Meet the Denmarks: Can you get where you’re going without knowing where you are?
Life had been particularly busy the last few weeks. The girls were busy with sports, dance and music lessons and April was spending a lot more time with her parents since her Dad’s heart attack last year. The reality of life for the Denmarks is family first. The only time Conrad and April had available for the next meeting was on a Saturday morning and they were thankful June could accommodate them.
June started the planning session with kudos and a question; “Well, you two are proving to be superstar clients! Thank you for providing your financial details so quickly. We have a solid baseline to start our work. How do you feel about the life aligned planning process so far?” April answered first “I can’t believe it was just 3 weeks ago that we started this process. We’ve talked more about our dreams, goals, and finances than we ever have. I feel as if we’re more in tune with what we want in life and with each other.” Conrad added, “I think my stress level is decreasing by the day. There were so many things I didn’t even realize I was worried about until it was on the table for discussion. From little things like realizing the cable bill is getting out of hand to big things like how the business could impact our family – life was starting to feel heavy.” June commented, “It sounds as if there have been some positive developments. Let’s delve deeper and discuss your values in the context of how you make financial decisions.”
“At the first planning session, we focused on your values. You identified that family, health, and achievement are your most important shared values. The expenses in your plan were ranked according to your values and the lifetime cost for each item. Do these rankings reflect your priorities? Is your spending aligned with your values? Financial decisions usually imply trade-offs. Is it more important to buy the new Dodge Ram this year or create memories with Jordan and Lily by taking your trip to Disney World?”
June continued “Now we’ll review your financial picture to see if you can achieve your life vision if you continue on the current path. By doing this we’ll be able to identify issues and opportunities and design your plan.”
They proceeded to review how their net worth, income-producing assets, and cash flow would change throughout their life. It was clear that their lack of attention to planning for retirement would keep them from realizing April’s dream of retiring at age 60. Unless they could depend on the business to provide their nest egg, they would need to make some changes.
The summary of their current income and expenses showed that April and Conrad have excess cash flow at the end of the month. They need to decide how to use that cash to more effectively achieve what really matters to their family.
Of more immediate concern is risk management. If either April or Conrad passed away suddenly, the family would not be able to count on a secure future. If April became sick or was unable to run the business, the family’s security would also be at risk. The third risk that surfaced in the discussion was related to the business. June pointed out that the business was exposing them to potential personal liabilities that could be minimized through incorporation. These issues, coupled with not having estate documents in place, were jarring. The kids were at risk. Conrad and April’s sense of urgency was rising.
June remarked, “More questions than answers have emerged out of this discussion. Let’s make a list of the questions to create some ‘what if’ scenarios”. Conrad and April made quick work of listing what was most important to them:
- What needs to be done to protect our family in the event of a death or a disability?
- What steps need to be taken to insulate our personal wealth from the business?
- Are we saving enough for education for Jordan and Lily?
- Should we focus on paying down our mortgage or should we be addressing other issues first?
- What do we need to do if we want to travel in retirement?
- Is there anything we can do to stop paying so much income tax?
Conrad and April left the office and made their way over to The Common to debrief. Even though it was hard to acknowledge the shortcomings in their current situation, they were excited by the emerging opportunities!
The information in this commentary is for informational purposes only and not meant to be personalized financial planning advice. The content has been prepared by the team at Fraser & Partners from sources believed to be accurate.