“Keep It Simple, Stupid” (KISS) Your Way to Financial Health

by Eve Kaplan, CFP(R) Professional

Are you familiar with the KISS (“Keep it Simple, Stupid”) concept? KISS helps you refine your elevator speech, write concisely…and the KISS concept can boost your financial health. How? By helping you focus on essential ways to strengthen your financial well-being.

After working with hundreds of financial planning and investment clients, here are relatively simple and  straight-forward KISS (“Keep it Simple, Stupid”) ways to improve your financial health.

Banish Toxic Debt:

  1. Work to eliminate ALL credit card debt. Consolidate accounts and create a realistic plan to rid yourself of insidious and toxic CC debt.

Streamline Your Investments and Reduce Costs:  

  1. Two factors drive returns and risk: asset diversification and investment expense ratios. Asset diversification – especially with professional guidance – helps you avoid putting too many eggs in one basket. The running costs of your portfolio (e.g. mutual fund fees) also drive returns. Look up the underlying fund expenses on morningstar.com and ask your broker or advisor why you need to buy A, B or C shares from him/her when there are less expensive options.
  2. Consolidate as many of your accounts as possible, especially old 401(k) and other retirement accounts that charge administrative fees (even if you’re left the employer)
  3. Avoid purchasing annuities (esp. variable annuities) unless you fully understand the pros and cons, tax and inheritance implications, potentially high fees and surrender penalties. Get 2nd opinions on annuities from someone who doesn’t sell them!

Pay Attention to Overlooked Assets (Social Security/retirement planning):

  1. Social Security is a “take for granted, overlooked asset” for many folks. If you are tempted to take Social Security at age 62, think again and get grounded advice on the benefits of postponing benefits. Married couples benefit additionally from some Social Security planning strategies that can provide you with additional income. Social Security is not allowed to advise on strategies to maximize your benefits, so don’t expect to learn about this from Social Security!
  2. Work as long as possible. A financial planner can tell you how long you should work and what you should do in retirement to avoid outliving your assets.

Your Loved Ones Will Thank You….  (Estate Planning):

  1. You could be handing an enormous mess to your heirs (family, friends) If you don’t have your estate documents in order – or you have NO estate documents (will, living will/medical health care directive, powers of attorney). Estate attorney fees are not high if they potentially save your heirs hundreds of thousands of dollars of estate tax when your assets pass to your family, friends or charity.
  2. Anticipate (and defuse) potential conflicts amongst your future heirs. A big trigger for conflict amongst sibling heirs is an ill-considered distribution that leaves some heirs filled with resentment. Sometimes trusts or other mechanisms can be put into place to quell potential conflicts.

Avoid Excessive Tax Payments:

  1. It pays in spades to time IRA distributions if you work (or not), consider Roth IRA conversions (if you qualify), give charitably in the form of investments (instead of cash), etc. Wise advisors consider which types of investments are best held in taxable accounts, which in tax-deferred accounts, etc.

Who Delivers Advice That Puts Your Interests First?

  1. The financial advice-giving landscape is improving, prompted by the prospect of federal regulations to protect clients from abuses (expensive products, conflicts of interest) by advisors. Although new Department of Labor regulations have been postponed under the current administration, trends will move toward greater client protection. In the meantime, it’s best to work with “fee-only” advisors who are “Fiduciaries.” Fiduciaries put your interests before their own interests at all times. The quality of the advice you receive can depend upon how your advisor is paid.

 

(C) Copyright 2017, Eve Kaplan. All Rights Reserved.