A Better Financial Blog

Last week I offered a post on investing for beginners, and something I read today motivated me to continue the thoughts.  The article in question was on the Wall Street Journal’s personal finance section regarding the pros and cons of annuities.  The article is a good read and the point counter point debate offers some interesting considerations from an investing for beginners perspective.  While the article is a good overview of the debate, however, there is an element that is missing from consideration.  And that is the fact that anyone’s personal savings portfolio absolutely must be structured in such a way that it serves to minimize risk while increasing return.   Motherhood and apple pie?  Perhaps, but the point is that investing for beginners requires a determination over the type of approach that one is willing to take to reach long term savings objectives.  

 We are fortunate that at A Better Financial Plan we have the opportunity to serve a wide variety of people who come from just about every walk of life imaginable.  While we speak with seasoned investors who are looking for creative alternatives to their current status quo, we also speak with a good number of people who would qualify themselves in the “investing for beginners” category.    While their concerns and objectives are slightly different they absolutely share some similarities and we find ourselves offering the same foundation of advice when we begin working with them.  So much, in fact that we decided to start to formalize content that is geared towards investing for beginners. 

Pleased to bring you another episode of the Long View today.  For first time readers the long view is our occasional on demand video series that covers a host of topics that are oriented to better educate our clients and prospective clients on how to achieve their long term savings objectives.  Today’s entry answers a frequently asked question that we receive.  The question goes something like this “As financial planning consultants what is it that you are after from me?  How much of my investments do you need” 

Today I am happy to announce the start of a new occasional series from A Better Financial Plan called the Long view.  The Long View is a new on demand video series that will feature myself and other advisors from A Better Financial Plan to help communicate some of the insight that we have developed from having worked with many different clients.  Our clients are always looking for the best way to invest money and make decisions based on their own research.  We are committed to assist these efforts.

What does social media have to with do financial decision making?  How could a LinkedIn account help one to discover the best ways to invest?  How does a 140 character tweet affect one’s decision over how they will manage their long term savings strategy?  And what could be the connection be between the number of Facebook friends one has to how well their investments are performing?   After reading a very popular article that appeared this week in the New York Times entitled The Flight From Conversation I’m convinced that there is much about social media that impacts our ability to truly investigate options and . . .well socialize them if you will, in order to help conduct good and sound financial decision making. 

The best way to invest is becoming a more difficult question to ask.  It can be even more difficult in an election year.  That once every four year event where those who have chosen to make a career out of politics spend literally billions of dollars on crafting a message that will propel them into power.  Sadly as we watch the goings on of a presidential campaign through the heat of the coming summer into the early fall we are guaranteed only one thing, repetition.   This side says the other spends too much and that side says the other doesn’t tax enough.  All the while our national debt climbs at a breakneck speed, while entitlement programs are broken down on the side of the road with no mechanic in sight.   This rhetoric might not do much to solve problems but absolutely impacts the decisions we make over the best way to invest for the long term. 

The analysis of term vs whole life insurance unfortunately is frequently distilled to only consider the cost of each.  This is ultimately an unfair comparison.   First it is unfair to categorize whole life insurance solely as an expense.  As we discussed in a recent post on term vs whole life insurance not only does whole life carry with it benefits that must be considered differently than what term delivers, the variations of whole life that exist today (universal life, variable life and indexed universal life) require a much broader consideration  of the myriad of benefits against what truly is an expense for service in the case of term life.  The distinction is critical and one A Better Financial Plan is committed to propagate.    

If you are seeking to discover the differences between term vs whole life insurance the first consideration is to understand that this may be the wrong question for you to ask.  While term vs whole life insurance is an issue that certainly deserves a conversation, the products and what they offer customers are similar in only one aspect; they both carry financial coverage for the policy holder’s family in the unlikely event of the policy holder’s death.  Other than that term vs whole life insurance has much more to do with the nature of this similar benefit and the differences in how the benefit is accumulated and delivered.  A better evaluation would be term vs permanent insurance.

Today something a little different that I feel compelled to share.  I've waited a little while before posting this because I didn't want it to seem as though I was capitalizing upon another's misfortune.  In fact there was a fair amount of internal debate whether or not I simply skip writing about this at all.  Eventually I felt as though it would be disingenuous to not cover it.  You see our 1346 plan offers insight into the “why” behind our advice over ways to invest money.  1346 is literally the driving force behind why we are in this business and the manner in which we try to help our clients.  (you can read about 1346 here).  The four tenants of 1346 are pay yourself first, earn a fair rate of return, never lose money, and take action to financially protect your family.  It is the last that I’d like to address today as a recent event in our popular culture underscores its necessity.

To better understand the debate over term vs whole life insurance it is critical to take a look at the history of how permanent insurance has evolved over the last thirty plus years.   Examining the derivatives of whole life insurance, as well as the events that moved America away from consumption of whole life as a fundamental element of personal savings illustrates just how much perception plays a part in the discussion of term vs whole life insurance.   Additionally it is interesting to consider historical events of the life insurance industry in light of the ‘newer’ long term savings vehicles that were introduced at just about the same time.