I recently had my annual eye exam. Strange topic to be writing about, right? Please bear with me as I try to connect this visit to the optometrist with personal finance.
1. Near-sightedness is just as challenging as farsightedness but DIFFERENT.
Near-sightedness causes distant objects to be blurry while close objects may appear normal. I am extremely near-sighted but can read 20/20 when a book is directly in front of me.
In the financial realm, do you feel like you have the day-to-day financial decisions of your household mastered? Then you may struggle with identifying and actively working toward long-term goals like retirement and children’s education funding. You may be so myopic, or focused on the here and now, that you don’t take time to reflect on the future. Planning for the next 3, 5, and 10 years requires intention and focus.
Farsightedness is the opposite: objects far away are clear but closer objects are difficult to see. Applying this concept to personal finance, you may be on “auto-pilot” when it comes to saving for distant 10 and 20-year old goals. Yet you struggle with day-to-day cash flow management as your family grows and careers evolve. Paying off debt may feel challenging. Alternative, you may wonder if you should put extra cash towards an emergency fund now or increase your 401(k) contribution.
Regardless of whether you fall into the nearsighted or farsighted camp, a financial planner can help. She will provide accountability and support as you develop short AND long-term financial goals. She’ll give unbiased guidance and direction. Don’t take my word for it: Farnoosh Torabi outlines the “when” and “how” of hiring a financial adviser in this recent Oprah magazine article.
2. Surgery isn’t for everyone.
Several months ago, I discovered I’m ineligible for LASIK surgery (insert sad face here). For those of you unfamiliar with the procedure, you go to a LASIK specialist and see if your cornea is the right thickness for surgery. If all goes well, you should have perfect vision within a year of the surgery. Follow-up appointments are still required, but LASIK is a nice, quick way to restore your vision without glasses or contacts.
When it comes to personal finance, a one-time “quick fix” may NOT do the trick. Financial planning is a process. It evolves as your life circumstances change. The planning issues you have with three kids under the age of 10 are far different from the issues faced by pre-retirees with children in college or retirees with grandchildren. That’s why I rarely do one-off projects for clients on an hourly basis. I’d rather be there to consistently support you throughout life’s twists and turns.
3. You may explore multiple options.
The eye exam ended and my optometrist suggested new prescriptions for glasses and contact lens. I was at the office another hour as the technician explained my purchase options in detail. I have a vision insurance plan which made the manual calculations even more difficult. Ultimately, she handed over a hand-written sheet with 4 columns. I had to choose one.
Luckily, financial planning technology has progressed significantly in the last few years. When my clients want to explore different retirement or lifestyle scenarios, I have the option within Advizr to run “What-If” scenarios. What if instead of private college we fund in-state, public tuition? What if we live on 90% of current living expenses as opposed to 100% during retirement? Changing one variable can have a substantial impact on the likely success of a financial plan.
4. Insurance only lessens the blow.
As explained above, I had a vision insurance plan that saved money on my annual eye exam, glasses, and contact lens orders. However, the plan wasn’t enough to cover it all. I still ended up paying over $400 out-of-pocket.
In the personal property and health insurance realm, there’s usually a deductible. This is the amount you must pay out-of-pocket before any insurance benefit kicks in. In other words, you pay a recurring premium on the policy itself AND the deductible if you need to use insurance to file a claim. The lower the deductible, generally the more expensive the insurance policy. With disability insurance, large employers often cover 50 to 60% of your base salary if your disability lasts more than 180 days. What about the remaining salary that is not covered? That’s why supplemental long-term disability policies are often recommended by financial planners.
Did I do a good job of connecting these two seemingly disparate concepts? Financial planning is about much more than investments.
Deb Meyer, CPA, CFP®