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A financial planner shares 3 pieces of money advice clients never want to hear

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Financial planner Don Grant.

  • After 20 years in the business, financial planner Don Grant says clients hate to hear three things.
  • First, you're not saving enough, either for retirement or your kid's education.
  • Also, you can't afford that much house, and you need to take on more investment risk.
  • Vanguard Personal Advisor Services

Don Grant has been a financial planner for nearly 20 years, which means for nearly two decades he's been having tough talks with people about their money.

"When I first meet with clients, I say, I'm often going to tell you things that you may not want to hear but I have to tell you," said Grant, who serves as an ambassador for the CFP Board.

Grant shared with Insider the top three pieces of money advice his clients never want to hear.

1. You're not saving enough

Grant works with clients at various life stages, and those nearing retirement age aren't happy to hear that they can't leave their jobs as soon as they want.

"I've had to bend a couple of people back to work for a couple of years," said Grant, who works as an investment advisor with Fortis Advisors in Wichita, Kansas. "When you're not putting away enough, we're not going to hit our targets, which means you could potentially outlive your savings."

Your financial planner can help you examine your income and assets as well as what you'll need after retirement to determine how much you should be saving and investing to maintain your lifestyle long after you've put in your papers.

If you have children, you also need to save money for their education – no matter how brilliant you think your kids are, said Grant (but not at the cost of saving enough for your own retirement).

"Susie is a great tennis player, but you still need to save for college," Grant said. "I have had a number of clients who have kids who are extremely talented athletes or great at academics and they think we're just going to get by on scholarships."

Think again – and start a 529 plan. Grant recommends saving about 60% of what you think your child's college tuition will be.



2. You need to take on more risk

You may be tempted to cash out your investments when the markets are down, but don't.

"Essentially, one out of every four years the markets are down, but the average recovery from a stock market crash is about 400 days," said Grant.

So, stay the course.

"We've got to trust the history of the stock market and other markets we're invested in," Grant said. And trust that your advisor has helped you invest wisely so you won't end up broke.

"They need to stay invested and they need to take on the risk to be able to achieve their goals."

For small business owners, this risk means being willing to stretch their investing beyond their own companies. Because entrepreneurs are already taking on risks simply by being in business, they're often leery of investing in the markets.

"When they give me money, they want to put it in CDs," Grant said. But last year's pandemic showed why it's crucial for entrepreneurs to diversify their investments.

"Small businesses got hit the hardest last year, and if there is a slow year, you may need to hit some investments you had in another place that did well," Grant said.

3. You can't afford that much house

Whether you're looking to buy your first home or your dream house, the mortgage isn't the only price tag you need to consider. Homeownership can be a great source of pride. But when you're spending your weekends fixing the deck, stopping leaks, mowing the lawn, or getting a new roof, you realize it also can take a toll on your time and money.

"It's an asset, but it's not creating any income for you. It's a drain," Grant said.

While Grant still believes homeownership is a good idea, he asks his clients to remember this: "Examining how much house you can afford has to do with all of the management and maintenance of the house, too."

All in all, Grant wants his clients to keep their eyes on the prize.

"The key to keeping on top of this," he said, "is have a plan, monitor that plan, and base your spending on what that plan tells you that you can do."

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Personal Finance

Financial planners say their clients thank them most for 5 smart money tips

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Financial planners say their clients appreciate personalized advice.

  • Financial planners say their clients get the most value from a handful of money tips.
  • Those tips include how to save for the near future, and how to choose the right life insurance.
  • Other advice: Time in the market is better than timing the market, and use your HSA to invest.
  • Vanguard Personal Advisor Services

When it comes to managing your personal finances, there's a lot of advice that gets floated around. You might find yourself asking friends for tips, reading articles for hours, or even scrolling social media to see what your favorite financial influencers have to say.

I spend a lot of quality time learning about finances and trying to figure out how to optimize and enhance my own portfolio. When I talk to financial planners and advisors, I find myself inundated with so much good information that it can be overwhelming. That's why I decided to try to find the best tips that financial planners give to their clients by asking them which tidbits of information make their clients thank them again and again. Here's what they had to say.



Don't just save for the faraway future

Many people work hard now and save for their future retirement. But Jake Northrup, a financial planner and advisor, says that it's not enough to just save for later on in life, and his clients appreciate his strategies that focus on the near future as well.

"You need to save in the right ways to provide you with the flexibility to use money throughout your life, rather than just waiting until age 59.5 when most pre-tax account penalties disappear," says Northrup.

He encourages his clients to save in different "buckets," each with a corresponding investment strategy: zero to five years, five to 15 years, and 15+ years.

"Many people handcuff their ability to enjoy money throughout life because they only save in their 401(k). By also saving into a Roth IRA and brokerage account, you give yourself the flexibility to utilize money much earlier in life," says Northrup.

Get a financial education

If there's one thing I've learned in my own personal finance journey, it's that you have to seek out personalized advice along the way. Financial planner Cody Garrett says that personalized education during the financial planning process always garners tremendous appreciation later on.

