What Type Of House Are You Building?
By Rob Wrubel, CFP®, AIF®
An elderly carpenter was ready to retire. He told his employer/contractor of his plans to leave the house-building business and live a more leisurely life with his wife enjoying his extended family. He would miss the paycheck, but he needed to retire. They could get by. The contractor was sorry to see his good worker go and asked if he could build just one more house as a personal favor. The carpenter said yes, but in time it was easy to see that his heart was not in his work. He resorted to shoddy workmanship and used inferior materials. It was an unfortunate way to end a dedicated career. When the carpenter finished his work, the employer came to inspect the house. He handed to front-door key to the carpenter. “This is your house,” he said, “my gift to you.” The carpenter was shocked! What a shame! If he had only known he was building his own house, he would have done it all so differently.
So it is with us. We build our lives, a day at a time, often putting less than our best into the building. Then with a shock we realize we have to live in the house we have built. If we could do it over, we’d do it much differently. But we cannot go back. You are the carpenter.
Each day, you hammer a nail, place a board, or erect a wall. Life is a do-it-yourself project. Your attitudes and the choices you make today, build the “house” you live in tomorrow.
This story was given to me by a friend and colleague a few weeks ago when I was talking to him about the Blueprints financial planning process I have developed for working with families with special needs. So often, I see people put great effort into helping others, their careers and their extended families. So often, they forget to put the same passion into their own financial and personal lives.
This story is a great reminder that we need to put our energy and passion into building and creating the life we want for ourselves and for those in our immediate families.
Look for the warning signs that you lack effort and yield poor results in your financial and personal life. These signs blink loudly even if we choose to ignore them. Solid financial and legal planning will improve the outcomes you desire. We have a good idea of what life looks like when your special needs planning efforts pay off – reduced stress, increased wealth for you and your family, directed care for your special needs family member and succession plans to continue your efforts.
So what happens if you put little or no exertion into building a solid financial life? Here are some of the signs:
1. High and increasing debt
High levels of debt that continues to increase jumps to the front as the biggest warning sign for you. You cannot plan for the future when you spend more than you earn. You cannot prepare to care for your spouse, sibling or child with special needs if you leave a wreck of credit cards, mortgages and car loans for them to sort out. High interest payments take away the ability for you to put money into your family’s accounts to grow over time.
Those struggling with debt need to understand how each interest payment takes money away from their family today and in the future. They need to look ahead, set their sights on new and important goals and begin the work to increase income or live on less to chip away at the mountain of bills. Obviously, there are often circumstances leading the debt – medical bills, loss of a job, student loans that kicked started a career. These are almost always in the past. The time has come to address the past, embrace today and prepare for the future.
2. No emergency fund
Basic financial planning guidelines recommend families hold three to six months of spending needs in an emergency fund. Three months can work for people with stable employment that will not change. Longer times than six months could be useful for those in sales, entrepreneurs and anyone else with variable or changing income.
The emergency fund should be kept in a safe, easy to access, account. It should not be invested for growth like retirement assets, long-term and trust assets. The money needs to be there in case of someone losing a job, an unexpected medical or some other unforeseen circumstance.
3. Lack of expressed goals
The carpenter in the story put little effort into building the last home of his career. Imagine how different it could have been. A small change in thought on his part would have yielded different results. If the employer had simply stated, “This will be yours,” and expressed his intentions the carpenter would have been motivated to construct a far better house. The carpenter might have taken the time to find an architect, to dream big and to decide what type of house he really wanted.
Financial planning starts with a conversation about goals. Priorities are discussed and an action plan put into place. The most common expression I hear after someone starts planning is that of relief. Worry often decreases when the pieces of the plan are laid out. Of course, we will always be concerned that our special needs family member is living and can live a safe, meaningful life. Planning helps you understand what steps you will need to take to make that happen.
4. No estate plan
The estate plan is the foundation of a Blueprints special needs plan. Of course, you first need to know where to build and what you are trying to accomplish before taking this step. Once you have determined the key elements of your plan you need to put the foundation in place.
Many family still do not know of, understand or have worked on the special needs trust. This type of trust works to keep your son or daughter, sibling or spouse eligible to receive benefits. Your savings and investing may be at risk without also addressing your estate plan.
Rob Wrubel, CFP,® AIF® is a Senior Investment Consultant with Cascade Investment Group, member FINRA & SIPC. Cascade Investment Group is not a tax or legal advisor. You should always consult with your tax advisor or attorney before taking any actions that may have tax consequences.