PHYSICIANS

While swimsuit season may be ending, financial fitness stays trending year-round. According to a recent study, “save more and spend less” was the top New Year’s resolution for 2017. In fact, financial resolutions have cracked the top five year over year, and hold steady behind losing weight.

So, why aren’t we all walking around with smaller waist lines and larger wallets?

Well, because maintaining financial health requires a lifestyle change – just like maintaining your physical health. The changes you make to get yourself on the right path need to become positive lifetime habits that are part of your daily routine.

10 Tips That Will Help You Get (and Stay) Financially Fit

Here are 10 tips to help you get started living the life you want:

1. Know your “why” behind money. Your specific reasons for working, investing, spending, and saving. If you don’t have that figured out, you don’t have anything to fight for. You can’t live intentionally with your money, because there’s nothing guiding your behavior.

2. Set goals and assess them regularly. Three years from now, what has to have happened for you to feel successful, both personally and professionally? From your answers, pull out your top five goals – and write them down! Categorize them into short, medium and long-term goals. You can also use the SMART method to help you define your goals further:

• Specific – Don’t set broad goals.
• Measurable – Track your progress.
• Assignable – Take personal accountability.
• Realistic – Only do what you know you can do.
• Timeline – Give yourself a deadline.

Related: 5 Goal Hacks to Help You Achieve More

3. Know your expenses. Between lifestyle creep and fixed expenses, most people don’t fully grasp how much they’re spending. Every year, you should sit down and reevaluate your expenses versus your income – no matter how much money you make. That way, you can gauge your spending habits, and see where your money is being allocated. This can help keep your net worth out of the red.

Related: Why High-Income Earners Are Living Paycheck to Paycheck

4. Know your current financial position. To be able to get where you want to go, you have to understand where you are today. You then have to be able to optimize your current financial position as your information changes. Without being able to see your entire financial life in one place, and evaluating how everything is working together, you may not end up living the life you want.

5. Avoid drastic changes. Crash diets aren’t solutions for long-term success. Rather, slow and steady wins the race. Identify all the changes you’ll need to make to reach your goals, and work through them gradually. This way, your focus is on creating lifetime good habits – not clicking the instant button.

LIFE HACK: Saving 1% more of your income each year is a small change that can produce big results down the road.

6. Tune out the noise. There is more financial noise than ever in our media today. That’s why you need to adhere to a disciplined, rules-based approach to your financial life, based on your most important values. Like Warren Buffett said, “Market forecasters will fill your ear, but never your wallet.”

Related: Investment Noise: Know It and Forget It

7. Make sure your financial strategies align with your most important values. The only constant in life is change. As your life changes, your strategies should then be updated based on what matters to you most at this moment in time.

Related: Do Your Financial Actions Support Your Most Important Values?

8. Know the difference between risk and volatility. Risk simply means the probability that your investment will lose money. It has no direct effect on your returns. Volatility is the amount of fluctuation a portfolio can experience. The higher the volatility, the more erratic your compound returns can be. Volatility is one of the biggest wealth eroding factors you’ll encounter. That’s why you have to mitigate it.

Related: Volatility Gremlins Are Killing Your Bottom Line

9. Practice cost and tax management. Investing costs and taxes matter – they can erode your returns just as much as volatility. Your strategy should work to lower the cost of expense ratios and be tax efficient. Remember that a good advisor can be worth a reasonable fee. Just be sure they’re providing you with value-based solutions, not selling you products.

10. Create an Investment Policy Statement. Even the best investors can get nervous when the market moves. But when the market moves, you need something that reminds you why you’re invested a certain way – that reminds you of your most important values, and stops you from making poor decisions. That’s when you pull out your IPS. If an investment decision doesn’t meet this criterion, you shouldn’t invest in it.

Related: The Best Way to Guide Your Investment Decisions

Why Does It Matter to You?

Being able to live the life you want is the ultimate goal. But, let’s take that one step further – being able to life the life you want, at every stage of life, is the ultimate goal. That’s why maintaining your financial health is so critical. Not only will it ensure that you remain optimally positioned for success today, but it can increase your chances of success in the future.

