Financial Fitness with Trevor Lawson, CFP Ep 39

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Mm-hmm.

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I'll see you there. All right, welcome back to the Find Your Edge podcast. I am here today with Trevor Lawson, and instead of talking about our usual fitness or nutrition related topic, we're talking about financial fitness. So Trevor, welcome to the show.

Thank you very much. And in my humble professional opinion, the, the financial fitness is equally important as some of the other forms of fitness. It is a pleasure and honor to be here today.

Fantastic. So Trevor, give us a little bit of background information on you and your business, your specialty, your certifications, all that good kind of stuff.

I am a certified financial planner at Capital Financial Solutions. We are headquartered in Raleigh, North Carolina, with offices down in Charlotte and in Richmond. And in my personal professional practice, I focus a lot on retirement income planning, so helping folks when they are within that 5-year window of thinking about, you know, what's next. And that's not always just, you know, sitting on the rocking chair and sipping coffee. For some folks, that's starting a new career. For some, that's going back to school. But helping people kind of make that transition later in their life into what's next and helping serve as their financial partner through the later years of life. And getting up to this point, what brought me to Raleigh initially was going to NC State University where I studied chemical engineering and realized halfway through that that's not what I wanted to do for the rest of my life. But I picked up a, a skill set that does translate into this world where a lot of our thinking that goes into the financial plans is very left brain and analytical. So there is some correlation there, believe it or not. But I am a Wolfpacker and my wife and I live here in Raleigh and we welcomed our first child into the world this April. So she's going on 7 months now and I'm a new parent. And so I'm getting— I'm juggling this world of financial fitness and parental fitness, marital fitness. Physical fitness. So I'm excited to share some time with you all today and talk through this kind of balancing act here.

And also you didn't mention the triathlon fitness.

Yes.

And this is sort of how we got to know each other. And I was like, oh, Trevor, you would be a great fit for the podcast. So yeah, it's been really cool to see you working on your swimming and your biking and all that good kind of stuff. So all the things.

Yes. Thank you. Yes. I, uh, I saved the best for last. I, uh, have enjoyed working with the folks at Endurance Edge, Chris in particular, and, uh, shout out to Carly. And, um, and I was training for the Battle at Buckhead, which unfortunately the plug got pulled last minute there because of the hurricane. And so I—

yeah, that was a bummer. It is a bummer, but Lots of opportunities for racing in the future. So that's going to be great. But before we jump into financial fitness stuff, Trevor, there's a little disclaimer you wanted to give us all, right?

Yes. So I am a financial professional by trade, but today's conversation is meant to be very educational. So everyone's situation is very different. So all of the, the items that I share today are meant to be very educational and not meant to be applied necessarily to you and your unique financial situation for personalized financial advice, I recommend seeking counsel from your financial professional.

Awesome. Very cool. Okay, let's jump in because I am so eager to talk about this.

Let's do it.

What are some of the— let's start with the basics, right? Everybody needs a foundation. So what are some of the basic things that we need to consider to be financially fit? And maybe even what is your definition of financial fitness?

Fantastic question. So that's a, that's a very good place to start, and I'll kind of back into a definition talking through really at the foundation of someone who is, in my opinion, financially fit is having an emergency fund in place really at the core. So, you know, the Financial Planning Board would recommend 3 to 6 months worth of our expenses just sitting readily available in cash. For a rainy day. I'm a proponent of having a little more in cash if possible, but that's really at the foundation of someone who's, who's financially fit, is having liquid savings available. So I guess that would be the equivalent of having a strong core, if you will. Over and above that, it's paying off your credit cards monthly and managing your mortgage debt, and we'll talk more about that throughout the podcast today, but paying off your credit cards monthly is very important. For those that maybe have already, you know, dug a hole with their credit cards and are trying to kind of work their way out of it, that is very common. And having an emergency fund in place, even if you've already racked up credit card debt, is a way out. And so what I mean by that is working on— while you're paying off your credit card, even if it means temporarily having to pay the minimum, building up some cash on hand. That way, inevitably, as life happens and you're working very hard to pay off your credit card debt and the roof needs to be replaced, or you have to replace your alternator, to keep from having to put money continuously on credit, stopping even if you've got to, again, drop down how much you're paying on your credit card every month. Build up that liquid savings to keep from that credit cycle from continuing. So those are two very important things. The others are invest for financial independence. I say financial independence intentionally because, again, retirement means something different to everyone. For financial independence, I simply mean the ability to not have to work, even if you choose to still work. And then the, the last two items would be, you know, connecting with Coach Chrissy. So these would be flexibility. So protecting your financial fitness with life, disability, and health insurance. So that again is protecting your, your longevity from a physical fitness perspective. These are the financial equivalent of that, just protecting your financial house from, from life's unknowns. And then, Chris, you and I were talking about this a little before the podcast, just having a basic estate plan in place. So wills, power of attorney, trust in some cases. Having that foundation really protects you financially from, again, life's unknowns. So those are some of the, the big things to think about getting started and becoming financially fit.

