Hey parents, join the LA Kings on Saturday, November 25th for an unforgettable kids day presented by Pear Deck. Family fun, giveaways, and exciting Kings hockey awaits. Get your tickets now at lakings.com/promotions and create lasting memories with your little ones. Radical Personal Finance, episode 19. On today's show, a discussion of the value of cash in your portfolio.

A discussion of whether or not it's possible for financial experts to find common ground. Some information on the upcoming podcast movement conference and the upcoming FinCon conference. And the bulk of today's show will be an overview of the financial planning process, which will be helpful to either do-it-yourselfers who are looking to work their way through their own financial planning process or CFP students.

So thank you for being with us for today. Today's show is Monday, 7/14, so Monday, July 14, 2014. That's a cool number. I didn't realize that until I hit record. That's a cool number. 7/14/14. And as I said, the bulk of today's show will be a discussion of the financial planning process.

And I think it'll be helpful to either do-it-yourselfers or to CFP professionals or those who are studying to become CFP professionals. But before we do that, a little bit of discussion about those topics from last week. And over the weekend, I was considering Friday's show. And if you didn't get it, you might want to go back and listen to the Friday Q&A show.

Episode 18 was Friday's show. You can find it at RadicalPersonalFinance.com/18. And on Friday's show, I took five or six questions from the audience, but several of them had me thinking over the weekend. And I was just reminded again of how incredibly individualized financial planning is or should be and how difficult it is to lay out big-picture planning ideas to say, "This is what you should do.

This is what your plan should be," without actually knowing an individual situation. So that was really fun for me, was to answer those questions. However, it was pretty challenging. And one of the things that I was thinking a lot about over the weekend was just the positioning of cash in a portfolio.

And I was struck by how, you know, if you were in a situation where you were hanging on to a good amount of cash, I was struck by how different the advice could be in different circumstances. And so in the first scenario, I was thinking about a couple of scenarios.

And this had to do with some people that I was talking to and some discussions that I was having. And in the first scenario, I was thinking about a young person, you know, a young family, a young couple, a young man or woman who's just setting out to build up their financial plan.

And they're trying to figure out what to do. So let's say this person has an income. That's the step one, is to build an income. Essentially, all financial planning comes down to cash flow planning. That's a topic for another day. But let's assume the person has an income. And if this person has an income that they can rely on, then we look at it and say, "Well, what should we do?" Well, then you say, "Can we save some out of it?" So you save some out of it and you build up some surplus.

Now, the question is, what do you do with that surplus? I'm just struck how different my advice would be in a couple of different scenarios. So the first scenario would be, what if you had a large amount of cash and maybe you were investing in some other venues such as IRAs or 401Ks, things like that.

You had a 401K at work and you're doing that, but then you still have cash on top of that. What should you do with it? And I was struck by, you know, I guess the standard advice would be to dump it into an investment. But the problem is, what investment?

And here's where you get into a topic that's not really discussed that much in the financial world. And I'm not sure that I have the answer for it because it's a very individualized answer, but do you think of your cash as something that needs to be gotten rid of?

Or do you think of it as dry powder, to borrow the metaphor? You know, is that your reserves? Is that your supply? We all know about the topic of having an emergency fund. And yes, that is certainly valid. It's a good idea to have an emergency fund and have cash reserves.

But once you get past that point in time, then what do you do with it? And, you know, I was thinking it's not always a bad idea to have cash if you're just waiting for an opportunity. And so, one of the things that always was difficult for me when I was working in the mainstream financial advisory world is that sometimes a client would say, "What should I do with my money?" And I would say, "You should invest it in stocks," or "You should invest it in this, this other opportunity you have." Sometimes I would say, "I don't know." And it's very difficult to be able to say, "I don't know," but the reality is a lot of times, "I don't know." First of all, it's not my money.

It's your money. So, you know, I'll give you some ideas, but at the end of the day, I don't know what you should do with your money. I'll just lay out the options and the opportunities for you. But a lot of this is very time-specific. And hanging onto cash is certainly not a bad plan.

My experience has been you never know where, you know, you never know where life will take you. One personal anecdote about this, you know, my wife and I bought a house about a year and a half ago. And we bought that house. We had been saving for a while.

We had been saving money for a down payment. We had been saving and doing the things that we needed to do financially to be prepared for it. We'd spent a lot of time thinking about what would be an intelligent type of property to buy. We were absolutely thrilled with the plan that we had of what we were doing and where we were going to be.

And we were absolutely thrilled with this. So, we went ahead, we shopped, we got a fair deal on a house. It was exactly what we were looking for. But then, what, a year after we bought the house, then I decided to make this change in my own business life and close one business and open a couple of new ones.

And so, when I decided to do that, we had put down a massive down payment on the house with the goal of minimizing the mortgage amount and because we had been saving the cash for that. And a year after we did that, it's not that I could no longer afford the house, but a year after we did that, then I had the idea to make this business change.

And I sure would feel a lot better if I had more dry powder, more cash in my reserves. As it is, it's fine. I've got a plan. Everything's working out. I can still plan, but I had to go through some extra steps to figure that out that I wouldn't have had to go through if I'd had some cash on hand.

Now, I was just struck. If you go back and you look and you start reading the biographies or the autobiographies of people that have had great financial success, oftentimes you'll see that they spotted an opportunity. They saw something that needed to be done and they had the ability to move on it.

I think lots of people have seen opportunities but not had the ability to move on them. And sometimes having cash in your portfolio, just having reserves, money that's not committed can allow you to buy the franchise in the new hot, I don't know, franchise that's available, whether that's a new restaurant or a new frozen yogurt shop or a new kids' game emporium or whatever it is, or the new bounce house rental or the new video games in a trailer thing or whatever it is, that can allow you to have the opportunity.

It can also allow you when you see the deal on the investment opportunity. So if you're looking for an inefficient market, so let's say that you say, "Well, in general, maybe the capital markets are fairly efficient, but where is there an inefficient market? Maybe you see an inefficient market in automobiles in your location." Well, that's what automobilers do, is they see an inefficient market, they buy cheap, they sell high.

And so if you have cash to get started in a business like that, you can get started and you can do those sorts of things on the side and they can be very profitable, more profitable than delivering pizzas. So just consider it's not always bad to have cash. And on the other hand, sometimes if cash is for fear, someone is holding on to cash, then on the other hand, it can be really bad.

And so then if you were advising somebody, you would advise them to try to get out of the cash position and get into an investment situation. Because if you're 50 years old and you're looking forward and you're trying to figure out how you're going to invest for retirement and you're scared of the market and you're not just sitting on cash, that's not going to work.

You got to get over the fear. Or if you can't get over the fear, you got to find some way to get over the fear through some alternative strategy. Maybe it's a private investment instead of in publicly traded companies or something like that. So just was considering. It's kind of an interesting nuanced discussion.

Is cash considered to be dry powder or is cash a liability that's just sitting there losing money to inflation? Interesting concept. I'm sure we'll explore further. All right. Next, two conferences that I'm going to over the weekend. And this has gotten me for an article that I want to lead off with before we move into the primary discussion of the day, which is to talk about the financial planning process.

I'm calling in August to the podcast movement conference in Dallas, which, by the way, if you ever considered starting a podcast, I think it's a great idea, even though mine is brand new. I see podcasting as this incredible new frontier for people to explore and for us to just knock down the barriers of entry that have existed in so many industries and get good quality information that's out there where people can pick and choose and the best of the best can rise to the top, not because they were good at compelling the station manager to get them on the air or even because they were good at drawing audiences.

Drawing audiences, popularity is not necessarily a sign of accuracy. So if you're interested in starting a podcast, I think it's a great idea. I'm really enjoying this process for me. And you might enjoy going to the podcast movement conference in Dallas, which will be August 15, 16 and 17.

Just registered for it last week, decided to go. I'm really looking forward to it. There's going to be some big names there in the podcast community and check it out at podcast movement dot com. I've set up you had an easy option on your checkout to set up an affiliate link for for going.

