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Sharing Your Situation With Someone Can Help You Achieve Your Money Goals With Brendan Halleron

Sharing Your Situation With Someone Can Help You Achieve Your Money Goals With Brendan Halleron

VENTEUR spoke with Brendan Halleron, CFP®, AIF®, BFA™, Partner and Financial Planner at Affiance Financial.* Halleron offers clients guidance as they work toward achieving their financial goals. He likes to think of himself as his clients' personal Chief Financial Officer (CFO), helping them make better financial decisions. Halleron’s goal as a financial planner is to help clients prepare for all the unexpected situations life may throw their way.

*Affiance Financial is registered as an investment adviser and only conducts business in states where it is properly registered or is excluded from registration requirements. Registration is not an endorsement of the firm by securities regulators and does not mean the adviser has achieved a specific level of skill or ability.

Personal Finance

What is financial literacy, why do so many people struggle with it, and how can we become more financially literate?

Financial literacy, in my view, is the relationship between you, money, and money's role in your life. 

It's tragic that in this country and worldwide, basic financial literacy concepts and skills are not taught nearly enough, given the vast ramifications of any financial decision. 

The best solution is to take matters into your own hands: learn. Whether reading books or articles, watching YouTube videos from qualified instructors, or talking to a financial professional, it is up to you to empower own your financial livelihood.

How can we manage our money more confidently, and what would this look like in practice?

The advent of social media has made access to financial knowledge more accessible than ever (make sure you are learning from trustworthy sources, such as CFP® Professionals). 

Managing your money is ongoing for the rest of your life. Unfortunately, many people fear investing because they do not understand it. Rather than taking proactive steps to move towards knowledge, many ignore this area of their life or put it off for "a better time" in the future. 

Take action today! 

Spend less than you make, pay yourself first, learn investing basics like the importance of compounding interest and diversification, and focus on controlling what you can control: staying employed, staying healthy, having enough cash on hand for emergencies, and doing activities that provide joy and fulfillment. 

If you still aren't feeling confident, seek a relationship with a trusted financial professional.

How does our health affect our wealth, and what can we do to ensure we're on track to a prosperous future? 

It's often said that without your health, wealth means nothing. 

Speaking from experience, this is highly accurate. 

During COVID, I experienced this first-hand as I became overweight, out-of-shape, and developed health complications. What good is it to have money if I can't do the things that bring me joy–playing golf, skiing, and traveling? 

So now, I work with a trainer three days per week to keep me healthy, accountable, and on track for my immediate and long-term personal goals. 

Sure, it is more expensive than doing it myself, but, for me, it is priceless. 

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. Reflect on Your Relationship With Money

Set time aside, either by yourself or with your partner, to deeply consider: how you were raised with money, your current financial condition, and where you would like to go with your finances. Once those areas are more known, you can determine what matters most and what matters least in your financial picture and allocate your resources more appropriately.

2. Consider Changing the Narrative to “Paying Yourself First”

Everyone wants to get paid more! And paying yourself first–by putting money into a retirement account before paying the landlord, phone company, or grocery store–will help you fight the urge to base your savings on your after-expenses cash flow amount, not your salary.

3. Find an Accountability Partner

Maybe it's your spouse, mentor, friend, financial professional, or even a phone or web application. It is much easier to achieve goals when they are written down, and you have the knowledge that you will have to report on your success or failure.

What strategies should we use to save more, and why might these be the most effective?

Start small. 

Think of a snowball rolled down a snowy hill: it starts small, but the longer it rolls, the bigger it becomes. 

To begin with, saving nothing and jumping to saving 10% of your income could cause personal financial austerity, changing how you live your life and potentially causing you to feel negative toward saving down the road. 

Instead, start small. 

Save just a few percent of your income. 

Then, over time, slowly increase the amount you are saving. 

One strategy to increase your savings is when you receive a raise, consider increasing your 401(k) contributions. You did not have that money to begin with, so saving it will not impact your standard of living. But it will go a long way toward your retirement savings goal.

What should we look for in a bank account, and how might this change depend on our financial situation, and why?

For a checking account, the main concern is access and ease. 

Does the account have a solid network of ATMs and online functionality to run your life with minimal fees? 

For a savings account, it's all about the interest rate. 

I see many larger institutions offering savings accounts with interest rates between 10 to 200 times LESS than competing online banks or credit unions. 

You work hard for your money, and it should be working just as hard for you. 

Retirement

Why is a 401K not the best vehicle to prepare you for retirement?

It depends on your goals. 

If your main goal is to buy a home, maximizing your 401(k) is suboptimal because you can only touch that money once you are over age 59.5. But a company-sponsored retirement plan, such as a 401(k), is a fantastic way to save for retirement, especially if your employer offers a matching contribution. In retirement, taxes are one of the biggest expenses. 

Saving in a taxable account and a 401(k) can help add flexibility to your money, both today and in the future. 

Handling Debt

What steps should we take to reduce our current debts, and why? 

Tackle debts with the highest interest rate first. 

Paying down debt is a form of saving, and the interest rate you avoid is the implied rate of return. As you tackle your debt, starting with the highest interest rate, you slowly reduce your interest expense and increase your cash flow over time. 

What are three commonly made debt reduction mistakes, and how can these mistakes be avoided? 

1. Not Having a Sufficient Emergency Fund for Life’s Unexpected Events

If the pandemic taught us anything, cash is king, and having it available in times of need is vital to your financial well-being. 