Have you ever found yourself asking this very question, wondering what to do next, and what the best option is for your financial success? Don’t be embarrassed if you have. I would dare say that you’re in good company, given the fact that Americans collectively owe $1 trillion in credit card debt. In fact, the question of whether to invest or pay down debt is one that I’m asked frequently by clients.

Logic is Always 20/20

Trying to tackle debt while still trying to save and invest can be tricky. But, when you think in terms of pure numbers, pure logic, the answer to this question is actually pretty simple. Ask yourself which number is greater, the return on your investment or the interest you’re paying on your debt. If you’re paying more interest than you’re earning, paying off your debt is the smarter choice.

Here’s one way I explain this to people when they ask me whether they should invest or pay down debt:

If you eliminate debt that you’re paying 15% interest on, that’s a guaranteed 15% return in your pocket. If you invest, you may have the possibility of earning 10%. So, what’s better for you to capture right now – a guaranteed 15% return, or a possible 10% return?

Numbers and logic make this a no-brainer. But it’s not always that simple, because money is emotional.

The possibility of earning big will usually tug at your heartstrings harder than paying off your debt. Plus, saving into your investment account gives you a sense of future security and accomplishment. Paying bills is stressful and not what you “want” to do with your money.

Related: The 6 Most Common Bad Investing Behaviors to Avoid

Good Debt vs. Bad Debt

To be able to truly answer the question of whether you should invest or pay down debt, you have to understand all of its components.

That includes categorizing your debt into good debt and bad debt, and understanding how they affect you. This is the first step in creating a debt strategy that works for you.

Here’s a basic guide to help you discern what portion of your debt is good and what portion is bad:

Bad Debt (credit cards, car loans, unsecured loans, etc.):

1. It has high interest rates.
2. It’s not tax deductible.
3. It’s not attached to appreciating assets.

Good Debt (mortgage):

1. It has low interest rates.
2. It’s tax deductible.
3. It’s attached to appreciating assets.

Good debt is an interesting topic. It’s worth pointing out that most private equity and real estate firms build their empires by leveraging almost everything they have. People do this in a similar way. Why wouldn’t they, given that the market and other appreciating assets are out-earning the current interest rates?

For instance, the ticker SPY for the S&P 500 has returned 7% for the last 20 years. In comparison, our all-equity ETF portfolio has an average back-tested return of a little more than 9%. That means in 20 years, $10,0000 becomes $58,474.

Related: Protecting Your Portfolio Against Market Downturns

Your 4-Step Action Plan

Given all the factors we’ve discussed here, there’s probably one thing you’re thinking right about now – Great, but where do I start?

You should start with the following four-step action plan. We use this with our clients, and strive to approach their financial life in the following way:

1. Build core liquidity. You should have a minimum of 3-6 months in liquid cash. It would even be wise to have 6-12 months of near-liquid assets on hand as well.

2. Eliminate bad debt. Again, that would be any substantial amount of short-term debt that may have high interest rates.

3. Save 15% of your salary. With $1 trillion in credit card debt weighing on Americans, it’s no wonder that the average savings rate has plummeted to just under 6%. But if you can’t save, everything else has to work harder to pick up the slack. A healthy savings rate of at least 15% is critical to reaching your full financial potential.

4. Invest. Investing is critical to your success, but should only be done when you’re in the right position to do so.

5. BONUS! Have an ideal mortgage to income ratio. Your mortgage payment should be no more than 15% of your gross income. Otherwise, you may wind up house-poor down the road.

This action plan takes a “priority and combination” approach to your financial life. Put simply, this approach focuses on securing your liquid safety net first, paying off bad debt, and finally investing. Once you have your core liquidity built up, you can then use your 15% savings to accelerate your debt pay off. I recommend this approach because it allows you to pay off your debt, and eventually invest, while still being able to adapt to life’s changes.

In other words, you’re not completely sacrificing one important element (i.e. savings) just to take care of another (i.e. paying off debt).

