MP spoke with Mark Williams, president and CEO of Brokers International, about personal finance. Brokers International is an insurance brokerage agency working with over 5,000 independent insurance agents, financial planners, and financial professionals nationwide. Williams assists financial professionals with insurance product support, marketing and branding efforts, broker/dealer and RIA assistance, and overall practice management.
Williams has been in the financial services business for over 30 years as an insurance agent, field manager, and wholesale representative for three major insurance carriers. For the past ten years, he has been the president of two major insurance brokerage companies.
Personal Finance (Generally)
What is financial literacy, why do so many people struggle with it, and how can we become more financially literate?
According to Investopedia, financial literacy is the ability to understand and effectively use various financial skills, including personal financial management, budgeting, and investing.
Most people struggle with financial literacy because we Americans do not receive formal education about money or financial planning.
Most people have to rely on their own skill set or motivation to learn about money concepts and how to invest and save for the future.
There are hundreds of avenues one can take for self-study, such as the internet and local libraries.
Additionally, financial literacy programs are often found in work settings through employee training and partnerships with financial services companies and representatives.
How can we manage our money more confidently, and what would this look like in practice?
One of the best ways to manage our money more confidently is by using the services of a financial professional.
The consequences of poor money management can be far-reaching and last for years. The products and services we use to manage our money and grow our retirement nest eggs can have tax implications and financial consequences on our beneficiaries, depending on our physical or mental well-being, and derail many plans.
Using a financial professional can avoid many costly mistakes now and in the future. Several online resources can help anyone find an insurance agent or financial professional in their local area.
How does our health affect our wealth, and what can we do to ensure we’re on track to a prosperous future?
Living a healthy lifestyle has many benefits beyond just feeling better physically; it can also be financially rewarding.
Many products used in personal finance and retirement planning are priced based on your health. That means the healthier you are, the lower your cost to own those products. It is common sense.
Health insurance, life insurance, disability insurance, long-term care, and countless other products we use to plan for a healthy retirement are based somewhat on the insured person's health.
One way to see this in actual practice is to get an insurance quote for different life insurance and health insurance products based on various health conditions. The cost differences can be astounding.
One way to ensure you are on track is to get regular annual physicals and consult your medical professional(s) to ensure you are reducing health risks and living a healthy lifestyle.
Budgeting and Saving
What three out-of-the-box strategies can you share to help us improve our personal budgeting, and why these three?
1. Evaluate Credit Cards
We all use credit cards; however, most do not manage them well. We should constantly review our cards' interest rates first and pay the highest interest rate cards.
Second, if you use plastic, ensure you get something in return, such as points, miles, or cash back.
Hundreds of cards offer reward programs, so take the time to investigate them and get the most rewards you can.
2. Reduce Streaming to Just One Service
This is an often overlooked and underutilized strategy.
Write down on a piece of paper anything — and I mean everything — that you pay for monthly or annually. You will probably find some redundancies or things you can live without.
Start with iCloud storage, music, and TV streaming services, gym memberships, software and hardware fees, etc.
My family recently realized all four of us were paying for separate cloud storage. When we combined them all (using AppleOne), we saved $22/month and got more storage!
3. Get Creative With Gift Giving
We all give gifts — birthdays, religious holidays, and Valentine’s Day, to name just a few.
These gifts add up and can be expensive.
Try and use hobbies and special interests to make gifts. Most people love to receive a handmade gift (usually, it means more and shows the amount of time and thought that went into the gift giving).
My wife and I decided not to buy ourselves birthday gifts, and in exchange, we would plan an experience instead.
Try giving out coupons for “family bowling night,” “Dad’s night out for pizza,” or other fun event-type things instead of giving gifts you eventually give away, sell at a garage sale, or just throw away.
What strategies should we use to save more, and why might these be the most effective?
Check Your Withholding
Many of us either over- or underpay the government all year round. If you receive a refund yearly from the IRS, perhaps it’s time to adjust your withholding and move that money into your retirement or savings accounts.
Alternatively, if you are underpaying and are worried about paying a bill to the IRS every year, adjust your withholding to reduce that added stress and have a more accurate annual budget.