I love that. That's super cool. And I love how you reference Coach Christy and her mobility classes, right? You gotta stay flexible.

And we do.

Yes, I love it. That's so cool. Let's see, I thought it was kind of interesting that you talked about the debt piece. Like, maybe it's like pausing on debt in order to really get emergency savings plan up. So maybe touch on that. If, if we're walking away with student debt or we're walking away with extra excess credit card debt, because that's a really tough one to figure out. So yeah, talk a little bit more about that.

Super tough. And I saw this growing up with my own family, and I see it all the time with clients. When you come out and you've got a certain amount of student loans that you're having to pay for, and you, uh, you know, early on, maybe you're, you're trying to build your career as a small business owner and you're having to take out personal loans, or you're, you know, you're having to use a credit card on a month-to-month basis. That's all too common. But in order to eventually, again, kind of come out from underneath that debt, it's critically important to have some type of cash savings in place that you can lean on for future expenses. So without that, let's assume we don't have any cash and we're just getting by off debt and paying off debt and getting buy off using our credit card, for example, as our emergency fund. Well, it just becomes a cycle. I mean, you get to the point where you've had— you've paid off the credit card and you're good for a couple months, but something goes wrong. And eventually, you know, it will. And we have to have, you know, the ability to have money readily available to pay for, like I mentioned earlier, the car when it breaks down, or the house. And so to end this ongoing cycle of potential credit card debt, having an emergency fund in place that we can pull from to pay these future unknown expenses will help eventually end that cycle of paying off the credit card, running up the credit card, paying off the credit card. So that is one effective way I found over the course of my career that can help people really escape that cycle.

And similarly, like, this brings me to my next question, which is, are there certain things that we need to be cognizant of? Because this makes me think of like budgeting and what are you spending on a month-to-month basis or maybe an annual basis or whatever. What are your thoughts on budgeting? What are your thoughts on like obviously making more than you spend? And how does that tie into like your debt or investing or getting to build up this emergency fund? Like, what, you know, which step happens first? That was, that was a giant question. But, and then tie that into the data heads, cuz I'm sure we have a ton of data heads out here, right? Like, should I, like, what percentage of my income should I spend on, um, triathlon coaching? Or what percentage of my income should I spend on my mortgage, my bills, my internet? So yeah. Take it away, Trevor.

This sport has a way of making you become a data head, and, and since becoming an athlete with you guys and having, you know, the Garmin and the apps, it's hard not to kind of fall victim to the data. So yes, I can relate, and there's the financial equivalent of some of the same metrics we track in the physical realm. So I guess two numbers that jump out that are worth kind of keeping an eye on to start are 28 and 36. So 28, 36. In other words, try to spend no more than 28% of your monthly gross income on housing expenses. And this is coming from the Financial Planning Board. So no more than 28% of your gross monthly income on housing expenses, and no more than an additional 8% on debt. So that additional 8% would give you that 36 that I talked about, so that your total debt service does not exceed 36% of your monthly income. So 28% housing, 36% on total debt would give you a very healthy kind of income-to-debt ratio. And that's important for many reasons. When you go to qualify for a house, certainly that's something they look at, but also from just keeping your kind of monthly budget, to your point, Chris, in check and giving you the ability to save, having your metrics below those numbers would free up the ability to save. And that's where, you know, working with a professional can help you really prioritize where we should be saving, whether that be short-term savings, kind of midterm savings for, you know, fun 5, 10-year goals, or retirement. But if we start there with housing and overall debt, then we can kind of get creative in how much we're saving and where we're saving and making sure that savings works for you. Over time.

