Relative asked for help

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Topic Author
DressSock
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Relative asked for help

Post by DressSock »

I was talking to my cousin this weekend and they told me they were going to get a financial advisor. I said that's not necessary and explained how I have my financials set up with Vanguard TDFs, 75% VTI / 25% VXUS, and a HYSA.

Well that lead to them asking me what they should do. They want me to tell them what to do with their money. What I know about him:
  • He's a single 48 year old guy looking to buy a house.
  • Income is $240k and monthly expenses are $7,000.
  • He maxes out his 401k, but nothing else for savings or investing. He has 401k's from previous jobs, but hasn't moved them.
  • He has $310k sitting in a savings account getting very little interest. Like $100 a month! My jaw dropped when he told me about it.
Based on that, these are initial my suggestions/questions:
  • Keep 6 months expenses in a checking/savings account he can easily access as an emergency fund.
  • Put the estimated amount of a house down payment in a HYSA. Since he lives in NYC, would VUSXX be best for state income tax purposes?
  • Open a tax advantage account, but would a TDF be best? Would 2035 or 2040 make sense?
  • Because of his salary, he can do a backdoor Roth correct? Or would Mega backdoor Roth make more sense? I know he can do both. I haven't done either so I'm not familiar enough to advise him in this area.
  • If he still has money to invest, then invest in VTI-VXUS-BND in a split of 45-35-25. That's my initial thinking because it would reduce the most risk for him at his age. However, it's purely guessing on my part.
I'm open to hear any suggestions and advice. I know what I did for myself wouldn't be 100% applicable to him and I feel a bit more nervous since it's not my own money I'm handling here.

Thanks!
Last edited by DressSock on Tue Jun 11, 2024 9:01 am, edited 1 time in total.
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climber2020
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Re: Relative asked for help

Post by climber2020 »

Tell him to come here and ask questions so he can learn for himself.

If you manage his money and stocks crash soon after, all of a sudden you're the incompetent family member who lost all his money.
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retired@50
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Re: Relative asked for help

Post by retired@50 »

DressSock wrote: Tue Jun 11, 2024 8:06 am
I'm open to hear any suggestions and advice.
Thanks!
Welcome to the forum.

Teach him.

If you share this site, and maybe suggest some reading he'll be able to get there on his own.

Discuss with him the various concepts. Safe money for the house down payment, invest the rest.

He's a 48 year old man who earns six figures annually, which means he's smart enough to figure this out (with your help :happy ).

Regards,
"All of us would be better investors if we just made fewer decisions." - Daniel Kahneman
KlangFool
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Re: Relative asked for help

Post by KlangFool »

DressSock wrote: Tue Jun 11, 2024 8:06 am
  • He's a single 48 year old guy looking to buy a house.
  • Income is $240k and monthly expenses are $7,000.
  • He maxes out his 401k, but nothing else for savings or investing. They have 401k's from previous jobs, but haven't moved them.
DressSock,

A) He cannot afford to buy a house. If he buys a house, nothing else matters.

B) Please ask him why he can afford to buy a house when he is only saving 20+K in the 401K per year.

C) And, if he is only saving 20+K per year, how could he be only spending 7K per month?

D) Gross income = 240K. Assume taxes at 80K per year (very high estimate) and annual saving of 30K per year, his annual expense is estimated to be 240K - 80K - 30K = 130K per year. This is before buying a house.

KlangFool
Last edited by KlangFool on Tue Jun 11, 2024 8:49 am, edited 1 time in total.
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smitcat
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Re: Relative asked for help

Post by smitcat »

"I'm open to hear any suggestions and advice."

I think you need to post a whole lot of additional data and also clean up the information already posted.
Examples:
- you say single 48 yo guy but then say 'their' concerning numerous other items (is this a pronoun usage or a numbers mistake)
- if more than one person what are the numbers for each and total
- for expenses what are the curent numbers for rentals for each and totals
Really just a large list of unknown and unclear numbers so far. Please help.
Last edited by smitcat on Tue Jun 11, 2024 8:41 am, edited 1 time in total.
SevenBridgesRoad
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Re: Relative asked for help

Post by SevenBridgesRoad »

Don't get drawn into being his portfolio advisor. This falls into the category of "no good deed goes unpunished". Encourage him to learn and discuss what he has learned. That's the best path for both of you.
Topic Author
DressSock
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Re: Relative asked for help

Post by DressSock »

climber2020 wrote: Tue Jun 11, 2024 8:13 am Tell him to come here and ask questions so he can learn for himself.

