Traditionally, financial advisers provide advice on investments, retirement plans, and perhaps even some tax advice. However, the relationship investors have with their financial advisers often goes beyond conversations about just their money. We find ourselves in the role of counselor, therapist, and voice of reason.
During a couple’s annual meeting, they dropped a surprise—they were buying a vacation home. They had spent the summer traveling to the beach, to a cabin, and across the country to visit their grandchildren. They were enamored with how the “new normal of working from home” allowed them to go where they wanted while still being able to remote in for a full day’s work. With this newfound flexibility, they decided a vacation home would be a perfect fit.
As financial advisers, we generally do not dash dreams. We assess your current financial situation and your goals and then chart a course to help you achieve them. However, adjusting your financial journey to accommodate your dreams often brings up factors you may not have considered during the dreaming phase.
Vacation homes are a common goal for many investors. However, a second home would tie them to one location. The spontaneity of deciding to go wherever they wanted would be lost. Even if they found their perfect slice of heaven, there were still more financial matters to work through.
A second home involves more than just a mortgage. It means double the furnishings, maintenance, homeowners’ association fees, insurance, maybe even double the vehicles if the location requires a golf cart or ATV. Additionally, they would need to consider whether this getaway would be close enough for regular maintenance or if they would need to hire landscapers or cleaning services.
While many affluent couples may not hesitate at the associated costs, this couple reasoned that they could rent the home as a vacation getaway when they were not using it, potentially covering many costs with rental income. This sparked a conversation about additional liability and insurance needs, as well as discussions about taxes and what could be written off versus merely offsetting their costs.
After reconciling the logistics and long-term needs, and if the fantasy retained its allure, we would examine how this purchase and ongoing costs would affect their plan. We would run cash flow projections, assessing what this significant purchase might cost them over the long term. Would they need to delay their retirement for a few more years? Would this affect their ability to help pay for their grandchildren’s education? What would happen to the dream if the economy experienced a recession? We would also explore various scenarios to provide them with the most information possible to make an informed decision.
Your money is there to support the life you desire. Some investors focus on their long-term retirement goals, while others aim to live to the fullest now, addressing each new phase of their life as it comes. There is no right or wrong way to spend or save your money. A financial adviser is there to assist you in making the best financial decisions along the way, taking every consideration into account to ensure dreams don’t turn into nightmares.
If you have questions on how to incorporate a new goal in your overarching financial plan, the experts at Henssler Financial will be glad to help:
- Experts Request Form
- Email: experts@henssler.com
- Phone: 770-429-9166
Listen to the September 16, 2023 “Henssler Money Talks” episode.
This article is for demonstrative and academic purposes and is meant to provide valuable background information on particular investments, NOT a recommendation to buy. The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products.
