Join Tom for a CE event on July 31!

On July 31, Financial Planning Advocate, LLC will be hosting a CE event with Tom Tillery as the presenter and will address the subject of The Replacement of a Life Insurance Contract: The Good, The Bad and The Ugly.

On a rare occasion, a life insurance contract will have to be replaced. The Internal Revenue Service mandates strict rules as to the replacement and design of the new life insurance contract. Financial advisers need a keen awareness of the applicable sections of the Internal Revenue Code; the various types of life insurance contracts; and the unique features and benefits of each contract type. This presentation will walk the adviser through the replacement process and illustrate the “finished product” with a case study.

The Webcast will be held on Friday, July 31, 2015 at 1:30PM EDT. The course is approved for one hour of CPE and CE. To register for the class, please email us at hello@ttillery.com. Virtual Seating is limited.

Risk Transfer in the Financial Planning Process

No man is worth his salt who is not ready at all times to risk his well-being, to risk his body, to risk his life, in a great cause. —Teddy Roosevelt

I have been looking for an opportunity to use this wonderful quote by Teddy Roosevelt. It is from an article in the New York Times (12/08/1915). The article is a summary of his remarks for the Harvard Advocate in which he promotes the need for military curriculum at schools of higher learning.

The purpose of today’s posting is not to advocate for military curriculum, which I do support, but to discuss risk management in the personal financial planning process. It is human nature to seek security. Security may be defined as the absence of risk. Once the basic needs of food, clothing, and shelter are met, the next need on the list for most of us is a sense of safety/security. [Read more…]

Nothing ever becomes real till it’s experienced – Part 3 in an 6 part series

“Nothing ever becomes real till it is experienced – Even a proverb is no proverb to you till your life has illustrated it . . .”

This quote by John Keats has been a part of my life for the last four decades. And I have been waiting for a venue to apply it. My series of blog postings on the personal financial planning profession has provided just such an opportunity. The quote is from a letter by Keats to his brother and sister, George and Georgiana. The letter is long, but the sum of the matter is that knowledge acquired from books has little merit until actually applied in life.

And in point of fact, his observations have been supported by several studies and decades of research. The “sum and substance” of the studies is that “experts” in their various fields are experts as a result of the time they have put into their profession. This correlation between “time in grade” and superior performance is across all disciplines.  Everyone from a chess grand-master to a physician benefits by time practicing their profession. [Read more…]

Why can’t we be friends? Part 2 in an 6 part series

It was in 1975 during my enlistment with the U.S. Air Force that I first heard the song “Why Can’t We Be Friends?” by the American Funk band War. The song was the title track of an album, which bore the same name. This song, like many by the band, was socio-political in nature and addressed the senseless animosity between races in the United States. Also, NASA played this song was played during the linking of U.S. astronauts and Soviet cosmonauts for the Apollo–Soyuz Test Project.

I would like for all of the various financial planning credentialing entities to hold hands and sing: “Why can’t we be friends?” The needless bickering and infighting is senseless, without purpose, and detracts from the profession. All of this ‘chest thumping’ about ‘my credential is better than your credential’ is a waste of their membership’s valuable resources (dues). [Read more…]

Use credit wisely and build a strong reputation

Establishing credit is a great deal like establishing a reputation. Ben Franklin said “It takes many good deeds to build a good reputation, and only one bad one to lose it.”  Establishing credit, whether a consumer is just beginning, or starting over, can be daunting. However, I have seen that with a little knowledge and a few simple steps a consumer’s credit may be established in short order.

The first step in the consumer’s journey is to check their credit report. The credit report is the reputation that a consumer has built over time by those “many good deeds”: timely payments on credit cards, car loans, mortgages and student loans; payment of rent or utility bills; responsible management of a checking account. These items are all a point of reference for a credit report. [Read more…]

Debt & Moderation

I typically begin a posting with a quote. Today’s posting on the need for, and the responsible use of debt, provided several challenges in the quote department. One challenge is current popular opinion which states that all debt is Biblically and morally wrong. The second challenge, and perhaps very revealing, is that quotes on the responsible use of debt, outside of economic circles, is very limited.

