All in Financial Planning

What is #FeeOnly Financial Planning?

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The way in which your financial planner is compensated can make all the difference in the recommendations they make for you. That’s because some advisors work under a standard that requires only that their recommendations be suitable to your particular situation. Other planners work under a fiduciary standard that requires advisors to consider what is in their client’s best interest. You may be wondering why your advisor would make a recommendation that is not in your best interest. That’s where the issue of compensation comes into play.

There are three basic ways in which financial advisors are compensated:

  • Through a commission-based model

  • Through a commission & fee model

  • Through a Fee-Only model

Both commissioned and commission & fee advisors receive a compensation based on the specific financial products they sell to you. Because of the conflict of interest inherent in these transactions, these advisors may have difficulty putting the client’s interest above their own.

NAPFA’s position is that the Fee-Only method of compensation is the most transparent and objective method available. This model minimizes conflicts and ensures that your financial planner acts as a fiduciary. Fee-Only planners are compensated directly by their clients for advice, plan implementation and for the ongoing management of assets. All NAPFA members are required to work only within the Fee-Only structure, accepting no commissions for their work.

Fee-Only financial advisors may be paid hourly, as a retainer, as a percentage of assets (AUM), or as a flat fee, depending upon the planner you choose.

Financial Advice Tailored to You

Tips to make sure you are not getting general “one-size fits all” advice

Professional financial advice targeted toward you, your life and your goals works much better than generalized, scattershot investing tips.

Have you ever received a financial tip or idea that didn’t quit fit your personal situation? Many people mean well when they give suggestions when it comes to investments or taxes, for example. However, it’s really hard to give good advice without having at least a partial view of someone’s financial life.

Everyone’s investment and financial planning needs defy a one-size-fits-all planning strategy. Most financial situations are unique and require personalized, realistic and achievable advice – especially when working with clients from different professions and industries.

I like to ask specific questions about you, you’re values, you’re background with money, what’s currently keeping you up at night when it comes to money, and what’s most important to you when it comes to money. Do you want to save for retirement or a child’s college education? Retire early, later, mini retirements, or create a passion profession wants you’re financial independent? Buy a business, start a business, sell a business? Sell or buy your home, rent and travel?

One Big Question

What do you do for a living? Many professions require specific planning strategies due to certain employer benefits, insurance needs, debt management or retirement income. And if you’re a business owner, entrepreneur or solo-preneur, there’s all sorts of ways to take advantage of profits. For example:

·       A retiring contractor leaving behind a physically strenuous work life may initially want to file for Social Security as early as possible, without fully understanding the true costs and benefits of waiting

·       A schoolteacher with a pension may be unaware of the opportunities to save and invest through tax advantaged accounts outside of the pension plan

·       A young physician may require a specific type of cash flow and risk plan to make sure student loans are paid and family is provided for in case of an unforeseen emergency.

Life Stages Matter

Life stages also often determine the need and perceived availability of specific financial advice. According to a recent survey, only one-third of Americans consistently take action after receiving financial advice. Age, gender and circumstances of advising clients, however, often predicate who will take financial advice, as does the specificity of that advice.

For instance:

·       Individuals are more than 60% more likely to make a financial change after an explicit investment recommendation rather than after general guidance

·       One in five of the 1,006 American adults surveyed called finding relevant financial advice “difficult”

·       Of those, 51% said they don’t know where to start looking, and 74% said they don’t know which sources to trust for financial advice

Age and Gender Matter Too

The survey also found that the desire to seek advice and take action differed based on age, gender and other individual factors:

·       Respondents ages 18 to 34 showed more interest in getting financial advice than any other age group surveyed, and 40% said they frequently look for financial advice

·       Those in this age group were also more likely to make changes after receiving advice

·       Nearly half of women surveyed believed personalized, objective advice will cost more than they can afford, and more than one-third said they don’t have the time to look for it

·       Women were, however, more likely than men to act on advice received

·       Boomers were the most likely to report that financial advice was very difficult to find. Only one in three admitted they consistently act on the advice they do receive

The Bottom Line

When you’re talking to your financial advisor or interviewing potential planners, ask their specific experience with individuals in your profession and stage of life. Ask about strategies unique to your situation and settle for nothing less than advice personalized to your needs.

Writing Your Own Financial Plan, Part 2 — Goal Setting

The second part of this three part series, is around the topic of: GOALS.

