Being flexible in life, and in financial planning

If there’s one lesson we’ve learned from the pandemic, it’s how to be flexible. Whether your life was completely upended, or barely impacted at all, there’s no question that the world around us has shifted dramatically in the last 13+ months. When this all began, many businesses and even industries were forced to pivot and engage with their audiences in a new way.

And as individuals, many of our lifestyles changed significantly. We may have experienced one or more of the following:

  • Working from home 100% of the time, which for many people led to the purchase of a bigger home or renovations of an existing home.
  • Radical changes to spending, such as reduced/eliminated travel, gas, parking, eating out and entertainment costs.
  • Perhaps most profoundly, a reexamination of what is most important to us and whether we want to make any shifts, professionally or personally.

How does this relate to financial planning?

There are a couple of parallels here. You may have noticed that I do NOT offer a standalone/one-time financial plan. Why not? It’s TOO STATIC! One of the primary reasons I structured my engagements with clients to meet on an ongoing basis: life changes ALL THE TIME. 

In the last year, how many of these things have you experienced?

  • Major house repairs/renovations, 
  • A large bonus or salary increase, 
  • A job change or new business opportunity,
  • Significant changes in your spending (see above, but largely travel/entertainment=down, home improvements=up),
  • A refinance of your primary mortgage, reducing your monthly payment amount,
  • An IPO, merger or other significant change at your employer,
  • Hiring a nanny/educator or beginning private school for your child(ren).

There’s certainly some value in a one-time 75-page plan, but it’s fairly limited, in my opinion. I prepared some of these standalone plans for clients in January and February 2020 (at my former firm). Many of these were totally obsolete within a couple months.

The process of financial planning is just that: a process. And a highly dynamic process at that. The exercises I work through with new clients, around goal-setting and defining values, are likely to be revisited and reviewed every single year. While some people are unwavering and single-minded in their focus, the vast majority of people I’ve worked with have shifting priorities.

Walking the walk

If anyone had told me 18 months ago that I would quit my job (which I very much enjoyed) to launch my own firm, I would never have believed them. Here I am, almost 9 months in with nearly 50 clients and tremendous growth; you better believe my situation is different. My cash flow has changed profoundly, and I’ve had to thoroughly revise my plans for everything from work-life balance to retirement. And that’s OK! In fact, it’s more than OK. Among other things my job satisfaction is dramatically improved. As I said, I liked my former job, but the ability to create something from the ground up is satisfying on a different level. 

My financial situation has changed and I’ve had to incorporate those changes into my “plan”. Again, I don’t love the idea of a static plan, but having something that one can adjust as needed is much more impactful. Imagine working with a planner and having an annual meeting cadence. In my case, my life a year ago could not look more different. Would my planner be able to adapt to my changing circumstances mid-year? Or would that have prompted a response like “we’ll review the changes at our next meeting” (in, say, 9 months)?

Takeaways

If you’re looking for a financial planner, I’d encourage you to consider working with someone who has this mindset around the dynamic and flexible nature of this work. Financial plans are not set in stone. If the planner or firm doesn’t have a mechanism to easily manage updates and changes to “the plan”, I’d consider continuing to search. 

If you already have “a plan”, remember that, while useful, it is likely to need regular updates and modifications. As planners, we make assumptions all the time: about inflation rates, and longevity and all sorts of things which are ultimately “unknowable”. Our job is to react to changing information and help you continue to move forward with confidence and reassurance that your money is set up to help you live your most fulfilled life.

Life Planning aka “Financial Planning Done Right.”

When I was about 13 years old, my mother attended a weekend spiritual retreat, and I tagged along with her. While on the retreat I had a powerful experience in the woods and these words came to me: “You will become.” 30+ years later, I am reminded of that experience and focused anew on what I will bring to the world.

Over the past couple months, I have had the good fortune of attending two training courses led by the Kinder Institute for Life Planning; first the 7 Stages of Money Maturity and then a four-day EVOKE Life Planning training. To say these experiences were powerful is an understatement. The training process is specifically designed for financial planners and promises to help “uncover your clients’ most exciting, meaningful, and fulfilling aspirations and engage them in the work of creating their own vibrant futures, based on a solid financial architecture.”