Related: 15 Common Sense Money Principles That Will Change Your Life

Why Does It Matter to You?

Numbers make the answer to whether you should invest or pay down debt pretty simple – if you’re paying out more than you’re earning, investing may be an act in futility for you right now. But as we’ve shown here, that’s not all this question asks you to consider.
This question is about more than just numbers – it’s about prioritizing your financial life in a way that makes your money work for you. A way that makes your money work as efficiently as possible. That means having six months of liquid cash built up, paying off any substantial bad debt, and then investing. There’s no one-size-fits-all timeline for the action plan we’ve outlined here, either. However, it’s important to remember that the longer you delay investing and compounding your savings, the less time your money has to grow. That can mean a diminished lifestyle in retirement.

When you look at the big picture, debt directly affects your ability to save, invest, and ultimately live the life you want. Start tackling it now, and you can find yourself much better off in the future.

The game of reaching your full financial potential is 70% behavior. Successful people practice good habits, every day, for their entire life. They’re willing to do what others are not. Successful people also live intentionally with their money – meaning they use their money to live life on their terms and conditions.

That’s really what the secret “formula” boils down to. How you behave, and the choices that you make every day. Those choices are what determine your success.

You see, how to find financial success isn’t some huge secret or algorithm that takes expert-level knowledge to crack. If you were to ask a wealthy person how they got there, you would probably be shocked at how simple their answers are. You’d probably leave the conversation thinking, “Heck, even I can do that.”

And you absolutely can. That’s because much of what successful people do when it comes to money is simply abide by common sense principles – many of which I’m about to share with you here.

Here are 15 common sense money principles that will change your life:

1. Spend less than you make. The is probably the most important common sense principle you can apply to your financial life. If you are constantly overspending and maxing out your lifestyle, you’ll never reach your full financial potential.

2. If you can’t pay for it in cash, you can’t afford it. This mantra is the best way to avoid drowning yourself in credit card debt. Waiting to make large purchases until you have the money will always pay off more than spending money you don’t have.

3.Forget about the Jones’s. Living up to society’s definition of “rich” can be costly. Wealthy people know what their definition of financial success is – and that’s the only one that matters. They would gladly defy societal standards, rather than living a deceptively poor lifestyle just to keep up appearances in the eyes of their peers.

4. Protect yourself. Stuff happens. And when it does, your financial foundation can quickly crumble if the proper defenses aren’t in place. You should seek to protect every aspect of your life’s work – from material assets like your home to your most important asset, you.

5. Pay your credit bills in full every month. If you want the second fool-proof way to avoid going into credit card debt, don’t charge more on them than you can afford to pay off every month.

6. Money doesn’t buy happiness. Having money doesn’t mean anything. It’s how you use your money that creates your emotional response. There’s plenty of research to prove you derive the highest degree of happiness when you spend your money on experiences, not things.

7. Slow and steady wins the race. No one becomes financially successful overnight. It’s a long road of practicing good habits and staying disciplined. If you keep searching for the instant button, or speculating and gambling with your money, you’ll never reach your full financial potential.

8. Get comfortable with being uncomfortable. Investing is one of the most unnatural things you’ll do in your life. But you have to be okay with that – you have to be okay with the fact that markets rise and fall. Staying disciplined according to your Investment Policy Statement is the best way to find investing success.

9. Time is your most valuable resource. Stop thinking that you have time to catch up. Not only does your money need time to grow, but it needs time to bounce back from drawdowns. The longer your money is invested, the better your chances of financial success. Investing early and investing smart are crucial.

10. Out of sight, out of mind. If you’re like me, it’s easy to find a home for the money you see sitting in your checking account. One of the best ways to curb unnecessary spending and boost savings is to set up automatic deposits from every paycheck to go straight to your savings or investments.

11. Costs matter – a lot. Costs from taxes, expense ratios, and advisor fees add up. They directly impact your bottom line. Over the long-term, they can eat a large portion of your wealth. Be sure you know how much your investments are costing you, practice tax management, and work with an advisor who is transparent on the fees you pay directly to them.