Take Advantage of 401K and Match
Many people have access to employer-sponsored benefit plans. Most of those plans offer an employee match (up to a certain percentage), which means your employer gives you free money!
Take advantage of the full match yearly to boost your retirement accounts.
Flexible Spending Accounts/Medical Savings Accounts
These accounts allow you to save money for specific expenses pre-tax and then pay for qualifying services without paying taxes on that income. Both accounts have contribution limits, but you should investigate these tax-favored accounts if you have regular medical or daycare expenses.
Create a Budget (and Stick to It!)
Most people spend more time planning a vacation than they do reviewing their financial situation.
Create a budget annually and review it monthly.
People are often amazed by what they spend money on and just how much they are spending.
Once you have created that budget, stick to it and reward yourself for good behavior, like dieting. Many people often realize just how much fun it is to start saving money and watching that amount grow rather than spending that money.
What steps should we take to reduce our current debts, and why?
Evaluate Credit Cards
As written above.
Refinance Your Home Before Interest Rates Go Up
Analyze your current mortgage(s) and look to reduce interest rates where you can. Often using equity in our home is a better option than using credit cards for loans or more significant expenses. Explore home equity loans or HELOCs. These loans often have tax advantages or offer much lower interest rates than credit cards or personal loans.
Student Loans Review
The same analysis you use for credit cards can also be done with student loans.
Investigate the various programs and companies that offer student loan reductions.
What are smart places to park cash, and why?
So you have some cash and want to “park” it somewhere.
Before someone decides where to put their cash, they should ask themselves what the cash is for and when they will need it.
The reason for this is that the answer is “It depends.”
If you need the money for something specific, within a few months to a year, consider an account that is 100% liquid with no withdrawal fees or charges, like a savings or checking account, money market account, or credit union account.
The amount of interest you earn on that money will not be that significant due to the short timeline, and you will not want to pay a penalty for an early withdrawal.
A bank's CD (certificate of deposit) may also be an alternative; however, the bank may assess an early withdrawal fee.
Often a short-term money-market account within a brokerage firm may be another good place to keep cash on hand because they pay interest, with most offering penalty-free withdrawals.
All these accounts should be considered based on how much cash you have, when you need it, and what associated fees.
What types of insurance should we consider being covered by, and why?
This is a tough question because everyone has a different financial situation that should be considered for their specific needs. Having said that, however, most people should have the following:
Healthcare is expensive, and one trip to an emergency room could be financially catastrophic for many people.
My son had a skiing accident years ago. He was airlifted to a hospital and stayed there for several days after a 5-hour surgery. Luckily he fully recovered, but the entire bill for all his care was well over $750,000, most of which was covered by our health insurance.
If there is anyone (besides yourself) who relies on your income/finances to meet their daily living expenses, you should own life insurance.
Life insurance costs more the older you get and the less healthy you are. Buying life insurance when you are younger and healthier is prudent, and it will ensure that the people relying on your income will be taken care of if you don’t make it home tonight.
Many life insurance policies can be customized to meet your needs, so consult a financial professional.
Questions based in part on topics and comments provided by:
- Jen Hemphill, Accredited Financial Counselor at Association for Financial Counseling and Planning Education (AFCPE®)
- Herman Thompson, Jr., CFP®, ChFC®, Certified Financial Planner® at Innovative Financial Group
- Leslie H. Tayne, Esq, Financial Attorney and Founder/Managing Director at Tayne Law Group
- Linda Hamilton, Executive Vice President and Chief Operating Officer at Iroquois Federal
- Ann-Marie Anderson, Financial Advisor at PHP Agency
- Paul Dilda, Head of Retail Strategy, Products and Segments at BMO Harris Bank at BMO Financial Group
- Matthew Benson, CFP® Owner and Certified Financial Planner™ at Sonmore Financial
- Josh Richner, Outreach and Marketing Coordinator at National Legal Center
- Ken Tumi, Founder at DepositAccounts.com and expert at LendingTree
- Martin A. Federici, Jr., Chief Executive Officer at MF Advisers, Inc.
- Ba Minuzzi, Founder and Chief Executive Officer at UMANA