4 Tips for Your Financial Self-Assessment

4 Tips for Your Financial Self-Assessment

If life were only as simple and fun as a BuzzFeed quiz, we’d be awarding ourselves with lavish titles of “hero”, “artist” or “divine spirit”. But alas, self-assessment, when it comes to your personal finances, acumen can be deeply challenging. We tend to believe we are champions of knowledge and experience, but the reality might lead us to disappointment. Remember, your beliefs inform your attitude and your attitude informs your decisions. In other words, what you believe becomes your reality; sometimes in direct opposition to reality.

Personal financial planning not only deals with where you allocate your 401(k) plan, but spans areas like cash flow management, risk management (more than just investment risk), college cost planning, retirement planning, investment planning, tax planning, estate planning, social security and health care planning. All areas that determine your future.

Let’s examine 4 topics that might provide you with a basis for self-knowledge and a platform to make choices that really work to better your life.

  1. Your beliefs: If you flip a coin, and during the first 7 flips the coin lands on heads each time, do you believe the next time the coin will come up tails? If you believe that, you are asserting that the coin has decision-making ability and will try to equalize the binary nature of coin flips, and subsequently, will want to come up tails. After 7 heads in a row, it has to land on tails, right? Of course, we are aware that the coin has no ability or even desire to land on a certain side. When it comes to your attitude towards money and issues of financial concern, consider what you believe and whether those beliefs are grounded in objective information or if they’re tinged by bias. Think about areas like buying a stock: You believe the stock price will rise—but what you might not consider is that you are buying the stock from someone who decided that it was time to sell. What knowledge did they have that you lack?
  2. Acknowledging lack of knowledge and experience: I don’t know about you, but if my furnace breaks, my hand is reaching for the phone—not a wrench. The same holds true when it comes to my health. While WebMD contains a lot of information, I am confident that I can get better answers from my physician. Somehow, when it comes to financial issues, men (especially) seem to feel that they are, by genetic disposition, able to handle what can be extremely complex, and contain far reaching consequences. When it comes to making money decisions, are you more or less likely to ask for help or rely on your feelings of what you believe is correct?
  3. Frequency of review: How often do you review, or believe that reviewing all your financial matters is necessary and important? If you believe that financial planning is a “set it and forget it” check box, or that items only need to be revisited when there is an occurrence like a recession or change in employment status, marital change, death or a noteworthy event, you might be surprised that a reactive stature when it comes to your financial plan can place you in a very problematic position.
  4. Change-ability: Even for the most self-aware, change can be difficult. Consider the last significant change you’ve experienced and what process you endured to create a successful change. Whether it’s a change in job, housing, health insurance carrier or CPA, there’s typically a level of pain in starting afresh. Shifting strategies, even something as seemingly simple as cutting discretionary spending, can be rife with pain. Consider how well you navigate change and how you’ve been successful in the past. Use this knowledge to better your financial path for the future.

Your ability to successfully meet the challenges of your complex life are best supported by having a clear understanding of your knowledge, beliefs, biases, and ability to insert objectivity into your preset thinking. Move away from biases and towards objectivity. Take some time to really consider these four items and where you stand. The security and the well-being of you and your family depend on it.

Michael Kay
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I founded Financial Life Focus because I wanted to work with people who put your success at the forefront of everything they do; people who understand that finding balance is ... Click for full bio

Are Your Clients Failing to Plan for the Costs of Long-Term Care?

Are Your Clients Failing to Plan for the Costs of Long-Term Care?

Written by: Matthew Paine

It’s been a tough few years in my family. My mother has been battling cancer for what feels like forever, and while she’s been managing her health with diet and exercise for some time, a few months ago everything changed. Her cancer had become aggressive, and chemo, which she had dreaded, was suddenly the only real option. My mother is in her late 70s, so the already brutal side effects of chemo resulted in a prolonged hospital stay that is currently at four weeks and counting. The good news is that she’s mentally strong, and she’s battling like a lion.

My dad is another story. Suffering from early-onset dementia, his ability to understand what’s happening and why my mother isn’t at home shifts from day to day. Because he’s unable to drive or care for himself (at least predictably), my siblings and I have been juggling taking care of him ourselves. It’s not an easy task, especially with jobs, children, and lives of our own to manage as well.

Like many families, none of us—my mother, my father, my siblings or myself—saw our current dilemma coming our way. Clearly we should have. My mother hasn’t been in top health for years. My dad’s condition is sure to get worse. And even if both of them were in perfect health, their age alone should have driven us to communicate better, earlier, and smarter. Despite being in the financial services industry myself, I haven’t been involved in my parents’ finances. I know they saved well for retirement, but I don’t know where they stand financially today. I don’t know what or how much insurance coverage they have. I have no idea how they plan to pay for their long-term care—or if there even is a plan.

