Darren Straniero, CFP® OnPlane Financial Advisors
- 16100 Riffle Ford Road , Darnestown, MD 20878
- (703) 856-7979
About Darren Straniero, CFP®
My professional purpose changed when my wife and I were blessed to go from having 1 child to 5 children in just 2.5 years. That wasn’t built into our financial plan!
Today, I help parents and families make sense of and maximize their financial lives. What I’ve found is that even some of the smartest people make small, consistent mistakes with their finances. And over time, these mistakes – if left unchecked – can cost you thousands of dollars in excess taxes, fees, and opportunity cost.
By providing direction and accountability in my clients’ financial lives, I help them get the right answers to their questions before problems arise. In short, I manage the financial future for you, so you can spend more time today focusing on the other meaningful areas of your life.
I’m a Certified Financial Planner® professional who has spent the last 10+ years in the financial services industry. My practice revolves around three key phrases:
-Life is NOT a straight line (see above: 4 kids in 2.5 years!)
-Focus on factors YOU can control
-Do well. Be well. Financially
You’ll find me talking about these a bunch in my blog.
There’s more to life than work, though.
My wife, Jill, and I were married in 2008. We have five kids: Jackson, Thomas, Charley, AnnaMay (twin girls), and Sutton. We love watching our kids play sports and both Jill and I coach their teams – sometimes we even coach together! We also love to go the beach and we spend time in the summers in Rehoboth Beach, DE.
If I’m not managing the future for clients or with my amazing wife & five kids, you might find me coaching, cooking, golfing, or playing cribbage.
I think we're all prone to inertia in some shape or fashion, be it financially or otherwise. Guilty as charged.
You wouldn't know it by looking at me but I've put on some weight this year. I don't watch my weight. I've always been thin and eat fairly well most of the time. And I've always been pretty active. Like most people, I go through phases of working out. Generally it's pretty regular and I'll take some time off here and there. This year has been a challenge for me.
I started my own firm earlier this year and that's kept me plenty busy. In addition to being a husband & father, I also coach a handful of our kids' teams. We have friends, too, and like to see them. I always figured I'd find the time again but there was no external force compelling me to change.
Until the pants started feeling a little tight in the waist…lol.
A tendency to do nothing or to remain unchanged.
A property of matter by which it continues in its existing state of rest or uniform motion in a straight line, unless that state is changed by an external force.
Just how important is inertia is our lives - especially in our financial lives? Think about it:
How hard is it to start getting up early to go the gym the first morning?
How hard is it start exercising (again) if you've taken an extended break?
How hard is it to get that garage cleaned out and organized?
How hard is it to find or change financial advisors?
This is inertia. Change. Is. Hard.
Most of us reading this won't do something different until we experience a trigger. And that trigger compels us to change.
Earlier this year, I met with a potential client. I haven't been able to get this sequence out of my head and I still worry and wonder about them. They showed me a laundry list of items on their agenda, things they'd either put off or haven't gotten around to tackling yet due to other financial priorities. They were seeking help with executing their agenda and getting their financial house in order. They needed financial planning.
After a successful meeting, these fine folks decided they were going to attack their financial agenda on their own and wished to seek my counsel after they've put themselves in a better financial position. I wished them good luck and even told them it's possible for them to accomplish their tasks on their own. I have no doubt they can do it - all of us can do it.
Like I said, this particular situation has stuck with me. And I keep thinking of them and the following analogy:
Imagine you aren't feeling well, physically. You have symptoms that tell you you're sick, and you're overweight, plus your blood pressure is elevated, your diet is out of balance, etc. You should see a doctor and/or get help, right?
Now let's imagine we attempt to treat ourselves, physically and medically, on our own. And once we've gotten ourselves healthy, then and only then will we go see the doctor.
Back to this potential client. Again, very fine folks. They have symptoms that tell me they are financially sick. They should get help. They've decided not to, and that's a choice I don't begrudge. I respect it but I still wonder. Will they actually do it? And will they execute their agenda in a manner that provides efficiency and the proper levels of execution to position them for long term financial success? I also worry about inertia and the cost to potential lifestyle and wealth.
At the end of the day, we all have goals. Financial goals, health goals, personal goals. The biggest challenge many of us face when trying to defeat these challenges is taking that first step and overcoming inertia. That feeling of everything being just fine and dandy the way it is. Sometimes inertia shows up in the form of other words like busyness, laziness, doubt, stubbornness, fear and maybe even ignorance. Who wants to be called out for those descriptions?!