One of the key components of the life planning process is to answer George Kinder’s 3 questions:

1) I want you to imagine that you are financially secure, that you have enough money to take care of your needs, now and in the future. The question is, how would you live your life? What would you do with the money? Would you change anything? Let yourself go. Don’t hold back your dreams. Describe a life that is complete, that is richly yours.

2) This time, you visit your doctor who tells you that you have five to ten years left to live. The good part is that you won’t ever feel sick. The bad news is that you will have no notice of the moment of your death. What will you do in the time you have remaining to live? Will you change your life, and how will you do it?

3) This time, your doctor shocks you with the news that you have only one day left to live. Notice what feelings arise as you confront your very real mortality. Ask yourself: What dreams will be left unfulfilled? What do I wish I had finished or had been? What do I wish I had done?  [Did I miss anything]?

I’ll be honest; I had heard these 3 questions many times before in podcasts and articles about life planning. I didn’t feel particularly compelled by the questions. In the course of the training, I sat down and actually answered each of the questions for myself. It was question 3 that had the biggest impact on me. My answer, simply, was “I’m not done becoming!” Actually there was a bit more to it than that, but the basic message was to continue the work I am doing with Xena Financial Planning and help my clients live their most fulfilled lives.

In the four-day, intensive training each of us was paired with another planner. We spent the next several days guiding each other through the EVOKE (Exploration, Vision, Obstacles, Knowledge & Execution) process. Each member of the group was able to fill the role of both client and financial planner. 

My experience was exhilarating. Every single member of our group left feeling energized and inspired. Not only am I motivated to go live my own life plan, I am thrilled to bring this into practice with my clients. 

Investments, tax planning and cash flow are certainly part of this process; but they are usually less important than your family, friends and true passions. With a more profound understanding of your goals, we can devise finely tuned strategies to help you make those goals a reality.

In our next meetings, I will work with each of my clients to design the life you want to live and take steps to start living it right now.

Open Enrollment is Here Again!

It’s October and that means pumpkin spice lattes, Halloween decorations and…open enrollment time. 

For many of us, this is the month when we have the chance to make decisions about our health insurance, life insurance, FSA/HSA accounts and more. How do you sort through all of it, and more importantly, how do you make sure you’re taking full advantage of your employee benefits?

401(k) match and the After-tax 401(k)

First and foremost, I hope you’re taking FULL advantage of your company’s 401(k) match. This is something you can’t afford to miss out on. If your company matches 3%, make sure you are contributing at least that much, or you’re leaving money “on the table”. Of course, I’d like it if you were saving the maximum amount to your 401(k)/403(b) but this is a bare minimum.

Many companies are now offering an after-tax 401(k) option as well: Facebook, Microsoft, Amazon and Salesforce all do (to name a few). I wrote a recent article on how this option works. If you’re already maxing out your 401(k) contributions, I highly recommend taking advantage of the after-tax option (with an in-plan conversion to Roth). 401(k) contributions can be changed at any time, so this one isn’t tied to open enrollment (it’s just a good reminder to double check your contributions).

Health Insurance

You’re faced with multiple options regarding medical, disability and life insurance. The decision around which health care option to choose can be complex, and depends on your health status. That said, if your company offers a high deductible health plan (HDHP), it’s worth considering. If the HDHP is an option, it is usually accompanied by a health savings account (HSA). HSAs are a fantastic way to save and the account balance can be invested with NO future tax due. EVER. Not only that, many companies will automatically contribute $1,000 or more to your HSA every year.

HSAs deserve a post of their own, but if you have access to one, and you’re reasonably healthy it may be a great option. Unlike a flexible savings account (FSA), you do NOT lose the money you contribute if you don’t spend it. If you are using an HSA, I recommend contributing the maximum per year.

Disability insurance

Disability insurance is one that is often overlooked or misunderstood. I sincerely hope your employer offers disability insurance, and if it’s optional, PLEASE opt in. Disability insurance is right up there with health insurance in terms of importance. If you’re young, your future earning potential is one of your biggest (if not THE biggest) assets. Disability insurance, specifically long-term disability (or LTD) protects you in the event you are unable to work for a period of time. 