12. Money is like a kid. It’s incapable of managing itself – think of how your kids would’ve turned out had you let them make their own decisions, without any guidance or discipline from you. Money is the same way. You have to apply structure and discipline to how its managed, and you have to tend to it on a regular basis.

13. Your most important values must align with your financial actions. If your financial actions aren’t furthering your most important values, you’re probably not going to accomplish the goals you set for yourself. Values should play the same role in your financial life as they play in your daily life – they should guide your financial actions and priorities.

14. Be debt free. Or at least bad-debt (i.e. credit card, other high interest debt) free. Carrying substantial amounts of high-interest debt directly affects your ability to save and invest for your future. It makes everything else in your financial life have to work that much harder to pick up the slack.

15. Live the life you want. Wealthy people know their “why” behind money – you need to know yours too. Why do you work, why do you invest, why do you do any of it? Your answers will be specific to you, but it ultimately comes down to being able to live the life you want. That’s the real goal – to have your money work for you, so that you can reach your full financial potential. But you have to start with “why.” Otherwise, you don’t have anything to fight for. You can’t live intentionally with your money, because there’s nothing guiding your behavior.

Hiring a financial advisor can be stressful. You’re trusting someone to help you accomplish one of – if not THE – most important things in your life. That’s why you need the leg up. And the best way to do that is to know what matters, what doesn’t, and the critical questions to ask a financial advisor before hiring them.

Seeing Through the Smoke and Mirrors

The institutions and Wall Street broker-dealers have spent the last century building their grandeur. And they want to hold onto that power, forever. As consumers have gotten smarter, the traditional industry has had to do a lot to cloud your vision from what’s really going on.

For example, a lot of people don’t even know what their investments are truly costing them. And costs matter – a lot. They directly impact your bottom line. When investing, you can incur fees and other costs at almost every turn, from the advisor fee, to the institution’s fee, to the cost of the funds in your portfolio (your expense ratio), taxes, and more. And unless you explicitly go digging, most of these costs will remain hidden from you.

They also try to saturate your brain with a lot of fancy terminology to describe those of us qualified to offer financial advice – broker, CFP, CFA, CMT, advisor, investment manager, financial planner, portfolio manager, and so on. Which combination of the alphabet do you choose? While you should do some basic investing research before hiring a financial advisor, I say ignore the words and letters. Instead, find out what this person actually does and how they conduct business. That’s what matters more.

The next few paragraphs will give you the most important bit of information you should consider when hiring a financial advisor – and that’s knowing the difference between an advisor and a broker.

Advisor vs. Broker: Who Has Your Best Interest at Heart?

It’s critical that you understand what I’m about to say – Most people 1) don’t realize that most advisors aren’t fiduciaries, and 2) don’t realize that they’re not actually working with an “advisor.”

Before the 90s, there used to be a known distinction between advisors and brokers. In fact, there’s still a hard distinction between the two – it’s just not known to most people. It was in the 90s when the traditional industry stopped calling their salespeople brokers, and started calling them advisors. Ever since then, they’ve done a good job keeping the catch-all “advisor” category alive and well.

The biggest distinction is that advisors are fiduciaries. This means they represent you, and are legally obligated to work in your best interest. No one else’s. They typically charge a flat fee of assets you have under their management, and that is how they’re compensated. Basically, they have zero to no conflicts of interest, because their loyalty lies specifically with you.

On the other hand, brokers are not fiduciaries. They work for an investment firm (commonly known as a broker-dealer), and are representatives of that broker-dealer. Not you, the client. Brokers are obligated to sell the products offered by that broker-dealer. When it comes to products, a broker’s standard is “suitability.” This means if an investment is suitable, but not necessarily the best or conflict-free, they can still sell it to you. They’re paid on commissions from the broker-dealer they represent, not by you. The need to sell among brokers is high.

The 5 Most Revealing Questions to Ask a Financial Advisor Before Hiring Them

There are numerous questions, theories, and strategies for picking an investment advisor. But I believe it really comes down to asking a few core questions that get to the root of what matters most – what this person stands for.