So I've gone ahead and set that up just because I had to click one button and set it up. So I'll go ahead and include the affiliate link in the show notes. If you're interested in going, consider using my affiliate link and meeting me there. I'm looking forward to it.

Maybe if any of you are, we'll set up some kind of meet up while we're there and have an opportunity to meet there at the show. Number two is I'm going to the FinCon conference in September, which is in New Orleans. This is September 18 through 20. And FinCon, I think it originally was the financial bloggers conference.

I wanted to go in the last couple of years, but wasn't able to because of, you know, my my business and everything. So this year we'll be going to FinCon. I'm looking forward to going there for the blogging conference. Now, FinCon was soliciting authors, people who are attendees. They were soliciting people to write an article for their for their magazine that they will distribute at the show.

And as part of that magazine, I was thinking, what what do I really have that I would like to say? You know, and certainly I could sit down and write six tips for how to save money or eight tips to saving for retirement or four underutilized tax planning strategies or the most useful way to do blah, blah, blah.

And I may do that kind of stuff in the future. But I was thinking, what message do I really have? And it really gave me an opportunity to sit down and write and sit down and think. So I wrote an essay. And I'm not going to talk too much about that essay just in case they publish it.

I don't want to steal their thunder and we'll talk about it later. But basically, the message that I realized, one of the major messages that I have in my mind is to try to get the financial community to come together and talk with one another. And this is in large part what my show is designed to do.

I don't expect my show to appeal to the average Joe on the street, although I shared my dream about being able to take somebody who has an above average interest in financial topics or in building wealth. I shared my dream of with a goal of bringing them and being able to take them up from no knowledge to multi-billionaire with the information that I share.

And I do definitely hope to do that. However, I wouldn't expect that my kind of in-depth, long show would really appeal to the average person with just an average interest in money. I would expect this to appeal to someone with an above average interest in money, someone like a financial blogger, someone like a financial podcaster, someone like a financial advisor, someone like an insurance agent, or an individual who's interested in entrepreneurship, interested in business and in money.

And so that's the reason for some of the content that I plan, which is going to go pretty much in depth. And I was just thinking about it. My mission, one of the missions that I hope to accomplish with the show is to help people find common ground with one another and help people have more intelligent discussions.

It's okay for us to look at exactly the same situation and get different answers. And it's okay to look at different situations and get different answers. And this was one of the things that I learned coming back over to the media side from, again, six years of financial planning, working with hundreds and hundreds of families, is that financial planning, in order for it to be effective, needs to be exquisitely unique.

Your plan should be your plan and your plan only, which leads into the main topic of the show, to open up and talk about that planning process. But two planners are going to look at a situation, and they may agree on, I don't know, 75 percent. But then the 25 percent, they may have different suggestions, and that's okay.

But all of us can work together to educate the public and to educate people, to give them language to have a more intelligent conversation. If we didn't have, you and I, if we didn't have a grasp on the English language, we wouldn't have an ability to discuss something or debate something or argue something.

This is what happens in financial planning, is that when people have a limited financial vocabulary, perhaps -- and there's nothing wrong with that, we've all been there -- but if you have a limited financial planning vocabulary, then you become intimidated, largely, by financial topics. And you don't have an ability, you don't have a framework, a construct, a mental model through which to work, through which to see the world.

If you have language and a basic understanding of the meaning of terms and the nuances and both the explicit meaning and the implied meaning, the connotations of terms, and you also have a framework, a mental model, through which you can view topics, then you can have a much more intelligent conversation.

And on the basis of that conversation, it's perfectly okay for different people to disagree with one another. And so I just share that with you. And I was reminded while I was writing that essay, I was reminded of this article. And I went and Googled it and found it.

It's back from June of 2013. So I first read it, I think, a year ago. And this was an article in Forbes magazine by -- the author's name is Tim Maurer or Marer or something like that. So I've actually just reached out to him for an interview. I hope to talk with him.

He has a book. I haven't read his book yet, but I thought it was interesting. He is a financial advisor, but he's also involved a lot in some public speaking and public financial education. I'm going to read this article from Forbes, and you'll find a link to it in the show notes.

Title, "Can Financial Experts Agree on Anything?" The level of public disagreement in the financial kingdom, which adds financial media, gurus, educators, authors, and bloggers, on top of the behemoth financial industry, has become so prominent that the public doesn't know who or what to believe. I say amen to that.

That is so true. I can go to the bookstore today, and you give me the topic, and I will show you two books -- or to Amazon, probably, because it's a local bookstore, and I'm going to have the volume. You give me the topic, and I will show you two books written by a "financial expert," and they will emphatically disagree with each other.

And if you read both of them, and if you didn't have the context of the other one, you would probably be persuaded of the truth, the veracity of the one author. But if you had the other one, you might be confused. So you have to step back and understand more, understand the realities of things, the subtleties of things, and then ask yourself about the situation.

And this is the common ground, and this is where my show will fall short. This is where all financial blogs will fall short. This is where all financial TV shows, all financial radio shows -- this is where all financial punditry that's not individualized financial planning will fall short. Because if you were a personal financial planning client of mine, and I spent, say, five to six hours with you over the course of a period of weeks and months, I would have a much greater understanding of your situation.

And then I would draw on my background of financial knowledge to give you recommendations and suggestions. This show is not financial planning. It's not personal financial planning. This show, the way that a show like this can be effective is to give you ideas and tips and things that you can incorporate and you can consider what will work for you.

But then you have to take that information and you have to go back and ideally talk to your own financial advisor, talk to your own financial planner. And I really believe that everybody needs their own financial advisor. Now, this may be a formal relationship or an informal relationship. It may be a paid relationship or an unpaid relationship.

But it may be your spouse. But we all need somebody that, just as I said on Friday, view your life like a business. We all need somebody to whom we can defend our business plan. Continuing with this article, differentiation. Disagreement, or put more politely, differentiation, pays the bills. It puts us on the map, drawing attention to us and our ideas.

Differentiation isn't inherently bad, but it's certainly not always good. The thing is, quote, "The thing is, differentiation is selfish," says Seth Godin, marketing author and guru extraordinaire. Most customers, of course, don't have the same selfish view of the market, the same obsessed knowledge of features and benefits. We as financial experts might consider acknowledging that those whose patronage we seek don't care nearly as much as we do about that which differentiates us.

Their lives do not hinge, as ours often seem to, on the difference between passive and active investment strategies, term and permanent insurance, fee-only and fee-based planning, fiduciary and suitability standards, capital gains and ordinary income tax rates, and the list goes on and on. Even though we may be willing to sacrifice our very livelihood devoted to differentiating on one or more of these issues, most people who seek the opinions of financial experts just want a better life.

I'll interrupt again. Amen. These are the debates that endlessly go around in the financial world. With these debates, is it healthy to have them? Yes. But the reality is I am absolutely convinced, open to being unconvinced at some point in the future if I can find the evidence, but I'm absolutely convinced that most of these arguments are unnecessary.

Or if they are necessary, they're necessary largely within the context of professionals because the key differentiate, for example, active versus passive. I was having an email discussion with a friend of mine this morning and we were going back and forth on this long-standing debate of active versus passive. And in active versus passive, is it important?

I think it probably is, the differentiation and the discussion over this. However, can you understand it without a background in this debate? I don't think you can. Number two, it's not nearly as important as the fact that someone's actually saving and investing money. And it's not nearly as important as the fact that the person understands their strategy and that they stay invested through the downturns if that's a component of their strategy.

And it's not nearly as important as it is that they're saving enough and they're doing it in a well--in an efficient way. So no matter what your opinion is on this active versus passive debate, it's only one piece of the debate. And it may be the most important one to you, but it's only one piece of it.

Continuing with the article. The Financial Common Ground Project, the Financial Common Ground Project. The differentiation frenzy came to a head a few weeks ago when Dave Ramsey reared back and threw a roundhouse tweet at a collective of financial planners who aggressively questioned the validity of his investment approach. In case you didn't see this, this was about a year ago.