For some people this gets you really excited, and the prospect of writing goals, and thinking about the future and setting goals is a motivating and energizing experience. That’s wonderful, run with it and use this skill for setting goals to better your financial life. For many, however, the idea of goal setting is daunting or just plain dull. For some the very word “goal” causes you to feel anxious or maybe you just don’t believe in goal setting and it hard to think with any real clarity about the future. For these people, I encourage you to try using words like priorities, or targets, or objectives, or even educated guesses to lighten the burden you feel when it comes to setting goals. Remember that you can always change, modify, remove, and update goals. Most likely things will change, we don’t know what’s going to happen tomorrow let alone 10 years from now. So let that give you some freedom to put things in writing, knowing that you can always edit them later.

The whole idea around the “goals” part of your financial plan is to target a few of the most important desires you have for your life over the next set of years. I’m purposely vague on the amount of goals and the time frame of your goals because that’s the beauty of a personal financial plan, it’s unique to you. In part 1 of your financial plan, you already wrote down Your Highest Values or Your Purpose, which will allow you to check your goals against these values to make sure they align with what’s most important to you.

Another way of thinking about your goals or guesses is to think about the “big rocks” you need to get into the jar first. We’ve all heard or seen the visual experiment around prioritization which uses big rocks, small rocks, pebbles, sand, and a jar. The goal is to get it all inside the jar, a nd if you don’t start with the big rocks you’ll never get it all in. The rest of the stuff just kind of fits in around the sides and on top, as long as you get the big rocks in first. So when it comes financial planning, what are the big rocks in your life that you need to have your money go towards first, each month, or each year?

A good friend, Ron Blue, talks about six categories of long term goals to choose from. These categories might give you some more ideas on where to start when it comes to putting some financial life priorities in writing. The six long term goal categories with which you can begin to prioritize your money for, are:

  • Financial Independence

  • Family Needs

  • Lifestyle Desires

  • Being Debt Free

  • Starting a Business

  • and, Charitable Giving

Within each category there are numerous specific goals that you may come up with, but these will at least start to get the ball rolling.

Some people like the idea of categorizing your main objectives around time. Having a short term, medium term, and long term goal categories might help you think about what’s important. Short term goals may be 1-2 year goals, medium term might be 3-5 year goals, and long term may be 5-10+ year goals. When you think in terms of what age you’ll be at that time, and try to imagine yourself at that age and what you’d like to have happen, that also helps you visualize and put in writing financial goals.

How to start a sole-proprietorship business in San Luis Obispo — Quick Start Plan #SanLuisObispo #soleprop #businessownership

I work with a lot of business owners in San Luis Obispo, and being one myself, I thought I’d right a ‘quick start’ tutorial on how to set up the simplest kind of business — a sole proprietorship.

This article is meant to be a nuts-and-bolts, “what’s needed”, general information in order to create a formal sole-prop business in SLO.

  1. Fictitious Business Name Filing

If you are using a fictitious name, or a doing business as (DBA) name, you will first need to file for it with San Luis Obispo County. Here is the 4 step process outlined:

In short, you’ll need to make sure your fictitious business name isn’t taken then file for the name here:

Then, you need to publish the fictitious business name statement once a week for four weeks in a local newspaper like the tribune. 

Then the newspaper will provide you with proof of publication to the County of San Luis Obispo.

The fee for is about $52. Here’s the link to the county fees:

2. Acquiring the City Business License. 

You’ll need complete the business application:

You can mail it to: P.O. Box 8112, San Luis Obispo, CA 93403-8112 or drop it off at: 990 Palm Street, San Luis Obispo, CA 93401-3249 

If your business address is your home, you’ll need to complete this form and submit it along with your business application:

You as the home owner, or your land lord will need to sign it. The city will post a small sign in front of your home for a couple weeks that a business permit is pending. 

The total cost for the business license for a home-based business located within the city limits is $226.96

Here is the cities “How do I get a business license?” page with more info:

3. Setting up separate Business Checking, Savings accounts.

Next, I would go to either the current bank you use, or search for an online business bank to set-up separate business checking and savings accounts. You will need a copy of your business license for this. These accounts will further legitimize your business by keeping all your expenses and revenue separate from your personal bank accounts.

I also like the idea of starting a separate credit history for your business as soon as possible by applying for a separate business credit card with which you can make business expenses with. Disclaimer: if you are not “good” with credit cards, or have a history of not paying your credit card balance off every month, then it’s not a good idea to put yourself in a position to rack up credit card debt through your business. A credit card only makes sense if you pay off the balance every month so as to not subject yourself to any high interest fees. 

Disclaimer: this article is not meant to be specific advice nor recommendations for anybody, rather general information. 

I'm teaching a 'Planning for Financial Independence' course at Cuesta College

Join me this summer as I teach a course on Planning for Financial Independence at Cuesta College.