If you manage his money and stocks crash soon after, all of a sudden you're the incompetent family member who lost all his money.
retired@50 wrote: Tue Jun 11, 2024 8:21 am Welcome to the forum.

Teach him.

If you share this site, and maybe suggest some reading he'll be able to get there on his own.

Discuss with him the various concepts. Safe money for the house down payment, invest the rest.

He's a 48 year old man who earns six figures annually, which means he's smart enough to figure this out (with your help :happy ).

Regards,
SevenBridgesRoad wrote: Tue Jun 11, 2024 8:38 am Don't get drawn into being his portfolio advisor. This falls into the category of "no good deed goes unpunished". Encourage him to learn and discuss what he has learned. That's the best path for both of you.
climber2020, retired@50, SevenBridgesRoad: Trust me. I've told him about the site and to come read to see what would suit him best. He's not interested in that. This is the main reason he was going to hire a financial advisor so he can, in his words, "give my money to someone to handle."
KlangFool wrote: Tue Jun 11, 2024 8:27 am DressSock,

A) He cannot afford to buy a house. If he buy a house, nothing else matters.

B) Please ask him why he can afford to buy a house when he is only saving 20+K in the 401K per year.

C) And, if he is only saving 20+K per year, how could he be only spending 7K per month?

D) Gross income = 240K. Assume taxes at 80K per year (very high estimate) and annual saving of 30K per year, his annual expense is estimated to be 240K - 80K - 30K = 130K per year. This is before buying a house.

KlangFool
A, B) Honestly I'm not sure myself.

C) I didn't ask the full details of his expenses. The 7k is a number he mentioned during the discussion. I think he will have to take some time and sit down to calculate the actual numbers.

D) I'll ask him for more information. The conversation we were having was one in passing. The information I provided was what I knew without asking questions directly to him.
smitcat wrote: Tue Jun 11, 2024 8:34 am I think you need to post a whole lot of additional data and also clean up the information already posted.
Examples:
- you say single 48 yo guy but then say 'their' concerning numerous other items (is this a pronoun usage or a numbers mistake)
- if more than one person what are the numbers for each and total
- for expenses what are the curent numbers for rentals for each and totals
Really just a large list of unknown and unclear numbers so far. Please help.
Their is a pronoun usage mistake (went back and corrected it). It's only him. Monthly rent is $2500. I do agree more information is needed. The topic came up in passing and we didn't dive into the full details of it.
Last edited by DressSock on Tue Jun 11, 2024 9:02 am, edited 1 time in total.
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retired@50
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Re: Relative asked for help

Post by retired@50 »

DressSock wrote: Tue Jun 11, 2024 8:57 am
climber2020, retired@50, SevenBridgesRoad: Trust me. I've told him about the site and to come read to see what would suit him best. He's not interested in that. This is the main reason he was going to hire a financial advisor.
In that case, send him to Vanguard Personal Advisory Services or Vanguard Digital Advisor.

See link: https://investor.vanguard.com/advice/pe ... bo-advisor

Vanguard will help him avoid the pitfalls of many advisers. Those pitfalls being high costs and complicated portfolios.

Regards,
"All of us would be better investors if we just made fewer decisions." - Daniel Kahneman
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HipCoyote
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Re: Relative asked for help

Post by HipCoyote »

retired@50 wrote: Tue Jun 11, 2024 9:00 am
DressSock wrote: Tue Jun 11, 2024 8:57 am
climber2020, retired@50, SevenBridgesRoad: Trust me. I've told him about the site and to come read to see what would suit him best. He's not interested in that. This is the main reason he was going to hire a financial advisor.
In that case, send him to Vanguard Personal Advisory Services or Vanguard Digital Advisor.

See link: https://investor.vanguard.com/advice/pe ... bo-advisor

Vanguard will help him avoid the pitfalls of many advisers. Those pitfalls being high costs and complicated portfolios.

Regards,
+1 on this notion. Point him in a direction and move on.
dbr
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Re: Relative asked for help

Post by dbr »

DressSock wrote: Tue Jun 11, 2024 8:57 am
climber2020, retired@50, SevenBridgesRoad: Trust me. I've told him about the site and to come read to see what would suit him best. He's not interested in that. This is the main reason he was going to hire a financial advisor so he can, in his words, "give my money to someone to handle."
If that is what he wants to do, then that is what he should do. The only comment you might add to that is to suggest he be sure he understands what the cost of paying someone to handle his money is. I don't know that I would even butt in and suggest VPAS. There is a hazard there that if he meets with disappointment in the market it will still be your fault.
an_asker
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Re: Relative asked for help

Post by an_asker »

climber2020 wrote: Tue Jun 11, 2024 8:13 am Tell him to come here and ask questions so he can learn for himself.