And this was--Dave said something about helping more--I help more people in 10 minutes than you financial planners help in a year or a lifetime or something like that. And he took on a bunch of people on Twitter and it really ticked a bunch of financial advisors off. And that's the debate that he's talking about.

Google it if you want to see the exchanges. I wondered in a blog post response if a diverse group of financial experts would come together to find common ground, to affirm what we jointly believe to be the foundational principles of personal finance, to momentarily set aside our differentiation and speak in a single voice for no commercial benefit.

Over 30 experts from a wide variety of specialties in four different countries answered with a resounding yes. Together we co-authored a list of 12 unifying principles of personal finance that we hope experts and consumers alike can support and benefit from. The only question now is, are we the only ones?

Please read the list below and follow this link to show your support for this initiative. And I'm going to read these principles and just consider them. I thought they were excellent. I went ahead and signed on to--I went ahead and signed on to his--as a supporter of these. To me, these make all the sense in the world.

And I think it's a good--a good starting point to further this conversation. The unifying principles of personal finance. One, progress. The benchmark for success in personal financial planning is progress, not perfection. Excellence is more a product of good habits than a revolutionary event. Two, discipline. A household must consistently spend less than it earns, regardless of the level of income.

The foundation of financial success is a disciplined cash flow system, such as a budget, which is designed to make household spending decisions purposefully and in advance. Debt. Debt wisely used can help build wealth, but fueling unsustainable lifestyles with borrowing is the quickest path to financial ruin. We are well served to pursue an eventual debt-free path.

Buffer. Changes, surprises, and failures are guaranteed, but their impact can be minimized through the creation of a financial buffer. This buffer, a cushion of cash savings, will help lessen the burden of emergencies and other unexpected events. Risk. It is better to make an informed risk management decision than to act on a consequential reaction.

Many risks can be adequately managed through risk avoidance, risk reduction, or self- ensuring through risk assumption. However, the potential for catastrophes from which a household could not survive financially should be transferred through insurance. Investing. Investors have succeeded utilizing strategies on a continuum ranging from entirely passive to surprisingly active.

None succeed purposefully, however, without following a disciplined strategy. Taxes. Taxes are an important element of financial decisions, but rarely the most important. Tax minimization is wise, while tax evasion is illegal. Giving. Giving of time and money is good for everyone, donors and recipients alike, and may also result in a reduction of taxes.

Future. Plan for tomorrow, live for today. Failure to plan for major expenses, such as education and retirement, is folly, but deferring all gratification for the future strips the joy from life today. Estate. Everyone, with very few exceptions, should have well-conceived and clearly written estate planning documents, including, at minimum, a will, with or without a revocable trust, a durable financial power of attorney, and advanced directives, including a health care power of attorney and living will.

Legacy. Leaving a legacy, a relational impact on friends, family, and community, is as or more important than leaving an estate. The sum of your assets less your liabilities at death. Guidance. Whether from a book, blog, article, class, radio program, TV show, advisor, or specialist, financial advice is only beneficial to the degree that it is consistent with your values and goals and leads to action.

As far as I'm concerned, that's a great place to always take just about all financial planning conversations. And so I would challenge, if you're interested in finance, consider through and see if you could agree with that list. You can jump over there and sign on. Will it make much of a difference?

I don't know. But these 30 people who came together to write this, I'm impressed with how comprehensive that is. And in reality, I can fit just about any financial planning conversation into it. And then you get to differentiation. So on one blog post, you read, spend lots of money to maximize enjoyment.

On the other blog post, you read, don't spend a lot of money to maximize your later enjoyment. Or you hear one person say, increase your income. And the other person, decrease your expenses. They're all valid. It's just looking at different parts. And it's fun to be differentiated in the marketplace.

And don't get me wrong, differentiation, there's nothing wrong with it. I'm certainly trying to differentiate. A, the title of my show is called Radical Personal Finance. B, it's every day. C, it is long. And D, it goes in depth. So out of the dozens and dozens and dozens of great, I'm sure, podcasts that you can find on iTunes on finance, I'm trying to differentiate myself in hopes that you'll spend a lot of time with me.

However, I wish that all of the other podcasts would continue doing what they're doing and keep on educating because we are not each other's enemies. Those of us who are interested in and talking about and educating this, we are not each other's enemies. And a lot of times, people are very critical of our, very, very critical of our political leaders, constantly looking and saying, well, why can't they work together?

And yet we do the same thing in our own industries. If we're going to be upset at Congress for not working together, why don't we start by leading by example? Because the politicians, there's nothing wrong with them. The politicians and the way, the politicians, our government, and the way that they govern is a perfect representation of the American people.

Now, you may not want to admit it. So if you're in the minority of the American people like I am, you might get a little upset at saying, well, this is a perfect representation of the American people because it's not a representation of me. It's not. It's not a reputation of me.

But it's a perfect representation of the American people. What kind of people in the American society allow their government to go $17.5 trillion in debt directly and $222 trillion in debt indirectly through, if you count in the unfunded liabilities of various government promises that have been made, those figures that I'm quoting, $17.5 trillion is based upon the national debt clock, usdebtclock.org, and the other figures are Professor Lawrence Kotlikoff's figures.

He's a professor at Boston University, an economics professor who is, that's his estimate of the total indebtedness and the total liabilities of the US government. So what kind of people allow that to happen? The same kind of people that allow their own spending to get out of control. Just a little bit.

Not that much. Reality is $17.5 trillion is really not that difficult for our tax money to pay. The $222 trillion is not that difficult for our tax money to pay over the long term. But it is a major problem if something doesn't change. And this is how many people run their finances.

So our enemy is not each other. Our enemy is financial illiteracy, financial ignorance. And we can work together on that and then have spirited debates about differentiation within that. But why don't we tone it down a little bit and, not to be all kumbaya, but why don't we tone it down a little bit and be friends?

And again, look at your opponent's argument and understand it to the point where you could debate it and argue it for him, and then at that point go ahead and make your decision. Don't figure, "Well I'm in this camp because my guru says this, and me included. I don't want to be a guru.

I want to be a teacher, but not a guru." So don't say, "Joshua is my guru and he says this." Uh-uh. Understand for yourself and make your own decision. If you're interested in reading those, I think it's 12 unifying principles. I didn't count them. If you're interested in reading those unifying principles of personal finance, you'll find them in the show notes with the links to the Forbes article and then also at financialcommonground.com.

And I have reached out to Mr. Tim to invite him on the show, and so I hope I can do that over the next couple of weeks. Next, the primary topic of today. We are going to talk through the financial planning process, and as an outline for that, we are going to use the CFP board's job task domains.

So if you are not interested in becoming a CFP certificate or if you're not interested in kind of the formal side, give me about two minutes to explain for those who are, and then we'll work together through this information. So if you're interested in becoming a CFP certificate, you need to understand the job task domains in order to be ready for the test.

And you need to understand these domains. You need to memorize them. And so these domains were the output of the CFP board's 2009 job analysis studies. They did a study, talked to all the people that are involved in financial planning, and came together and wrote out these eight things.

And it's really confusing and nuts how they do this all, in my opinion, of these domains and the principles and all the rest of the stuff. You've got to memorize it for the test, so you just memorize it. But it is a useful outline for you if you're interested in being a do-it-yourselfer, if you're interested in just kind of looking through your financial plan to see what a comprehensive outline of topics would be for a certified financial planner professional.

And so the eight major domains are, number one, establishing and defining the client-planner relationship. And so these are basically the order that you move through. I don't know why they call it domains, but this is kind of the phase that a financial planning engagement moves through. So if you were to engage me as a financial planner in our relationship, if we were doing that, which we're not, but if we were doing that, then we would move on an individual basis, then we would move through these eight major domains.

So number one, establishing and defining the client-planner relationship. And I'll go into detail on each of these. Number two, gathering information necessary to fulfill the engagement. Number three, analyzing and evaluating the client's current financial status. Number four, developing the recommendations. Number five, communicating the recommendations. Number six, implementing the recommendations.

