Ask A Financial Expert

Unblocking the 3 Wealth Blockers

by Joe Martinez
CFA, Phlox Capital Management

___________________________________

Joe Martinez, CFA, is the founder of Dallas-based
Phlox Capital Management, an investment management
and financial planning firm.

In the words of Warren Buffett, building wealth is “simple but not easy.”  In my 25 years’ working with successful people of tremendously varied backgrounds, I see three key “Wealth Blockers” time and time again:

Scattered Accounts
People rarely stay with a single employer for the duration of their career. Consequently, the typical investor has two or three “legacy” 401k accounts from prior employers. Investors may also buy an insurance product, for example, and be unclear whether the product continues to meet their evolving needs. For the self-employed, the retirement saving landscape is complex, resulting in a deferment of the decision to save and a sense of scattered priorities.
We find that scattered accounts, including insurance policies, create a sense of malaise for many investors. The scattered accounts phenomenon makes it harder to optimize your investment strategy and monitor investment returns and expenses.
Unblocking: There are multiple remedies for the scattered accounts problem. One of our favorites is using an online “dashboard” to consolidate your investment holdings – these tools make it possible to view all your accounts on one screen while the money itself stays put if necessary. For the do-it-yourselfer there are several options for accessing this type of software free of charge.
Reactive Planning
As the saying goes, “If you don’t know where you’re going, any road will take you there.”
Life events create the need for a plan. Job change, marriage, divorce, childbirth, graduation, nearing retirement, the loss of a loved one – the list goes on and on. For couples, it’s important that we feel an alignment with our spouse toward common goals, and we all know these goals evolve. We may need help reconciling many competing objectives.
Many of us jump on a career treadmill and don’t know how to jump off. We may earn a high income but lack a sense of fulfillment. We may desire a different lifestyle but have no idea how to think about a potential transition. Formulating a transition plan while meeting one’s family obligations is daunting to say the least. Sometimes just knowing we have an escape valve allows us to thrive while staying in the same place. Having our finances in good order makes a huge difference.
Unblocking: Consider seeking help from an expert when facing stressful decisions. Counselors, therapists, and financial advisors may all play an important role in developing a new plan for the future and alleviating stress. Change is always a bit uncomfortable. However, making the right change at the right time can be life-changing. When it’s go-time, I say “go for it!”
Inadequate Savings
Whether one earns $100,000 per year or $10,000,000 per year, it’s easy to spend more than we earn. And let’s face it – we all enjoy “budgeting” as much as we enjoy “dieting.” Budgeting and dieting – two challenging endeavors – both involve behavior modification.
Unblocking: we use a 3-step process:
1) Figure out how many different accounts your family uses to spend money
2) Total up the amount spent in the last year and compare that figure against income
3) Set goals for saving for the next 12 months and most importantly, automate the cash deposits to these savings vehicles.
We call this process “one-time budgeting.” There are countless other tools and tricks to help that are available online. My suggestion is to select a simple tool or plan, because the more complex we make the savings process, the less likely we are to stick with it.
Lastly, consider the fact that even elite athletes competing at the highest levels employ coaches. Everyone can improve their game. When it comes to your finances, selecting a coach / advisor who will challenge you to raise your game may be just the edge you need.

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