My Comments: What would you do if you just found out you were getting an extra $300,000? And to whom is this question posed?
The article appeared in a news feed on my phone this morning as I was drinking coffee and getting ready for the day. You can find it HERE.
I’m sharing it with you for other reasons, none of which should imply I’m about to have an extra $300k, because I’m not. Unfortunately.
Since it appeared in a public forum, there are financial advisors across the country, who when asked this question by someone, will immediately think of answers like these:
1. Buy stocks and bonds (I make a commission.)
2. Buy an annuity (I make a commission)
3. Invest in a managed portfolio (I earn a fee or % of the assets invested)
4. Buy a portfolio of mutual funds and let me manage them (I make a commission and a fee)
5. I’m a realtor also, so buy a property and hope it appreciates (I make a commission)
6. Buy a life insurance policy and gain tax advantages (I make a commission)
7. Etc., etc., etc….
To be fair, some of those thoughts crossed my mind since for the past 41 years, I’ve called myself a financial advisor and earned a living from commissions and advisory fees.
On the other hand, offering someone a litany of options, all of which might be valid choices, begs the question that should immediately follow the above question, which is “What are your strategic goals?”.
This implies that someone has developed and articulated their strategic goals, all of which surface when you ask yourself certain questions. For example:
1. I’m a long way from retirement, so do I want to spend it now or do I want to grow it and spend it in the future?
2. I’m close to retirement and this money will help a lot but I have an immediate need to pay down debt. Should I use it for that or perhaps pay off my home mortgage?
3. How much money do I make now and how significant is this $300k in the grand scheme of things when it comes to living my life the way I want to?
4. I know that receiving this money has no current income tax implications for me but if I successfully turn it into $400k, what are the future tax implications?
5. Does having this money present opportunities to limit other existential threats to my financial future like bankruptcy, my future health needs, living too long and being broke, paying more taxes than I need to pay?
6. How much risk am I willing to accept without getting really nervous?
7. Etc., etc., etc….
The lesson learned by me from the article is that there are people who are only in the ‘answer’ business and there are people in the ‘question and answer’ business and if this happens to you, you should first find someone in the ‘question and answer’ business that you can trust and enjoy working with, who will help you first define your strategic goals.