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My family and I recently vacationed at the Portage Point Inn, outside of Onekama, Michigan for a week.  During one unseasonably hot afternoon my brother-in-law jumped from his chair poolside, hopped a fence and ran down a nearby dock in a panic.  Along the way he yelled to us that he had lost his wife’s Apple Watch in the lake where he was swimming minutes before.  Since the watch was waterproof there was still a chance to recover it – if we could find it along the sandy bottom.  The rest of us soon joined him in a seemingly hopeless quest to find a small watch in about 800 square feet of lake bottom ranging from 3-20+ feet deep water.  The scene that unfolded over the next 15-20 minutes reminded me a lot of financial planning.

Soon three or four of us were pacing back and forth on the dock staring down into the water.  Like contemplating buying a home as a recent college grad, saving enough money to send a few kids through college, or figuring out how to fund the perfect retirement in your 40s and 50s the task seemed a bit overwhelming.  We had little hope of finding the watch unless we took a minute to gather information, acquire the right tools, and develop and execute a plan.  A 2012 study by the CFP Board found that people with a financial plan saved more money, felt more confident about reaching their goals, and lived more comfortably than those without a plan.  The following chart shows the results of a more recent but similar survey by Schwab.

Source: 2019 Schwab Modern Wealth Survey

Sadly, despite the obvious benefits, most Americans don’t have a financial plan at all.  To be fair, most people are not equipped with all the tools and expertise to build their own financial plan from scratch.  Those that have a plan usually rely on the help of others to guide them in the right direction.  Unfortunately, it can be difficult to find a competent advisor that you can trust will do what is best for you.  Consumers must be wary of financial sales professionals working on behalf of a fund company, bank, or insurance company.  These individuals often have strong conflicts of interest.  This article provides some questions you can ask an advisor to make sure they are working on your behalf.

In the case of the lost watch our “trusted advisor” showed up in the form of a precocious and curious 10-year-old girl.  Excited to help she offered her snorkels and goggles then yelled for her mom to hurry over with them.  These would prove to be very important tools to assist in solving our problem.  In financial planning the tools come in the form of cash flow spreadsheets, net worth statements, investment accounts, estate documents, and insurance policies.  The tools needed depend on the goals you are working towards, and the problems you are trying to solve.  Budgets, cash flows and net worth statements help to organize the data.  IRAs, 401(k)s and other tax advantaged accounts maximize savings for retirement.  A Health Savings Accounts allows you to accrue funds for our healthcare expenses without paying taxes.  There are similar accounts for college savings and so on.  Carefully crafted estate documents provide a framework for distributing money after death.  Without identifying your goals, gaining access to the right tools, and hiring a competent advisor to create and implement a plan, the chances of success are significantly reduced.

So back to the watch.  We had acquired some tools to help, but we still needed to gather more information to ensure we put them to the best use.  While my brother-in-law was aimlessly treading water, unable to see his feet much less the bottom of the lake, our advisor, the little girl, started to pepper him with questions.  Where did you jump in?  Which way did you swim?  When did you notice the watch fell off?  Are you sure you had it on when you jumped in?  How deep is the water there?  If you’ve been through one of our discovery meetings at TAAG you can probably relate.  The rest of the group, now about a half dozen strong, quickly caught on.  As we got more and more information, we began to develop a plan to maximize the chances of finding the watch.  We assessed the risk and ruled out searching in the deeper part of the lake – you may want a $10,000,000 portfolio value, but it wouldn’t be prudent to risk everything you have on some crazy investment opportunity to get it.  My brother-in-law relayed his swim path, and I joined him in the water.  Using the goggles, we were able to better see the bottom of the lake.  We spread out, each focusing on a manageable section of water where we thought the watch was mostly likely to be found.  Others used their phones to call the number associated with the watch, our hope that it would ring or light up to reveal the location.  We had come a long way from the haphazard and unorganized “search” just a few minutes before.  Now we had identified the right tools, developed a plan, and assigned roles in the execution of it.  If we were going to realize our goal of finding the watch this was the way to do it.

A few minutes later, after several dives, I emerged with the watch in hand.  The search team cheered, along with many others poolside that had taken an interest in the treasure hunt.  Just like a successful retirement, putting a child through college, buying a dream home, or making your final mortgage payment – the combination of the right tools, reliable data, and expert advice allowed us to build a plan and execute it.  With a little luck it worked, and we had a successful outcome.