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There is one thing that can helps you weatherany storm in life – and that’s a financial plan. 

While it’s normal to worry about when things don’t go well (whether it’s a job loss, a pandemic, or both), there are strategies you can use to combat the stresses of finances with rationality rather than emotions. 

In this episode, I discuss why strategizing for tomorrow eases your uncertainty today and the lasting impacts of a financial plan (no matter what happens). 

Show Highlights Include:

  • The three ‘Menahem Yaari’ pillars of truth you need to plan your financial future and preserve it during uncertain times. (1:25)
  • How to avoid the ‘fear and greed’ cycle of spending money and treating your finances illogically today.  (4:50)
  • How to save for emergency funds and pay down debt (without it feeling like a complete burden).  (8:40)
  • Why having a financial plan doubles your income and drives the lifestyle you want (even if you don’t your goals yet).  (12:06)

To schedule your complimentary retirement track review, head to https://onecapitalmanagement.com. You can also call us at 805-410-5454 or text the word ‘TRACK’ and we’ll reach out to you.

Read Full Transcript

Welcome to Make your Money Matter, the show that aims to change the way we think about financial advice. So, you can make better decisions.

Brad Barrett is a managing director and partner at One Capital Management, a wealth management firm serving nearly 1500 clients nationwide. With over $2.5 billion in assets, they’re a group of advisors dedicated to ensuring their clients achieve their investment and retirement goals. And now here's your host Brad Barrett. [0:26.1]

Brad: Welcome to Make your Money Matter. The show for truth seekers who are fed up with outdated financial advice. My name is Brad Barrett, I'm a Managing Director and Partner here at One Capital Management. And it's my goal on this show to reaffirm what you know, to be true and to challenge the advice you may have been told is true. Here at One Capital, our mission is simple to help our clients here at One Capital Management and you listeners live well and not just survive, but thrive. Friends, we live in a world where we are consuming information at warp speeds, and it's easier than ever before to access information yet more difficult to find truth. And that's what we're after because after all your money matters and knowing how to plan your financial future is vital to your financial success. I love the topic we're gonna be discussing today. As I talked to many of my colleagues here at the firm and our advisors of planning in an uncertain world, specifically planning for your financial future in an uncertain world. And at any point throughout today's program, if you hear something that prompts a question, a question about your plan that you may have with another advisor, or if you don't have another advisor, and you're hearing this podcast today, give us a call. You can call us at (805) 410-5454. You can also text us. You can text the word, T R A C K to (805) 410-5454 and we'll reach out to you to set what we call a retirement track review meeting, complimentary free of charge for you to take a look at where you are in this lifespan of retirement planning and to see if you're on track for the goals and objectives that you want to have in retirement. [2:09.8]

And if you're near one of our offices, come on by right here off Leslie Boulevard off the 101 Freeway. But if you're not near one of our offices, you can do what hundreds of others have done and get your tailored retirement and investment track review meeting without ever leaving your living room. That's right. We've had clients throughout the country and especially all throughout through Ventura and LA County and even Santa Barbara County, many of them had never even stepped foot in our offices. So, if you haven't had your investment return looked at lately or your financial plan reviewed in the past year or so or any other questions as you relate to the topic or me going through today on planning and financial planning in an uncertain world, give us a call (815) 410-5454, or go to our website at onecapitalmanagement.com. [2:53.7]

So, as we talk today about uncertainties, the word randomness comes in. In life friends holds randomness. Let me give you an example. I grew up in thousand Oaks, California. My wife grew up in Santa Barbara, California with 300 million Americans, roughly walking around this great nation of ours I would suggest that the probability, even as close as we may have been in location, the probability of my wife and me ever meeting was actually pretty low. Put another way, the odds were very high that we never meet, that our paths would never cross. In fact, I bet there was more than a 99% probability that we never know each other even existed. Yet, we met fell in love, had two beautiful kids, married in spite of all the probabilities. So, life indeed is built with randomness. Random, unpredictable unforeseen events can defy the best probabilities, just look into 2020 and what happened. Randomness can baffle and deride probabilities of success, turning some worlds upside down, flying in the face of what once seemed so probable. [4:00.4]

There's a professor Menahem Yaari, he's a distinguished economic scholar who was taught at Stanford and Yale. And one of the pillars of his economic philosophy is that when making plans for the future, a person must account for uncertainty. And as I've learned in my 15 years in this business, in the financial services industry, the only way to combat uncertainty and randomness is proper planning and active management. So, from the great recession or even the great depression to today's health crisis, we're reminded that there are things that are just out of our control. Uncertain times come without an invitation. Times that try men's souls usually appear without advanced notice. So today we're gonna be talking about how can you better prepare so, these uncertain times don't destroy your finances. What can you do to build your house on a rock so that when that storm comes, it will still be standing. [5:00.2]