Here are what I believe to be the five most revealing questions to ask before hiring a financial advisor. Take these questions with you when you conduct your interviews:

1. Are you an independent advisor or a broker? Your first question should get to the root of whose best interests they represent – yours, or an institution’s. I started Jarred Bunch because I was passionate about making a difference in people’s lives – so much so, that I walked away from a cushy, six-figure job in corporate America to strike out on my own. I remember being so excited about building a company that was going to change the industry. On the day my business cards arrived, I looked on the back and saw in writing, “Scott Jarred is a Registered Representative of so-and-so big Wall Street broker-dealer.” This was the opposite of who I am, the opposite of what Jarred Bunch stands for. I couldn’t make money work for people – I was still working for and being controlled by the man. So, we broke free from the chains, and became an independent Registered Investment Advisory firm (RIA).

2. Who pays you? If they’re truly an advisor, their answer should be something like, “You pay me.” They should clearly lay out how they charge their fees, and disclose all costs associated with doing business. Down the road, if you decide to work with them, you should also ask for complete transparency on portfolio costs. Brokers, on the other hand, are paid commissions by the broker-dealer they represent. In addition to the conflicts of interest this can create, it can also cause them to jack up your advisor fees – they have to make money after the broker-dealer takes their cut off the top.

3. Are you legally obligated to act in my best interest? The answer to this must be yes. All the time, no exceptions. If they’re a true advisor, their answer will be yes. This is their duty as a fiduciary – they are legally bound to act in and offer solutions that represent your best interests. Brokers are legally bound by contracts with their broker-dealer, and must act in the best interests of that broker-dealer. Yet another red flag that they’re not a true fiduciary.

4. What is your firm’s history and current professional standing? In other words, you can ask to see a copy of their Form ADV. This is a registration document that advisors must submit to the SEC and to state securities authorities. Form ADV is divided into two parts. The first part discloses specific information about the Registered Investment Advisory firm that is important to regulators. This includes things like name, number of employees, nature of the business and so on. The second part acts as a disclosure document, and includes information on fees, any conflicts of interest that may be present, any disciplinary actions, if they act as a broker-dealer and more.

5. What do you think you can help me accomplish in the next three years that would make my life significantly better? During the interview, take the opportunity to outline your top priorities, and give the high-level overview of what reaching your full financial potential looks like to you. Note that you should be doing most of the talking when you get to this point. The advisor’s job should be to listen, and hear what value you’re looking for them to add to your life. Then ask them what specific steps they can take to help you get there – so that when you guys meet three years from now, you’ll feel like the time you’ve invested in this relationship has been worthwhile. Not only does it give you a glimpse into how well the advisor aligns with your values, but also gives you a clue as to whether they view the world with an abundance or scarcity mindset.

Why Does It Matter to You?

Two of the most important people in your life are your doctor and your financial advisor. Cliché, I know, but something that I believe.

In fact, think about hiring a financial advisor in terms of what made you pick your doctor. Would you have chosen them if they told you their loyalty lied with anyone but you, the patient? If they said that they have to represent the best interests of an outside group, not you? If they only offered you one treatment option, regardless of whether it was the best thing for you, because that’s what the group who controls them allows?

Heck no. So, why then, would you consider hiring a financial advisor, one of the most important people in your life, who conducts business this way?

That’s why it’s so important that above all, you ensure you’re working with a true advisor – not a broker using the traditional industry’s smoke and mirrors to make you think they’re an advisor. This means that you’ll have a fiduciary on your side – someone who’s bound to the same principle of “First, do no harm,” as your doctor. You’ll have hired someone who goes to work for you every day, and who you can count on to educate, guide and counsel you toward reaching your full financial potential. While it will be their job to listen to what it is you want, it’s their responsibility to protect your financial well-being. If you ask them to do something they believe would threaten your well-being, it’s their job to explain why you shouldn’t. Just like your doctor would do if you asked them to perform an unnecessary or risky procedure.