Number seven, monitoring the recommendations. And number eight, practicing within professional and regulatory standards. If you are going to be a financial professional, you will need to know and practice within all eight of these. If you're going to be a do-it-yourselfer, ignore for the most part number one, work on number two and number three, and number four and number five, and number six and number seven, and ignore number eight.

So we'll go through those in detail. But I'm going to read these from the CFP document. The document is listed in there, and I'm going to talk about them as we go through, because I do believe it provides a useful outline. But then also, if you're not interested in reading the document, at least it'll be here in an audio format so you can listen while you're doing other things.

So the main one would be establishing and defining the client-planner relationship. And so if you're a do-it-yourselfer, you can ignore this one, because you're the client and you're the planner. But if you were a professional, then you would first identify the client. So this is really important. Who is the actual client?

Is it an individual? Is it a family? Is it a business? Or is it an organization? Or is it something else, like an estate? Is it a trustee of a trust? Who is the actual client? And so depending on who the client is, if the client is an individual, so a single person, that would be a difference.

If the client is an individual husband in a married relationship, that would be a difference. If the client is the whole family, in one way, it's easy. That's fine. But then what do you do if your clients disagree with one another? What if the husband and wife disagree? Well, that brings in an added element of planning needs.

So you want to identify the client and be very specific as to who your client is. Sometimes that will be an excellent relationship, and sometimes it'll be a difficult relationship. B, discuss financial planning needs and expectations of the client. So here, you have all financial planning engagements. You're going to start off with a discussion of what are your needs and expectations.

Now, in general, this annoys people, because we all do. All financial professionals do it. And they sit down and they say, "Well, the next guy's going to talk." It either annoys people if they've been through it before, or it's life-changing. And they sit down and just talk about what are the needs, what are your goals, what are the ideas that you're trying to accomplish.

So you've got to have a little bit of that at the beginning. To lead on to number three, discuss the financial planning process with the client, and then explain the scope of services offered by the CFP professional in his or her firm. So with these two together, you're going to share what -- here's what I'm able to do, and talk about the process with it.

Next, assess and communicate the CFP professional's ability to meet the client's needs and expectations. Depending on the type of planning engagement, this may be very specialized, or it may be very generalized. And a CFP professional may be able to meet all of the needs of the client, or it may be a complete referral relationship, where a professional's only brought in to work on one specific area.

Next, identify and resolve apparent and potential conflicts of interest in client relationships. There are almost always some kind of conflicts of interest. You cannot eliminate -- nor should it even be necessarily the goal. You cannot eliminate all the conflicts of interest, but you have to provide for them, and you have to make the client aware of them.

There is a serious ethical duty to make the client aware of the potential conflicts of interest, and then work through them in some way. Next, discuss the client's responsibilities, and those of the CFP professional. Define and document the scope of the engagement with the client. One of the things that people are often not familiar with when engaging a financial planner is they are not familiar with how planning engagements may have different scopes.

A planner could be engaged to simply do a review of a 401(k) asset allocation, or a planner could be engaged to do a simple life insurance plan, or a planner could be engaged to do a comprehensive financial plan, including estate, including asset allocation, including tax, including retirement, including insurance.

It could be comprehensive. You have to define it so that both the client and the planner are able to work together. Next, provide client disclosures, provide your regulatory disclosures and your compensation arrangements and associated potential conflicts of interest. That is domain one. Domain two. Do it yourself or tune back in.

This is where we get to why I'm doing this, which is to say, here's how you can plan your own way through your own financial situation. Domain 2A, identify the client's values and attitudes. So here we're going to explore with the client their personal and financial needs, priorities and goals, explore the client's time horizon for each goal, assess the client's level of knowledge and experience with financial matters, assess the client's risk exposures, example, longevity, economic, liability or health care, and assess the client's risk tolerances, example, investment, economic, liability or health care.

So you need to understand who you are as a person or who the client is if you are a professional working with the client. This makes all the difference in the world. And this is why I'm tying this tied in the financial common ground and decided to do this topic today.

Is that two people are going to be radically different. You and I are going to be radically different. I've got different risk tolerances. I've got a different time horizon for my goals. I have radically different financial goals and financial needs than you do. No matter even if we look similar from the outside, our values may be completely different.

So never assume that, and this is why it's so difficult to write financial topics, is that when you're writing, you have to assume a certain thing about your audience. If you know your audience, you can make a general assumption, but you can't assume that the client or that you are the same as the next person.

Everyone's going to have different abilities. Everyone's going to have different options. Everyone's going to have different assets, whether that's financial assets or other assets, which is coming up in the next section here. So the next section, domain 2B, is gather data. Number one, summary of assets. For example, cost basis information, beneficiary designations, and titling.

This is important for the financial planner on the technical side. However, I would encourage you, if you want to be a do-it-yourselfer, what are your assets? So for example, do you have a high degree of education? Is that an asset? You would want to exploit that. Do you have certain skills?

Do you have sales skills? Do you have marketing skills? Do you have writing skills? Do you have speaking skills? Think about those assets. And as you're designing your financial plan, you need to incorporate into your financial plan the idea of how do I earn an income? And in that situation, you need to make a complete summary of your assets.

Next is summary of liabilities. So on the financial side, this would be the balances of liabilities, the terms of the loans, the interest rates, so that we can figure out what debt should we pay faster, what debt should we pay slower. But we want to list that out. But then on a personal level as well, what are your liabilities?

I'll let you take it from there and not beat this into the ground, but what are your liabilities? It's very important to look not only at balances and interest rates, which is what many people do, but also at terms. And so this, if you read financial information, you'll often see a debate.

This is where I want to point out one of the debates. There are other aspects to it. One of the debates in financial planning is in what order should I pay off my debt? So one way would -- there are many ways, but one way would say, well, you should pay it in the lowest balance first.

This was called the debt snowball, made most popular by Dave Ramsey. Pay it with the lowest balance first. And the idea is by paying your debts with the lowest balance to the highest balance, then you really can benefit from the behavior modification of the psychological boost of making quick progress on those debts.

And this is extremely powerful. This is amazingly powerful. But then you also have the interest rates. And so with the interest rates, the idea here is that the higher the interest rate, the more money you're spending in interest every month. And since you've already purchased whatever the purchase is, there's no cost savings to you.

There's no reason not to get rid of that interest rate at the highest rate first. But the challenge might be if you had a large balance, a large debt, and you were looking at -- if you had a large balance on a high interest rate, you may be spending a very long time paying that one debt off and focusing any extra money towards that versus the other, versus the low balance one where you could get that psychological win.

But the terms oftentimes people don't hear. So here what I would explain is I would say, "What are the terms of your debt?" So first of all, how is the note structured? Do you have a balloon payment on the debt? And this balloon payments may not be common for every day, the average consumer, so to speak.

But they are very common in certain industries or in certain situations. So do you have a mortgage with a balloon payment after a certain period of time, five, seven, ten years? Do you have a business loan with a balloon payment? That's very common in business planning. If so, you need to be aware of that and you need to factor that in.

Another aspect of the terms would be what are the rates? Are the rates adjustable? Do you have a rate that is on a low rate for now and that's going to adjust later that you need to be planning for? Or is it for a fixed rate? Is the debt recourse debt or is it non-recourse debt?

So if you default on the loan, does the lender have the ability to come after you personally for the difference? This would be in business debt. Then what I would say is if your business defaulted on the loan, can the lender come after you personally? Or is this debt bankruptable?

So for example, student loans versus another debt. If I had the option of, if I had two loans, each of $10,000 and an equivalent interest rate, and one of them was a personal line of credit at a bank and the other were a student loan, I would pay the student loan off first because a student loan debt is not bankruptable.

However, my personal line of credit may be a bankruptable debt. So if I worse came to worse, I'm disabled, I'm forced into bankruptcy due to a medical problem of some kind, then in that situation I want to make sure that I was doing good planning as far as how quickly I want to pay back the loans.

