Another professional affiliation we take seriously here at Step By Step Financial is our relationship with the Alliance of Cambridge Advisors. Founded by a pioneer member of NAPFA, Bert Whitehead, the ACA is a growing group of financial counselors who share his belief in unbiased, independent financial advice and consumer advocacy. With a rigorous training program and high credential requirements, the ACA maintains some of the toughest-to-meet standards in the industry for its fiduciary standard of care required of its planners.
Most financial professionals will give you their credentials, which will include the professional organizations they belong to. Here at Step By Step, one of our longtime associations is NAPFA: National Association of Personal Financial Advisors. In fact, many of our referrals come from their handy “find an advisor” function on the website. Every advisor is required to pledge a Fiduciary Oath annually (no sales commisions for products, complete disclosure of business practices) and adhere to a strict Code of Ethics. They provide ongoing continuing education for affiliated advisors and are often noticeable in the public sphere, promoting integrity in the financial profession. Step By Step is proud to be a part of NAPFA. We hope you’ll take 40 seconds to view their latest video: The NAPFA Story. It gives a great background introduction to how it came to be and it’s mission.
Today’s post is written by guest blogger, Virginia Nolen, also known as Kevin’s assistant.
This will be news to most of Kevin’s readers, but as a little background information: my husband accepted an appointment to a new job last summer, which happens to be 1100 miles and an entire climate away from his previous one in the humid, lush South (yes, that needs to be capitalized). This meant picking up our family, putting our beloved little house on the market and moving to the high desert of Colorado’s front range. Being the sensible and wary folks that we are (in other words: low risk tolerance), we chose to rent until such time as our house back in the South sold. Well, it took 7 months but the house did sell (and we’ve closed the contract, so I can say it’s a sure thing). Now I’m itching to make another small miracle happen and buy in our new area before our rental contract is up in August. Kevin has been listening to me drone on about it and decided that I’m learning some lessons that you might benefit from. So here, in a nutshell, is my highly amateur guide: Steps to Finding (and Purchasing) a New Home.
Spend hours on the internet looking at houses you’ll never be able to afford. Decide to call it “research” into what you’d really like.
Spend hours on the internet looking at houses in approximately the neighborhoods you’ll want to move to, mostly looking at the ones that are out of your price range. Again, call this “research” into what the high end of the market looks like.
Spend hours on the internet looking at houses that are more mid-range, then spend hours looking at foreclosures and short sales that are still way out of your anticipated price range, pretending to keep in mind that you need to keep your total mortgage to 2-2.5 times your annual income.
Spend hours on the internet (are you sensing a theme here?) figuring out what a low-mid range house is in the approximate geographic area you need to live in, and figuring out what the rough price range is of a house that’s the size you want to live in for the next 15 years (bigger than a shoebox, smaller than a mansion?).
File your previous years’ tax returns because you’ve procrastinated after having moved across state lines and the whole idea just gives you the heebie-jeebies.
Do a lot of number crunching. Any mortgage broker is going to look at your monthly income vs. your monthly mortgage+insurance+escrow and want it at 28% or less. Run numbers comparing monthly income to total monthly debt, knowing it needs to be at 36% or less to be a sure deal.
Go to www.annualcreditreport.com and print out all three major companies’ free credit reports for both income-garnering adults in the house because you really don’t know anymore what may or may not show up on a credit report and, like the taxes, you’ve procrastinated this yearly event because moving is expensive.
Gasp at the gross underestimation you might have made when calculating your monthly debt + anticipated mortgage payment vs. monthly income and knowing it needs to be at 36% or less.
Decide it’s not really as dire as it appears at first glance and promptly start looking more seriously at foreclosures in the low range of the housing market in the general geographic area you want to live in to be in at least the same county as the main wage earner’s workplace.
Wonder if a student loan that is currently in deferment will count as monthly debt (even though you’re not making payments at this time). Call Kevin, who knows more about it than you do, have him say “Great question! Let me make a call.” He talks with a really smart mortgage broker and the short answer is: maybe. Longer answer is: yes it will count, if it’s been in deferment for less than 12 months. They’ll want some kind of proof of deferment so they don’t have to count it. If it’s been in deferment for longer than 12 months, it most likely won’t be counted and they won’t ask for proof.
