm not saying blow your money irresponsibly and forget about the future. I'm saying plan for those short-term things, have the experiences and know which ones you can't do or you have to put off, but focus on now and making the right decisions now and that retirement thing will be a lot easier when you start planning for it. Thanks for listening. Talk to you.

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Content Disclosure: Luchini Financial LLC is a registered investment advisor. This content is provided for informational and educational purposes only and is not intended to be personalized investment advice, nor a recommendation to buy or sell any investment. Luchini Financial works closely with each client to gain a full understanding of their unique situation prior to rendering advice. The information contained herein is derived from numerous sources, which are believed to be reliable, but not formally audited by Luchini Financial. Information may include statements which are time-bound and subject to change without notice or opinions, which may not come to pass. Please consult Luchini Financial with any questions.

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