Is the interest deductible? So this would be, I would rather have interest that's deductible than interest that's non-deductible. So if this is deductible on my personal tax return, i.e. my student loan interest, i.e. my home mortgage interest, I would prefer to keep those and eliminate the non-deductible interest versus paying off the mortgage and winding up with non-deductible credit card interest.

Now, on the other hand, is this interest deductible in a business account? And so if I'm going to borrow money on a credit card, is there a way that I can make sure that all of my business expenses go onto the credit card so that I can set up my liabilities in a way that all of that interest is deductible and also so that it's bankruptable if worse comes to worse?

Many times, at least in my state in Florida, and I'm not familiar with the other 49 states' laws, but at least in my state in Florida, whether or not the structure of your debt will have a major impact on whether you can do a Chapter 7 bankruptcy or Chapter 11 or 13.

I always get them confused. Chapter 13, is that the payment one? Let me Google this real quick. I think that's the payment one, and Chapter 11 is the business one. This is the value of... Okay, so yeah, Chapter 13 is a payment plan. Good, I got it right. I always freak out, especially when I'm doing podcasts.

It's very intimidating for me to do podcasts because I always freak out for a moment and doubt myself when I... and doubt myself when I want to have a topic and I need a detail real quick and I have to call it up and then say it publicly where I'm held to account.

All right, so now that I hopefully got it right here, let's continue our discussion. So Chapter 7 versus Chapter 13. So Chapter 7 would be a complete dismissal of the debt. Chapter 13 would be a restructuring and a payment plan. And they each have different advantages and disadvantages. But one of the things is you're often not eligible for a Chapter 7 debt.

So if you are an income earning person, and you... and I'm speaking in generalities, please don't take this as legal advice, but you should be aware of it and you should think of it. So if you're a high income professional, and you are in a situation where you've borrowed a lot of money on personal lifestyle, cars, credit cards, houses, whatever your personal lifestyle expenses are, and then you've started a business, but the business doesn't have any debt, well, you're not going to be eligible for Chapter 7.

You have to work out a Chapter 13 workout plan. However, if you had been prudent with your personal finances, then you... and you had set something up, but you had borrowed to fund the business. If the business failed, then you would just simply be able to declare a Chapter 7 bankruptcy.

And in my state, there are regardless... basically regardless of your income, then you have a situation where it was a business debt. And so that business debt is forgiven, or it's not forgiven, but it's expunged and it's done, it's settled, it's gone through bankruptcy, and you get a fresh start.

And so you can go and you can take your earning ability and go on to the next thing. That can be a major difference for somebody. If you are a highly compensated individual and you're making $200,000 a year, the difference between having a heavy amount of personal debt and having a heavy amount of business debt, and it just being able to be wiped away versus having to spend the next 5 to 10 years paying it off, that could be a major difference for somebody.

Now, the problem is I'm going into depth on something here that very rarely happens, because generally I'm talking about careful planning. And it doesn't seem many people who plan carefully don't wind up in bankruptcy. However, you may decide that you're going to take on a considerable amount of debt to fund a business venture, whether that's a capital intensive business of some kind, and you need to be aware of how to structure it under favorable terms.

So pay attention to the terms. So if I were doing a debt payoff plan for somebody, I would probably, if someone said, "Joshua, what do you think about what order to pay off the debts?" I would say, "Well, you know, in general, then I'm going to do a balance.

In general, I'm going to focus on making sure that we really tie in the behavioral modification." So if someone has to lose 100 pounds, you're probably not going to start with, "You've got to change this diet all over the place, and you can't ever cheat." But a small behavior modification of something as simple as cut out drinking soda might have a big impact.

So same with finance. The behavioral modification is absolutely valid. If somebody has always been a spender, and they're first trying to turn their ship, the behavioral modification is absolutely valid. And if you are going to be able to pay the debts off in a short period of time, under a very intense, as Dave Ramsey would say, gazelle intensity, very intense one to two to three years maximum, then the interest rates really aren't that big of a deal by the time you go and actually run the numbers.

However, if there is a dramatic discrepancy in interest rates, and if you've harvested that behavioral amount, you absolutely have to take advantage of the fact that you can pay off the higher interest rate first. And then if you consider the terms, in general, the answer will usually emerge. Most people's financial liabilities are not generally that complicated.

So if you just look at it and consider what debts are recourse debt, what debts are non-recourse debt, which debts are secured, which debts are not secured. Is there a large difference in the balances? Is there a large difference in the liabilities? Are there any other extenuating factors? Do we owe somebody that we really don't want to owe?

Do we have an easy creditor versus a difficult creditor? The plan will emerge. It's not as complicated as I'm making it out to be, but this should be how you make that decision. And this should be how you make that recommendation for somebody. Next, summary of income and expenses, all income and all expenses.

Someday soon I'm going to try to create, once I can build the margin to be able to do so, like a do-it-yourself financial planning guide and through a series of videos. And I think step one of that guide is going to be track your expenses. Without data, you can't make good decisions.

And so most people have no idea what their expenses are. If you could do nothing else but just simply track and record your expenses every day manually in some way that forced you to face them, I bet you could probably coach yourself out of any financial problem. So summary of income and expenses, any estate planning documents that are still in the gathering data stage.

So this is, again, back to the CFP board situation where take from it if you're a do-it-yourselfer, if you're a CFP person, just learn the information. Gather estate planning documents, read them. Gather the education plan, any resources that are allocated towards that with full information on that. Gather retirement plan information.

Gather employee benefits information. When I was a planner, I was always a stickler for finding out what your employee benefits are. If you're listening to my voice and you have employee benefits, 95% of you, and so I guarantee that's you, tongue in cheek, guarantee that's you, 95% of you have no idea what your employee benefits are beyond the fact that you have them.

So you say, well, I think I got some disability income insurance. Okay, how long does it pay for? How much does it pay for? How disabled do you have to be? How qualified do you have to be? Find out the information on it. Now, it's really daunting, but that's why my show is here.

So in the future when we do information on disability information, disability insurance, and you have a couple of shows to listen to, listen to those shows and then go pull out your policy and you can find it. I always tell clients, I said, listen, you just get me this information and we'll talk it through.

I'll explain what all the terms mean. And so instead of it being mumbo jumbo written in your employee benefits documents, I'll explain what the terms mean and I'll tell you this is junk or this is good. And it's very, very simple once you actually understand it. Number eight, government benefits.

So for example, Social Security or Medicare benefits, pull your Social Security statements every year. Social Security doesn't send them out anymore. If you haven't done this recently, put an action item on your to-do list, pull your Social Security statements. Go to SSA.gov, set up a user name and account, pull your Social Security statements.

If for nothing else, you need to check your earnings record. Because if somebody's putting in fraudulent tax returns on your Social Security number and they're falsely reporting your income, that can be a major problem. But it's hard to remember if it's 32 years later and inflation has increased the wage bases so much from $20,000 of taxable income to $120,000 of taxable income.

It's really hard to remember. So you need to do this each year, especially now that they don't mail them anymore. Any special circumstances, for example, any legal documents and agreements, any family situations, I would put in here any special needs situations, just find out what the data is on those or any -- a druggie for a kid, I mean, you got to plan for that.

If your kid is disabled or if your kid is a drug addict, you need to plan for that. Tax documents, investment statements, insurance policies and documents, life, health, disability, liability insurance, any closely held business documents, so shareholder agreements, any kind of terms, buy/sell agreements, any kind of business documents that are associated with it, bonus plans, stock options, things like that.

Number 14, inheritances, windfalls, or any other large lump sums. This is a big deal. Inheritances, a lot of times people just don't want to plan on it, but also people don't know about it, so they don't know about them, because in our society we don't talk about money, which change that, go make it normal to talk about money in your family.

I'm determined with my children that it would be normal to talk about money, and we could avoid a lot if we could spend a lot more time talking about money and religion in our culture. So you need to plan on those, or any windfalls or any other large lump sums, you need to kind of think about these things and plan on them.