About the class:

Planning for Financial Independence

We will cover the fundamentals of sound personal financial planning. We will help you chart a course for financial independence according to your values, goals, and targets. We will teach cash flow planning, risk management, investment management, college education savings, retirement planning, and estate planning basics.

Summer 2019

Register Online Here

DATES: Monday & Wednesday, June 3 & 5, 2019

TIME: 6:00 - 8:00pm

FEE: $40 — all proceeds go back to the Cuesta College Foundation

LOCATION: Cuesta College, San Luis Obispo Campus, Room 4760. Physical Address:
Highway 1, San Luis Obispo, CA 93403

INSTRUCTOR: Eric Maldonado, CFP®, MBA

QUESTIONS: Contact instructor at or (805) 250-4552

P.s. Feel free to forward this along to a friend.

#AquilaWealthNewsletter -- Home Ownership vs. The Stock Market and An Under Appreciated Way to Save Money - Your Car(s)

In this week's personal financial newsletter installment, I have a couple articles to highlight from my reading -- Home Ownership vs. The Stock Market and An Under Appreciated Way to Save Big Money -- Your Car(s) 

Home Ownership vs. The Stock Market

The age old question, "what's a better investment, owning a home or owning stocks?" is addressed in this article. The article writer, Ben Carlson, is more-so writing a response to a research paper put out by the San Francisco Federal Reserve Bank in March entitled The Risk Premium Puzzle. Like many a research paper that attempt to take on a massive data-set in order to draw out a couple of conclusions, there are some glaring issues with this research paper. Namely, the paper shows real returns of the world wide housing market as pretty much keeping pace with stock market returns going back all the way to 1870. Which could then lead people here in the U.S. to believe that owning a home is as good of an investment as owning stocks, aside from the fact that any world wide housing data going all the way back to 1870 would be fraught with all sorts of questionable data gathering methods. Taking world wide data on housing, and using as a basis for owning a home in a very specific part of the world is obviously flawed. Carlson points a couple other very important items to consider when owning a home which this paper didn't consider, "the leverage involved, the cost of borrowing, the length of time in the home, the imputed rent, the psychic income from home ownership and the fact that you have to live somewhere."

Here are a couple opinions from the article I agree with:
"... comparing your home as an investment to the stock market makes little sense."

"Risk can be exponentially higher in housing for the simple fact that it’s also the roof over your head."

"I’m not saying people shouldn’t invest in real estate ... But before you head down that path, no matter what the historical return numbers show, first understand the risks involved in trying to make the roof over your head the biggest part of your nest egg."


An Under Appreciated Way to Save Big Money - Your Car(s)

I like this article because it gives some outside-the-box ideas and resources when it come to saving money and counting the cost of car ownership.

First consider the actual cost of your car, including: 

  • Insurance

  • Gas

  • Maintenance

  • Registration fees

  • Taxes

  • Depreciation

Nerdwallet has a helpful tool for finding out the real cost of your car per month:

The 3 main points listed in the save money category, from most to least obvious & convenient, include:
1. Buy Used
2. Go Down to One Car
3. Negotiate via Email for your next car

On the negotiating via email front, here's a link to an email template:

Writing Your Own Personal Financial Plan, Part 1 -- Your Values and Your Purpose

In this 3 Part Series I will cover, what I believe to be, the three main elements of a properly built personal financial plan.

The 1st element of a well written personal financial plan is: Your Purpose and Your Values.

We start your financial plan writing process with the question: “What is important to you about money?” And, if you have a significant other, this is a wonderful opportunity to hear from them about what makes money important to them. So you can take turns asking each other “what is important to you when it comes to money and finances?” 

It’s important to start with this type of question before moving on into goals, specific to-do items, or investment techniques, because this focuses the entire personal finance discussion around your core values that you hold to be most important to you. 

Everyone has a story when it comes to money and how it has impacted their life from childhood all the way through adulthood. And this plays a major roll in finding out what you value most when it comes to money and having a plan for your finances. So, a few other really insightful questions to ask of yourself, or for you and your spouse to ask of each other, is “what was money like for you growing up” or “what is your first memory of money’s significance in your life?” The answers to these questions will start to fill in some details as to why you think about money the way you do.

Another great exercise to use in coming up with your highest values or your main purposes when it comes to your finances, is to ask yourself or have some one ask you “why is money important to you?” And the key is to continue asking this question over and over with each new answer that comes to mind, until you come to your highest values or purposes for money. Usually it take 5 to 7 “why’s” until you come to a place where your answer is the most important thing to you when it comes to dealing with money and planning for the future.

For example, someone might answer “providing for my family” to the first question “why is money important to you?”