Says Garrett, "Unlike financial 'advice' that tells others what to do, education provides the clarity and confidence for families to make their own well-informed decisions. Given the uncertainty and financial variables out of our control on the path to and through retirement, having clarity about one's financial situation and a measurable action plan to refine the plan has greater value than the numbers on the page."

What kind of life insurance is needed

A big part of working with a financial planner or advisor is getting help figuring out what types of insurance you need. Charles H Thomas III, a financial planner, says that it means a lot to clients when he can help them plan for big situations that could happen later on.

"I work with lots of families who know they need life insurance to protect their children, but are unsure where to start or how much they need," says Thomas. "When I work with a family to see what future obligations need to be covered, like college, income replacement, and more, it removes a lot of stress and uncertainty from the decision."

Treat your HSA as a long-term investment account

Perhaps some of the best advice involves strategies that aren't so obvious.

Financial planner Kevin Mahoney finds that one of his most helpful pieces of advice is to treat your health savings account like a powerful long-term investment account.

"Many of the millennials with whom I meet have not considered how an HSA may fit into their overall investment strategy," says Mahoney. "For my peers who do have these accounts, they often spend the contributions in the same tax year or don't take advantage of the HSA's investment option. But the HSA's triple tax benefits mean that contributions invested today in low-cost, diversified funds can grow to significant amounts by the time retirement (and our larger healthcare expenditures) arrives."

Time in the market is better than timing the market

When it comes to getting advice on investing in the market, there are varying schools of thought. Financial planner Keith Onto says clients appreciate it when he reminds them that time in the market is more important than timing the market.

"I can't tell you how many times clients have reached out and asked whether now is the time to sell and move to cash in anticipation of the next correction," says Onto. "No one can consistently time the market, and more often than not the market has gone the opposite direction of what the client may expect. More importantly, the client needs to be reminded of the time horizon for their individual goals."

Related Content Module: More Financial Planner Coverage

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Personal Finance

How to Dig Out of a Financial Hole in 5 Steps

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Running into a financial dead-end is no one’s dream. But it is definitely everyone’s nightmare. With the thoughts of lost assets, unpaid debts, and little to no funds, the situation is enough to induce anxiety among the toughest of minds. 

If you find yourself in such a scenario, it can be difficult to find the light at the end of the tunnel. But even though it can be difficult to believe, all is not lost in a financially challenging situation. As long as you keep your wits and perseverance intact, you can make your way out of these difficulties. 

To help you make it through to the other end, here’s how to dig out of a financial hole in 5 steps. 

1. Assess Your Situation

With millions of people struggling with debt, collections, and limited income, you are not alone in your financial problems. But similar to almost every human experience, the challenge looks unique for everyone. Keeping this in mind, make it a point to assess your specific situation. From your existing debts to your current assets, this calls for you to take every detail into account.

From there, you can learn how debt collection laws protect you in your specific situation and how you can manage recovery with your current income. This lets you plan your next steps, such as expense control and debt payments, with a comprehensive picture in your mind. 

2. Speak to a Financial Advisor

While taking note of your specific scenario is a basic first step, its effective resolution calls for professional help. That is where you can speak to financial advisors who specialize in helping people out of financial ruts. With many such professionals now making use of advisor transition services, you can find them running their own private or affiliated practice.

This makes it incredibly easy to reach out to these experts and get the advice that you need for financial stability. These professionals can advise you on aspects such as controlling your expenses and maximizing debt repayments. This ensures that you can recover your finances in a timely manner, while also benefiting from knowledgeable decisions to boot. 

3. Find Ways to Keep Motivated

If you are planning to simply barge on with financial management with no regard to mental health, you might crumble under the process before you have even started. That is why it is important that you find ways to keep yourself motivated. Looking into a mental health app can help you in this regard. 

In recent years, mental health coaching has joined the ranks of flourishing business ideas in the medical industry. This makes it easier for you to reach out to these experts even from the comfort of your home. In many cases, these services also don’t break the bank. This allows you to access them on a budget and lets you follow your goals with their help.

4. Stick to Your Budget

Making your way out of a financial rut requires persistence at every step. This is perhaps more evident in the practice of sticking to a budget, which comes into play in almost all financial recovery plans. That is where a budget planner app can come to the rescue. 

By using these solutions, you can have the information about your financial recovery handy with you at all times. If you ever need to refer to your financial standing before a purchase or a payment, you can simply refer to your phone in your pocket. This convenience is one of the top reasons why you need a budget planner. At the same time, the solution stays critical in terms of following financial recovery plans. 

5. Do Regular Check Ins 

Whether you are going at it solo or getting help from a professional, handling financial management calls for frequent check ins. This not only enables you to determine the efficacy of your budgeting and expense control efforts, but also allows you to tweak your ongoing strategy as you see fit. This particular aspect goes a long way towards helping you out of your financial problems.