In our practice we use debt with our clients in a variety of ways: asset protection, short term cash flow needs, and as an investment. The ‘true north’ in the application of debt in financial planning is moderation. Moderation as a quotable phrase provided a more substantial harvest. [Read more…]

Begin with Personal Financial Ratios

In his ground breaking self-help book, The Seven Habits of Highly Successful People, Stephen Covey presents an approach to being effective by attaining goals and aligning oneself to “true north” principles of character. Habit two teaches “Begin with the End in Mind.” Whenever I teach students or clients the importance of personal financial ratios, I always make sure that I share this principle. The personal financial ratios are a goal to strive toward and a goal to be obtained.

The first step in the process is to create what is commonly referred to as a budget. Susan Tillery, CPA / PFS, CFP® has coined the phrase “spending plan.” I find this title to be very empowering: it emphasizes choice in spending decisions. Once the spending plan is completed it should be reviewed in light of the following financial ratios. [Read more…]

A Voice for Moderation

“In life,” said he, “these were so squint of mind

  As in the handling of their wealth to use

No moderation – none, in either kind.

—The Comedy of Dante Alighieri, L’Inferno,

In his tour of Hell, Dante confronts those who have been condemned for the sin of greed; and in particular, greed with regards to wealth. He describes the greedy as being closed minded and having no moderation. It does seem that wealth has that effect on many.

One of the basics of personal financial planning is moderation on both the planner and the client’s part. Some synonyms for moderation are: self-restraint, self-discipline and self-control. In recent years, as I have reviewed the work of other personal financial planners, I have seen a lack of moderation. [Read more…]

The Buck Stops Here!

The Recession of 2007 – 2009 generated a great deal of blame and finger pointing. In my mind I visualize the recession as a “multi-car accident” with everyone fleeing the scene and pointing their fingers at the “other guy” as the responsible party. No one hung around to be accountable.

Actually in U.S. history, no one is more accountable than President Harry S. Truman, the haberdasher from Independence, Missouri. He inherited the “multi-car accident,” World War II, the Cold War, and global inflation. But on his desk was a reminder of a strong truth: “The Buck Stops Here.” Many do not know that prisoners in the Federal Reformatory at El Reno, Oklahoma, made this sign. On the reverse side of the sign are the words “I’m From Missouri.” [Read more…]

Unbridled Optimism!

I must confess I am an unbridled optimist. I have always been the glass runneth over type, as opposed to a half full or half empty—kind of person. At social events, I will not shy away from the “doom and gloomers.” I usually confront them with a positive comment. The conversation goes something like this: “I can’t wait till so and so is out of office because they are ruining the country.”

My response is, “the only way to ruin a country is for its citizens to abandon it.” William James said, “Pessimism leads to weakness, optimism to power.” Dietrich Bonhoeffer felt that “The essence of optimism is that it takes no account of the present, but it is a source of inspiration, of vitality and hope where others have resigned; it enables a man to hold his head high, to claim the future for himself and not to abandon it to his enemy.”

Here is more good news to confront the “naysayers.” The IRS has just released the “Fall 2013 Statistics of Income Bulletin.” And the news is good—go figure. For tax year 2011, taxpayers filed 145.4 million individual income tax returns. This is an increase of 1.7 percent from tax year 2010. Even better, the adjusted gross income reported on these returns is up 3.5 percent from the previous year. And the icing on the cake is taxable income for 2011 rose 4.4 percent. And knowing the taxpayers predilection for understating income and overstating expenses, I would say the news is even better.

So, has the U.S. government rescued it citizens? I would say, “No.” It’s the citizens of the United States that not only rescued themselves but saved the planet during 2007 – 2009. More particularly, it was the U.S. small business owner, who regardless of economic circumstance—famine, war, or recession—is able to make a living for themselves and their families.

If you are looking for optimism to begin the New Year, then look no further than your neighbor and all those who embrace the “can do” attitude of America. And the next time bad news is heralded at an event, share some good news. Automobile sales are up. Housing sales are up. We have a surplus of oil and we are about to export natural gas. Just being an American is cause for optimism.