And the last part of domain two is recognize the need for additional information. So that's gathering the information necessary to fulfill the engagement. So if you were going to do this for yourself, go through that and try to gather any information. Now, this is incredibly daunting. To do an excellent financial plan for somebody as a planner, it can be anywhere from a dozen hours to hundreds of hours, depending on the scope of the engagement.

Almost very few, very few financial plans are that large and significant in scope, but it can be. And you can see a good, thorough financial plan will incorporate all of these aspects. So at least if you're doing it yourself, you've got the time, go ahead and do it. I'm going to pick it up here, domain three, analyzing and evaluating the client's current financial status.

So A, evaluate and document the strengths and vulnerabilities of the client's current financial situation. So if you're doing this yourself, sit down and write down the strengths and the vulnerabilities of your current financial situation. Number one, financial status. Create a statement of financial position or a balance sheet. This should be the first document you make.

List all your assets, list all your liabilities. When you list the assets, you want to divide them up into cash or cash equivalents, investment assets, or use assets. And so these are the different assets that you want to list out. And if you'll just make those different differentiations, make those different categories.

If you have a car, use asset. If you have a house, use asset. If you have investment assets, they'll go in that. So cash would be cash or short-term T-bills, things like that. But if you have stocks, bonds, mutual funds, cash value life insurance, annuities, other assets that are not very liquid, precious metals, business assets, real estate assets, those would go into the investment assets.

And just by sitting down and making this for yourself, making a properly formatted financial statement, you'll look at it and you'll say, "Wait a second. I got this big major house that is worth a million bucks, and I got $20,000, and that all goes into my use assets, and I got $20,000 in my 401(k).

There's no possibility, period, that I'm going to gain wealth if I keep doing that. Doesn't mean I have to sell the house, but you got to say, "I got to move some of these assets over onto the investment assets." So create a statement of financial position or a balance sheet.

Create your cash flow statement. One of my pet peeves on cash flow statements is I have yet to see somebody make one when they're talking about creating one of these things where they're properly incorporating taxes. Your cash flow statement has to incorporate taxes, and it should be split out into fixed expenses and variable expenses.

So you should be listing at the top of your cash flow statement all of your income. Then you should list all of your fixed expenses. Then you should list all of your variable expenses. Then you should list all of your taxes. And then you should list any difference. And then if you add all that up, there should be a $0.

Now the difference column accounts for any savings or any surpluses or deficits. And so the surpluses or deficits will lead you to your natural next step of what do I do? Okay, I've got a $30,000 a year surplus. Even after this, what can I do? Or a deficit, well, where can we save?

How can we save? But include taxes in that situation and calculate them out because this is what keeps people for is taxes. And if you don't track that in your cash flow statement, if you don't track that, then you don't have the ability to be able to project forward and see how changes that you would make can save you.

A good financial planner may be able to make dramatic differences in your situation. You can do this for yourself. Again, this is not intended to be a pitch on a financial planner. I just want to tell you how to do it. Or if you are a financial planner, get the vision for your job and do your job right.

A good financial planner should be able to make a dramatic difference in a client's tax situation. If you can't do that, how do you even -- yes, there are other aspects that are important. But what's the biggest expense? Until April 16th or 18th or whatever it was I read the other day, April 18th is taxes.

We've got to affect this number. That's one of the things we've got to make a big deal out of changing so that we can allow a similar or same lifestyle without paying so much to the government. C is a budget. And so the budget would be the forward-looking projection of here's what we're going to do.

The cash flow statement is here's what we are currently doing. And the budget would say, well, based upon these parameters, what could we do? And so if you're going to make a change to the cash flow statement, if you have a deficit, you're 20,000 bucks in the red every year, then you've got to make a budget that's going to keep you within it going forward.

How to stick within a budget, it's a decision for a whole other day. But this is the formal part of it. And then you would run a capital needs analysis. And so capital needs analysis would be your analysis for any insurance needs, retirement needs, major purchases. The first thing that you've got to do if you're going to plan for something is figure out what the price tag is.

So if you're going to buy a yacht, what's the first step? Find out how much a yacht costs. If you're going to buy a house, what's the first step? Find out how much of a house you want to buy and define it. Then decide how you're going to save for it.

And you're going to create your capital needs analysis. How much capital do you need and when do you need it? And how much can you save and can you hit that goal? It's the same whether it's for retirement or it's the same whether it's for a life insurance analysis or it's the same whether it's for a long-term care insurance analysis or it's the same whether it's for buying a car or it's the same for whether you have a money for going on vacation.

It's just simple. It's a capital needs analysis. Number two, risk management and insurance evaluation. So take a look at your insurance coverage. Write down any retained risks. So what risks are you retaining? Risks don't go -- you know, the risk of your dying doesn't go away just because you have a million dollars and you're self-insured.

You're not self-insured. You're just simply choosing to retain the risk because you're comfortable with that risk. Or you're choosing to transfer the risk to an insurance company. And it's a completely logical, careful thought process about -- it can be a completely logical, thought-provoking -- I'll tongue-tie. It should be and can be a fairly logical, thought-out situation.

It is logical that if you don't have a lot of money and you can't afford to retain a risk, you can transfer that to an insurance company. And it's also logical that if you can afford to retain a risk, you can go ahead and retain it. We'll talk about that in an insurance lesson.

But it's just simply what risks are you retaining? Next one would be asset protection. So for example, take a look at your titling. Titling of assets. The titling of assets can make a substantial difference in your asset protection if you get sued. If you own a house -- and let's just take an extreme but simple example.

It rarely happens, but it does happen. If you own a house and you get sued and your wife or husband is not an owner on that house, then that house -- if you lose your lawsuit, that house could get out from underneath you if you don't live in a state with good protection for -- if you don't live with good homestead protections.

So take a look at the titling of your accounts. Take a look at the trust, any trust that you have established for the purpose of asset protection. Take a look at the form of business. If you are in a non-risky form of business, it may be appropriate to do business under a situation -- under an entity that doesn't provide for business asset protection.

That may be fine, because there may be other advantages. There are advantages to being a sole proprietorship. But if you're in a business where you have a very risky business, then you would want to be careful to make sure that your business form would account for that so that you could transfer that risk to somebody else.

And the other thing is you need to understand the difference between personal risk and business risk. So if you are a professional -- so the most common would be -- we think of physicians. A physician cannot get rid of their risk of professional liability just by having a corporation that owns their company.

That's why you hear about physicians malpractice insurance. I as a financial planner, if I were doing financial planning, I could not transfer my risk for my professional liability of giving bad advice. I couldn't transfer that risk from my -- I couldn't transfer that risk out just simply by having a corporation.

So for me as a financial planner, it's completely -- if I'm sitting in an office and I have no other forms of risk, and I'm just concerned about professional liability, that's not going to make any difference in my -- you know, should I do a sole proprietorship, partnership, S-corp, C-corp, LLC?

That doesn't make any difference because I'm just worried about professional liability. And so professional liability may be covered with insurance. So for financial advisors, this would be errors and omissions insurance. For physicians, this would be medical malpractice insurance. Next would be client liquidity. So this is part of the risk management and insurance evaluation.

Basically, the example here would be an emergency fund. And so notice that the proper technical financial planning term is client liquidity, not emergency fund. So again, this is where you have all these articles and all these debates about, well, should you have an emergency fund or should you haven't one?

And so one person says yes, one person says no, how big? If you've got a million or $2 million or $3 million in an investment account, and those investments are liquid that they could be sold, and you have some lines of credit or something backing you up to give you time to sell the investments out, you probably don't need six months of cash sitting in a bank account.

You probably don't. Now, you might still want it. That's fine. But you probably don't need it. But on the other hand, if you have very illiquid investments or no investments, then you've got to have some cash. You've got to build a buffer. You got to build an emergency fund.

But the overarching theme to this is liquidity. Do you have liquidity? Liquidity, how fast can you generate cash if you need to? Some investments are very liquid. They can quickly be transferred into cash. Some investments are very illiquid. They can't be. Your house, you're not quickly transforming your personal residence into cash.