You can only save for the future if you have a safety net for today. 

2. Using Your Retirement Accounts To Pay Down Debt

You are robbing yourself of needed funds in retirement and incurring taxes and penalties along the way, further digging yourself into a hole. 

3. Not Properly Budgeting

The most successful individuals and couples I know do one thing consistently: they budget. It can be a manageable process, but you need to understand how much money comes in, how much goes out, and how your resources are utilized. 

Brendan Halleron, CFP®, AIF®, BFA™, Partner and Financial Planner at Affiance Financial

Investing

What three out-of-the-box tips can you share to help us better approach personal investing, and why these three?

1. Boring Is Beautiful

History has shown that patient, persistent, and disciplined investors reap the reward of investment returns. But this does not happen overnight, no matter what you hear or see on TV and social media. 

2. Ignore the Noise

Media companies and publications are strongly incentivized to solicit their followers' reactions. Investing takes patience and the discipline to ignore the noise. It's the risk premium you accept when you invest in security for the long term. Over time, history has shown that patience pays off.

3. Diversify

You are not diversified if your entire portfolio increases or decreases in unison. The purpose of diversification is to never "kill it" (e.g., outperform the market) but also never "be killed" (e.g., your entire portfolio drops to $0). The same bodes true for owning a single stock, such as the stock of the company you work for. Stock concentration can create wealth, but diversification preserves it.

What are intelligent places to park cash, and why?

Online savings institutions are often a clever play to park cash. 

My personal favorites are AllyBank, CapitalOne, and American Express. 

Another longer-term option for money that is particularly relevant in our current economic climate is I Bonds. I Bonds are bonds issued directly by the government (TreasuryDirect.gov) and designed to protect the owner from inflation. 

The annual purchase limit is $10,000 per person per year, and cash needs to stay in an I Bond for at least one year, five years to avoid penalties (among other stipulations), but the United States government guarantees them. In today's high-inflation environment, I Bonds offer an interest rate higher and more secure than virtually all other fixed investment vehicles. 

Should investments into VC funds be included in one's portfolio?

In the traditional sense, VC funds should not be included in one's portfolio. 

I have worked with a few clients who have made VC investments, and while some have hit and made clients very wealthy, others have gone to $0. 

Before making a VC venture, you need to ask yourself, "Will I be okay fiscally if this money goes to $0, and will I be okay emotionally if this goes to $0?" 

If you can honestly answer yes to both, then you are financially viable and able to handle the risk (as well as a potential reward) of early-stage investment. 

But, you need to thoroughly understand the business, its value proposition, and its competitive advantage; otherwise, you are speculating. 

Insurance

What types of insurance should we consider being covered by, and why?

Term Life Insurance

Term (known as temporary) life insurance is a no-brainer for young modern professionals with a partner or family. It is the cheapest life insurance coverage for the maximum death benefit, ensuring you protect those you love in case of an unforeseen event. In addition, I have seen it save families financially by providing funding to pay off a house, pay for children's daycare or education, or help the surviving partner make up for the lack of income to continue to save for their retirement. 

I believe permanent life insurance policies are only needed in four situations, for those: 

  1. Who have large estates (over state/federal estate tax exemptions) 
  2. Who already maximize all other savings vehicles
  3. Who have a specific charitable bequest to fund
  4. Who have a strictly emotional need for insurance

In all other cases, permanent policies are expensive and provide little value to their owners. 

Personal Liability Insurance

Another underlooked vehicle is personal liability insurance (an umbrella policy). This is extra coverage above and beyond your typical property and casualty coverage in case of catastrophic events that could ruin someone's financial future, such as severe bodily injuries, injuries resulting from your pet, or accidents within your home.

Other

Is there anything else you would like to share?

Faith, family, and finances are three topics most individuals avoid discussing. 

It can be tough to share your situation with someone, especially someone you do not know. 

But seeking the advice of a financial professional can be a valuable tool to ensure you are on track to meet your financial goals. 

Consider interviewing multiple planners or advisors who are fiduciaries to request a review of your financial situation. After a review, you might discover you are doing well on your own and do not need any assistance. However, more often than not, a financial professional can identify areas of opportunity or improvement that can help you exceed your goals or reach them faster. 

Topic Contributors

Questions based in part on topics and comments provided by:

  1. Jen Hemphill, Accredited Financial Counselor at Association for Financial Counseling and Planning Education (AFCPE®)
  2. Herman Thompson, Jr., CFP®, ChFC®, Certified Financial Planner® at Innovative Financial Group
  3. Leslie H. Tayne, Esq, Financial Attorney and Founder/Managing Director at Tayne Law Group
  4. Linda Hamilton, Executive Vice President and Chief Operating Officer at Iroquois Federal
  5. Ann-Marie Anderson, Financial Advisor at PHP Agency
  6. Paul Dilda, Head of Retail Strategy, Products and Segments at BMO Harris Bank at BMO Financial Group
  7. Matthew Benson, CFP® Owner and Certified Financial Planner™ at Sonmore Financial
  8. Josh Richner, Outreach and Marketing Coordinator at National Legal Center
  9. Ken Tumi, Founder at DepositAccounts.com and expert at LendingTree
  10. Martin A. Federici, Jr., Chief Executive Officer at MF Advisers, Inc.
  11. Ba Minuzzi, Founder and Chief Executive Officer at UMANA
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