Episode 5: Values Based Planning – Matter Before Money

Isaac Wright: Glad to have you back here at Wright Money Tips. I’m Isaac Wright. And, you know, we had a chance to talk at our last episode about stocks, what to own, whether or not you own stocks that have been high-flying, and could that cause you pain in your portfolio. And we talk about a lot of times, when you talk to your family, your friends, you’re always worried about what stocks you own or you don’t own.
Today I really wanted to step back and actually talk about something that I think is more important than that, which are the values around how you decide to invest your money and what we call value-based planning. So with that in mind, I actually asked Ricky, if you all haven’t remembered Ricky from our first episode. He was one of our guests.
I want to introduce Ricky again. Ricky is our senior advisor here at Financial Dynamics & Associates, a CFP professional. Most importantly, Ricky, I think when it comes to value-based planning, can you maybe first of all, just kind of describe what does that really mean? What is value-based planning?
Ricky Lafon: Well, I think that we can simplify that and we can say it’s basically creating an investment plan or retirement plan around what a client values most.
Isaac Wright: You know, because a lot of times, again, when people talk about investing, they immediately go to the stocks that they want to own or how much money they can put away in their 401(k).
But for all of you listening today, value-based planning has some specific components that in my mind, if you do correctly, you’ll make better investment decisions. And the reason for that is because you know the reasons why you’re investing before you go out and invest. Ricky, can you maybe give a couple of examples of what I mean here when you and I are talking about value-based planning. What are some of those values?
Ricky Lafon: Yeah, absolutely. You know, there are some people who want to first and foremost plan for their family. Whether that’s income for surviving spouse or taking care of children. It could be an education need for a child or grandchild, or it could be for fun and relaxation.
When can I retire? How fast can I retire? How can I have fun along the way? Or it could just be for charity and legacy. Do I want to leave a legacy for my kids and grandkids? Do I want to leave something for my church, college, or university that I want to bless as well?
Isaac Wright: Those are a lot of things. Let me slow down here for a minute because the first thing that I thought you brought up really made sense with family. If you think about it, most people primarily invest for the fact that they want to be able to have the protection for their family financially in the future. That may make a decision around your investments, whether or not how much risk you want to take.
For example, let’s say you have a situation. Let’s say for a lot of you out there have a situation where you have a spouse that has a health condition, or maybe you have a health condition. The question is how much money would be available to your spouse or your loved one, if you have a life-changing event. So, like I said, a death disability, something like that to me, that is a huge decision-maker as a value before you run off into the stock market.
Ricky Lafon: You’re exactly right there. And once we anchor ourselves to what values we have and how we’re going to plan, then we can go deeper with values-based investing.
Isaac Wright: So outside of family, you said charity. When you talk charity for example, to me that’s something that is a value that may be on the back end of a plan. Once they figured out that their lifestyle will be okay for their immediate family, their loved ones, and the people they want to take care of.
I would probably want to throw this in as well that I think sometimes supersedes that is when you say retirement to me, what I kind of think about is fun. How many of you out there are trying to figure out a situation where your definition of retirement means that. Maybe you still want to work part-time. Maybe you still want to get involved in some activities that pay you a salary or some benefit or start a business. But ultimately, especially what we’ve seen in 2020.
I mean, we’ve had a lot of conversations with people that simply just want to figure out when can they start having more fun and enjoyment with their money.
That’s what I’m trying to say. To me, that’s a bigger conversation. Maybe when I say, when can I retire? Where can I transition?
I think another question we fielded is, how much money can we afford to have as a discretionary budget, maybe even before we retire? So, a lot of families we are serving now are definitely at a point where they may still want to work and they still have to work for five, 10, 15 years.
Is that kind of what you have found without going into too much detail? Is that kind of a scenario that you see has been more and more let’s call it, on the forefront because of all the craziness we’ve had here over the past year?
Ricky Lafon: Yeah. I would say right on pace with that. Plus we’ve got more clients coming to us more now than ever that don’t have a pension plan and they have to create their own pension plan.
And with that, we need income to cover their expenses and throughout retirement. And we don’t want to sacrifice enjoying yourself, especially during the early years of retirement, we want our clients to go out and enjoy themselves.
Isaac Wright: So, as you’re kind of listening to what Ricky and I are covering, kind of what I would call the big values are family enjoyment, fun, discretionary needs, having that ability to have those experiences with the ones that you love, maybe having a charitable inclination when it comes to your plan. These are all values that will help you kind of mold if you will, the type of investments and the type of plan that you want to create.
Ricky, let me ask this with those in mind. If we go just quickly, another level deeper, when it comes to values, what are some specific values that you find that drive the decisions around investing itself to hopefully accomplish better things for the family and so forth?
Ricky Lafon: Two big ones stick out in my mind and that’s going to be personal values. There are going to be those people who want to be socially responsible. They want to invest in things that can make an impact on our environment, society, culture, things like that.
But there’s also faith and a person may want to align their investments with the tenants of their faith. Whether that’s screening out stock or investment types that they may, I should say may or may not want to own.
Isaac Wright: That’s good for everybody to know. So, you know, here at our firm, we definitely have portfolio plans that can be laid out to really target into some of those values.
Also, Ricky, I think when it comes down to picking the stocks and creating that portfolio and monitoring it against those types of screens for let’s say, tobacco or firearms, or just a litany of things that people may have a bias for or against. It’s important for all of you to know that when it comes to creating a financial plan, you want to feel good about what type of plan you’re putting together.
So, think about it from this perspective. If you’re putting together a plan that is owning the type of stock that you feel good about and it’s accomplishing the goals of retirement, having more enjoyment, protecting or looking after your family; we wanted to have this conversation, Ricky, I think in a way, just to step back from trying to figure out, let’s say where to invest your money all the time, based upon a stock valuation, if you will.
Ricky Lafon: Yeah, that’s exactly right. I mean, we can sit and chase gains or accumulation all we want to, but what are we really working towards? And I think that’s what matters the most.
Isaac Wright: Well for all of you here today, I really hope that you liked the conversation around value-based investing. Ff you feel like you’re having some concerns about the type of investments you own, or maybe more importantly, not having the goals lined up before you invest please reach out to us, we’re here to help.
If you have any concerns or questions you can visit wrightmoneytips.com to request some time on our calendar. Or please subscribe when visiting wrightmoneytips.com to receive notifications on new episodes, our newsletter, and even upcoming events.
Ricky, what a great conversation today. It was nice to take a step back if you will and just say, what’s the most important thing you’re trying to accomplish in life? And I think if you drive that conversation, that some of the things that we covered today will be helpful.
Ricky Lafon: I couldn’t agree more. Well said.
Isaac Wright: Well, everybody, we want to thank you for tuning in to Wright Money Tips. We’re going to have another episode in the not too distant future. Take care. We’ll talk to you soon.