So here are a few ways we can use Compounding Actions to tackle Financial Inertia:
1. Shock Therapy
Not shock therapy in the traditional sense or like Dr. Peter Venkman used in the movie Ghostbusters. About 50 years ago, Kurt Lewin introduced his three-step model for change. We can use this same model to get us moving forward, financially or otherwise. Basically, we have to shock ourselves into action. Financially, we could ask ourselves some questions like:
“How much money am I losing by not getting started on this?”
“How much could my money be growing if I were investing all the money that I’m currently losing/spending?”
“What would that money mean for my [insert financial goal here]?”
And of course, if we can't shock ourselves into action then it makes sense to find someone else to do it for us. Remember our doctor analogy above?
2. Create Very Short Term Goals to Create Short Term Victories
By setting short term goals that can be easily obtainable, we create momentum. And momentum is what we need to overcome financial inertia. Remember, an item in motion tends to stay in motion! So earn yourself some wins and keep on keepin' on. Maybe that's increasing your rate of savings by 1% (hint: open enrollment season is upon us!), or saving an extra $xxx per month. Cancel a service or subscription you aren't using (enough). Make it something small and easily obtainable. Small, incremental steps can lead to huge long term gains!
3. Visualize What It Is You Want
I'm not saying go all Stuart Smalley here and build yourself up. Let's not confuse visualization with the "think it and be it" advice our friend Stuart and other self-help gurus bombard us with on Facebook. But visualization works! From sports to business, science tells us our mental thoughts can be just as powerful as action.
According to this article, "When we visualize an act, the brain generates an impulse that tells our neurons to "perform" the movement. This creates a new neural pathway -- clusters of cells in our brain that work together to create memories or learned behaviors -- that primes our body to act in a way consistent to what we imagined. All of this occurs without actually performing the physical activity, yet it achieves a similar result."
This is powerful stuff, friends! When it comes to your financial life, visualize what you need to do to get where you want to be. Maybe that's creating more sales at work to earn more money to save for a down payment on a house. Or it's visualizing your lifestyle to create the life you want and be able to spend time on the things you value.
Much as we view our investments through a long-term lens, so too must we view the changes required in the other areas of our financial lives. We've all heard about compounding interest when it comes to our investments. Overcoming inertia in our financial lives creates a different form of compounding. A compounding interest of sorts on our behavior, on our actions. Small steps, time, persistence. Focus on the factors we can control.
Then we can better harness the power of compounding in both our investments and our financial lives.
Yesterday two very large financial institutions announced they would no longer charge "commissions" on any online exchange-listed stock, ETF (domestic and Canadian), and options trades for any investor on their platforms.
The cost associated with investing has been plummeting for years. First it was the robo-advisor firms pushing down costs for asset management. And lately, another financial startup became one of the first investment firms to charge $0 for trades. Now it appears everyone is getting in the game.
I'm a big fan of this trend. Investing costs is one of the core financial factors we can control. So seeing costs trending south means more of your investment money stays in your account. Your net rate of return increases by whatever costs you're able to save or not pay.
Couple this with the fact every person with internet access has more information available to them than at any point in history. You can literally find information on pretty much any company, any fund, any stock. You can also find a multitude of opinions on this information, too. And on top of that, this information is cheaper than it's ever been - if not entirely free.
Can “Free” Be a Bad Thing?
I think it can. While I love love love the idea of $0 trades/$0 commissions, I worry about the impact this could have on your ability to trade freely. Before yesterday, TD Ameritrade (one of the institutions that announced $0 trade fees) charged an investor $6.95 per trade. This doesn't seem like much, right? But if your portfolio contains 10 different ETFs or stocks and you want to fully rebalance your account each year then it will cost you $69.50.
Rebalancing is an important part of any investment plan. Over time, some funds might increase in value while others might go down in value. The end result? You might end up with more stocks than bonds, or more bonds vs. stocks than you want - this is pretty common in a diversified portfolio. So rebalancing helps keep your stock to bond mix aka asset allocation consistent and now we can rebalance and/or reinvest with $0 cost to you*, the investor. Oh, and rebalancing can also help improve both your overall performance AND behavior.