Then the second “why” question is “why is providing for your family important to you?” And someone might answer, “because I want to make sure I can spend time with my family while we’re healthy and young.”

Then the third “why” question is “why is spending time with your family important to you?” And the answer might be, “because I want to make sure we experience new place around the world”

And (you guessed it) the fourth “why” is “why is that important to you?” The answer, for example, might be “because I want to give and serve people in need with my family?”

The fifth question, “is there anything more important than giving and serving with your family?” Answer, “No that’s the most important thing to me.” 

Another title for this exercise is called “The 5 Why’s.”

Now as the example above shows, this person now has at least one purpose or one highest value for their financial plan, which is "to give and serve those in need with my family.” This then become a driver for the rest of their financial plan and it dictates their main goals.

It helps to frame goals with what you value, and it gives a “true north” when determining if your goals are compatible with what is really important to you. Putting your values and purpose for money in writing also serves as a way of preventing you from setting goals that don’t really jive with what’s important to you and/or your significant other. For example, maybe someone thought their mail goal was to buy a condo in the city, when in reality, after going through this exercise, they actually value most flexibility, space, and travel. So, this allows them to redirect their funds towards these goals that better align with their lifestyle desires.

In short, start your financial plan by trying to come up with one or two purposes or highest values for money in your life. This is different than a goal, because goals tend to change based on ages and stages of life, where as, your values and your purpose tend to stay constant and consistent throughout life.  

Putting “your why” to paper, or “your highest values and purposes for money” in writing might sound daunting or even a little too touchy-feely when it come to writing a personal financial plan. However, it’s the most important step of the process. At first it can be slow-going to come up with core values when it comes to money but give it some time and you’ll start to recall pivotal money moments  in your life and you’ll start to have answers to the “why is money important to you?” question.

Planning Continues Upon Retirement for Business Owners

As a business owner, you have invested a great deal of time and effort into building your company over the years. You know the amount of planning needed to maintain daily operations and grow your business. Now, you may be ready for retirement. But, the planning does not end. What you do next, and how you navigate potential tax issues and regulatory pitfalls, can make a big difference in the long-term success of your retirement.

Here are some of the more “taxing” concerns you may face associated with retirement:

Early retirement and early withdrawals.

If you take withdrawals from your qualified retirement plan before age 59½, you may be subject to a 10% Federal income tax penalty. There are certain instances in which early withdrawals may be taken without penalty, such as death, disability, or substantially equal periodic payments. Otherwise, at 10%, the penalty tax can be significant, so it is important to plan accordingly.

Waiting too long. You must begin taking required minimum distributions (RMDs) from your traditional Individual Retirement Account (IRA) by April 1 of the year after you reach age 70½. If you fail to do so or do not withdraw enough, you will be subject to a 50% penalty tax, which will be incurred on the difference between your RMD and the actual withdrawal amount. Your RMD amount is based on the previous December 31 balance, divided by your life expectancy (or the joint life expectancy of you and your spouse, if applicable).

Working while receiving Social Security.
If you receive Social Security and also continue to work, a portion of your benefits may be taxable. For more information, refer to Internal Revenue Service (IRS) Publication 915, Social Security and Equivalent Railroad Retirement Benefits, or consult with your tax professional.

You may be subject to the “give-back” if you are under full retirement age (based on the year of your birth), receive Social Security benefits, and earn income. The law requires a give-back of $1 for every $2 earned in excess of $17,040 in 2018 for those individuals between the ages of 62 and full retirement age who are receiving a reduced Social Security benefit.

For the year in which an individual attains full retirement age, the give-back is $1 for every $3 in excess of $45,360 for 2018. Starting in the month in which the individual attains full retirement age, the give-back is eliminated. If you are under full retirement age and thinking about taking Social Security benefits while still working, it is important to understand the potential tax consequences of doing so.

Where you live in retirement matters.
Each state has its own rules on income, estate, sales, and property taxation. Your tax and legal advisors can help you assess the potential tax advantages and disadvantages of your retirement destination.

Planning Continues through Retirement

Your personal retirement plan probably involved building a nest egg with regular savings over decades. Now that you are preparing for retirement, continue with your planning.

Time IN the Market > TimING the Market

The belief that you, or a particularly talented financial manager, can foresee the direction of the stock market is a seductive one. Some investors are confident that, with proper research, they can make money by snapping up equities when prices are low, and shifting their investments into cash or bonds when the market hits its peak. Even worse, they believe they can pay someone else can do it for them. But longitudinal studies have shown time and time again that no one can consistently predict the direction of the market in the short run.