In the end, your decision for hiring a financial advisor comes down to what you value in a person who is responsible for playing this role in your life. After all, this is your financial life, no one else’s. But just remember, you get one shot at your financial journey. And failure is not option. So, I would caution you to hire wisely. I promise, if you find the right advisor, you’ll never want to leave them, because they’ll help you live the life you want.

Breaking news alert – the financial industry has an agenda for your money! Okay, no offense, but if this is breaking news to you, then you need to read this article more than most.

Yes, the financial industry has an agenda for your money. Everywhere you turn, almost every solution you’re offered has their best interest at heart, not yours. But, shouldn’t your financial actions support your most important goals? Shouldn’t the effort you’re putting in be working to further your best interests? Absolutely.

Whose Agenda Are You Furthering?

If you fail to acknowledge the simple fact that the institutions have designed things mostly to benefit themselves, you may find yourself never living the life you envisioned. Essentially, the game of finance is just that – a game. Successful players take the time to understand the rules and instead of admitting defeat, figure out how to make the rules work to their benefit instead.

Now, the point of this isn’t to paint the traditional financial industry as the enemy. Besides, making them the enemy doesn’t do you or I any good, we still have to deal with them every day. But there are in fact rules that the financial industry adheres to. Rules that you need to be aware of, as they can limit your financial success. You can’t change their agenda or the rules they stipulate for the game. But, you can define the way that we live and work within them, and bend them to your advantage.

The 4 Rules of Financial Institutions

The traditional financial industry has four core rules that they live by:

1. They want your money. This simple rule is what starts it all. You want to save for retirement? Here’s an IRA. Oh, you want your employer to help you save for retirement? Here’s a 401(k). When you’re ready to save for your child’s college education, pick from our selection of 529 plans. And the list goes on. The institutions have designed solutions for your biggest needs simply because of rule number one – they want your money.

2. They want your money systematically. Once you give the institutions your money, they want to make sure that you keep giving it to them, on the same day, every moth, year after year. Think about 401(k) contributions – these often come straight out of your paycheck. People often make IRA contributions on a schedule as well. Many times, we operate in ways that are convenient for us, hence paycheck deductions. Yes, the institutions do a good job of tricking us with convenience.

3. They want to hold onto your money for a long time. All of that money you’re putting into your 401(k) is locked away until you’re 59 ½. And just in case you get antsy before that, you’ll find yourself slapped with taxes and penalties galore should you try to pull it out. Isn’t it funny how you have to pay to get your own money back? For all of those responsible people who want to keep saving into their IRA past this same age, don’t worry – they’ll hold onto it for you until your 70 ½ .

4. When the time comes, they want to give back as little as possible. Money that you take out of your 401(k) goes in pre-tax. That means when you go to take it out, you’ll be paying taxes on it. The same goes for an IRA. This is different than a Roth IRA, where you put in post-tax money. Concerning IRAs, they also don’t want you to let those sit and grow for too long. They’ll keep it until you’re 70 ½ , but then you must start taking distributions from it. This lowers the principle, which lowers the return.

Why Does It Matter to You?

Yes, you can’t change the rules of the financial institutions. But you can change how you live within them. And I’m not trying to trash 401(k)s, IRAs or any of the other things we’ve mentioned here. These aren’t “bad” things to do – in fact, they can be essential tools to help you succeed financially.

What is important for you to take away is that part of winning the game of finance is mastering a balancing act. Financial success depends on a healthy balance of money that is under your control, and money that is out of your control. Based on these rules, all of your money shouldn’t be tied up in long-term savings accounts. Life happens, that’s a fact. When it does, you need to be able to access your money when you need it. For instances where your money is tied up, you need to know what role these strategies are playing and exactly how they fit into your complete financial life.

You don’t lump all of your goals into one end all, be all goal. You have multiple goals, multiple things you’re working toward. Money is the same way. You have to dedicate different buckets of money to different goals. And it’s not just about having a lot of buckets – it’s about having the right ones that are best suited to the purpose that money is serving.

Let me put it this way – one of my cardinal rules for reaching your full financial potential is to never have more money out of your control than in your control. Remember this, and you can go far.