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Financial planners and the world of saving money

Do you need one? Can you save regularly without? What do other people do? What constitutes enough for retirement?

Of course the first thing to say is that there are no right answers when it comes to saving money. However, the most useful piece of advice I have ever come across in regards to money is this (from a planner named Ruth Hayden): It doesn’t matter what you deserve, what you need or how you feel. Managing money is about simple addition and subtraction. It has to add up! In other words you have to downsize your present life so that saving money for retirement and having a healthy bank balance is possible. If that means you live in a tough neighborhood or a too small house, so be it.

The second most useful piece of information (that changed my perspective and thus became self advice) is from an NPR podcast that mentioned someone’s theory that the reason that Chinese people were better at saving money than Americans had to do with some linguistic reference to money which implied a time that expanded across a lifetime, not just what is there right now. It certainly made me think of retirement as part of today’s income stream.

The third item that has changed my view of savings is watching what others do and don’t do. While most of you don’t have the opportunity to know what all your friends are doing savings wise, I have the sort of occupation where I am regularly asking people how much money they make and how much money they have in the bank.

I have seen people who have zero savings or retirement and are living paycheck to paycheck with $200,000 of income for a family of 4 and people who are families of 4 living on $50,000 and are saving for retirement. Obviously one family is applying items one and two to their habits and the other is not.

Certainly this perspective breaks down when you are living in dire poverty, where the goal is to not be hungry each day. But, since most of you who are reading this are not in that category, it is worth taking the advice/perspective from above.

I occasionally get asked what is a normal amount for someone to pay for a house when they have x income. While this question implies an excess of income such that someone could spend more, the important point is if there is just you or your self and one other person, why do what everybody else is doing? However, to answer the question, mortgage companies will approve you for roughly 1/3 of your income. To answer the question directly, mortgage companies will approve you for roughly 1/3 of your gross monthly income. However, why let them make decisions for you? If there is just you and one other person, and you have a high income do you really want to take care of and furnish a giant house? Or, are you still at the stage of life where you really only need a small house or condo? My point is simply this, don’t let other people and or outside forces or common practice determined for you what you need

That brings us to the question of financial planners. The older I get the more I can see differences in do it yourself jobs and jobs done by people who know what they’re doing. While you might feel confident that you can manage your own investment portfolio, I believe in the notion of expertise, even though our do it yourself society says there is nothing to be known. My advice is to get a financial planner and get serious about saving money. Having someone that you can meet with her or speak to you helps you focus on your savings goals. Financial planners take a small percentage of the amount that you are saving from the mutual fund that they put your money into. Some financial planners work in what is called a fee for service model. That means that you pay them an hourly rate for their advice and direction.

Definitely something to think about and consider! I frequently get asked for the name of my financial planner. I can’t recommend him highly enough. His name is Chad Norling and he can be reached at 952-884-3326 or cnorling@advisornet.com.

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