One of my favorite parts about being a tax and financial advisor here at Step By Step is getting to know my clients. Relationships are the foundation of society and without a strong, trusting, confident one there is little I could do to effect positive change in the lives of my clients. One of the ways I can start building that relationship is by being as forthcoming as possible during an initial interview with potential clients. To that end, I have taken the time to pick the 5 most common questions asked by potential clients in my practice, and to provide a summary of my answer to each.
1. How much does your service cost? This will vary depending on the retainer agreement, but the minimum fee is $800. Our goal is to provide each client with more value than the cost of the service. If I don’t think I can do that, then I will tell you upfront (and I have!). In that case, it’s not worth your money or our time.
2. Why can’t I do this myself? This answer might surprise you, but you can! Why don’t you? Another example would be that I could represent myself in a court of law, but I don’t. There are professionals for a reason and a financial advisor, like a lawyer, has specialized trainingto practice their specialty with much greater efficiency than someone without it. It’s the value of time. You pay someone else to specialize in one area so you can concentrate on your area of expertise.
3. I just need <fill in the blank>, why are we discussing all these other issues? Our practice focuses on holistic advice that will help your entire financial health. If I were to help you mitigate the symptoms but didn’t try to cure the illness, what good would that do you in the long run? Yes, we can help with the urgent issues but I am always going to ask broader questions to make sure there aren’t other influential factors that you might not realize are there.
4. I don’t know what to ask; if you were in my shoes, what would you ask? The questions I would ask someone I was interviewing to be my own personal financial advisor are: How many clients do your work with? Will I get released if I don’t meet your minimum assets? Will I get the same level of service as someone with a higher value of assets? What are your credentials and why do they matter? If you get hit by a bus tomorrow, what happens to my information and the work you’ve done for me?
5. Why should I choose you over other advisors? You should work with Step By Step if you like me and if you value what we can do for you. It’s that simple!
If you are looking at retiring soon, do you have the answers to the questions to adequately prepare for this time in your life? I have listed below and also included in the video typical questions I help clients answer. If you have these questions, you may want to consider seeking out a financial planning professional.
Will I outlive my retirement savings?
What will I spend my time in retirement doing?
Will social security be available to me?
Should my annuity really be inside of an IRA account?
How much money do I really need to retire?
I want to retire early. How much should I be saving now?
I am a teacher. What pension payout option should I select?
Below is a blog entry I wrote on May 6th, 2010. If you do not remember, this was the day of the infamous “flash crash.” As I was thinking about what to send out this evening in preparation for what could be a very volatile (prices go up and prices go down) period in the market, I found this article said it all. I encourage you to not panic and to make decisions based off of emotions. If you have a long-term plan in place, there is the high likelihood you do not need to do anything different than what you are doing now. If you do not have a long-term in place, you may want to consult with a professional to help put a thought-out and objective plan together. As you read the article below, please remember how you reach financial security. You do not reach it overnight but rather by taking “one step at a time!”
By: Kevin F Jacobs
Written: May 6th, 2010
Today was an unprecedented day in the stock market. At one point the Dow Jones was down nearly 1,000 points (I can’t believe I am even writing that number).
I want to stress that the best thing to do is to remain focused on the things you can control, i.e. your savings rate, your asset allocation, your debt-to-income ratio, etc. You can not do anything about what the market does day to day, but you can do something about those things mentioned above. You are going to hear many “talking” heads on the radio and TV give various explanations for why things happened the way they did. However, the real question is how these events are going to affect you and the ones you love. We have a tendency to get lost in the stress of everyday life and we forget to make note of the blessings we have each day.
I am not telling you to be oblivious to what is going on in the world but that you need to work on the things you can do something about and let everything else take care of itself. It is important you do not overreact to short-term market events. During times like these it is important to remember the basics regarding your financial life:
1.Live on less then you make
2.Have $0 consumer debt
3.Don’t buy more house then you can afford
4.Pay as little in taxes as you are allowed
5.Have proper cash and emergency reserves
6.Save for the short-term and invest for the long-term
7.Spend time with your family and those you love instead of watching the latest stock market charts.
As for the rest of it, take a deep breath and remember to control the things you can and let go of those things that are outside of your power.
Are you looking to work with a financial planner? Are you confused of who you should contact? Do you know how the adviser you are meeting with is getting paid? Do you want someone who is working for your best interest? Consider the benefits of working with a fee-only adviser who is held to a fiduciary standard. Check out the video above for more details.
Kevin Jacobs, doing business as Step By Step Financial, LLC, is registered with the State of Oklahoma as a Registered Investment Advisor.
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