Income Does Not Equate to Wealth: Expert Financial Insights

Investing and retirement saving is different for everyone, so developing a plan that works for your unique financial situation is important. Here are some financial insights from a professional fiduciary financial advisor.

Senior Finance Advisor recently had the opportunity to chat with Sterling Raskie, Vice President of Client Engagement for Blankenship Financial Planning and Lecturer in Finance at University of Illinois at Urbana-Champaign, who is an advocate for the client experience. He believes that advisors should be client-focused and client-driven, not product driven. He notes:

“I ask myself, ‘how would I want to be treated if I was a client?’ and I found a method that agrees with me. Being a fiduciary advisor, you legally have to put your clients first. Being transparent and being held to a certain standard is important. Finance is more fun if you work in a business model that you’d apply to yourself as I think to myself: ‘If you do the right thing for your client, the money will follow.’”

When asked how Americans are doing with their financial planning and what his recommendations are to get your ‘financial ducks in a row’ – which is the name of the blog his pen frequents – here are some recommendations he offers:

1. Are Americans Saving Enough for Their Futures?

Some folks are doing a relatively good job saving. Overall, though, the general population is not saving nearly enough as “prioritizing is tough,” according to Raskie. Usually what is top of mind takes precedence, whether that’s paying a mortgage, car loan or student loan. “Status quo is the norm as it works throughout life,” Raskie comments. “Planning for the future needs to be a priority before it’s too late.”

2. What Do You Think of the Financial and Retirement Planning Classes That Are Now Being Offered?

“Generally, these classes seem good, although I can’t judge for every class,” discusses Raskie. He points out that the courses won’t do anyone any good until someone is ready to take them. He notes that when people are ready to absorb the information, they usually take a class. “I have had people come up to me and say: ‘Your courses should be mandatory’” – simply because the information is so helpful in terms of financial and retirement planning and setting yourself up for future success.

3. Do You Have Any Advice on How Americans Should Keep Their Finances Organized?

A great place to start when organizing finances is to look at your last three months’ worth of banking and financial statements, according to Raskie. “It’s easy to pull these snapshots up and they generally provide an unbiased picture on where you’re spending your money.”

Once you have big-picture info, there are a number of great financial apps that help keep track of your finances, such as Mint, to help you stay disciplined and learn where you need to budget your money. “A financial professional can help you assess your situation and reach your goals, but the overview is important to give people the ability to assess themselves,” Raskie notes. ‘I like to ask my clients: ‘What do you notice about your spending and what actions might you take?’ As once people more ownership, they’re more likely to follow through.”

4. What Should Americans Who Are Approaching Retirement Keep in Mind When It Comes to Getting Their Finances in Order for Retirement?

Taking a good look at spending and whether it’s sustainable for retirement is important to consider, especially if their retirement is approaching.

Raskie notes: “It’s qualitative: What do you envision your retirement to be like? Based on your current levels of spending, do you have to retire later, or can you retire when you want? What do you anticipate your longevity to be? Some people are living too long but don’t have enough assets to sustain their lifestyle. Basically, retirement is a function of how much you need to spend, and a little perspective is important.”

These are some of the important retirement questions to ask as many Americans are outliving their assets. Planning for retirement with specific spending habits and budgets in mind is crucial to adequately saving for your desired lifestyle. Raskie points out that “each person’s retirement has to be customized for their unique needs.”

5. What Is the Rip Van Wrinkle effect in portfolio management and wealth planning?

Raskie has coined his own term, the “Rip Van Wrinkle” effect, which means to set up your investment portfolio and then put it on autopilot. He comments:

“This is my own humor to bring home, it’s a concept I created that means, from a portfolio standpoint and saving for retirement, once you have figured out a good mix of investments, keep saving systematically and set it up on autopilot. It’s important to not be actively trading in your portfolio. Look at it yearly and for major life events and adjust accordingly.”

Raskie further notes that “there’s a lot to be said for inactivity. Don’t try to outsmart the market. There’s always someone smarter.” A focus, should be on what you can control, instead, whether that’s personal finances or expenses. Once you set your ideal allocation in your investment portfolio, keep funding and leave it alone.

Your Net Worth is the Bottom Line

Sterling Raskie brings years of financial planning, investment and insurance experience. He openly admits that teaching forces him to “be on top of his game as students keep him on his toes.” From a wealth standpoint, Raskie stresses that “income does not equate to wealth – there are a lot of people making great money, but they’re not saving much – their net worth is not much as they’re not saving.”

Keep in mind that wealth is what you keep. He believes in frugality and identifying needs versus wants. “It’s important to assess what you need. Little things add up at the end of the month so set a budget and prioritize. Remember to pay yourself first.”

Connect with an expert financial advisor you trust to help you not only navigate the market, but also keep you focused on your finances.

About Sterling Raskie

Sterling Raskie is a Lecturer of finance at the University of Illinois at Urbana-Champaign where he teaches courses in wealth management and finance. Sterling is also Vice President of Client Engagement for Blankenship Financial Planning - a fee-only wealth management firm helping clients nationwide.