It's not going to happen in a week, generally. Or at least you're not going to get the full value. So that would be a consideration. Those all came under risk management and insurance evaluation. Number three, benefits evaluation. Take a look at your government benefits. So Social Security, Medicare, do an analysis of that.

Take a look at your employee benefits. We're going to do extensive shows on Social Security planning. But the biggest mistakes that I see happening right now, the biggest disasters happening right now, happen in Social Security planning, with poor Social Security planning. Social Security planning is an amazing tool if used right.

And because of the fact that the payments are annuity payments and they're guaranteed, you can make some dramatic changes with Social Security that could be very, very significant. Save that for another show. Take a look at your employee benefits. Number four is investment evaluation. Take a look at the asset allocation.

Take a look at the investment strategies. Take a look at the investment types. Five, tax evaluation. Current, deferred, and future tax liabilities, income types, special situations. So for example, stock options or international tax issues. All of these will go into a good tax evaluation. You're going to figure out, should I go ahead and bring this tax liability forward, i.e.

invest in a Roth IRA, or should I move this tax liability backwards, i.e. invest in using a traditional IRA? Should I take this income out as wages? Wages will enhance my Social Security benefits. It will also increase my Social Security tax, but it will enhance my benefits. Or should I take this out in the form of profits and dividends, which aren't going to be subject to the Social Security tax, but are also not going to gain me Social Security benefits?

Not right or wrong. It's an individual situation. Are there any other special situations that are going to occur? So if you're going to -- do you know that in four years you're going to take a sabbatical and not going to earn any income? Well, in that situation, maybe you could do something like -- I'm just trying to use simple examples to make sure that everyone can relate to this, although it could be simple or extremely complex.

It can be done at $1,000 a year or at $1 million a year. It just depends on how you want to time the income. But, for example, a special situation would be if you knew you were going to take a sabbatical in four or five years, and so you knew your income was going to go away and you were going to live on investments, then what you would want to do is you would want to go ahead and defer the maximum amount of income towards that future year, so using an IRA or 401(k) or things like that.

And then if you could arrange this properly and get the technicalities taken care of, then you would want to go ahead and you would try to set it up so that you were in a position to go ahead and convert that, maybe convert from a traditional IRA to a Roth IRA in the year of your sabbatical up to whatever bracket you're trying to stay under.

That could make a difference. But if you don't know that, you've got to think about this and consider what you're going to do. Number six, retirement evaluation. Take a look at any retirement plans and strategies. So what are the pension options? Do you have annuitization options? Take a look at your accumulation planning for retirement.

Am I saving enough? How am I saving? Am I saving in the best way? And then also the distribution planning. You've got to talk about distribution planning. Retirement distribution planning is incredibly important, incredibly important, and no one talks about it. Okay, a few people talk about it. We've got to talk about it.

You've got to look at it for yourself. Number seven, estate planning evaluation. Look at your estate documents. Look at any estate tax liabilities if you have them. Number C is ownership of assets, beneficiary designations, gifting strategies. One tip for you, go and pull a copy of all of your beneficiary designations for all of your investment accounts and all of your insurance policies.

Take a look at this. And what I bet 50% of you will find is that they're out of date. They probably have an ex-spouse listed as the beneficiary of a form. I made all my clients when I was doing financial planning, I made all of my clients go and pull every single one of their beneficiary designations from their IRAs, from their 401Ks, from all this stuff, and invariably we found one or two that were out of whack.

You know, they had set up the trust, but it wasn't on the 401K, so the 401K was going directly to the kids. Why did we spend $8,000 in legal fees if we weren't going to retitle the 401K? Good attorneys will try to make sure it's done, but at the end of the day, you're the client or it's your situation.

So take a look at your beneficiary designation. Gifting strategies would be if we're trying to transfer money out of the estate, and don't worry about it if you're not familiar with what that would mean, but we could give away incredible amounts of money and diminish the size of the estate, and we could do it in really intelligent ways.

Number eight would be business ownership. So what form of business are we going to own? What employer benefits are we going to provide? Do we have a succession plan in place and an exit strategy? I love working with closely held businesses. I've looked at some statistics recently, but closely held businesses are such an amazing planning opportunity, and yet the problem is that they're very difficult to plan for.

How do you transfer an employee, a closely held business, and gain the full value of it? It's very difficult, and you have to do it carefully. But yet, what's most business owners' biggest asset? It's their business. So we've got to put some strategies in place to make the business attractive if we can to set up a -- to build a market for the business.

And if you have a prospective business, make sure that you've got a plan in place for the disposition of the business. Don't die and leave your spouse the business that he or she can't run. Make sure that you've got a planner lined up -- or excuse me, make sure that you have a buyer lined up, and make sure that that's taken care of so that you can replace the largest value of the asset -- value of the business for your family as an asset, so that your business doesn't get sold for 10 cents on the dollar because you died.

There are really good, strong planning techniques to take care of this. If you're doing it for yourself, go learn about them. And then the last one is risk management. So what are the business risks that we're subjecting ourselves to? We get to a point where the legislation and the laws and the liabilities become so significant, there's just no point in continuing because the risk is so high versus the potential profit.

Shut that business down and go to another country, go to another industry, go to somewhere else. There are certain industries -- I scratch my head and wonder why people keep businesses going in certain industries in this country because of the risks that are inherent. And I've worked with some clients and they're very poorly protected.

Number nine, education planning evaluation. So take a look at what's the education plan, take a look at any sources of financing, take a look at any tax considerations. Number 10, any other considerations. So special circumstances, example, divorce, disability, family dynamics, any inheritances, windfalls, other large lump sums, charitable planning, or elder care.

So taking a look if we need a continuing care retirement community, long-term care insurance, nursing home or long-term care and in-home health care, taking a look at those and planning for those. So this is all part of the analysis. And so a comprehensive financial plan can and probably should include all of those.

Now that would be utterly exhausting if you were a client and we were to go through all of those things. It would be utterly exhausting to discuss that. But if you're doing it for yourself, go do it. And then if you were a client, you would just figure out a way to tackle it in bite-sized pieces.

But all of these things interrelate with one another. And then B, identify and use appropriate tools and techniques to conduct analyses. Example, financial calculators, financial planning software, simulators, and research services. This would depend on the situation as far as what the planning situation. So that was domain 3. And that was the long one.

And we're going to buzz through 4, 5, 6, 7, 8, and very quickly. Because that was domain 3 where I wanted to spend the time and just say, "Do these analyses." Don't just sit and say, "Oh, you know what? I got a million bucks of life insurance at work and I'm putting money in my 401(k) so therefore I'm good to go." Think through.

If you care about getting really great results, think through these things. Talk to people. Talk to experts who are experts in every one of these industries. The problem with financial planning is you don't know what you don't know until someone shows you or tells you what you don't know.

Because a lot of times you think, "Oh, I'm really an expert on that." You may not be. I am not an expert on all of those situations. A couple of them, yes. And on many of them, I've got reference books. But at the end of the day, some of these things are so -- you've got to do it right.

And good advice is incredibly valuable or is very, very valuable. Domain 4. So from here, these would be for do-it-yourselfers. This would just be -- just listen and I'll buzz through these quickly. But for financial planners, pay attention to these domains. Developing the recommendations. So synthesize the findings from the analysis of the client's financial status.

Consider alternatives to meet the client's goals and objectives. So in alternatives, you would conduct a scenario analysis. For example, could you change some lifestyle variables? Could you conduct a sensitivity analysis? So could you change assumptions such as the inflation rate, rates of return, or time horizon? Creating one set retirement scenario is only one situation.

People try to make this simple. And simple is good. But you try to say, "Okay, I can't retire because I don't have my number." Well, there are an amazing number of variables that could be adjusted. Can you change the lifestyle? And then let's just say that you're on track.

