Finance

Planning Priorities

Financial planning involves a number of issues: some are addressed enthusiastically while others are deferred or avoided. Over the years I have found that the same issues fall into easy vs. hard …

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Financial planning involves a number of issues: some are addressed enthusiastically while others are deferred or avoided. Over the years I have found that the same issues fall into easy vs. hard to-do buckets.

Take mortgages. I rarely meet with a client who doesn’t want to pay down a mortgage as fast as possible. Usually I am a fan of extra payments. Lower mortgage balances leave open the possibility that the next home can be debt-free or that a nicer home can be purchased without constraining the budget.

Still, making extra payments doesn’t always make sense, especially for those who are financed at low interest rates and with very reasonable payments. Such terms don’t take away the desire to pay down the mortgage, however, which is based on the view that a mortgage is a big- and therefore bad– debt. Mix in the fear that the house could be lost if the mortgage suddenly became unaffordable and it is easy to see why many people pay down the mortgage.


Also consider life insurance. Since we are all going to pass away, we understand that our loved ones may need help after we are gone, if we have provided them with financial support. I am a huge fan of term life insurance, where you have enough coverage to pay off debt, fund college education costs and ensure survivor income and savings until the coverage is no longer needed– often retirement. Because the coverage can be relatively affordable, making its purchase is a top priority for many people.


Retirement savings is another component of the easy-to-do bucket that is embraced enthusiastically by most people. But like college savings, it is often funded insufficiently early on. Intentions are good, but an understanding of the necessary hard numbers can be lacking. Wishful thinking also plays a role: “I may get help from the markets.” Or “I hope my kid gets financial aid,” is what I sometimes hear. But estate planning – which also involves what happens after death– is not as readily embraced. While individuals will shell out $1,500-$3,500 year after year for life insurance, they are reluctant to pay a one-time fee of the same amount to get their estate plans in order (wills, healthcare proxies, living wills, powers of attorney and possibly trusts). I often make strong recommendations for clients to do their estate planning and provide them with names of reputa- ble attorneys, only to find myself repeat- ing the same recommendation at the next meeting. Sometimes the issue is complexity: Who should be the guard- ian? Shall we divide the assets equally amongst the kids? But most of the time I hear, “We know we need to do this; we just didn’t get around to it.”

Other deferred needs on the financial planning bucket list include long-term care planning and disability insurance. Some experts claim that people want to avoid the unpleasant thoughts of nursing homes and poor health. I find, however, that as long as clients are in good health, they are more than willing to talk about a time when they might not be. The issue is more that long-term planning lacks immediacy and can be coupled with the presumptive belief that “I may not need this.” Financial planning involves trade-offs and choices. Most people can’t do everything they want or should do. So the easy issues– those that are readily understood – are completed first. The longer term, complex or more expensive concerns are often placed on a back burner. Unless revisited regularly, some pressing needs can remain unaddressed.

Betsey Purinton, CFP® is Managing Director and Chief Investment Officer at StrategicPoint Investment Advisors in Providence and East Greenwich. You can e-mail her at bpurinton@ strategicpoint.com. The information contained in this report is not intend- ed as investment, tax or legal advice. StrategicPoint Investment Advisors assumes no responsibility for any action or inaction resulting from the contents herein.