"It Depends"

Becky Blevins, CFP®, CPWA®, MSFS September 5th, 2023

Ah, the dreaded response you get from your Financial Advisor to your broad financial question.

“Should I sell my house and rent in retirement?” It depends! What do you estimate the sales price will be on your current house? What is your basis (how much did you pay plus any capital improvements you have made)? If you owe capital gains taxes on the sale, your net proceeds may be impacted. What are your current carrying costs for the house? Do you anticipate any large maintenance expenses due to the age of your house? Were you planning to relocate at some point in the future anyway? What are the rental prices in the area you want to live? Are you moving to a different state? State tax rates vary, and some states have much lower tax rates than others. The list goes on and on.

“Should I finance a vehicle or pay for it outright?” It depends! Is the dealer offering a special financing rate? How does that compare to the interest rate you are earning in your savings account? Do you have enough money in your savings account to cover the cost outright while maintaining an appropriate emergency savings level? If you finance, are you able to cover the payment from cash flow (translated – spend less on Amazon to cover the monthly payment)? The list goes on.

There are very few “universal truths” in our business. If you are retired, then you should always do X. If you have school-aged children, then you should always do Y. The only real universal truth is “it depends.” It depends on what is best based on your personal and family situation.

So how do we turn “it depends” into sound financial advice? We start by having a base financial plan built out, ideally before these broad questions come up. Then when you are faced with a big financial decision, your financial planner can ask questions about all the different variables and layer that on top of the base financial plan. By utilizing all this information, your financial planner can project the impact of these various “what-if” scenarios using cash flow and Monte Carlo analyses.

But there is another “it depends” that we cannot model out, and that is how you FEEL about making a certain financial decision. I often tell people that all financial decisions are made with both “the head” and “the heart.” The most prevalent areas where I see examples of this are taking a mortgage on a new home and covering education costs for children and grandchildren. Sometimes people are very debt adverse or hesitant to take on debt, even if it makes the most financial sense. Or they really want to cover all their children/grandchildren’s higher education costs, even if it has a negative impact on the overall success of their personal financial plan. We recognize and understand this, so it’s our job as your financial planner to help you figure out how to make the decision that feels best (heart) while maintaining a satisfactory cash flow and Monte Carlo result (head).

So, the next time you have a big financial decision to make, do not hesitate to reach out to your financial planner; just be prepared for the dreaded “it depends” followed by a string of questions. I promise those questions will help us go from “it depends” to “this is best financial choice for you… but how does it feel in your heart?”

Read More By Becky Blevins, CFP®, CPWA®, MSFS

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security. Investment advisory services are offered through Concord Wealth Partners, an SEC Registered Investment Advisor.

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