Well, what happens if we adjust your inflation rate? What happens if we get a wonky period of abnormal rates of return? We're in one of those periods of abnormal interest rates and abnormal rates of return. What happens if your time horizon changes? So once you create a plan, then if that plan doesn't work, you figure out how can we make it work.

And then once you say, "How can we make it work?" then you say, "How can we break it? And how can we put plans in place so that the plan doesn't wind up broken if those ways that we try to break it occur?" If that made sense. Number C would be consult with other professionals on technical issues outside of the planner's expertise.

None of us are experts at all of these areas. It's okay. When I was a new financial planner, I remember being so embarrassed to say, "I don't know." And if I were to say, you know, a few things that have occurred to me over the years that I've learned is I always wanted to look like an expert.

I wanted to pretend I was really great. And so I was scared to say, "I don't know." And as my knowledge and expertise and experience grew, I became just much more comfortable with quickly saying, "Man, I've got no idea, but I do know how to find the answer." And this is the same with all of our industries.

There is so much information out there. And I'm convinced one of the skills of learning that people have to learn is not to memorize stuff. In a world of Google on your hip, why do you need to memorize anything? Ask the Googler. But we need to know how to find information and we need to know how to have a baloney detector to understand is this good information or not.

So consider that. So consult with other professionals on technical issues outside of the planner's expertise. Develop the recommendations. And here are the things you have to consider while developing your recommendations. So don't just tell someone, "Here's what I do and here's why." If you're going to be a good planner, and whether that means I'm going to do individual financial planning or whether that means I'm going to give a good advice, whether I'm going to write great articles, I'm going to give great advice on a podcast.

Consider these things. Consider the client attitudes, values, and beliefs. Consider behavioral finance issues. So anchoring, overconfidence, recency biases. Behavioral finance is so important and I'm excited about some of the work that I want to bring you of some of the developments that are happening in this field. There's some awesome stuff going on in the world of behavioral finance to really bring out this so important psychological side of things.

And it's not just leave all of this to the number crunchers. And three, consider interrelationships among the financial planning recommendations. Financial planning is in many ways a balancing act. You take from one, it goes down on one side, the other side must go up. And you decide where and where those ones go up.

Example, social security tax planning. So taking care of your employment taxes. If you reduce your wages, it reduces your social security tax. It also reduces your social security benefit. Maybe okay with that. I would be in general because I would prefer to be responsible for that. But you may not be okay with that.

And you may reach a series at a point in time at which increases. So for example, if you were to look at your social security earnings record and you were to understand how the formula works and take your highest 30 years, it may be to your advantage to take a couple years of high earnings and run the scenario.

But maybe to your advantage to take a couple years of high earnings and really help out your benefit formula. Especially if there's any kind of question about it. So it depends. And finally, document the recommendations. So you want to document the recommendations for the clients. Now we get to domain five.

Communicating the recommendations. And this is really, really important to figure out how to do this in a way that's going to speak to your client. Every client speaks a different language. So some are visual. Some are audible. Some of you have listened to me for an hour and 14 minutes while I've gone on and on about this.

And some of you are not here. But some people, I can't take that. I can't take an hour and 14 minutes. So figure out how to communicate them. Present the financial plan to the client. Provide education. Review the client goals. Review any assumptions made. Review the observations and findings.

Discuss various alternatives and then make recommendations. Obtain feedback from the client and revise the recommendations as appropriate. Provide documentation of plan recommendations and any applicable product disclosures to the client and verify the client acceptance of recommendations. Domain six, implementing the recommendations. Create a prioritized implementation plan with timeline. You can't do it all at once.

You can't. It's not possible. So you create a timeline. Assign responsibilities. So is the CFP professional responsible? Is the client responsible? Is an attorney or other professional responsible? Support the client directly or indirectly with implementation of the recommendations. Coordinate and share information as authorized with others. As authorized, important.

Make sure you don't share any information unless you are authorized. Define monitoring responsibilities with the client. So what will be monitored? How frequently will it be monitored? And what are the communication methods between the planner and the client? Are we going to do an investment review once per year or is this going to be a monthly event?

And domain seven, monitoring the recommendations. So 7A is discuss and evaluate changes in the client's personal circumstances. For example, aging issues, changes in employment. Things change all the time and you got to make sure that the financial plan stays current. Almost as soon as the plan is written, it's out of date essentially.

And this is why, in my opinion, the most important thing is not the plan. It's the client planner relationship on an ongoing basis. And staying informed. Because if you know the situations and you know the rules, you can adjust to them as time goes on. And if you don't, you need a planner.

Someone who can adjust and someone who's very close to you. Next, review the performance and progress of the plan with the client. Review and evaluate changes in the legal, tax, and economic environments. Make recommendations to accommodate changed circumstances. Review the scope of the work and redefine the engagement as appropriate.

Provide client ongoing support. For example, counseling or education. And then finally, domain eight, practicing within professional and regulatory standards. This one's really boring, but basically it is important for CFP professionals. Just skip it if you're a do-it-yourselfer. Adhere to the CFP board's code of ethics and professional responsibility and rules of conduct.

Understand the disciplinary rules and procedures. Work within the financial planning practice standards. Manage practice risk. So document, monitor your client's noncompliance with the recommendations so that if your client comes back to you and says this didn't work, you can illustrate, look, the plan, you didn't follow the plan. And then maintain awareness of and comply with regulatory and legal guidelines.

So that is -- those are the eight domains of the CFP board's job task domains. I hope that you found that interesting. I tried to make it applicable both to professionals and to people who are just -- have an above average interest in financial planning. And so I would, again, I hope I made it applicable.

And I hope I gave you some ideas to look for in your own planning, some of the ideas that are not maybe normal, that are not mainstream, the things that are not necessarily talked about all the time. I really feel there's tons and tons of these opportunities that you can look into.

So that's today's show. A couple of things here at the end. I'd love some feedback. I can do -- you know, I was thinking about doing just an article review of different articles and blog posts and ideas. But I really want to give some of this meat and potatoes information.

And I want to do it to equip you and also to have it here as information for those who are looking for it in the future. Tomorrow's show, if all goes according to plan, should be an interview with Jake DeSilis from The Voluntary Life. He and I are speaking at 9 a.m.

So that show should be out pretty early in the day. And if you have any questions that you'd like me to ask him, I love his show. I really enjoy it. Let me know, and I'll be glad to ask them. This weekend, interviews have been pushed back. This weekend I'll be interviewing Jacob at Early Retirement Extreme.

So one of my other favorite authors. If you have any questions you'd like for me to ask Jacob, let me know that. And may I ask a favor of you? If you've enjoyed today's show or if you've at least gotten through it, would you be willing to leave me a review in iTunes?

I'd really appreciate that. And if you would do that and then just shoot me an email to let me know, I'll thank you. I've got a couple of ways to thank you for that. I really appreciate that. iTunes, the way iTunes rankings work is it's all based upon reviews.

And so I feel I'm doing my best to give you good content. If you would just take one moment and check the link at the bottom of the show notes right on your cell phone, flip over and just leave a review for me, that would mean the world to me.

I'd really appreciate it. And it will help us to get a little bit more attention for the show. And the more attention for the show, the bigger and better the guests I can have on. You don't have to listen to me all the time. You'd be able to listen to top shelf people talk.

And so that would just be, I'd really appreciate it. So if you could do that right now even, that would be really, really neat. Don't do it if you're driving, but make a note and email yourself and remember to do it. I would so, so appreciate it. And again, shoot me an email when you do that and I'll find a way to thank you.

I've got a couple ideas for how to thank you. Thanks for being with me with that, with us. And with that, this is episode 19 of the Radical Personal Finance done. If you want to hear the show notes, radicalpersonalfinance.com/19. Peace out y'all. Another one in the books. If you're looking for an exciting role in customer service, food service, or retail, connect with a job at the airport.

Get started in a role that offers competitive wages, consistent schedules, and fast-tracked management while you work in a vibrant, exciting environment where security is a priority. The airport has it all. You can have it all too. Visit cmhserviceindustry.com to learn more.