Financial Planning Strategy
By: Dr. Gene Henssler
The Henssler Financial Group Position Paper

The Henssler Financial Group works with a simple, yet comprehensive financial planning strategy called The Ten Year Rule. The basis for The Ten Year Rule is:

Our philosophy is that any money you need within 10 years should be invested in fixed income securities, and any money that you will not need within 10 years should be invested in high quality, individual common stocks or mutual funds that invest in common stocks. We implement our philosophy by running cash flow projections, recommending the purchase of fixed income securities to cover liquidity needs within the next 10 years, and recommending the purchase of equities with any remaining funds.

First, we estimate your liquidity needs by running cash flow projections for you. Liquidity needs refer to the difference between your after-tax income and your desired after-tax spending for any given year. The projections will be based on information provided by you, including asset values, expected sources of income and your plans for retirement. These projections will help determine reasonable expectations involving your savings goals, your desired spending in future years and your expected retirement date. We will run several projections for you to help you determine which course of action will most likely allow you to meet your financial goals. Common goals include an early retirement date, a certain desired spending level in retirement, a dream home or some other large purchase.

Next, we recommend you purchase fixed income securities to cover your next 10 years of liquidity needs. A money market fund or other cash equivalent is appropriate for emergency reserves or funds needed over the next 12 months. We recommend that additional liquidity needs should be covered with the purchase of fixed income securities with maturity dates and amounts that correspond to those needs. We recommend either U.S. Treasury securities, or high-grade municipal bonds from your state of residence, depending on your projected tax bracket. We do not recommend the purchase of bond funds, as principal is not guaranteed as of any particular date.

Finally, we recommend you purchase high quality, individual common stocks or mutual funds that invest in common stocks with any funds not needed in the next 10 years. We recommend only common stocks that meet our strict financial criteria, or mutual funds that meet certain guidelines.

By following this strategy, your asset allocation will be specifically geared toward your unique needs. We believe this to be a more effective method of determining your appropriate asset allocation than simply plugging your age into a formula. Each and every client has a unique situation and unique needs. Our approach attempts to take all available information into account when determining the appropriate stock/bond mix. For assistance in creating your financial planning strategy, contact The Henssler Financial Group at 770-429-9166 or comments@henssler.com