People without a stable financial plan really tend to, in my experience, jump on every moment in the stock market, they buy stocks because everyone's buying and they selling them because everyone is selling. Warren Buffet calls it fear greed cycle. If you’ve heard anything about Warren Buffet, he's got a lot of quotes around this. People without a financial plan, don't know how to react to uncertainties because without a plan, they typically are acting more emotionally than rationally. Every inversion of the yield curve creates fresh anxiety. They are tossed around like a read because they don't have a strong foundation. Some people act on impulse or yield to the crowd mentality. Unfortunately, some people include 72% of Americans. Charles Schwab’s May, 2019 modern wealth survey found that only 28% of Americans have a financial plan while 26% don't have one at all. And without a solid financial plan, I really feel it's impossible to keep your head up when unemployment skyrockets high inflation or recession hits. It's difficult for someone with zero emergency funds as an example, to handle a job loss or a household with less than a thousand dollars in savings to endure a recession. [6:13.7]

So, embracing wealth planning and financial planning is of utmost importance. Some interesting statistics from the Charles Schwab report I mentioned show why financial planning really is the golden truth here. People with financial plans per this report are 70% more likely to pay their bills and save every month compared with those without a plan. Another point of reference here was people with a financial plan are 68% more likely to have an emergency fund than people without a plan. And those with financial plans are 74% more likely to automate a portion of their income into savings. And lastly, the note I want to bring from this Charles Schwab study what's financial planners exhibit better investing habits. The survey shows 85% of planners who invest regularly rebalance their portfolios and 75% consider risk tolerance when investing so people with written financial plans have a greater feeling of financial stability, 63% compared to those without a plan. [7:15.8]

When you have a solid financial plan, you're not always swayed by every movement of the stock market or left at rock bottom by every recession, if you will. So here at One Capital Management with our clients, my discussion at the top of this podcast and on our radio program, if you listen to that every week as well, I talk about not just living to survive, but thrive. And to bring some analogies in here for a second home builders, as an example, can't control the rain and the storms, but they can build a strong foundation. So, their houses can withstand adverse weather. A coach cannot prevent an important player from being injured, but he or she can create a star-studded reserve team so that they're as a replacement on hand. Organizations, such as ours here at One Capital Management now have risk management offices and risk officers who identify potential risks and put controls and systems in place to mitigate those risks. [8:11.9]

These examples, as rudimentary as they may be, show that while we cannot control the events and circumstances, we can create an execute plans that help us stand firm when adverse situations in uncertain times arise, which they will. So, I wanted to go through five ways that you can control your financial life in uncertain times, and is, as I was thinking about this podcast today, you remind me of an article I read last May from Goldman Sachs around this same topic. And these five ways are really some basic principles of financial planning that can help you get your financial house in order, especially with so much uncertainty surrounding the economy. There's no better time, and why I thought this podcast today, planning in an uncertain world was so timely. There's no better time to review the basics of how to take control of your finances. So, let's dive in. [9:02.0]

Number one and then not necessarily any priority order, but number one, build an emergency fund. Now for many clients saving money while trying to also pay bills and deal with bed at the same time can feel like you're pushing a boulder up this large Hill, but you can do it. The first step towards any financial goal is probably the hardest step to take just as in life. That's because sometimes we like to think up all the ways, why something won't work rather than just simply starting. So as a certified financial planner, myself, the designation, we talk about some reference points. So, in the CFP standards, a typical reserve fund or emergency fund would be cash on hand for three to six months of overhead. So, if your household overhead was, let's say $10,000 was your mortgage payments, all the stuff that you needed in your lifestyle to live and take care of your loved ones was $10,000 a month. You want to have somewhere between 30 and $60,000 of emergency funds. Again, more of a rule of thumb, but a good frame of reference when it comes to the topic. Number one of building an emergency fund. [10:07.9]

Number two, start saving for retirement. We all can dream that retirement will someday come, but starting now is really of utmost importance. And it may seem odd to start in a year if you're newly into the work-life and listening to this podcast right now to start. But it is a big difference when it comes to your timeframe of being in that, what we call accumulation phase, that working phase of your life. So, starting your retirement plan and finding a good investment manager, a good advisor to help you with how much you should contribute, you know, where you should place your assets inside of there. That's what we do here at One Capital Management. But finding that trusted partner is really important, just as important as making the first step, which is actually setting up your retirement plan and finding that advisor. Like I mentioned to sit with you to help you understand the contribution limits, how much makes sense for you, your overall cashflow, all stuff that we here at One Capital Management, our advisors put together for our clients. [11:03.5]

