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Most Common Missteps Before Meeting with a Financial Planner

Fellow CERTIFIED FINANCIAL PLANNER™ professional Elaine King recently wrote on about how you can prepare for your first meeting with your CFP® professional. She mentioned how new clients should familiarize themselves with the financial planning process, gather key financial information, have a solid idea about financial goals, prepare a list of questions and have expectations about what they want to discuss with the CFP® professional.

This advice is incredibly helpful in preparing for your first meeting. Conducting your own due diligence and taking an inquisitive and proactive approach will certainly aid your CFP® professional in understanding your current situation and help guide your financial life journey.


But I have found that when some clients meet me for the first time, they often spend a lot of time overexplaining or justifying their prior financial decisions. In this case, don’t worry. Your CFP® professional is not here to judge you — only to help you!

To help expedite your conversation and put your mind at ease, below are some common mistakes that many clients make before meeting with a financial planner. If any of these sound familiar to you, you may want to address them before meeting with your CFP® professional the first time.

Misunderstanding Insurance

Insurance is confusing and worse, clients rarely like it. That is why they often pay no mind to what their policies protect and don’t protect. But they should.

Protecting property and real estate adequately is essential. At a minimum, you need to make sure you carry enough underlying liability insurance to protect your assets and income if you are involved in an accident or lawsuit. The next step is to ensure your property is covered in the event of a total loss — such as from a fire or a flood.

Finally, you want to provide for yourselves and your loved ones if you become unable to work because of a death, or even worse: a total disability. Yes, you read that right; a disability is more detrimental (financially speaking) than death. Not only do you have a lost income but you also have increased care costs.

Discussions around insurance can be difficult since they primarily deal with protecting against loss, which can be hard to think about. However, it is important to understand how it protects your income, assets and loved ones in order to see the true value of insurance.

Unfunded Emergency Fund

I rarely see prospective clients who have 3 to 6 months of nondiscretionary expenses saved in a checking, savings or money-market account — otherwise known as an emergency fund. These are expenses that cover your basic living costs such as a mortgage, property taxes or groceries.

Having an emergency fund not only covers these expenses but, more importantly, stops us from using a credit card and paying exorbitant interest rates. An emergency fund should be kept in a cash or cash equivalent, so it maintains its expected value and can be readily available when needed.

Hoarding Too Much Cash

While many do not save enough in emergency funds, others are cash hoarders. For these people, there is never enough cash in the savings accounts, and some are even willing to keep balances on high-interest credit cards just to avoid seeing their cash balances drop.

The problem with cash hoarding may not be so obvious. There is a reason they call inflation “the silent killer.” Inflation is the loss of purchasing power of cash over time, and it usually silently rises 2% to 3% annually. With a checking account paying around 0.1% and goods and services increasing in cost 3% per year, you can be losing money on your cash hoard every day.

Knowing the Difference Between Good and Bad Debt

Not all debt is bad, which is why debt management is very important to understand. Good debt is debt we hold on appreciating assets, such as a mortgage or a business loan. It could also be debt we strategically hold because the interest rate is so low it’s beneficial to pay it off over the longest possible period.

On the other side, bad debt is debt owed on depreciating assets, such as consumer debts that carry very high interest rates. This is bad debt that should be paid back as quickly as possible.

Avoiding Estate Planning

Finally, people make the mistake of avoiding estate planning. It is not just for the rich — it is for everybody. While not all of us need elaborate trusts established to benefit future generations, we do all need a will, powers of attorney for our finances and health care, and a living will (also known as an advance health care directive).

Most avoid planning because of the associated costs, an inability to make difficult decisions, normal, everyday human procrastination or a fear of facing their own mortality. The problem with avoiding estate planning is that our loved ones need a blueprint on dealing with the financial consequences of our passing. By leaving them unprepared, we leave them vulnerable to financial hardship, on top of the emotional hardship they already bear.

If you have committed any of these missteps, don’t fret. When you hire a CFP® professional, you are hiring an advisor who has committed to putting your interests first — even if that is helping you manage your prior missteps and get you on the right track to achieve your financial goals.

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