Ahh, behavior. Another core financial factor we can all control. Let's go back to that $6.95/trade fee. Again, it doesn't seem like much, right? But it's just pesky enough. I mean, who wants to pay $70 if they don't have to. Not me! Since investing is a long term endeavor, that trading fee can act as a deterrent and help keep you in your investments. On the other hand, the $0 trading fee frees us up to be more careless in our predictions, speculations, and guesses around investments. There's no immediate financial impact to our decisions now! Don't like how the ABC Global Fund has performed? Fine. You could do some research - remember, it's easily accessible and cheap - find a new, shiny 5 star fund and pick that one…free of charge.
NOTE: if you've been following along I do not advise this type of investing. Don't predict. Behave and ride the waves!
Look, I'm not saying the trading charge will keep you in your investments nor should it necessarily. But I think it can be just enough of a deterrent to doing something stupid. Like bailing on an investment in favor of a newer, shinier investment that may/may not do better than the investment(s) we already own. It can also be the catalyst to keep us in our investments long term.
In light of this news, here's a few reminders for all of us:
a low cost, diversified investment portfolio still offers the best chance to reach the goals you set
time "in the market" will consistently outperform "market timing"
trying to pick the next Amazon or hot fund is fool's gold
be disciplined and behave around your investments
I do believe the move to $0 is a gigantic win for disciplined investors and advisors alike. And I do worry about the impact it could have on investors' ability to move in and out of investments freely, which could negate the positive effects of a long term investment strategy.
Be happy that costs are going down and remain an investor. Don't use this as an excuse to become a speculator.
*fund expense ratios and advisory fees still apply
Two words. Taxes & Time.
Taxes: I've yet to meet a person who says, "Sure, I'd love to pay more in taxes! Where do I sign up?"
Time: Quite possibly the most precious resources available in our lives. Sadly, it's not something any of us have any control over. When it's our time to check out, we really don't have any say in it.
We live in what feels like an ever-increasing busy life that demands of our time. Yet, when it comes to our time, it can be one of the highest taxes we pay.
One of my core sayings is focus on [financial] factors we can control. And one of those factors is, ironically, our time.
Nope, not a typo.
The key differentiator here is how much time we have vs how we spend the time we have. While it's true we don't have any control over when our last day on this great earth will be, we do have plenty of control over how we spend that time.
My father-in-law has a saying:
"I never used to pay anyone to do something that I could do. Now that I'm retired, I never do anything I can pay someone to do."
This is a perfect example of valuing time vs valuing money.
Money > Time
Based on his saying, it appears to me my father-in-law valued the money he saved by doing things and fixing things on his own when he was younger and working to save for retirement. And there's nothing wrong with that, btw.
Like most of us who're still working, I think it's interesting to note this was probably when his time was at a premium. Between work, family, and, well, life, he valued the money saved over the time spent. He saved money and spent time. The tax was on his time.
Time > Money
Now that he's retired, what he values has changed: Time > Money. We could posit it was the tax on his time that helped create a comfortable retirement and put him in a position where Time > Money. Again, my words - not his. Now he saves time, but spends money. The tax now is on his money. Not a tax in the traditional sense but in a philosophical sense.
Look, this financial planning stuff can too often get us too focused on planning for tomorrow. Now, I'm not saying go full ostrich and live today like it's your last day - although in some instances that's not terrible advice. But what if tomorrow never comes? This is the balancing act.
Speaking of balancing act, to create the money we need to buy the time we want often requires one of two things:
We spend more of our time earning that money (aka working) to create the money needed to buy time we want today. This might feel like a dog chasing its tail!
We use money that could be saved/invested for a future lifestyle to create the time we want today. This is Time Value of Money.
The juggle is REAL.
Here are some basic examples of using money to buy time:
You pay a lawn care service because you a) hate cutting the grass and/or b) would rather spend that time with your spouse, kids, or pursuing a hobby you love
You pay a subscription fee for pick-up service at the grocery store which creates an hour or two of time each week
You hire a painting company to re-paint the bedrooms in your house saving you XX hours
These are all instances where we could complete the tasks ourselves and save some money. And the balancing act continues. Do we pay the “tax” on our money for the time today, or do we pay the “tax” on our time for the money tomorrow?
This perfectly captures what I mean when I talk about "where your money goes, and why?"
Here's where I think it’s important to do an audit on your Spending Plan. Run a Money Value of Time analysis. Are you doing enough of the things that bring joy/value to your life? If not, maybe you can outsource a few things in your life.
When it comes to your financial life remember it's your money. It's your life. It's your time, and that time is limited. It's okay to pay someone to create time. It's also okay not to pay someone to create time. Only you can decide whether to pay that tax on your time.
And this, my friends, is real financial planning.