Love it. Okay, so we got our income-to-debt ratio, just like our power-to-rate ratio when we're thinking. I love it. Excellent. Um, all right, so it seems like this is more of your specialty, right, being the financial planner and the retirement specialist. So let's talk long-term first, because I'm always thinking of like, from like a fitness perspective, you know, we make those gains from a day-to-day basis of building it up, and we can still make gains even further into our life. But yeah, tell us about it, because I feel like sometimes that's the hardest thing, especially it seems to me if you're younger, to have that huge forethought. So when should we start thinking about retirement or focusing more on it, and what are some of our options out there?

Absolutely. So, so two words for, for that: compound interest. And, uh, Warren Buffett called it the 8th wonder of the world. So that can either work for you or against you, and that's One of the reasons why, you know, your, your parents, your grandparents, they tell you to start saving early is to allow compound interest to really start working for you. And the sooner you start saving, the more of an impact that can have. So it's not— in our, our, you know, world, we have a saying, it's not, you know, timing the market. So we're not trying to time when to buy, when to sell. It's time in the market. And, and the sooner we can start saving, the better. So there's, there's been numerous studies, and I'm happy to share a slide that kind of captures this, where 25-year-old starts saving a couple hundred dollars a month and then stops, you know, saving at age 35. You know how much they end up with at age 65 versus a 35-year-old, someone that doesn't start saving until 35 but starts saving an equal amount every year until 65. Surprisingly, that 25-year-old who saved early on but then stopped saving ends up with a bigger balance just because of what I've talked about in compound interest. And there's, there's a lot of ways to leverage compound interest. That can be through traditional kind of stock, bond, mutual fund investing. We have clients that are interested in real estate. So there's different ways to take advantage of compound interest, but the sooner we start the better. Awesome.

Very cool. Can we get a little bit more, more nitty-gritty on, like you mentioned, the traditional stocks, bond, real estate, etc.? But I know some employers offer various retirement programs. Is that something that we, or something generally that we should consider, or is this something that we should do on our own, or maybe a combination of the two, possibly?

That's a very good question. So yes, if your employer offers it, that's a great place to start saving for the long term. And I say that because a lot of employers will match. So you put in, you know, 5% of your income, they may match up to a certain percentage. And that's, that's employer-specific. But if we're not contributing to the employer plan and we're leaving that match on the table, we're, we're not, you know, taking advantage of free money, basically. So that's a wonderful place to start, is with the employer. And the nice thing about employer plans too is they oftentimes have higher contribution limits than some of the personal savings plans. So 401(k)s have a much higher contribution limit than, say, a traditional IRA. And then along those same lines, it's becoming more and more common for us to see kind of an after-tax Roth saving options available in the employer plan. And there's, there's been Roth IRAs for a while, but there's the, the discussion on should I be saving pre-tax or after-tax. There's not really a right or wrong, so to speak. The first thing is to save and invest. But in my professional opinion, and again, this is just, just an opinion, taxes will likely have to go up some over time. And so for those of us that are, that are willing and able to perhaps pay a little more in taxes today to get it in the Roth after-tax savings vehicle. That could be a huge advantage if taxes do go up in the future, having the ability to access those monies tax-free. But there's these different nuances in the way of where I should be saving, how much I should be saving, and whether I should be saving on a pre-tax or after-tax basis that a financial professional can help you effectively evaluate what's right for your situation.

I think that's a great segue, Trevor. You're like, it's like, it's like we've trained you or something. I'm like, oh, now we're getting into the nuances of like Roth IRA versus traditional IRA and 401(k)s and taxes and all this stuff. And it can be very overwhelming, certainly. And my sense is that oftentimes if it's too overwhelming, then they don't take any action at all, which is probably— inaction is probably the worst decision, I would guess.

I don't know. Decision nonetheless, but you're right.

It is.

Yes, for sure.

So what are ways that people can get better coaching on this? Is this coming to somebody like you, or is this, I don't know, finding what the World Wide Web says? Or what are ways for people to make the best decisions based on their needs?

That's Another really good question. And it is daunting in this day and age with so much information being readily available at our fingertips. It's almost overwhelming. And so where a trusted professional can help is kind of sorting through that noise and helping you figure out what applies to your situation, what does not. And so for someone looking for just financial guidance and coaching, what you would want to look for is the CFP. So the Certified Financial Planning credential. Is what holds a financial professional to a fiduciary standard to do what's in their client's best interest and not their own.

So this is not like, hey neighbor, tell me how you invested your money. This is like, this is somebody who's gone— you guys have definitely gone through some rigors in order to get that certification, correct?