The situation is forcing our family to get personal—and fast. Despite being careful about nearly every other aspect of our family’s financial lives, this one slipped through the cracks. We failed to plan.

Just like cancer and dementia, this failure to plan is an epidemic. And it’s only getting worse. To help your clients battle this epidemic, it’s vital that planning for long-term care become an intrinsic part of your retirement planning process. Here’s why:

Retirement planning alone isn’t sufficient.

We’ve all seen it. A client has a great retirement plan in place, and suddenly life throws an unexpected curveball. The later in life your clients get, the more likely that curveball will be the need for long-term care. According to the National Center on Caregiving, the number of people needing long-term care will hit a shocking 27 million by 2050. And according to the AARP, one in four people age 45 and over are not prepared financially if they suddenly required long-term care for an indefinite period of time. That statistic alone tells us that our efforts at planning are failing.

Long-term care costs are escalating rapidly.

According to a 2016 survey from Genworth Financial, a private nursing home room costs just over $92,000—about $7,698 a month—which is 19% more than it cost for the same care in 2011. According to the AARP Public Policy Institute, lost income and benefits over a caregiver's lifetime is estimated to range from a total of $283,716 for men to $324,044 for women, or an average of $303,880—and less than 10% of that care is expected to be covered by private insurance.

Medicaid isn’t the answer.

Many people assume that public programs are the answer to long-term care, but in the case of Medicaid, a program designed to assist the poor, it is a last resort. First, while nearly everyone over age 65 has Medicare coverage, that program doesn’t cover long-term stays. That means that many people who need that coverage are forced to spend down their assets until they qualify for Medicaid. How poor must a patient be to receive benefits? In order to be eligible for Medicaid benefits, a nursing home resident may have no more than $2,000 in "countable" assets, and the patient’s spouse—called the "community spouse"—is limited to one half of the couple's joint assets up to $119,220 (in 2016) in "countable" assets. The result: even a couple who has spent a lifetime saving for a comfortable retirement can be forced to draw down nearly all of their assets before qualifying for Medicaid.

Once on Medicaid, long-term care patients lose the one thing many seniors care about most: choice. As a recipient of public assistance, patients rarely have a say in where they receive care. Whether that means being placed far from family, in a less-than-desirable facility, or even in a facility that lacks certain types of care (such as a dementia unit or other specialized care), the patient is at the whim of the state.

The good news is that even for those who feel there’s no light at the end of the tunnel, there are options that can help seniors who are struggling to pay for their post-retirement care to not only cover those rising expenses, but to do so in a way that gives them the freedom of choice. A Veteran myself, I know that VA Benefits are highly underutilized—including long-term care benefits. You can learn more about these benefits here. As well, the National Association of Insurance Commissioners (NAIC)’s July report Private Market Options for Financing Long-Term Care Services offers a variety of options for helping finance long-term care needs. Included in that list is the use of life insurance policies to help to fund long-term care expenses—an approach that is supported by GWG Life’s LifeCare Xchange Program.

Related: NAIC Sees Life Insurance as a Viable Solution to Long-Term Care Costs

In my own situation, I know there’s a high likelihood that my dad will eventually require skilled nursing care. I hope that as my siblings and I begin to dig into the details of my parents’ estate, we’ll find that they have indeed planned for long-term care. If that’s not the case, I’m comforted to know there are options available to help ensure Dad is not only in a facility that can meet his specialized needs, but that his new home is where our family chooses for him to be. Life may throw its curveballs, but at least Dad’s care will count as a home run.

Matthew Paine is Senior Vice President at GWG Holdings.  Mr. Paine started his financial services career with AXA Advisors, developing marketing strategies for the North Central Region and building his personal practice. Since 2008, he has lead sales teams in raising capital in various assets classes ranging from the Life Insurance Secondary Market, Multi-Family Real Estate, Conservation Easements, and MBS Hedge Funds/Fund of Funds. Mr. Paine has a BA in Marketing/Management from the University of St. Thomas in St. Paul, MN and holds FINRA Series 7, 24 and Series 63 licenses through Emerson Equity, LLC. Member FINRA/SIPC.
GWG Holdings, Inc.
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GWG Holdings, Inc. (Nasdaq:GWGH) the parent company of GWG Life, is a financial services company committed to transforming the life insurance industry through disruptive and i ... Click for full bio