massage therapy journal

keeping you in touch.

  

Expert No. 6:

Financial Planner

Who: Bob Mecca, CFP, MBA, RIA

Where: Northbrook, Illinois

What: A fee-only financial planner

Why: To get tips on building an effective business

How to Contact: bob@MeccaOnMoney.com

Q What are the most common mistakes small business owners make? How can they best avoid them?

A One common mistake is a failure to provide a business plan. Many small business owners who I come across just come up with an idea and then let emotions take it from there.

The second mistake is that many businesses tend to leverage too much. They may overextend themselves with debt, whether a home equity line of credit or a small business loan. Right away, even before the doors are open, there is a burden. Now that we are in a rising interest rate environment, it becomes more expensive. It’s easy to avoid the first mistake: You need to write a business plan. You should create a bestcase scenario and a worst-case scenario. The reality will probably fall between the two.

You’re not actually planning for the worst; it’s a contingency plan.You always want to think positively— those who succeed think positively. They don’t think of failure. But you need to understand that things don’t always go as planned.

To avoid the second mistake—leveraging too much—do your homework, and understand what your biggest capital outlay is. And do you have a Plan B? Perhaps you might not get the most up-to-date equipment; perhaps that might not even be needed.You might first buy yours secondhand. I liken it to moving out of rental property to owning a house. Do you buy an $800,000 house first? Usually, you buy the $200,000 house first, gather your assets, build your bank account, and let the house appreciate before you take the next step. So put a cap on your leverage. See what you can afford to pay back on a monthly basis.

Q What is the most concise piece of advice you can give about financial planning that gets the greatest results?

A I learn from those who come to me and say, “Bob, I wish I had done this sooner.”  In a nutshell: Get started today. The first step is to invest as little or as much as you can each paycheck.

Q What steps can a massage therapist take to help ensure a secure financial future?

A First, you need to realize that you’re not going to be able to work forever. This leads to the second step: You need to set aside money now to pay for future living costs.  Your third step is to develop wealth accumulation and wealth preservation strategies.  Wealth accumulation is basically investing, and wealth preservation is basically insurance.  To use sports vernacular: No one wins with just good offense or defense—investing is offense; insurance is defense. Protect your health through medical insurance. Protect your income through disability insurance. Protect your family against loss of life through life insurance.  Protect your assets in case of catastrophe with property, home and auto insurance. Have the right stuff.  The key is not to pay too much for preservation.  You may need help from someone who does not work on commission and who doesn’t sell anything.

Q What are the three touchstones to effective financial planning?

A List your goals. Implement a plan. Monitor progress. When I meet with people about listing goals, in general—whether they have money or not—they don’t think about the future. I say, “What about needing money for a car?”  “Oh, yeah, but that’s not until next year,” they will reply.  They see it as long-term—but it’s not. People have to realize that unless they inherit money, you just don’t wake up one day and say, “That’s it, I’m going to retire, or I won’t work anymore and I will live a good lifestyle.”  People who fail to plan are the ones who are miserable.  They have to do things they don’t want to do. If you plan ahead, even though plans don’t always go as we would like, you will usually achieve financial Freedom. List your goals. Create a timeline and insert dates when money is needed.

Q What is the purpose of a financial planner?

A My business card doesn’t say financial planner; instead, it reads “fee-only life planning consultant.” That means a lot.  Life-planning consultant means I help people throughout all stages of life. I help people recognize goals, financial strengths and weaknesses, and I show them the best way to become financially independent.  The purpose of a plan is to help people financially succeed. I also help people with cash flow by helping them set up a budget.  Sometimes I help with tax reduction strategies; other times, I help with setting up estates—simple wills and power of attorney documents.

Q How does one find the right financial planner? How much should one spend?

A You should look for someone certified (a CFP), who is fee-only (doesn’t charge commission), has experience, is a good teacher and a good partner.  My own fees are predicated on work that I do with each client. I say, “It will take me X hours, and here’s my fee, and here’s the return you can expect to get.”  Typically, in the industry, hourly fees range $175 to $250, although it’s hard to give a set number.

CLIENT Bill of Rights

When choosing a financial planner, make sure the following apply:

  • Your personal interests are first and foremost.
  • The planner has the essential credentials necessary to provide quality professional work.
  • You trust the planner to be professional, courteous, sincere, sensitive and respectful.
  • No product is sold.
  • No service is suggested if not needed.
  • You know in advance how the process works, what is expected and the fee.
  • There are no hidden fees; no hidden agendas.
  • The fee is competitive and reasonable.
  • No client is accepted unless potential payback can be identified.
  • All information remains confidential.
  • In this partnership, you will be taught—as opposed to being told—what to do.
  • Honest attempts will be made to answer questions and explain concepts to help make you an informed investor.
  • He or she is responsive in a timely manner to the extent possible.
  • You are free to work with other professionals as you desire.
  • You have the ultimate, full control over your money.

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