It can be easy to lose track of your personal financial planning, budget, and income in the hustle and bustle of life. On The John Chapman Show, John discusses how this oversight, as well as not working with a financial advisor, can often lead to stress and the three common financial planning questions we’re all asking:

• Where do I stand with my personal finances? 
• Where do I want to be in the future?
• How will I get there?

John dives into each question and explains the strategies and guidance he gives clients to help them reach their goals. In addition, John discusses the importance of the exploratory process and how answering fundamental questions can help you pinpoint what you desire for your future and give you a financial planning framework. The ongoing exercise John shares can help you get a clear idea of your goals and the peace of mind that you’re spending your time and money effectively.

Listen to the full episode for more details and tips from John.

Audio Transcription

Speaker 1: (00:02)

Welcome to The John Chapman Show, where we talk about retirement readiness strategies to help you grow and preserve your wealth so that you get the most from life with the money you do have. Are you on track? John is an employee of Worthpointe, LLC. All opinions expressed by John and podcast guests are solely their own opinion and do not necessarily reflect the opinion of Worthpointe. This podcast should not be relied upon for investment decisions and is for informational purposes only.

John: (00:32)

Hey everyone, John Chapman here. I’m joined by my cohost, Erica. Erica, have you ever had that time when you’ve had a terrific weekend, maybe you’ve been out playing or doing something fun and you wake up, you get to your office or you get out in your home on Monday morning. And you’re just thinking, where the heck am I?

Erica: (00:52)

Yes, I actually did. It’s funny you ask that question. I just had that question come to my mind. I just got back from camping and you know, the very next day I wake up and I see 10 loads of laundry that I still have to do and an empty fridge. And somehow I have to feed my family. I have all these tasks and activities to drive my kid to, and I don’t even know where to begin. And I just literally asked myself how do I even get here?

John: (01:18)

Yeah, yeah. You know, and the reason I’m thinking about this Erica is because I just got off a phone call with a client the other day, and I could tell he was experiencing some, some pretty major discomfort. He was stressed out about his personal finances. And I really think most people are asking themselves these three questions. Where do I stand with my personal finances? And sometimes we ask ourselves even a really bad question that I want to encourage people not to do, but where do I stand relative to my peers? You know, sometimes at a corporate office, you’re thinking like, well, that guy got promoted. I wonder how much money he has or that guy just bought a new house. I wonder how much money they have. And that’s a terrible thing to do, but you know, we do that sort of stuff. 

John: (02:11)

So we’re asking ourselves something along the lines of where do I stand? Another question we’re asking ourselves whether we know it or not is where am I headed? Where do I want to be in the future? And then maybe even a third question that could even be harder if we can’t answer the second, is how the heck am I going to get there? Right. And so on today’s podcast, I want to focus on these three questions that I think basically everyone’s asking. And we also know from just some research that only like a third of people out there hire a financial advisor. And so you would hope that people that hire a financial advisor are going to go through this, but not always. So it’s not a given. So even if that were to be the case, there’s still what, 66% of people out there that haven’t worked with an advisor, they’re asking themselves as they have a high degree of discomfort by not having some structure.

John: (03:03)

And so I think today as we go through these three quick steps, hopefully we can start to give some framework and structure so people can start working through this. And so, you know, if I put it on my CFP®, my CERTIFIED FINANCIAL PLANNER™ hat, Erica, when I think about somebody asking me the question of where do I stand, I want to pose back to them a couple of thoughts. First, ask yourself what life stage am I at? What life stage am I in? That’s things like my kids are in middle school or my kids are in high school or I’m an empty nester. Or maybe it’s like, I’m in the VP role. And I’d really like to be in the C-Suite or I work at a large corporation, but I kind of want to be an entrepreneur or somebody. That’s what life stage you are in. Two other quick questions, Erica, it’s what’s my income.

John: (03:47)

And really you can boil that down to like, what’s my take-home pay. Like each pay stub comes in, it’s deposited; what’s my take-home pay? And then the last thing is, what are my assets? What are my assets? And as fundamental as this is thinking about life stage, income, and assets is the best way to orient yourself. And especially if you’ve maybe you’ve had a good run or maybe you’ve been busy, it’s easy to lose track of your income and not keep a budget. It’s easy to lose track of the different buckets of money you have and your home equity and all these other things. So Erica, how many people do you think keep track of their income or their assets on an ongoing basis?