That's right. Yeah. So you have to have your, you know, your undergraduate degree, and this is sort of like graduate level training, often like you know, tax accountants go through to get their Certified Public Accounting. This is financial planning's equivalent of that. So that would be very important to look for when looking for a professional to really help you start mapping out your future and again thinking through what, what may or may not apply to your situation. There are a lot of different ways in our world to partner with a planner. So some financial professionals will work with you on an hourly basis, some will build out kind of a plan and charge you just a flat fee for a plan. Some manage investments and are compensated through the management of your, your portfolio. So part of the screening process too would be, you know, evaluating different certified financial planners and learning more about how they're compensated and finding a compensation model that works right for you. And then two final things to look for would just be someone who has experience in working with people like you. So if you're a physician, or if you're a dentist, and oftentimes you have unique needs that a financial professional who's worked with a lot of other dentists and physicians may have experience in. And then lastly, working with someone who's independent, and so someone who, you know, doesn't offer a proprietary product or solution but can truly be objective in helping you figure out, you know, what investments, whether they be through this company or that company, or what insurance, whether it's through this company or that company, can really, again, act as a fiduciary and be objective about your situation would be things to maybe think about when, when looking to partner with someone.

Okay, so sounds like we need to do a little bit of homework.

That is correct.

Is there someplace that we can start? Like, does CFP® have a, like, a website or something like that? Or do we— how do we find you, Trevor?

Yes. So you, you're welcome to reach out to me for questions, but the CFP® is, is doing a good job nowadays kind of educating the general public on how to partner with these professionals. So I believe the most recent URL for them is letsmakeaplan.org. But on there you can go, you can type in your zip code and you can find a CFP in your area. And my recommendation would be to, you know, start there and find a couple that you want to interview, just like if, you know, you were going to get a big surgery, you might want to, you know, talk to multiple providers and make sure you're, you know, you're partnering with the one that you feel best about your, your outcome. Uh, same, same here. So start there and then maybe find a few that have experience in working with folks like yourself and interview a couple as a way to get started.

Very cool. What about for investing in particular, um, either companies or stocks or bonds that maybe align with our values a little bit better? Is that something that you guys can help with?

It is.

And, uh, can you give a couple of examples perhaps?

Yep. So it's becoming a popular topic in the world of investing. It's— they're calling it socially responsible investing, or SRI. But there's a lot of investment providers out there who will allow investors to do just that. They don't— they'll allow their money to sort of emulate their beliefs and allow them to, you know, to invest in ways that, that are meaningful. So an example of that would be we have some clients who are very anti-guns, or they're very anti-drugs and alcohol, or very anti-gambling. There are different investment managers out there who will allow you to kind of screen for companies that fall within some of these parameters and make sure that your portfolio doesn't contain any of them. Green energy is a big one right now. So the environment and going green, there are a lot of investment companies now that have kind of built out these portfolios where it's a very good environmental approach for investors and for the world. Cool.

Very cool. So as a CFP, I don't know whether it's a similar type of situation with dietitians, like we have to be licensed in certain states. Can you only work with people in North Carolina, or are there any stipulations on that?

Good question. So you can— a CFP is, you know, has the same qualifications in Tennessee as they may in North Carolina and California, but each state has, you know, specific requirements to conduct business in their particular state. So yes, we here are licensed in most states, if not all, and would have the ability to kind of work across state borders. But yes, the CFP itself The licensing required in Iowa is the same licensing required here in North Carolina. It's just a matter of meeting the proper state protocols to conduct business and, and pay your taxes in their state.

Cool. So if somebody were to come work with you, what are some of the things that they should expect and/or prepare for?

