Many people think financial planning begins and ends with retirement planning. The logic is you can draw a straight line between planning, proposal and doing business. Financial planning is a huge umbrella covering many other areas of a client’s life. Some do not ring the cash register immediately, but serve to strengthen the client relationship and dispel the client’s perception: “You only talk to me when you want me to buy or sell something.”
At this moment (March 18th) most people are pleased the stock market is doing well. They are frustrated because inflation is stubbornly high, and the Federal Reserve is not in a rush to reduce interest rates because of that problem. If you had a personalized inflation index for your life, you would record a much higher number than the government does. In my world, the fellow who does my shirts raised prices from $1.00 to $1.75 on January 1st. When going out for drinks in Manhattan, $17 a glass for wine now seems more normal and less extortionate.
Your clients may be feeling the squeeze, and you want to help them. Let us look at ten ways you can make this happen.
1. Find a cheaper place to buy gas. Local stations in NJ and PA seem to be charging about $3.29/gal for regular last weekend. Costco was $2.99/gallon. Other chains are looking to build market share and are offering good prices. Isn’t gasoline a commodity? You will probably need to tell your client exactly where to go to buy gas.
2. Park cash they don’t immediately need someplace. Bank money funds and checking accounts tend to offer incredibly low interest rates. You cannot drive past a bank without seeing signs for short term deposit accounts in the 5% range. (3/16/24). If you client has cash that they need liquid, but not right now, tell them to shop around. $100,000 earning almost nothing in a checking account might earn $1,250 in a three-month CD, if you can find a 5% rate. Your firm might offer FDIC insured CDs in that range.
3. What’s the cheapest lending rate at your firm? Many people carry credit card balances they intend to pay off, but end up carrying for months. Credit cards are charging incredibly high rates, around 24% on average.1 Financial services firms have embraced asset based lending. For a line of credit, secured by stocks of $25,000, the rate might be in the neighborhood of 11%.. Your client would need to be disciplined, but if a $10,000 credit card balance is costing them $2,400 a year in interest, if they can get that down to $1,100 they are saving $1,300.
4. Move from credit card to charge card spending. The VISA and Mastercard you client carries is a credit card. They pay the minimum the card requires and they can carry the balance over month to month. The American Express card is an example of a charge card. You pay off your balance in full every month. It changes no interest. If your client can shift to buying everything on a charge card, hopefully they should be able to find a way to cover that bill every month.
5. Paying down student loans. Many younger Americans carry student loan debt from their college days. It is very common for employers to offer tuition assistance plans. In that situation, an employee can continue their studies and their firm picks up all or part of the cost. Some employers, recognizing employees might have earned full qualifications at their own expense before joining the firm, offer a student loan repayment program. The Federal limit for this type of benefit is $5,150/year into 2025.2 Does your client’s employer offer this benefit? It can help reduce the debt carried by the your client.
6. Employee stock purchase program. Many listed companies offer employees the opportunity to buy company stock at a discount to the market price. The discount might be 10% to 15%. There might be no holding period required.3 Your client can set some money aside as a payroll deduction and receive shares they can sell, realizing a small profit if they sell immediately upon receipt. If your client could set $12,000 aside, enjoy a 15% discount off the market and sell those shares immediately, they might realize a $2,000+ profit, assume no change in share value.
7. How does your client buy heating oil? This strategy involves some risk, because you are subject to market fluctuation in the oil price. Many people enter into a contract with their heating oil supplier. They are usually offered a price at the start of the season. They pay on a regular schedule, spreading out the cost. The alternative is to buy on the spot market from local heating oil dealers. Your client calls around, finds one or two with pricing they like and requests a delivery when needed. It’s the same logic as choosing the gas station to patronize when filling up your car’s gas tank. If you use 500 gallons a year and can save 50 cents a gallon, that is a $250 savings.
8. Explore the world of discount grocery stores. The world of food shopping is getting shaken up by the arrival of discount grocery chains from Europe. Lidl and Alsi are two German examples. Aldi has recently been named the fastest growing chain in the US market.4 Their “secret” is focusing on own store brands instead of the familiar product names you see advertised on TV. Wal-mart and Costco are also places where groceries can be cheaper. If your client spends about $800 on groceries a month and might save 25%, that’s $200 a month or $2,400 a year in savings.
9. Treat hotel points and airline miles as another currency. Your client takes at least one vacation a year. Their credit cards earn reward points for travel. Centralize your spending and use those points as your vacation fund. If you can pay for flights or hotels with points, you can reduce the cost of vacation travel significantly.
10. Get a cash back credit card. It makes sense to earn airline miles or hotel points. It makes even more sense to earn cash back instead. According to research, cash back cards are the most popular, with 66% of cardholders have at least one of them.5 The card might give you 2% cash back, boosted as high as 6% with purchases in certain categories.6 If your client spends $2,000 monthly on credit cards, they could be getting $40 a month or $480 annually back, assuming a 2% rate.
These strategies do not require significant lifestyle changes. Together, they could add to significant savings. You are showing your value to your client through financial planning advice.
Related: Eight Mistakes To Avoid When Taking on a New Client
1 https://www.lendingtree.com/credit-cards/average-credit-card-interest-rate-in-america/
2 https://www.paycor.com/resource-center/articles/employer-student-loan-repayment-program-5-tips/
3 https://www.investopedia.com/terms/e/espp.asp
4 https://www.freightcaviar.com/aldi-fastest-growing-grocery-store-in-america/
5 https://finance.yahoo.com/news/poll-americans-incomes-reliant-credit-140000225.html#:~:text=than%20%2450K.-,Cash%20back%20is%20the%20most%20common%20reward.,card%20that%20offers%20cash%20back.
6 https://www.cnbc.com/select/best-cash-back-credit-cards/