Number three, pay down debt. Now on this show, Make Your Money Matter on our podcast. In fact, in a couple of weeks, I'm going to be having a whole show on this of how to manage debt of any amount. But number three, on my list of five things to put together in your planning during uncertain times is to pay down debt. Debt can be a burden, and there are a few ways to tackle debt. And I'll talk about this more in a couple of weeks on our episode, so stay tuned. You may have heard of the avalanche method, right? I know a lot of people talk about the snowball effect, where you target and knockout debt with the highest interest rate first, while making the minimum payments on other accounts, this can help actually reduce the total amount of interest you pay over time. So, if you've heard of that before, give us a call, we can help you walk through that. But paying down debt is a great way to start and simple things like even setting up automatic payments, which I know sounds rudimentary to a lot of people, but a lot of people we see haven't set those up and are managing their cashflow, especially our business owners who really don't know where their cashflow is coming from. So, debt, isn't it important part to your overall planning. [12:05.7]

Number four, and go with me here, write down your goals and make a plan. As simple as that statement is, I put this list together and was reading some articles around other colleagues with the same kind of ideas and here at One Capital's I was talking to my colleagues here and my advisors here and what I wanted to show and share on our podcast today was writing down your goals and making a plan is really the most important first step. And as I mentioned before, years ago, I was exposed to a really interesting study that focused on the 1979 graduates of the Harvard Business School. And the graduates were asked if they had, and I'm quoting clear written goals. What the study found out was only 3% had written goals and plans, 13% had goals, but they weren't really in writing and 84% hadn't set any goals at all. And why I'm sharing this study again here today is what I found absolutely astounding was 10 years after the initial study, the same Harvard MBA students were interviewed again and here's what it was concluded. The 13% of students who had goals, but hadn't committed them to writing were earning on average twice the amount of as the 84% who hadn't no goals at all. The 3% of students who had written goals were earning 10 times as much judge as the other 97%. That's why I'm bringing it up. The differentiator is having written goals and plans to achieve them. So, believe it or not writing down your goals and making a plan and setting the systems in place to achieve those goals are very important. It's something we'll help you do at One Capital Management, we do it for our thousands of clients we are blessed to serve across this country with the over two and a half billion dollars in assets that we manage for them. One of the, the first things we do in our discovery process with our clients is helping them define their goals and objectives and ultimately getting to what we call our black book or wealth forecast that encompasses their entire picture and a holistic planning approach. And it starts with believe it or not writing down your goals and making a plan. [14:11.7]

And fifth and finally of the five points I'm trying to make today around planning in an uncertain world is ask for professional help. If you're new to finance or the financial services industry, or the financial planning as a whole its maybe a good time to consider getting in touch with a professor for help. I mean, financial planners, they can work with you to identify your financial priorities and review your overall situation. And as I mentioned before here at One Capital Management, our first process called our discovery process helps you define those goals and objectives. And you're listening here going, you know, Brad, you talk about all these goals and objectives, I don't even know really what that means, or if I have them, I want to say this very clearly. We have such experienced advisors on our staff that help and know how to understand and ask the questions to help you drive your goals and objectives. And they may not be all numerical. We define it as quantitative versus qualitative. We're going to get the details to be able to build the plan for you, all the numerical data, the numbers, the assets, the income, the debt, we'll go through all that. Sure. But also, the qualitative goals, those life goals, those interests, that's important to us just as much as the numerical data is because ultimately when you get to retirement, which I know for some listening here right now, that may seem far off, but the reality is it happens quickly and there's a lot that happens in between them. So, making sure we have cash on hand to weather storms, if you will, is a part of that plan. Building investments, to be able to understand how those investments will work for you both today, maybe in the near future and then ultimately in later, future is also massively important. And your, you know, your changes in routines in lifestyles, right, will adjust over time. So, having this plan, this is footprint, this base model to build into, build the trust with an advisor, to help you work through any of the changes in your life that also impact your finances is really the first place to start. And that's why I listed it here as one of the five planning ideas when it comes to planning in an uncertain world, which is ask for professional help. [16:19.6]

And if you want our help, give us a call (805) 410-5454. You can go to our website at onecapitalmanagement.com or you can text us, text the word track T R A C K and one of our advisors will reach out to you to set that time, to go through your goals and objectives as it comes to, as it relates to your investment management and your overall planning. You can text the word T R A C K to (805) 410-5454. Hey, thanks for listening today on Make Your Money Matter podcast. If you found today's show interesting, you can also check us out every Saturday morning on KV TA 1590 am on our radio program, airing at 6:00 AM and 10:00 AM every Saturday. You can also go to our website at onecapitalmanagement.com to find out more about me, our overall investment philosophy and our star-studded advisory team. Again, thanks for listening today, if you liked what you heard, subscribe. Let us know what you think and always remember, make your money matter. [17:17.4]

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