Disability insurance is fairly complicated and there are all sorts of terms that may sound foreign if you’ve never encountered them- own vs. any occupation, elimination period, percentage of replacement income. In a future post, I’ll dig into those details further. In the meantime, if your company offers LTD, sign up for it! The ideal coverage will include the following provisions:

  • replace 60% or more of your income, 
  • have an elimination period of 90 days, and 
  • cover you for anything that prevents you from doing your own occupation.

One of the local colleges in Seattle (University of Washington) recently offered a special one-time open enrollment for LTD with NO medical review. This is HUGE. It meant that individuals who were previously denied coverage due to their medical history could sign up. If this happens in your company, I cannot stress enough, that you should sign up!

One final thing to be aware of, especially for those in tech who a) have high salaries and b) receive a significant portion of their income from equity comp: your coverage likely will be pretty limited. For instance, if you work at Amazon and your annual salary is $160,000, but you receive another $250,000 in RSUs, the disability coverage is only replacing salary income. If you rely on that $250,000 in equity compensation, you may want to consider a private policy.

Life insurance 

I generally prefer clients to have private term insurance, which isn’t tied to an employer. But your employer provided insurance can be an important component, and often does not require underwriting (in other words, they may not look at your medical history). It’s worth speaking to a financial planner to confirm how much life insurance you need.

Other benefits

Companies are offering a whole range of cool benefits these days, which you might not even know are an option. 

  • Access to legal insurance. This can be a great way to get a basic will completed. 
  • Discounted movie tickets or passes to Disney can also be a fantastic benefit (if and when we ever want to actually GO to Disneyland or a movie again). 
  • If you’re planning to have children, ask about the company’s maternity/paternity leave options. 16+ weeks is becoming more common with everyone from Deloitte to Lyft expanding their leave policies.
  • Financial planning benefit! I might be biased, but I love to hear about companies that reimburse for financial planning (Thanks, Nordstrom).
  • Travel stipend. (hmmmm. Maybe I should get a job at Airbnb!)
  • I recently learned that Goldman Sachs will pay for gender reassignment surgery. I had no idea they were so progressive. Go GS!

While open enrollment is the obvious time to review your company’s benefits, it’s a good idea to ask about the full breadth of benefits any time you are interviewing for a job. 

Xena Financial Planning is Born!

Xena Financial Planning blog introduction

Welcome to Xena Financial Planning (Xena FP).

I am so very glad you are here! Allow me to introduce you to my new firm.

I honestly did not set out with the intention of creating my own practice. In 2014, when I first entered the industry, I was eager to learn from more seasoned planners and get as much experience as possible. Fast forward 6 years and I feel called and emboldened to offer a new kind of planning firm.

My focus is on women (and their partners) in the early to middle stages of their careers. Specifically, I absolutely love helping clients who receive equity compensation as part of their income. It’s extremely common in the tech world and while there are plenty of brilliant people working in tech, many of them do not have the time or inclination to manage the influx of stock. I also offer a unique perspective and advice for women who own small businesses, based on many years of working in finance for small businesses and start-ups.

Not only do I feel compelled to serve a more specific demographic, I can improve on the process, which is in dire need of a facelift. The world of financial planning is in the midst of a seismic shift; the way that advice is delivered is dramatically different from the way prior generations received it. 

What I love about financial planning is the relationships and the process. I’m not overly focused on investment performance, nor do I plan to deliver a massive financial plan which might be better used as a doorstop. In my view, financial planning is a highly dynamic process, with many moving pieces that are constantly in flux. At Xena FP, I work with my clients on an ongoing basis, to help them navigate whatever life delivers. I strive to both educate and empower clients as we develop a collaborative relationship.

My desire to specialize, as well as build a process that works for our highly volatile world, led me to found Xena Financial Planning. Largely based on the fact that I founded the business in the midst of a global pandemic, my intention is to be 100% virtual. One of the things I have loved about the pandemic is not having to spend a lot of time in traffic; I am sure my clients can appreciate that! I’m so happy to have you here for some part of the journey. Together, we will build something extraordinary.