Financial planners share the smartest decisions they have seen clients make with their money

Meeting 2ShutterstockFinancial planners get an intimate view of their clients’ priorities.

Financial planners see it all.

Not only do they get an inside look into their clients’ spending, saving, earnings, and investments, but they can see past the numbers to the people behind them: their clients’ ambitions, fears, priorities … and decisions.

Below, six certified financial planners answer the question,”What’s the smartest decision you’ve ever seen a client make with his or her money, and why was it so smart?”

Jens Schott Knudsen
Investing in yourself can pay off.

Investing in themselves.

'The best thing a client can do is to invest money in themselves. That might mean going back to college, getting an MBA, a high level certification in their career field, starting a business, or a range of other possibilities. Ultimately, investing in yourself will likely provide the highest return on investment (ROI) that you will find.

'Investing in starting a business is certainly risky, but it is something that can help secure a person's financial future.

'That being said, I think starting a business is a lot less risky than having a job. When you work for someone else, they hold the keys to 100% of your income. When you work for yourself, a client or customer can fire you, and it is only a small percentage of your income.'

-- Alan Moore, CFP, Serenity Financial Consulting

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Once you set up passive income, you can sit back and relax.

Creating multiple streams of income.

'Investing in yourself today while simultaneously saving for the future.

'Chris and his wife Suzie, long-time clients, have always had a very diligent approach to saving and investing. Five years ago, Chris and Suzie left behind their steady paychecks, as executives in the entertainment business, to take the leap and start their own production company. In starting the business, they both agreed to live frugally and to consistently save the majority of their income towards two purposes:

• Reinvesting in the growth of their company.

• Building up their retirement savings.

'They agreed to split their savings in half. One half was invested into tax advantaged retirement accounts, which included creating their own defined benefit pension plan as well as a 401(k) profit sharing plan for the production company. The other half was reinvested directly into the business to build infrastructure, create content, and increase marketing to drive revenues. Doing so allowed them to scale the business faster than expected, yet, at the same time, they felt secure knowing they had reserves set aside with their retirement holdings. The rationale was that if the business did not work out for whatever reason, that they would still be able to grow their net worth via their well diversified retirement portfolio.

'Chris and Suzie's strategy was the smartest financial decision they could make as they bet on themselves while at the same time prudently saving and giving themselves a back up plan. I'm pleased to share that the production company is prospering and as the business grew, Chris and Suzie's savings grew along with it. They worked to hand over the management and day-to-day operations of the business to junior partners by offering them equity (ownership) in the company. Ultimately, the growth of their corporation coupled with the substantial income generated from their retirement portfolio allowed Chris and Suzie to achieve their goal of an early retirement.

'The result: They now have sustainable streams of income being generated from both the business and their retirement holdings. As Suzie says, 'passive income is liberating. It feels so good to have free time knowing that we earned it.''

-- Joe O'Boyle, CFP, Voya Financial Planning

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A husband who hired his wife was able to bulk up both of their retirement accounts.

Hiring a spouse into the family business.

'One of the smartest decisions I ever saw a client make with his or her money was when a married couple decided it would be advantages to hire the spouse for the family business.

'Here is what happened: The couple was married and under the age of 50. The net earnings of self-employment (NESE) to the husband was $US100,000. He was able to set up a SIMPLE deferral retirement plan and tuck away $US12,500 plus an additional $US3,000 in a SIMPLE match for a total of $US15,500.

'He then hired his wife to join his team and paid a wage of $US15,000 to her for her work. Now his NESE was reduced to $US83,350 after payroll tax and employment retirement match of $US1,650. She was now able to set aside $US12,500 of her own retirement plus an additional $US450 in SIMPLE match.

'So, for an additional $US1,200 in added payroll tax cost, the household increased their retirement accounts by $US12,450 by hiring the wife ($US27,950-$US15,500).

'This was a smart move and made sense, although every case is different and rules apply. The added benefit in some cases may be worth the cost of funding. In others, the hiring of the spouse may be justified in terms of other benefits.'

-- Jordan Niefeld, CPA, CFP, Raymond James Financial

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