Doing so on your own will require intensive calculations and planning. But if you have the help of a financial expert, you can simply hop onto a video chat app to get precise advice about revised strategies. This ensures that you have everything you need to optimize your ongoing plans. 

By keeping these points in mind, you can navigate your way through your financial challenge and towards your ideal recovery. This helps you improve your financial status in a timely manner, while also taking care of your overall well-being.

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Banking

Top 4 Reasons to Consider the Help of a Factoring Company for Your Business

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Many businesses fall upon financial strains that hinder their productivity and interfere with their daily operations. The traditional route has been to acquire a business loan to facilitate those needs. There are other ways to stay afloat while in operation though. One of those ways is a method called “factoring”. 

1. What Is Factoring?

Factoring is when a company provides invoice factoring services to alleviate financial pressure. This entails purchasing invoices at a determined discount. A percentage of the invoices are then allocated to the business within days to facilitate those needs. This subsequently enables the factoring company to take claim of the invoices and the payment processes that are accompanied by them. This is very beneficial to the said company for many reasons, one is an immediate increase of monthly cash flow and the shortening of anticipated invoice payments.

Dynamics of a Factoring Company:

  • Service is performed for a customer and then they are invoiced usually encompassing a 30, 60, or 90 payment window.
  • When a batch of invoices is collected, they are then transferred to a particular factoring company. 
  • The business is then advanced a percentage (typically 85%) of the invoices presented. This is usually completed within a 24 to 36 hours timeframe.
  • The factoring company is now responsible for the collection of the invoice from the initial customer.
  • When the invoice is paid in its totality from the customer, the remaining balance is then allocated to the business. A service fee is rendered to the business as well. This is taken directly out of the remaining balance. The fee is usually around 1 to 5%.

There are three types of factoring companies: recourse, non-recourse, and spot factoring.

  • Recourse is when the business owner assumes all liability if the invoices aren’t paid. This factoring type is the most common and affordable. Since the company agrees to be held liable for the risks involved within the transaction.
  • Non-Recourse of course is when the factoring company assumes the liability encompassed in the invoice’s assignment to them. If the customer reneges on their obligation to pay the invoice, the business can’t be held liable for payment.
  • Spot factoring is a type of factoring that accepts one or more invoices excluding a long-term agreement that the other two types entail. Also labeled single invoice financing, spot factoring is a convenient way to monetize invoices for compensation.

Before a business decides on a particular type of factoring, it should analyze certain factors. Evaluating their customer’s payment history and the number of their invoices are to be evaluated. For example, if the amount in question is considered small, the business owner may choose to absorb the risks themselves. 

2. Using a Factoring Company vs. a Bank Loan

Using a factoring company has some key benefits that traditional bank loans strain to accomplish. Here are some comparisons that differentiate the two:

Factoring Companies:

  • A debt-free form of financing
  • Unlimited Capital Allocation
  • Approval times are quicker, usually within 1-3 Days
  • Financing terms are determined upon the client’s creditworthiness
  • Minimal paperwork involved

Traditional Bank Loan:

  • Loan amount determined upon business’s creditworthiness
  • Longer approval period (even for a small loan)
  • Capped funding (loan is limited to a certain amount) 
  • The principal and interest is repaid within a determined duration    

3. Factoring Costs

 The costs of factoring are based upon a set of factors. These factors are mainly determined by the invoice’s creditworthiness and financing volume. Fees typically range from 1% to 3.5% for most companies. With some factoring companies, the fees are tailored to their specific circumstance, while others are charged a flat rate. Depending upon the business’s need the factoring cost vary. Factoring costs also depend upon the type of financing received. The different types of financing are purchase orders, Accounts Receivable, Purchase Order, and Trade Payable Financing. 

  • Accounts Receivables are used to convert credit terms into cash flow.
  • Purchase Orders are a viable option for wholesalers, vendors, and distributors.
  • Trade Payables finances goods and services directly from the supplier to the buyer.

 4. Payroll Funding

Accessing the cash flow needed to meet payroll can be a challenge. Factoring companies can accommodate these needs with efficiency and flexibility. Unlike most bank financing, the right factoring company can provide cash flow to facilitate payroll. Just this aspect of factoring can be a miracle to a business in a strain. 

Payroll funding can range anywhere between 80% to 95% of the accounts payable rendered. Employees should be compensated whether the business is growing rapidly or at a slower pace. Successful companies do just that, take care of their employees to facilitate overall growth. Payroll funding facilitates this need with effectiveness and efficiency.

Conclusion

As you’ve probably discovered within this article, there are many benefits for businesses to utilize a factoring company. From payroll funding to funding purchase orders, to invoice funding and even funding for a startup business as well, having a factoring company as an ally, definitely provides a sense of security for many businesses in need. As a business owner, having the ability to exponentially scale their enterprise is worth the ongoing investment. Cash flow is the key to most businesses ‘ success. Choosing the right one to accommodate you shouldn’t be left to just any company. atLine, a division of The Southern Bank Company can facilitate your Invoicing and Accounts Receivable financing needs.

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