Financial Planning: A Case Study

If you think financial planning is only for the rich, think again. People from all walks of life can benefit greatly from planning their finances. Developing a sound financial plan and sticking to it can greatly improve your chances of success. A recent situation I was involved in demonstrates how a long-term approach is critical, and how you need to be careful where you are getting your financial advice.

Some family members of mine run a dental practice back east. Like many small business owners, they’ve worked hard in their practice, but haven’t been able to put much into personal savings. They also weren’t earning all that much, after expenses were taken out. Several years ago, their broker ‘solved’ their cash flow problem by converting what retirement savings they had into a single annuity that would pay out over ten years. With only five payments left and little in savings, they were worried about making ends meet once the payments stopped. They asked for my help, and I got to work figuring out their finances.

As I looked through their financial information, their biggest problem became obvious. They were carrying several high interest rate loans, and the payments were eating them alive. On the other hand, what savings they had earned were next to nothing.


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The second thing I discovered was that they had no idea how much they were spending. They’d never done a real budget and usually just paid the most important bills until the cash ran out. To complicate matters, their business spending was mixed in with their personal expenses, buying business supplies from their personal accounts and paying for some household services from their business accounts.

The pandemic hasn’t helped, effectively shutting down their business for the past 8 months. But looking at the business expenses for the past few years, they were running at a loss even when the economy was booming. When I asked if they were willing to pay their patients to keep coming to the office, they said no, but that’s effectively what they’ve been doing.

The challenge became clear: we needed to figure out what their real spending needs were, and then deal with the debts. Fortunately, we were able to free up enough cash to eliminate their debts by next year. That means they’ll be able to save most of the remaining annuity payments to build up some funds for the future.


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The next problem was the ongoing expenses of running the dental practice. He should have retired a long time ago, but he just couldn’t afford to. Fortunately, he loves what he does and his patients are dear friends. Since he hasn’t set up his practice to be sold, the options will be limited, and the sale value will be minimal. But that will be better than operating at a loss and he’ll be able to spend more time sailing, which is his real passion anyway.

They’re not out of the woods, and the odds are pretty good they’ll either have to sell their home in a few years or look into a reverse mortgage. But they have some breathing room and some flexibility to make better decisions.

What’s really annoying is that their broker didn’t take the time to ask some simple, fundamental questions. It would have taken about two hours to figure out what the real problems were and design a better long-term solution. Instead, he took the big commission check and ran.In challenging times such as these, good financial advice is even more important. It can make all the difference in the world to your financial and mental health! At Blankinship & Foster, our mission is to not only provide sound financial advice and planning, but to make people’s lives better. Contact us to learn more about our proven process, which we call The Blankinship & Foster Way.

About Rick Brooks

Rick Brooks, CFA®, CFP® is a partner of Blankinship & Foster LLC and is the firm’s Chief Investment Officer. He is a lead advisor, counseling clients on all aspects of personal financial management. Rick serves on several boards. He is the Chairman of the Board of Girl Scouts San Diego, and also chairs the San Diego Foundation’s Professional Advisor Council. Rick and his family live in Mission Hills. Rick enjoys spending time with his family, theater, cooking, skiing, gaming and reading.

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