It honestly is a lot like looking at partnering with an endurance coach. I mean, it, it, there's a lot of similarities in really The way that we work with folks and the way that I found that you guys work with folks, Chris, it's, um, for someone new to the sport of finance, the benefit of engaging with a professional could be, you know, helping them develop good habits and mechanics very early on. And for that individual, it would be just coming prepared with, with questions and coming prepared with a general idea of where you want to get to financially and, you know, some things that you want to make progress on. For someone more seasoned who perhaps has done some, some sprint and Olympic triathlons is ready to kind of dabble in the world of Ironmans. The benefit of engaging with a finance professional would really be an accountability partner. So someone that can help you take it to the next level of financial fitness. And for those individuals, they've probably already done a lot of the basic things that we've talked about. And so when they're looking to kind of, you know, come in and talk and figure out how, if at all, we may be of service, it's helpful to kind of bring this checklist of items that we've got prepared. It's just a snapshot of assets and liabilities and certainly your goals, but an idea of what you've done to get to where you are and an idea of what you want to continue doing to make progress. But for everyone, working with someone like myself and a financial planner is, it's really like having access to a thought partner for helping you think through life's transitions. That could be getting married, having children, starting a business, selling a business, retiring, losing a spouse, you know, having access to someone who can help you think through these big transition moments in life and the financial implications of them is where this type of partnership with a financial professional can really be valuable. And over and above that, helping you evaluate the opportunity cost of financial decisions. So this is really financial planning in a nutshell, is opportunity cost. And that is an example of that would be, hey, if I decide to pay for my children's undergraduate, then how does that impact my ability to retire? Or if I decide to buy this beach home, then how does that impact my ability to send my kids to private school? These type of financial dilemmas, if you will, and really are what are called opportunity costs. If I do this with my money, then how does it impact my ability to do this with my money? That's where having a trusted relationship can really help empower you to make a decision with confidence.

So it seems like you guys are like the Magic 8 Ball. You can say, look, look at your future.

We're trying to be the endurance edge for financial fitness. We're trying.

You can share my tagline. I love it.

Awesome.

All great information, all great tips. Hopefully people will reach out to you and if not, reach out to a CFP. But of the things that we've talked about so far, what are maybe 2 or 3 things that you want people to walk away with for them to feel empowered with their financial fitness, or at least empowered where they're at right now?

So just in kind of in closing and in summary, core strength, you, you, you harp on it. Core strength in our world is liquid savings. So making sure that we keep cash on hand to take advantage of opportunities and to be be prepared for life's unknowns. Compound interest. So this is, I guess, in the triathlon world, this is doing the— maybe, maybe strength training to prevent future injury. Compound interest and just starting to invest, no matter the amount, just starting to invest. Your future self in 10, 15, 20, 30 years will be, will be very thankful. And then really, just like with any big decision in life, I mean, getting clear on your intentions and what you want your life to look like. For some, that is being able to retire early, and so for them, we may help kind of eliminate debts sooner and allow them to kind of live off less money so they can retire as soon as possible. For others, it's maybe generating some, some passive income, you know, whether that's through real estate or stocks, but having some income to support their professional career is, is their goal. And for a lot of our clients, either they're at a point where they feel comfortable financially and they want to pay it forward, and so helping them think through various gifting strategies and ways to empower others to lead a financially successful life, you know, that it's important to get crystal clear on your intentions moving forward to make sure that a financial professional can help you align that intention with a, with a plan of action.

Those are great tips. Thank you, Trevor. That was awesome.

Thank you.

So Trevor, people want to reach out to you. How do they do that?

The easiest way is probably my website. So it's trevor-lawson.com is an easy way. I'm on LinkedIn. I'm not on any other social media. We can have a debate on social media kind of offline as to my reasons for not, but I, uh, trevor-lawson.com is probably the best place to start.

And if you're just listening to this and you're not watching, Trevor literally has not stopped smiling this entire time. You're just such a positive energy. And sometimes finance can feel heavy and hard. And I feel like you do a really good job of sort of keeping it real and yet sort of keeping it sort of a little bit lighter and following people's goals. So. Yeah, kudos, Trevor.

I sincerely appreciate that. A smile goes a long way, especially nowadays and in this, this wild and crazy year we've had financially. A smile can hopefully allow folks to leave our office feeling a little bit better than when they came.

Awesome. Do you guys do virtual appointments? We do. Okay, cool. Of course you do.

Of course we didn't have a choice with COVID Yes, virtual has, as you're well aware, If you're not doing virtual appointments, you are— where were you during COVID Yes, exactly.

Yeah, very cool. Awesome. Well, Trevor Lawson, a certified financial planner, thank you so much for sharing your wealth of knowledge, at least to get us on the right path for financial fitness. And hopefully people can reach out to you. And thank you again for joining us on the podcast.

You're very welcome. It was my pleasure.

Thanks for listening to the Find Your Edge podcast. If you like what you heard, don't forget to subscribe on your favorite podcast platform so you never miss an episode. Episode. And if you're interested in learning more about our endurance coaching, sports and wellness nutrition, metabolic and sweat testing, triathlon training team, or our triathlon training library, be sure to check us out at theenduranceedge.com. And don't forget to follow us on social media at The Endurance Edge. Thanks again, and we'll catch you next time.