However, many armchair investors persist in the belief that, by carefully following business news and trusting their “gut” instincts, they will be able to beat the market. Some study the stock tips in personal finance magazines, others hope to glean additional insight from analysts’ reports and specialized investment newsletters, and still others attempt to mine all the available data, crafting complex simulations of how the market is likely to behave in the future.

But if financial professionals struggle to keep ahead of trends, private investors are even less likely to outfox the indexes. As soon as a piece of business or economic news hits the airwaves and the Internet, analysts and brokers react immediately to the information. Because these financial professionals act so rapidly, the stock market almost always reflects all the known information at any given moment in time. And even if an individual investor were able to develop an analytic model with some real predictive value, unexpected events—such as a terrorist attack or a natural disaster, or even a political scandal—could lead to sudden and dramatic market fluctuations that no model based on historical data could have anticipated.

It is only natural that investors would want to find some way to sit out bear markets and get back just in time for the next bull run. It is useful to keep in mind, however, that even the slowest equity markets have some bright spots. A diversified portfolio will help you protect against loss and capture whatever gains might occur in a market downturn.

Investors run a big risk by selling when they believe stocks have reached their peak. They may turn a profit when cashing in their equity holdings, but they could also miss out on some of the market’s best cycles. Being absent from the market for only a few of the days or weeks with the highest percentage gains can decimate a portfolio’s returns over time. Market timers who sell frequently also lose money to transaction costs and taxes, and miss out to a large extent on the compounding effect that benefits investors who remain in the market consistently. Instead of trying to time the market, investing in a properly allocated diversified portfolio driven by a goals-based financial plan is a much better strategy.

Trying to pinpoint the right time to invest in the stock market is an exercise in futility. If you have a longer period to save, owning equities provides the most effective hedge against inflation and taxation available. Since it is impossible to know where the market might go from here, it makes sense to start investing now and continue investing on a regular basis, regardless of market conditions. Remember: long-term investment success is achieved not by timing the market, but by time in the market.

My mission is to help 80 households be more generous over their lifetime. And that’s it. 

What’s a household? Partly it’s a way for me to measure how many people I’m helping. So it’s a family, a unit, it could be a husband and wife and their kids. Or, it could be an individual whose committed to the process of working together to make wise financial decisions. 

Why just 80 clients? There’s not a lot of science that goes into it for me. It’s a feel but also an understanding of my capacity. I want to give my full attention to my clients when they need it. I know I can do that with 80. So I’m capping it there. At least, that’s my conviction now.

I also believe there will be enough of a ripple effect with 80 committed clients working together for the next 5, 10, 15, 20+ years, that I’ll have plenty of reasons to feel like I made enough of a difference in enough people’s lives. Plus, it takes a long time to work one-on-one with clients to get clear on their goals, values, and action items. Then, there’s course corrections that happen as life happens. To do quality work, at some point you have to limit the quantity of work. Unless of course you’re building a corporate empire to scale, which I am not.

Why the focus on generosity? Of course there’s more that goes into a financial plan than being generous, but for me, that’s where all roads have to end up if I’m doing my job properly. 

Let’s take retirement, for example. Why do people want to retire. Well, there’s an infinite number of reasons, but there are a few main reasons. For some people it’s to rest, for others it’s to get away, for some it’s to spend time with family, and yet for others it’s to do nothing but their hobbies and passions. My thing is that retirement ought to be more of a change towards something else rather than an end in and of itself. And, I think the way to get it to be a change towards something new, is to have a reason outside of just making yourself more comfortable. Comfort is important, but at some point you max out on comfort. Then what? That’s where generosity comes in. I think we’re more fulfilled when we have an aim that involves giving something to someone else without expecting payback in return. To me, there’s an endless amount of financial planning work to be done in 80 households’ lives to maximize the generosity in each one, and thus the positive impact all around the world.

 Also, I feel that almost no one has anyone in their life challenging them to be more generous, nor teaching them wise financial principles to get to the point where they feel like they have “enough” or even “extra. For the most part, no one talks about their money at all to other people, let alone their closest family or friends. And it would be far too risky to tell someone what you think they should do with their money. So, that where my calling comes in. I’m not telling people what to do with their money, rather coming along side to provide a personal financial framework for you how and what to do to get the most out of what you have. 

The #Fiduciary Rule is Dead

But Clients Should Ask Their Advisor This Simple Yes or No Question

Over the past year, investors have been receiving notifications about the U.S. Department of Labor’s fiduciary rule that would have impacted financial advisors and their clients. Simply stated, the DOL’s new “fiduciary duty” standard would have required financial professionals who receive compensation for transactions to act in their client’s “best interest.”