December 20, 2021
If you grew up in the 90s, chances are the Home Alone movies fall somewhere in your list of favorite Christmas movies. Like me, you’ve probably seen them dozens of times, and maybe, like me, you’ve wondered about the financial situation of the family that lives in that beautiful home and takes the entire extended family (even mean old Uncle Frank) on lavish trips every year. I can’t help but think that if I were the family’s financial planner, there are a few topics I’d review with the McCallisters.
Boring disclosure: I don’t know nearly enough about the McCallisters or their financial situation to give any real financial advice. This is supposed to be entertaining, and maybe you’ll gain some general financial planning education along the way. Cool?!
All my financial planning relationships start the same way: my clients and I spend a lot of time talking about their values around money and their relationship with money. Making some assumptions about the McCallisters, I’d guess we’d spend a lot of time talking about family and how important it is for them to spend time together. It’s also clear that travel is important to them, but they’re not just taking lavish trips, they’re sharing those experiences with their loved ones. The McCallisters don’t seem to mind the expense of travel if it means they can all be together (well, most of them…*spoiler* not everyone makes it to their final destinations).
Ultimately, I see my job as aligning the McCallisters’ use of capital (time, energy, and money) with the things that are most important to them. So here are a few areas I’d want to review with the McCallisters:
Yeah,I know it’s kind of a boring start, but the McCallisters find themselves in sticky situations every time I see them. I’d want them to have a nice cushion to prepare them for those unexpected expenses. Generally, an emergency fund is meant to help cover expenses in the event of a job loss, but it can also help you pay for an expensive trip home so you’re not offering your watch to a stranger in exchange for a plane ticket.
The McCallisters racked up some credit card debt at the Plaza Hotel that wasn’t planned for. I’m all about having experiences (and I’m sure Kevin had a great one!), but we need to plan for experiences so we don’t have to put them on credit cards. I’d want to make sure there was a plan for that debt and any other high-interest debt they may have.
Travel is obviously really important to the McCallisters, and they don’t skimp when it comes to travel expenses. Yearly, I’d want to discuss their travel plans and make sure they have a separate account specifically for travel that they can contribute to monthly. We would want to have a healthy savings built up for travel because it’s important to the McCallisters to fund their trips for the entire family.I’d also encourage them to add to their travel estimates so they could purchase refundable tickets and accommodations as well as travel insurance.Unfortunately for the McCallisters, things don’t tend to go smoothly when they travel, so I’d want them to be as prepared as possible.
There are several reasons we would need to review the McCallisters estate plan. First, there are a lot of people who rely on them financially, specifically the kids. If something were to happen to Peter and/or Kate, what would the plan be for the kids? Who would raise them? Would Uncle Frank be responsible for making medical and financial decisions if Peter and Kate are incapacitated?
It would also be important to make sure Peter and Kate’s wishes for their assets were carried out. Without a clear document that laid out how their assets should be passed on, things could get messy and we could see some disagreements (I’m looking at you Buzz!).
Risk management is just a fancy word for insurance. I’d want to review all their insurance needs, specifically life insurance. As mentioned in the estate planning section, a lot of people rely on the income of Peter and Kate. We would want to make sure those who rely on their income would not be impacted financially if one or both of them were to pass away prematurely.
If Peter and Kate haven’t started preparing for retirement, we would need to start planning ASAP. We would talk about the dollars and cents, but we’d also spend a lot of time discussing how they might want to spend their time. A lot of folks have a hard time envisioning retirement, so we would spend time reviewing their wishes and dreams and how they could spend their time while in retirement. I’m guessing travel would be important, so we would make sure those trips were factored into their retirement plan.
Although I’d make sure all the technical stuff is covered, I’d be sure to remind Peter and Kate why we are building a comprehensive financial plan. For them, the “why” is to spend time with their family and to help create experiences for everyone. At the holidays, we’re reminded that what really matters in life is that we spend our time and create memories with the people who are most important to us. This is the exact reason we should have a comprehensive financial plan in place.
You wouldn't wait until the morning of a flight to plan a trip.
Don't wait until retirement to make a financial plan.