Financially planning?
March 2, 2016 3:32 PM Subscribe
Like a lot of people, my household has debt. We also have income. Neither is out of the ordinary or extra special but I'm wanting to know if I've planned appropriately. Is that something a financial planner does, which seems way overkill, or am I looking for someone else?
I've read past threads but they all seem to involve moving investments over to a person or firm. I think I'm looking for something more basic than that, but am I?
We have basic debt (my almost-six-figure student loans, a mortgage, a couple of 401k loans, and that's it) and sufficient income (my job). Retirement savings isn't so hot, nor is the emergency fund, though both exist. I'd like someone—online or in person is fine—to whom I can give details about our money numbers and ask questions about doing things effectively. I have this idea that financial planners are for people with substantial assets or investments to be done outside of a 401k and things like that but I wonder if I'm wrong.
Should I take my 401k company up on its perpetual offers or do I pay someone unrelated to any of my current accounts for that service? I'm a member of a couple of different credit unions but they call these services "wealth management" and "investment portfolio assistance," which seems badly overblown for what I'm after. Does it matter if I'm in Seattle (the actual city versus the area)? Are there companies here I should be looking at?
Am I overthinking how to stop overthinking this?
To give you an idea, my current advice solely consists of reading and posting on various Internet forums.
I promise I haven't sent everything to an offshore account in Barbados though I hear my alpaca business is doing great.
Just kidding about the alpacas.
I've read past threads but they all seem to involve moving investments over to a person or firm. I think I'm looking for something more basic than that, but am I?
We have basic debt (my almost-six-figure student loans, a mortgage, a couple of 401k loans, and that's it) and sufficient income (my job). Retirement savings isn't so hot, nor is the emergency fund, though both exist. I'd like someone—online or in person is fine—to whom I can give details about our money numbers and ask questions about doing things effectively. I have this idea that financial planners are for people with substantial assets or investments to be done outside of a 401k and things like that but I wonder if I'm wrong.
Should I take my 401k company up on its perpetual offers or do I pay someone unrelated to any of my current accounts for that service? I'm a member of a couple of different credit unions but they call these services "wealth management" and "investment portfolio assistance," which seems badly overblown for what I'm after. Does it matter if I'm in Seattle (the actual city versus the area)? Are there companies here I should be looking at?
Am I overthinking how to stop overthinking this?
To give you an idea, my current advice solely consists of reading and posting on various Internet forums.
I promise I haven't sent everything to an offshore account in Barbados though I hear my alpaca business is doing great.
Just kidding about the alpacas.
You should use your company's 401(k) offers to the maximum extent you are able. Does your company offer some advice as to how to invest your 401(k) contributions? If so, take it.
If not, go with a 60/20/20 split of three index funds, with the 60 the more reliable one and the 20s the more "hedgy" ones. For example, S&P 500 index for 60%, Small Cap Growth for 20%, International Somethingorother 20%. Alternatively, go with a targeted retirement fund, e.g. "Retirement 2035 Fund" and set it and forget it. The downside, in this fool's opinion, is that targeted retirement funds weight bonds too heavy so are too conservative in their strategy. But they're waaaaaay better than _not_ investing in a 401(k).
Pay down your debt responsibly. Go heavy on the retirement. The debt you describe tells me outside-of-retirement investments are in your future, not your present.
posted by mcstayinskool at 3:43 PM on March 2, 2016
If not, go with a 60/20/20 split of three index funds, with the 60 the more reliable one and the 20s the more "hedgy" ones. For example, S&P 500 index for 60%, Small Cap Growth for 20%, International Somethingorother 20%. Alternatively, go with a targeted retirement fund, e.g. "Retirement 2035 Fund" and set it and forget it. The downside, in this fool's opinion, is that targeted retirement funds weight bonds too heavy so are too conservative in their strategy. But they're waaaaaay better than _not_ investing in a 401(k).
Pay down your debt responsibly. Go heavy on the retirement. The debt you describe tells me outside-of-retirement investments are in your future, not your present.
posted by mcstayinskool at 3:43 PM on March 2, 2016
but I'm wanting to know if I've planned appropriately. Is that something a financial planner does, which seems way overkill,
For most folks who aren't easily overwhelmed by finances, there are a lot of books on financial planning that are helpful as a start - I like the Bogleheads series which covers pretty much most financnial situations to think of and have structured my financial strategy around those. A CFP can be helpful if you want a professional's take on your specific situation, and isn't necessarily overkill. The bogleheads wiki is also a good place to start.
I've read past threads but they all seem to involve moving investments over to a person or firm.
It might involve that, but the type of financial planner you want to to avoid in this context are commission based financial planners. Financial planners have their place, but what you're looking for is a fee-only financial planner, preferably one certified by NAPFA. These folks have a fiduciary duty to only you, not a firm. CFPs can also help you make sense of all the stuff you have available to you, and also help you plan for long term financial goals and develop a budget.
Again, you don't have to go to a CFP if you're willing to do your research on your own and read the books and strategies that will go through this with you, but sometimes it's helpful to have someone directly to talk with, if only once or twice just to get your house in order and develop a long term plan.
Should I take my 401k company up on its perpetual offers or do I pay someone unrelated to any of my current accounts for that service?
It's hard to say without actual numbers or knowledge of the exact offers but many strategies encourage you to, at a bare minimum, invest in your 401k up to company match.
posted by Karaage at 3:48 PM on March 2, 2016
For most folks who aren't easily overwhelmed by finances, there are a lot of books on financial planning that are helpful as a start - I like the Bogleheads series which covers pretty much most financnial situations to think of and have structured my financial strategy around those. A CFP can be helpful if you want a professional's take on your specific situation, and isn't necessarily overkill. The bogleheads wiki is also a good place to start.
I've read past threads but they all seem to involve moving investments over to a person or firm.
It might involve that, but the type of financial planner you want to to avoid in this context are commission based financial planners. Financial planners have their place, but what you're looking for is a fee-only financial planner, preferably one certified by NAPFA. These folks have a fiduciary duty to only you, not a firm. CFPs can also help you make sense of all the stuff you have available to you, and also help you plan for long term financial goals and develop a budget.
Again, you don't have to go to a CFP if you're willing to do your research on your own and read the books and strategies that will go through this with you, but sometimes it's helpful to have someone directly to talk with, if only once or twice just to get your house in order and develop a long term plan.
Should I take my 401k company up on its perpetual offers or do I pay someone unrelated to any of my current accounts for that service?
It's hard to say without actual numbers or knowledge of the exact offers but many strategies encourage you to, at a bare minimum, invest in your 401k up to company match.
posted by Karaage at 3:48 PM on March 2, 2016
Seconding /r/personalfinance. The FAQ should answer a substantial portion of your questions. You don't need an advisor. You can evaluate the quality of your 401(k) options with the information in the FAQ. If your options suck, switch to IRAs. Other than that, paying down your debt is the big thing you need to do and an advisor isn't going to really help with that.
posted by Candleman at 4:37 PM on March 2, 2016 [1 favorite]
posted by Candleman at 4:37 PM on March 2, 2016 [1 favorite]
A very common, and very good, recommendation is to consult a fee-based financial planner, someone whose compensation is not tied to selling you a product.
Some people will only consult one when a crisis occurs. Like visiting a doctor, though, you will be further ahead if you go early so that some early corrections can be applied before problems get out of hand.
You have, I believe, some early danger signs that can respond well to minor course corrections.
posted by megatherium at 4:41 PM on March 2, 2016
Some people will only consult one when a crisis occurs. Like visiting a doctor, though, you will be further ahead if you go early so that some early corrections can be applied before problems get out of hand.
You have, I believe, some early danger signs that can respond well to minor course corrections.
posted by megatherium at 4:41 PM on March 2, 2016
I asked my financial planner for a referral to someone who could help me figure out my money. Like you, I have student loans and, at the time I started working with my financial adviser, had credit card debt and zero savings other than a 401k. I was living paycheck to paycheck, with some extra days in there when I had no money on hand. Eek.
I started seeing her in November and have zero debt (besides the student loans and car payment) and have more money than days in each pay period.
So, yeah, call a financial planner and ask if they have someone who can help you build a monthly budget.
posted by LOLAttorney2009 at 4:48 PM on March 2, 2016
I started seeing her in November and have zero debt (besides the student loans and car payment) and have more money than days in each pay period.
So, yeah, call a financial planner and ask if they have someone who can help you build a monthly budget.
posted by LOLAttorney2009 at 4:48 PM on March 2, 2016
Also, You Need A Budget is popular software for getting a grip on personal spending, though they recently switched to a subscription model that has some people upset.
posted by Candleman at 4:53 PM on March 2, 2016
posted by Candleman at 4:53 PM on March 2, 2016
Just nthing a fee-for-service financial planner. If anything, more people should see them! The less money you have, the more crucial it is to make sure you're making the most of it. The fee-for-service financial planner my former employer knew and referred people to was more than happy to work with anyone.
(It can also help a couple make sure they're on the same page. I felt like I was dragging my spouse along through the mud until his work hosted a full-day workshop on financial literacy - then the lightbulb went off!. Not that we were on different pages really, but it helped even out differing levels of enthusiasm and commitment.)
posted by jrobin276 at 5:13 PM on March 2, 2016
(It can also help a couple make sure they're on the same page. I felt like I was dragging my spouse along through the mud until his work hosted a full-day workshop on financial literacy - then the lightbulb went off!. Not that we were on different pages really, but it helped even out differing levels of enthusiasm and commitment.)
posted by jrobin276 at 5:13 PM on March 2, 2016
A fee-only financial planner would be a good idea, but before that, you should read a book or two to get the lay of the land. I like Beth Kobliner's book Get a Financial Life, which strikes the proper balance between concision and detail.
posted by brianogilvie at 6:41 PM on March 2, 2016
posted by brianogilvie at 6:41 PM on March 2, 2016
There are some who say that you (and everyone else) are overthinking this:
All the financial advice you need can fit on an index card.
posted by GPF at 7:29 PM on March 2, 2016 [2 favorites]
All the financial advice you need can fit on an index card.
posted by GPF at 7:29 PM on March 2, 2016 [2 favorites]
I'm here to strongly recommend YNAB. It will help you sort things out, and their forums are great.
posted by samthemander at 9:55 PM on March 2, 2016
posted by samthemander at 9:55 PM on March 2, 2016
I recommend the book All Your Worth: The Ultimate Lifetime Money Plan, by Elizabeth Warren.
posted by merejane at 10:20 PM on March 2, 2016
posted by merejane at 10:20 PM on March 2, 2016
You can find great get-out-of-debt advice on the internets, and you can also find great how-to-save-and-invest advice on the internets. What it feels like you need is how to combine/prioritize those things.
A financial planner may help you come up with a plan for your money and implement it, but that person cannot tell you what your priorities are in the first place. That's what you need to figure out first.
From what you have said (and I'm missing a lot of information, but I won't let that stop me from pontificating ;-), I would say that you are more deeply in get-out-of-debt territory than how-to-invest territory. I would tentatively offer the following advice:
-- invest in your 401k only enough to get whatever match you get, because that is 100% "return" that you don't want to miss. If you get no match, then ALL of your extra money goes to debt.
-- make sure you have an emergency fund: enough cash to keep you out of trouble (and by trouble I mean credit card debt), when trouble (job loss, car repair, house repair) happens as it inevitably does.
-- pay down your debt, sending any available extra to the highest rate first. That is by far the most effective use of your money; a baseline for effective use of money is to not pay interest. That is likely your student loans, but you should also be highly concerned about your 401k loans. Both of those are debt where the interest you're paying is holding you back from any other use of your money, and any growth of your 401k.
-- once you're down to mortgage as your only debt, make sure it's at the best rate you can get ( < 4% at the moment; but your student loans and 401k loans will keep you from improving that right now). Then you can start to think about saving more, and doing it effectively, and that's where a planner would come in, but it's not incredibly complicated (read up on bogleheads, and low-cost index funds). In rough order:
Contribute to 401k up to match
Contribute to Roth IRA
Contribute to 401k up to personal maximum ($18k/year)
Contribute to an HSA, if you have one
Invest in a taxable investment account.
The one overall principle of money management is that it's all about interest rates: what you pay versus what you get from your investments. Right now you're still paying, heavily I'd guess, and you must focus on minimizing the former before you can think about maximizing the latter.
posted by Dashy at 9:16 AM on March 3, 2016 [1 favorite]
A financial planner may help you come up with a plan for your money and implement it, but that person cannot tell you what your priorities are in the first place. That's what you need to figure out first.
From what you have said (and I'm missing a lot of information, but I won't let that stop me from pontificating ;-), I would say that you are more deeply in get-out-of-debt territory than how-to-invest territory. I would tentatively offer the following advice:
-- invest in your 401k only enough to get whatever match you get, because that is 100% "return" that you don't want to miss. If you get no match, then ALL of your extra money goes to debt.
-- make sure you have an emergency fund: enough cash to keep you out of trouble (and by trouble I mean credit card debt), when trouble (job loss, car repair, house repair) happens as it inevitably does.
-- pay down your debt, sending any available extra to the highest rate first. That is by far the most effective use of your money; a baseline for effective use of money is to not pay interest. That is likely your student loans, but you should also be highly concerned about your 401k loans. Both of those are debt where the interest you're paying is holding you back from any other use of your money, and any growth of your 401k.
-- once you're down to mortgage as your only debt, make sure it's at the best rate you can get ( < 4% at the moment; but your student loans and 401k loans will keep you from improving that right now). Then you can start to think about saving more, and doing it effectively, and that's where a planner would come in, but it's not incredibly complicated (read up on bogleheads, and low-cost index funds). In rough order:
Contribute to 401k up to match
Contribute to Roth IRA
Contribute to 401k up to personal maximum ($18k/year)
Contribute to an HSA, if you have one
Invest in a taxable investment account.
The one overall principle of money management is that it's all about interest rates: what you pay versus what you get from your investments. Right now you're still paying, heavily I'd guess, and you must focus on minimizing the former before you can think about maximizing the latter.
posted by Dashy at 9:16 AM on March 3, 2016 [1 favorite]
This thread is closed to new comments.
posted by DarlingBri at 3:42 PM on March 2, 2016 [8 favorites]