Chefs, from the classically trained to the rock-and-roll celebrity types, cling tightly to the concept of mise-en-place when running their kitchens. French for ‘putting in place’ and a concept derived from the military, mise-en-place is the tightly coordinated planning and organization of the inputs needed to precisely execute the production of a meal. As iconic chef Anthony Bourdain put it, “Mise-en-place is the religion of all good line cooks . . . If you let your mise-en-place run down, get dirty and disorganized, you’ll quickly find yourself spinning in place and calling for backup.”
The notion of mise-en-place is very easily translated to the world of financial planning and investing for an individual or family. In order to receive the most valuable personal financial advice, clients must provide to their advisors accurate, complete and timely information to guide the decision-making process. And once valuable advice is offered, effective execution of the financial plan, often under timing deadlines, is required to capture all of the well-considered benefits.
The first step to improving financial mise-en-place is to consolidate financial accounts from bank accounts to brokerage accounts to credit cards. Simplification can greatly aid understanding and ‘mental accounting buckets’ are a well-documented cognitive bias to avoid as individuals benefit when assets are aggregated and full asset allocations are managed cohesively rather than in pieces. Consolidation of 401(k)s from former employers into your current employer’s 401(k) or a single IRA is usually helpful as often they remain in limbo for years, many times uninvested and missing out on crucial pre-retirement years of compound growth. Next, automate all financial transactions that can be automated. Direct deposits to bank and brokerage accounts, auto-payment of bills and credit cards, dollar-cost-averaging into retirement accounts—if it can be programmed, it should be.
Streamlining charitable giving is a significant way to enhance financial mise-en-place as well. Rather than make one-time gifts with checks, credit cards, or stock gifts, consider opening a Donor-Advised Fund (DAF). By initially placing philanthropic gifts into a DAF, prior to delivering donations to the final charity of choice, the record keeping for taxes is made easy with a single entity valuing the gifts. At tax time, seamlessly providing an accountant a full record of gifts to the DAF will ensure that you capture the full tax deduction from gifts. Further, there are very valuable financial planning benefits to a DAF including the tax-free growth of assets and the ability to time charitable giving to maximize its tax benefits.
Alternative investments are another area where proper organization can result in financial gain. At times, riskier, long-tailed investments such as venture capital or private equity may not turn out to be as successful as hoped. Due to the lifespan of a fund, which can be a decade or more, poorly performing investments of little remaining value can often be forgotten and mentally discarded; however, illiquid funds with losses have the ability to be sold for as little as a dollar back to the fund or a third party. This act of cleaning up allows the original investor to realize a capital loss and turn a neglected investment into an asset for tax purposes.
Record keeping and retention is often a laborious but crucial part of maintaining your financial mise-en-place. Carefully recording cost basis, particularly by lots, for private investments and legacy positions is necessary to maximize those investments in the context of taxes, family gifting, or philanthropic endeavors. For those receiving stock-based compensation, staying fully abreast of options and vesting schedules can mean the difference in millions of dollars. It is also highly encouraged that any early-stage employee gather and retain the supporting documentation to claim any applicable Qualifying Small Business Stock (QSBS) treatment of their company stock. A secure electronic vault, like the Sand Hill Client Center, can aid in the well-ordered retention of documents, including wills, trusts, and insurance policies. Adopting a password manager to store login credentials and allow for quick access to data on financial sites is also highly recommended in the digital age.
To optimize your financial well-being, it’s imperative to think like a chef. Simplify, streamline, automate, organize, retain. At Sand Hill, we realize both the importance of structuring your financial life and the challenge it poses to busy individuals and families. For our clients, we have the ability, experience, and technology tools to put in place and maintain your financial mise-en-place.
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