Erica: (04:24)

Yeah, I mean, I would say not as much as I would like to admit. I know I use a little app called Good Budget, but every time I show that to someone they’re like, oh, I’ve never heard of that. I’m like, okay. So I wouldn’t say very many people. I think they see money in the bank account and they say, great, I can just spend it.

John: (04:43)

Right. Yeah. And that’s probably pretty normal. So, if you’re thinking to yourself, where do I stand, the first checklist of items are your life stage, your income—your take-home pay—and what your assets are. And so you can use that as our starting point. If I’m kind of imagining this map, Erica, and the next point we want to pinpoint some area diagonally across on the map of where do I want to go. And I think some people have a hard time with this because it requires some introspection, but you would 110% have to go through this, if you haven’t done it already. And you need to ask yourself in one year, what needs to accomplish in my family and my faith and my business for me to feel like I’m tracking toward where I want to be going, or maybe in five years from now, where do I need to be with my faith and my family in order for me to feel like I’ve been spending my time well. And so if those questions don’t come easily to you, here’s some other tips that you can think about. It’d be things like, where are you going to be located? Who are you going to be spending time with and what activities are you going to be doing?

Erica: (05:52)

Yeah, John, that makes me think of a friend of ours. We’ve known them for a long time, invested in their kids from our youth group. All their kids are now in college. There’s one left. And at the end of this year, they’re going to go off to college. And they’re really thinking about relocating to a different state and city, form their new roots there, mainly because they want to be closer to their kids where their colleges are and they want to kind of experience that empty nester thing. But it’s kind of a scary thing to think about; they were in a certain spot for so long. And now at this new stage they’re asking themselves those very same questions. Yeah.

John: (06:29)

And I know that obviously they can become a challenge, but I heard a phrase one time: we’ve got unlimited desires, but limited resources. And so I think that’s where the challenge is in answering the second question, where do I want to be in the future? But as I work with my clients and we go through this exploratory process about thinking about the future, you have some creativity to really shape the life that you want. I eventually want to end that part with boiling it back down to some amount of income or some type of lifestyle that somebody wants to maintain for themselves in the future. Maybe I think that I can accomplish some of the hobbies. I can spend time with the people I want to, and I can give back to the charities that I want to with this amount of income per year or per month.

John: (07:14)

And when we, kind of home in on that, now logically comes to this third step, which is how am I going to get there? And so we can juxtapose question number one with question number two and say something like, how much do I need to save every year, every month, or however, do my 401(k) or my investment account in order for me to get there. Yeah. And Erica, being able to boil down that, okay, I’ve got X amount of dollars. I need to save $30,000 per year. I’m going to max out my 401(k) at 19,500, and I’m going to save $11,000 in my investment non-retirement account. And that doing that over the next seven years, 10 years with some stock market growth with my mix of stocks and bonds in my portfolio, that should get me to an asset level where I might be able to produce that, and thinking about my tax strategy and my legal strategy.

John: (08:11)

It just all ties a bow on, putting everything in perspective for your personal finances and finishing this step three can give just this huge sigh of relief. And I think that’s probably the thing that I craved the most in my conversations is this: thank you, I know where I stand on my income. I’ve got a clear idea. I’ve thought a little bit about the possibilities of the future. Obviously life can change. Maybe I’ll go down different avenues, but, if I can just save this much and let time do its thing. If I can think about getting involved in these activities, then hopefully that’ll be time and money well spent.

Erica: (08:52)

I like what you said about tying it into a bow; I like the idea of this gift box. And you’re just putting all this stuff that you need to start doing, looking at it a year from now, five years from now, 10 years from now. And then with that, with your financial planner guiding you through that, you can just tie it in a little bow and you’re like, great. Now I have a plan. Now I know how to move forward months from now, years from now. And then even longer than that.

John: (09:16)

Yeah. And obviously life changes. And so, the coronavirus last year was a good example where all of the things that you might’ve planned in January completely got pulled out of the rug, right? And so this is an ongoing exercise, but this is really the heart of financial planning and why I get so passionate about helping people. And then you can go off and live your life and you don’t have to worry about it. And some people try to make personal finances way more complicated than it needs to be. But I think people are asking themselves, where do I stand? Where am I going? And how am I going to get there? This is a great way for you to get on your way. So Erica, thanks for joining me again. And we’ll see you here next week.

Speaker 1: (09:58)

Thanks for tuning into The John Chapman Show. Be sure to subscribe on iTunes, Stitcher, or Spotify. We encourage your questions, comments, and feedback for additional information. Check out the John Chapman show.com or look for John on LinkedIn and Twitter. See you next week.