Most days I take my dog Fezzik for a walk.
And… on the rare occasion when I don’t or can’t, he goes crazy.
One of his favorite spots is on the corner of this one street.
Why?
Because that’s where his “girlfriend” usually hangs out.
A small black dog, named “Hope.”
Problem is… Hope is an older dog and doesn’t really go for pups (my dog is about 16 weeks old and annoys the crap out of all the old dogs in the neighborhood).
There’s another old dog… a hound dog… that we sometimes also see while out on a walk…
Fez loves him.
But… like Hope, the hound dog doesn’t much care for Fez.
They just don’t “click”…
Well… Fez thinks they should but he sorta turns them all off with his rambunctious play.
Reason I bring this up?
Well, we ran into the hound dog yesterday and it got me thinking…
One of the biggest mistakes financial advisors make with clients’ money is… doing incorrect analysis.
What do I mean by that?
A lot of confusion and misinformation is published on the web… and also is given to clients… because people do financial analyses and:
1) The cash flows are not the same and/or
2) The time periods are not the same.
Ex: People compare a 15 yr mortgage to a 30 yr mortgage and conclude the 15 yr mortgage is cheaper because you only pay on it for 15 years… pay less interest… and thus it’s a cheaper mortgage.
WRONG. WRONG. WRONG. WRONG. WRONG.
You have to make the time period the same in this type of analysis… so the correct way to do this is… you compare a 15 yr mortgage to a 30 yr mortgage…
OVER A PERIOD OF 30 YEARS for BOTH mortgages.
(Almost) no one does this.
Not even professional real estate investors.
The same problem exists for the so-called term vs whole life “debate.”
Advisors compare a 20 or 30 year term policy to a whole life policy (which lasts until age 100 or 120).
Now… are all these people stupid?
No, of course not.
Are they dishonest?
Sometimes, but not always (they might not have thought about it very deeply).
But, nonetheless, the analysis is wrong.
Truth is… I’ve been guilty of this too… and made bad decisions because of it.
OK, ’nuff sermoning.
If you’re tired of the conventional approach to financial planning and want for-real analysis and financial planning that actually works (both numbers-wise and psychologically), then go ye here and learn more about becoming a client of mine: