Adulting 201
November 16, 2020 9:31 AM   Subscribe

As of today, I am COMPLETELY DEBT FREE! Help me make sure I'll be responsible with the money I was using to get that way!

This has taken about a decade to pay off, with a super-aggressive paydown plan for the past two years. I am already planning to reroute most of what I'd budgeted for that debt towards savings, with most going to retirement - I'll be able to max out my IRA contribution each year now, and I'm also going to be slamming a lot into emergency savings for the next 3 years to build that up. I also already have a couple of existing smaller cheeseball savings accounts for things like Christmas gifts or "fun money" which I've also been paying into all this time, and I'm leaving those contributions as-is.

However, I have also realized that there are some "responsible adult" things I held off on getting in the interest of needing to prioritize debt - things like renters' insurance. So I'd also like to look into getting stuff like that.

So towards that end...what is the "stuff like that" I should be considering? If it helps: Single Brooklynite woman, 50, never married, no kids, no pets, no car (and no desire for one at present). I rent and I'm good that way. Decent benefits package from work, so assume medical/accident/life insurance are all covered.
posted by EmpressCallipygos to Work & Money (39 answers total) 32 users marked this as a favorite
 
Congratulations!
Normally I would have suggested a small travel fund, but, COVID. Sigh. I guess you could still do that.
But really, saving towards retirement is such an awesomely adulting thing to do.
posted by antiquated at 9:42 AM on November 16, 2020 [1 favorite]


Any optional medical stuff that insurance might not fully cover? Dental work, cosmetic surgery, etc.?
posted by briank at 9:45 AM on November 16, 2020


First -- congrats! That's huge!

Things to consider include renter's insurance, an emergency fund, and eventually a taxable investment account (if you max out your IRA + 401 contributions), and umbrella insurance.

I think the priority at your stage is to get money into tax-protected spaces. An e-fund really protects your ability to do that, when unexpected Things Happen - it helps to ensure that you'll make the retirement contribution despite what might usually be a cash crunch.

If you haven't already, thinking about asset allocation and what funds you want to invest in is good to get set up from the get-go. You can read about that stuff on the Bogleheads wiki (the three-fund portfolio) or similar sites.

Umbrella insurance is for once you've got enough assets that someone might sue them away from you. Even when you rent a car, that coverage is limited. If you had a bad accident where the regular insurance doesn't cover it adequately, and you were determined at-fault for some percentage, someone could decide that you have net worth that makes it worthwhile to sue you personally.

You could look into long-term care insurance, but mostly it's not worth it these days.

Do you have elders who will rely on you? That's a thing to consider saving separately for, and possibly in a dependent-care account if it will happen soon.
posted by Dashy at 9:46 AM on November 16, 2020 [2 favorites]


Renters insurance is not that expensive and very worth it.
posted by medusa at 9:50 AM on November 16, 2020 [11 favorites]


Maybe another smaller cheeseball account for upgrading the quality of life? Things like buying one really nice piece of furniture every year or two or a really good winter coat?

And no substitute for a robust emergency fund - that's great as a next priority along with your iRAs.
posted by metahawk at 9:53 AM on November 16, 2020 [4 favorites]


I Will Teach You To Be Rich covers all the stuff you should be thinking about as an adult for money, including some basics on investing. Another book that covers some of the less finance side of life is Girl's Guide which can has a ton of helpful stuff, no matter your gender.
posted by chiefthe at 10:00 AM on November 16, 2020 [1 favorite]


Response by poster: Just a quick redirect that I am not so much asking about money or investing advice, as much as I am about other stuff advice - kinds of insurance I may not know about, things like that.

Addressing a couple of points above:

* Happily, one of my existing "three or four cheeseball savings accounts" is dedicated to travel, and one is dedicated to "upgrading the quality of life", so that's covered.

* My insurance package from work already includes dental. I can also add vision in a few years as my eyes decay (they started out REALLY good, so I've got some time). As for cosmetic surgery, I haven't the least whit of interest.

* Dashy - I was wondering about long-term insurance; can you let me know more about why it "isn't worth it"? ....As for caring for elders - my parents live close by my brother, so a good part of that may be handled by him with me contributing financially, but that is likely not to happen for at least five or ten years. My parents are a) active, b) healthy, and c) smart about keeping themselves that way. But it may make sense to start a small fund for that now, any advice there as well?

* I've looked into books like "Girl's Guide" in the past, but they tend to be pitched more to people who are further back on the "get your act together" path than I am. I've already adopted and processed all their advice about "preparing a budget" and "how to cut corners and save even more", and that's how I got to where I am at present. If there's any kind of a single-sheet checklist anyone knows of, however, that may be helpful for me to at least review and contemplate whether I need each of their suggestions.

* Terms like "asset allocation" and "e-fund investments" may as well be in Urdu insofar as my understanding goes. I would like to focus on non-investment things, please.
posted by EmpressCallipygos at 10:15 AM on November 16, 2020 [1 favorite]


Long-term care insurance is what you buy to protect against spending your entire life savings to a care home. Same as all insurance, it's basically a bet that you make with the insurance company; they bet you won't use it after paying them for years, and you are buying a hedge against costs.

When it originally came on the market, like 10 or 20 years ago, policies were cheap(ish). More recently, insurance companies realized that they were coming out on the losing end of that bet more often, and have thusly started putting more limits on payouts, and increasing the prices, to the point where it's likely not worth it now.

At one time you might have been able to buy a LTCI policy for $1k a year that would cover 3 years in a care home, and paying 20 years of that policy seems wise. Now that same policy might cost you $10k+, the cost goes up bigly every year, and coverage is more limited. After 10 or 20 years of paying on that policy -- you may as well have just saved up the money yourself (this is "self-insuring"). And that's before getting into the underwriting (like whether they'll insure you at all) and all the conditions and restrictions.

Aside all that -- if you're starting to pile up money, I'll nudge you again, it's time to get up to speed on what an asset allocation is and why you choose funds to invest in. Those details make a big difference, just like interest rates on loans, but on the other side (Profit!) now. That's the real reward for paying off loans!
posted by Dashy at 10:27 AM on November 16, 2020 [1 favorite]


Congratulations! If you aren't already doing this: decide what % you want to set aside for donating.
posted by aniola at 10:41 AM on November 16, 2020


Response by poster: One last thing and I will sit on my hands -

I have expressly signed up for an IRA account where SOMEONE ELSE chooses the funds to invest in, because I don't have and will never have the ability to make those decisions on my own. I am thus far extremely satisfied with their results so far, so I am happy to call that problem "solved".
posted by EmpressCallipygos at 10:43 AM on November 16, 2020


Taking care of health stuff more proactively, if it's relevant. Not writing off as too expensive things like a gym membership, or physical therapy or doctor's appointments for stuff that's been bothering you but hasn't been critical, or paying for classes or equipment that would help you exercise more. All in the service of avoiding or postponing the painful (and often expensive) developments we can all expect later on.

Aside from an "emergency" account, it might be good to have something like an "anticipated eventual expenses" account (for things like replacing the eventual dead computer or worn out couch).

Possibly paying for things like a financial advisor, or all the other types of things that wealthier people do as a matter of course but that you'd never even consider doing while watching pennies.

If you can afford it, a bonus "social network" account could be good, for things like taking extra trips to visit friends, or helping friends visit you, or covering activities together that they might not be able to afford or that you couldn't afford previously. Not to the point of being profligate or anything, but I think investing in friendships and social ties is both one of the more meaningful uses of money, and on a more practical level (it feels a little weird saying this) potentially a good investment for mental health and general support as we age.

Congrats!
posted by trig at 10:47 AM on November 16, 2020 [2 favorites]


I plan on prepaying for my funeral. Don't know if it's the same in the U.S., but here the funeral home holds the money in trust; if it ends up costing more than what you paid +interest, they eat it, and if it costs less the balance reverts to your estate. Can't lose, except for the whole being dead part.
posted by kate4914 at 11:00 AM on November 16, 2020 [3 favorites]


P.S. Yay you!
posted by kate4914 at 11:01 AM on November 16, 2020


Congrats on paying down your debt! Giving a chunk of my income to nonprofit charities and directly to people/mutual aid organizations is one of the best life decisions I've ever made.
posted by k8lin at 11:06 AM on November 16, 2020 [3 favorites]


Way to go! kate4914's comment about pre-oaying funeral costs prompted the thought that you might retain a lawyer to put together your will, establish who will have power of attorney and health care proxy responsibilities if you are incapacitated, set up a trust if that makes sense for you, etc. They will ask you questions on issues you may not have thought about. Yes, you can muddle through with online forms but there is peace of mind in knowing that your solutions are bespoke.
posted by carmicha at 11:06 AM on November 16, 2020 [7 favorites]


Congratulations on your financial achievement! It's a real accomplishment in this modern era and you should be proud of yourself.

That said - this is not a novel or fun suggestion - is your IRA your only retirement savings? Because honestly, if you are 50 and a renter in NYC and just reached the point where maxing out your IRA contributions is feasible, you probably need to save more for retirement. Maybe you forgot to mention an employer 401k or something with a hefty balance, but saving more for retirement, even if it's not in a tax-advantaged account, is the best adult gift you can give your future self.

(ps: get that renter's insurance - it's usually trivially inexpensive compared to other insurance.)
posted by stowaway at 11:07 AM on November 16, 2020 [4 favorites]


Something I was really surprised to have my financial planner recommend was supplemental long term disability insurance. She pointed out to me that standard, workplace-provided LTDI would replace the monthly income that I live on... and leave me nothing for savings... and would discontinue at age 65. So I bought a small policy that would give me additional income to continue saving for retirement (and achieving my target retirement income) should I become disabled.
posted by amelioration at 11:09 AM on November 16, 2020 [5 favorites]


Another thought... It may not make financial or lifestyle sense for you to own property in NYC, but if you have an inkling that you might want to retire elsewhere, it could make sense for you to buy there, especially if it's a place where it's likely to appreciate and/or could offset its costs by generating income for you, perhaps as a short-term stay accommodation managed by a third party, or as a rental unit.
posted by carmicha at 11:18 AM on November 16, 2020 [4 favorites]


Do you qualify for an HSA - Health Savings account? One requirement is to have a high deductible health plan. If you do qualify, your employer may offer it as a benefit but you can open your own. You can contribute up to $3,550 in 2020 (it goes up each year) and that money has a triple tax advantage. I just opened my own this year with the company that holds my 401k. The money rolls over every year and can be used for medical expenses even if you no longer qualify to contribute to it. You invest it in a choice of funds just like your IRA - so you might set that up the same way you have the IRA.

Make sure that you have beneficiaries set up on all financial accounts and tell the people you list about the account, maybe even give them a list of places where your money is. Check out the laws of your state especially if your beneficiaries are in other states. You may not need a full blown will if your major assets are all in cash and have the proper beneficiaries set up.

I have been volunteering with a program that is sponsored by AARP for a few years. They have a lot of info on their site and you don't have to be a paying member to join it. You can read most of it without joining, too. I am not much younger than you are and have been meaning to read up on things like this - tips on getting ready for retirement 10+ years out.
posted by soelo at 11:27 AM on November 16, 2020


Long-term care insurance is a thing and you're probably young enough to get a lot of coverage for relatively little money - assuming we never fix our health-care system, knowing that you can afford a nursing home should you need one is probably worth the price. There are also plans now that let you (or family) withdraw funds if it turns out you don't need that care.

Also, sorry if this is too morbid, but a lot of funeral homes let you plan and pay for your funeral now - they can be expensive and painful for the people you leave behind, so taking care of that now could save money and emotional stress - and you can even put in special requests like a faux-fur lined casket... (ask me how I know)
posted by Mchelly at 11:44 AM on November 16, 2020


Response by poster: Maybe you forgot to mention an employer 401k or something with a hefty balance, but saving more for retirement, even if it's not in a tax-advantaged account, is the best adult gift you can give your future self.

Oh, d'oh - yes, I do have a 401K, and I have that contribution maxed out too already, with employer matching.
posted by EmpressCallipygos at 11:48 AM on November 16, 2020


I bought LTC insurance 12 years ago, and it’s given me tremendous piece of mind.
Do look into it, although premiums have gone up, how much you pay depends on the type of coverage you buy.
Buying before you turn 55 will save you quite a bit of money.
An example of premium costs, as relates to coverage:
We got a policy where the coverage provided goes up, based on inflation. However, that increase is always on the “base” amount we bought, and does not compound.
Example: 100k coverage, 3% annual inflation - new coverage 103k; next year inflation at 5%, new coverage 105k (based on original coverage of 100k).
As a couple, we pay about 3200/year for our policy.
Another feature is- if we use it (say for a stay in a rehab facility), and then are discharged, if we don’t use it again for 6 months, the policy “resets” as if we had never used it.
posted by dbmcd at 12:12 PM on November 16, 2020


What are things that are essential to protecting, maintaining or growing your ability to earn your income?

What are things that are essential to protecting, maintaining or improving your current and long term health and physical independence?

What are things that help make life meaningful for you now and in the future, including freeing up your time/effort/energy to do the things that enrich your life?

Fund accordingly. Congrats!
posted by ellerhodes at 12:12 PM on November 16, 2020 [1 favorite]


One of the first things I did when I made my last student loan payment was start a "fuck you money" fund. I've seen you post several times recently about how much you love your job and where you work. Awesome. If that should change, however, and work starts being a source of stress, I can't tell you how mentally comforting it is to have a chunk of money set aside specifically intended to allow you to walk away from a bad job when you need to. Even if you never use it.
posted by phunniemee at 12:19 PM on November 16, 2020 [6 favorites]


How old (general age)? How healthy? Do you have dependents? If you are not that old (earlier than 50s or 60s), are relatively healthy, and don't have dependents, you don't need long term care insurance or any kind of life insurance or to prepay for funeral expenses. You can pay for that stuff later.

You can invest any extra money or save it for the future expenses like a home down payment.

When I rented, renters insurance was like $80. Get that.
posted by The_Vegetables at 1:12 PM on November 16, 2020


If you were carrying a balance in your credit cards, revisit your credit card situation now that you are not.

Are there cards you should cancel (ideally not your oldest cards) or replace with better cards?

If you were paying an annual fee for a low interest card, can you change it for one with no fee? Higher interest rates don't matter if you aren't going to carry a balance. Can you switch to cards that offer rewards or cash back or better travel perks? When I was traveling a lot, I got a card with decent out of country medical insurance and rental car coverage and it saved me a fortune. When I stopped traveling so much, I switched it to a cashback card.

I would never advocate trying too hard to leverage rewards programs but if you use a card as a charge card and pay it off every month rather than using it as a source of credit, then not getting a card with some kind of reward attached is probably leaving money on the table.
posted by jacquilynne at 1:13 PM on November 16, 2020 [2 favorites]


Insurance is a hedge against expenses you may not be able to cover on your own. Just saving a bunch of money allows you to cover more expenses on your own and not have to make those bets with an insurance company / have more flexibility about what you do when something expensive happens. Renters insurance may be a good idea because it covers not just your possessions but also accidental damage to the rental property. If you have life insurance and no dependents, that should cover your funeral, heavens forbid. Or your retirement money could. Or your emergency fund. Cash is a lot more flexible than insurance.

It sounds like you’re pretty well set, I’d focus on 6+ months of emergency fund first and then just enjoy your financial security!
posted by momus_window at 1:18 PM on November 16, 2020 [1 favorite]


Response by poster: Oh, jacquilynne brings up a good point - I was carrying the debt on two cards, and paid one off some months ago. I switched to auto-payments for a couple of my utilities on that card and pay that off monthly, in order to keep my credit rating up. The second card got paid off now, and I'm going to use it for another couple existing regular monthly payments (like Netflix and my VOIP phone) and paying that bill off as well in full monthly to maintain the credit rating.

To address a couple other recent comments:

How old (general age)? How healthy? Do you have dependents?

....I.....address all three of these questions in my original post.

* 6 months' worth of expenses is indeed the target for the emergency fund, because that's what was recommended to me as a "fuck-you fund".

* I have three "slush fund" cheeseball accounts I've already had, for things like Christmas gifts and travel and "oh no the couch finally died and I need a new one". COVID has kept me from being able to do a whole hell of a lot with those so they're getting nice and healthy as well already.

* Got the IRA, and earlier this year even switched over to a MUUUUUUUUUCH better performing one. I will be maximizing the contributions to that now.

* I also have a 401K with employee matching at work and I've already maxed that.

* Renter's insurance is absolutely happening. I've actually found quotes that will give me ample coverage for only about $15 a month. (supplementary question - if anyone knows a site that I can check for multiple quotes, I'm all ears.)

* Getting a will is another thing I should probably do. I happen to be friend-of-a-friend with a lawyer - I don't think this is what she does, but she could probably point me in the right direction. (....actually....lemme do that now!)
posted by EmpressCallipygos at 3:39 PM on November 16, 2020


Normally I wouldn't suggest a big immediate lifestyle upgrade, but you mentioned in an earlier question that your landlord is trying to sell your building. If you want to move and/or might have to move anyhow, now is a pretty good time for it. Rents have dropped and a lot of places are offering promotional deals, because the rental market is so bad. I would do some preliminary legwork and consider how much more (if anything) you'd be comfortable paying, what kind of place that gets you these days, what sort of timeline your landlord's on, etc. and maybe put something aside for moving expenses just so you aren't caught by surprise.
posted by yeahlikethat at 3:58 PM on November 16, 2020 [1 favorite]


Also you might already know this but just in case: You can contribute to your 401k beyond the percentage that your employer matches, up to $19,500 for 2020. Your employer won't give you any additional money but you still get the tax benefits on what you yourself put in.
posted by yeahlikethat at 4:14 PM on November 16, 2020 [1 favorite]


This personal finance flowchart might be helpful—I find it useful at least for conquering indecision and checking boxes.
posted by chesty_a_arthur at 4:42 PM on November 16, 2020 [1 favorite]


Response by poster: Second reminder that I am not looking for financial advice, and instead on things like types of insurance, legal things like wills, etc.

I promise you my financial situation is in hand and I am not looking to change things now.
posted by EmpressCallipygos at 6:17 PM on November 16, 2020


re: the value of renters insurance, i'll be one voice of dissent -- it's more a question of how much it would cost to replace your stuff, and how easy or hard it would be to spare the cash requires to pay for the replacement in the event that all your stuff is loaded into the back of a van by thieves or rendered unusable by fire / irradiation / locusts.

If you have enough of a cash buffer to serve as a cushion, it'll be cheaper to self-insure things where the cost of the bad outcome happening is small compared to the amount of cash in your buffer. Cheaper 'cause you're avoiding paying an insurer's profit margin. For my situation, renter's insurance falls into this category, since I don't own much stuff, and the stuff I do own tends to be second-hand, the replacement cost would be a fraction of annual expenses, so I regard it as self-insured by my standard "emergency fund". But everyone's situation is different, and if losing some valuable stuff would be a major emergency that would exceed the cushion offered by an "emergency fund", sure, insure away!
posted by are-coral-made at 12:37 AM on November 17, 2020


are-coral-made, I think self-insuring is OK for specific things. If someone breaks in to my apartment and steals my computer, then yeah, it wouldn't be worth the premiums, deductible, and increase to future rates to file a claim. I'd just take the hit for a new computer.

We have high-deductible renters insurance for major catastrophes like a fire, flood, building collapse, etc, where you have to replace a significant portion of your belongings. None of our stuff is especially valuable, but we do have a modest apartment's worth of it. You think you don't own much but start tallying up how much it would cost to replace the contents of your sock/underwear drawers, or everything in your kitchen in one fell swoop. All the little accoutrements to existence add up really fast!
posted by yeahlikethat at 12:29 PM on November 17, 2020 [2 favorites]


Response by poster: The renters' insurance package I saw on one quote even covered for "you throw a party and one of the guests gets kneewalking drunk and falls on the stairs while they're leaving, and they try to sue you".
posted by EmpressCallipygos at 1:19 PM on November 17, 2020 [1 favorite]


Yeah unless you're a millionaire there's no way you can self insure for renter's insurance and come out the better side of it. It costs like $120 a year and covers if my dog runs out the door and trips my neighbor, and 5 years of renter's insurance is still cheaper than if the roof leaks on my computer.
posted by phunniemee at 3:52 PM on November 17, 2020


It costs like $120 a year and covers if my dog runs out the door and trips my neighbor.

Yes, it's cheap and that is because the odds of you ever collecting a dime on it are very long. Let's say the hypothetical neighbor sues you for $10,000. The insurance company is betting that this won't happen to you in a hundred years. And the typical deductible is $500 so good luck on your computer.

Perhaps it is cheap for peace of mind but it isn't necessarily a good bet. Only about a third of renters have renters insurance.
posted by JackFlash at 5:28 PM on November 17, 2020


Congratulations! That is a huge accomplishment!

I think renter's insurance is worth it for peace of mind. Less so for the value of "stuff" (which, however, even with our old/mismatched stuff still aggregates to a surprising amount if you add it up) than the value of the liability protections (like your guest tripping, or somehow causing damage to the apartment below you). It's cheap and the chance of needing it is low, but the potential risk of not having it would be catastrophic, at least with our budget. As you start having assets/savings, consider getting umbrella insurance as another layer of protection. Again, cheap and unlikely to be needed, but potentially important.

I see people have suggested it already, but look into if your insurance allows FSA or HSA contributions -- there are tax advantages to funding some of your healthcare costs that way.

Wills: Along with getting your financial house in order, setting up a will seems like a key part of being an adult. We are in the middle of it right now, actually. Not having dependents makes it both simpler and more complicated -- having to make explicit decisions about where the money will go is being surprisingly tricky, especially emotionally. But more than just the decisions about your assets, it goes along with setting up paperwork for the medical side of things (like, who can make decisions for you if you can't?). We considered doing it all ourselves but chose to work with a lawyer; the cost is reasonable and I like the certainty of having everything pulled together.
posted by Dip Flash at 6:21 AM on November 19, 2020


Woohoo! HOORAY FOR DEBT-FREE!

It sounds like you've got stuff pretty-well in hand. A will and health care proxy paperwork are definitely must-haves for 201-level adulting. FSA's are great for expected levels of medical costs because paying with pre-tax dollars is like a 30% discount. The use-it-or-lose-it nature of it means conservative levels of funding may be best for that.

I don't know if you have big annual expenses (for me, an example would be 'auto insurance') where they give you an option to pay in a lump sum or over the year with them tacking on interest, but I love being able to pay it all at once because now that I'm out of debt I take delight in *not* paying interest when I can avoid it.
posted by rmd1023 at 11:12 AM on November 19, 2020


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