Friday, November 30, 2007

Our Journey To Financial Freedom #9 - The Professionals We Used

In early October, 2007, I announced that I had retired in my forties. As promised, I am writing a Friday series on "How We Did It," of which this is segment #9. ( #1 is about our childhood , #2 is about education, #3 is about working, #4 is about lifestyle , #5 is about goals, #6 is about staying on track, #7 is about the role of luck and #8 is about my personal finance mind tricks.) This segment about the times we chose to use professional help.

Most of my life I have been a do-it-yourself type of person. My dad was a great do-it-yourselfer and I inherited his ability. Why hire an electrician when I can follow instructions to rewire a light switch? Correct a leaking faucet or toilet? I can be a plumber for a day. Of course, I know my limits. For the big jobs, I call in the pros, e.g. roofing, cutting down a large tree, painting the exterior of a 2 story house.

I also applied this approach to managing my personal finances. On my own, I learned about buying real estate (mainly my home), investing in the stock market (equities and options), buying fixed income securities (CDs, and municipal bonds), and managing IRAs. I still do my own taxes, by hand:-), and routinely do mortgage payoff or compound interest calculations on Excel spreadsheets. Finally, both my spouse and I are pretty good at paying ourselves first, putting money in emergency funds and paying our bills (including credit cards) on time. However, for the big, complex or way out of my league jobs, I hired a pro. Here are some key areas where we used professionals.

  • Trust and wills. Just before moving to Japan for an international assignment, the company's tax consultants asked us if we had a will. Since we didn't have children at the time, our answer was, "no." He then advised us that while we were in Japan, our estate would handled under their laws, if we had no will. However, if the decedents had a will or trust, Japan would recognize the documents.

    Needless to say, with only a short time to moving, we hired a local firm to do the legal work for living trusts, wills, durable powers of attorney, and living wills. For us, it was well worth , given the limited time to do it. A colleague once told me he saved money by buying the living trust forms at an office supply store and doing it himself. I guess if I were single, I would take the risk. However, with a family and the responsibility to ensure the estate is protected for them, I think it's worth the cost of having an attorney make sure it is correct.

  • Validating amount needed and managing funds for retirement. While we were overseas in Japan, I realized that it would be a good idea to hire a professional wealth manager when when returned. It became obvious to me that I didn't have the time to completely keep up with the latest developments nor did I have time to effectively manage a large investment portfolio.

    When we returned, I began to investigate financial advisors. Fortunately, I liked one of the first ones I identified. Their investment approach of prudently growing wealth was in line with my personal preference, and their approach had avoided a large part of the tech decline in 2000-2002. Also, I knew people that had been with them for many years and were satisfied.

    Thus, we moved a portion of our savings to a managed investment account. Over the past two and half years, I have had numerous discussions with my financial advisor on investment strategies, retirement readiness and market environments. Importantly, he had access to sophisticated tools (e.g. Monte Carlo simulations) to provide a great estimate of retirement funds sustainability, which gave me high confidence we could retire in our forties. And most importantly, he has given me confidence to stay invested in the stock market even during times of high volatility.

  • However, in both cases, I did not completely delegate responsibility to the professionals. For the trusts and wills, we already had a working knowledge about estate planning, the benefit of revocable living trusts and how we wanted to distribute our estates. For financial planning, I had already developed financial goals and investment strategies from which we could further refine with our financial advisor. In addition, I am very involved when new investment strategies are being considered.

    As we get older, I expect that we will need additional professionals (e.g. a CPA and family attorney) and will be working to identify good candidates in the next few years.

    Here's the series:

    1. Our Childhood Preparation
    2. The Value Of Higher Education
    3. Making The Most Of My Job
    4. Lifestyle and Spending Choices
    5. Setting Goals, Developing Plans and Tracking Process
    6. Staying The Course
    7. How Luck Played A Role
    8. My Personal Finance Mind Tricks
    9. The Professionals We Used
    10. When Preparation Met Opportunity
    For more on Reaping the Rewards, check back every Friday for a new segment.

    Photo Credit:, Andrew

    This is not financial or legal advice. Please consult a professional advisor.

    Copyright © 2007 Achievement Catalyst, LLC


    Unknown said...

    How about an apt insurance agent? Perhaps you haven't experienced the severe devastation that can result from an uninsured exposure?

    Super Saver said...


    Thanks for your comment. An excellent point.

    As I wrote in Protecting Your Wealth – Insure Against the Risk of Financial Disaster , I believe having excellent insurance coverage is important. However, since my insurance policies were fragmented, i.e. some (health, disability, long term care) from work and some (auto, home) from from an insurance company, I had been doing research mostly on my own, and then working with my company or insurance agent on the the specifics of the policy I want. If I were to start a business, I would probably look for an insurance professional with whom to work since I have little knowledge about business insurance.