One of my guilty pleasures is watching television. Something about a good movie or series that allows me to turn my brain off and relax. Disclaimer, if you are looking for a good show, I am usually your guy. That said, I do especially love a good bank heist or espionage show. It’s fun seeing all the creative ways these writers come up with to try to outsmart the other party. What you tend to find in any of these movies is the answer always lies in “follow the money.” Who done it? Follow the money. Why did they do it? Follow the money. How did they do it? Follow the money. You get the point, if you want to know the answers to a good crime show, repeat after me, FOLLOW THE MONEY. Alright, now I’m not bringing this up to show off my vast knowledge of the television underworld. In fact, this same logic of following the money is extremely useful and appropriate in financial planning. There are so many times the answer to one’s problems simply relies on those three magical words, follow the money. I thought it would be interesting to share some real-life examples of this. Example 1: New client comes in and we start asking them how much they spend a month. They answer with something like $10,000/mo. I go great and what is your take-home pay each month. They’ll answer with we bring home $15,000/mo. Now in theory this sounds great, right? If you are thinking what I’m thinking, we have $5,000/mo to help accomplish all their financial goals. Then inevitably I’ll take a look at their cash statements, and they have $10,000 in savings to their name. Bet you’ll never guess how we solved this mystery? All we must do is follow the money. By doing so we’ll realize they don’t realize that their expenses are substantially higher than they projected. By following the money, we can find out what is real and what isn’t. We can then come up with a solution and realistic expectations based on their actual real-life scenario. Example 2: Client comes in and has $30,000 in credit card debt. I ask them what is going on, how did they accumulate this debt. They’ll say something like, it was a one-time thing, and we are working on paying it down aggressively. Fast forward a year and we are having a check up meeting. Now their credit card debt is $35,000. The answer is the same thing, with another emergency expense added to the mix. The analysis here, follow the money. These individuals are living above their means clearly. By following the money, you can give any excuse or answer you’d like, but by following the money trail you’ll realize their needs to be serious adjustments made to their lifestyle. Example 3: Client comes in and has $150,000 sitting in cash. These people make good money, but not insane amounts of money. Before they even speak there are two natural conclusions that come to my mind. Option A. they truly live substantially below their means. Option B. an influx of cash came in from a one-time event. Survey says? Both! I’ve seen both situations play out. I have clients who have an inheritance that just came in or sold a property or got a large gift from a family member. I’ve also seen clients who live way below their means and by following the money we realize they could either spend more or save in a more appropriate vehicle than cash. Example 4: Client comes to Diversified Tax and files their taxes. They give them the unfortunate news that they owe $75,000 in taxes. They are shocked because they are withholding money at an appropriate rate and can’t imagine why they owe so much money. By following the money we recognize that they had a huge stock grant vest at work they didn’t realize. This caused a large taxable event that they weren’t aware of or prepared for. Follow the money This little tidbit comes in very useful when doing some forensic analysis of your finances. Simply put, money doesn’t lie. If you follow the ins and outs of your money, you’ll be able to truly solve any money mysteries in your own life. As always stay wealthy, healthy, and happy.

May 24 2023

Follow The Money

Andrew Rosen From Our President, Financial Planning, Hot Topics

Contents hide

1 Follow The Money

2 Follow the Money in Financial Planning

3 Follow the money

Follow The Money

One of my guilty pleasures is watching television. Something about a good movie or series that allows me to turn my brain off and relax. Disclaimer, if you are looking for a good show, I am usually your guy. That said, I do especially love a good bank heist or espionage show. It’s fun seeing all the creative ways these writers come up with to try to outsmart the other party.

What you tend to find in any of these movies is the answer always lies in “follow the money.” Who done it? Follow the money. Why did they do it? Follow the money. How did they do it? Follow the money. You get the point, if you want to know the answers to a good crime show, repeat after me, FOLLOW THE MONEY.

Follow the Money in Financial Planning

Alright, now I’m not bringing this up to show off my vast knowledge of the television underworld. In fact, this same logic of following the money is extremely useful and appropriate in financial planning. There are so many times the answer to one’s problems simply relies on those three magical words, follow the money. I thought it would be interesting to share some real-life examples of this.

Example 1:

New client comes in and we start asking them how much they spend a month. They answer with something like $10,000/mo. I go great and what is your take-home pay each month? They’ll answer with, we bring home $15,000/mo.

Now in theory this sounds great, right? If you are thinking what I’m thinking, we have $5,000/mo to help accomplish all their financial goals. Then inevitably I’ll take a look at their cash statements, and they have $10,000 in savings to their name.

Bet you’ll never guess how we solved this mystery? All we must do is follow the money. By doing so we’ll realize they don’t realize that their expenses are substantially higher than they projected. By following the money, we can find out what is real and what isn’t. We can then come up with a solution and realistic expectations based on their actual real-life scenario.

Example 2:

The client comes in and has $30,000 in credit card debt. I ask them what is going on, and how did they accumulate this debt. They’ll say something like, it was a one-time thing, and we are working on paying it down aggressively. Fast forward a year and we are having a check-up meeting. Now their credit card debt is $35,000. The answer is the same thing, with another emergency expense added to the mix.

The analysis here, follow the money. These individuals are living above their means clearly. By following the money, you can give any excuse or answer you’d like, but by following the money trail you’ll realize there needs to be serious adjustments made to their lifestyle.

Example 3:

The client comes in and has $150,000 sitting in cash. These people make good money, but not insane amounts of money. Before they even speak there are two natural conclusions that come to my mind. Option A. they truly live substantially below their means. Option B. an influx of cash came in from a one-time event.

Survey says? Both! I’ve seen both situations play out. I have clients who have an inheritance that just came in or sold a property or got a large gift from a family member. I’ve also seen clients who live way below their means and by following the money we realize they could either spend more or save in a more appropriate vehicle than cash.

Example 4:

The client comes to Diversified Tax and files their taxes. They give them the unfortunate news that they owe $75,000 in taxes. They are shocked because they are withholding money at an appropriate rate and can’t imagine why they owe so much money. By following the money we recognize that they had a huge stock grant vest at work they didn’t realize. This caused a large taxable event that they weren’t aware of or prepared for.

Follow the money

This little tidbit comes in very useful when doing some forensic analysis of your finances. Simply put, money doesn’t lie. If you follow the ins and outs of your money, you’ll be able to truly solve any money mysteries in your own life.

As always stay wealthy, healthy, and happy.

Andrew Rosen

In his role as Financial Planner, Andrew forges lifelong relationships with clients. He coaches them through all stages of life and guides them to better achieve their life goals. To set up an appointment with Andrew, or any of our qualified financial advisors, contact us at clientservices@diversifiedllc.com or call 302-765-3500.

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