If you manage his money and stocks crash soon after, all of a sudden you're the incompetent family member who lost all his money.
Exactly!!
toddthebod
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Re: Relative asked for help

Post by toddthebod »

DressSock wrote: Tue Jun 11, 2024 8:06 am
  • He maxes out his 401k, but nothing else for savings or investing. He has 401k's from previous jobs, but hasn't moved them.
  • He has $310k sitting in a savings account getting very little interest. Like $100 a month! My jaw dropped when he told me about it.
Well, which is it?
barnaclebob
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Re: Relative asked for help

Post by barnaclebob »

I'd focus on educating him on the damage that 1% a year in AUM fees can do while also telling him about how if he can use basic percentages he can manage his own money. A 6 week training course from Edward Jones isn't going to give an salesman the secrets to the investing world. If that doesn't motivate him to learn, then going to a salesman is is best option.
delamer
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Re: Relative asked for help

Post by delamer »

HipCoyote wrote: Tue Jun 11, 2024 9:40 am
retired@50 wrote: Tue Jun 11, 2024 9:00 am
DressSock wrote: Tue Jun 11, 2024 8:57 am
climber2020, retired@50, SevenBridgesRoad: Trust me. I've told him about the site and to come read to see what would suit him best. He's not interested in that. This is the main reason he was going to hire a financial advisor.
In that case, send him to Vanguard Personal Advisory Services or Vanguard Digital Advisor.

See link: https://investor.vanguard.com/advice/pe ... bo-advisor

Vanguard will help him avoid the pitfalls of many advisers. Those pitfalls being high costs and complicated portfolios.

Regards,
+1 on this notion. Point him in a direction and move on.
I also agree. You can’t save him from himself if he doesn’t care enough about his money to perform due diligence. But at least with Vanguard, he won’t get ripped-off in fees.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
Topic Author
DressSock
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Re: Relative asked for help

Post by DressSock »

retired@50 wrote: Tue Jun 11, 2024 9:00 am
DressSock wrote: Tue Jun 11, 2024 8:57 am
climber2020, retired@50, SevenBridgesRoad: Trust me. I've told him about the site and to come read to see what would suit him best. He's not interested in that. This is the main reason he was going to hire a financial advisor.
In that case, send him to Vanguard Personal Advisory Services or Vanguard Digital Advisor.

See link: https://investor.vanguard.com/advice/pe ... bo-advisor

Vanguard will help him avoid the pitfalls of many advisers. Those pitfalls being high costs and complicated portfolios.

Regards,
Thank you. I think I will go this route, but still let him consider an adviser if that's what he truly wants to do. I'll provide it as another option for him to look at.
toddthebod wrote: Tue Jun 11, 2024 10:23 am Well, which is it?
I phrased it poorly. He doesn't invest his money or keep in a high yield savings account. He simply lets it sit in his savings account which has accumulated to $310k.
sailaway
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Re: Relative asked for help

Post by sailaway »

DressSock wrote: Tue Jun 11, 2024 12:10 pm
retired@50 wrote: Tue Jun 11, 2024 9:00 am
DressSock wrote: Tue Jun 11, 2024 8:57 am
climber2020, retired@50, SevenBridgesRoad: Trust me. I've told him about the site and to come read to see what would suit him best. He's not interested in that. This is the main reason he was going to hire a financial advisor.
In that case, send him to Vanguard Personal Advisory Services or Vanguard Digital Advisor.

See link: https://investor.vanguard.com/advice/pe ... bo-advisor

Vanguard will help him avoid the pitfalls of many advisers. Those pitfalls being high costs and complicated portfolios.

Regards,
Thank you. I think I will go this route, but still let him consider an adviser if that's what he truly wants to do. I'll provide it as another option for him to look at.
toddthebod wrote: Tue Jun 11, 2024 10:23 am Well, which is it?
I phrased it poorly. He doesn't invest his money or keep in a high yield savings account. He simply lets it sit in his savings account which has accumulated to $310k.
$1200/pa on $310k is nearly 4%. Assuming you were rounding, that sounds like it is a HYSA.

If someone isn't interested in educating themselves for DIY, the next best is a Vanguard, Fidelity or similar low fee advisor that isn't going to move things around and invest in high fee funds.
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greg24
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Re: Relative asked for help

Post by greg24 »

I'd suggest a first step of helping your friend move that 310k into a money market at Vanguard, Fidelity, Schwab, etc. They could easily increase that $100 a month to $1,000 a month.
scophreak
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Re: Relative asked for help

Post by scophreak »

KlangFool wrote: Tue Jun 11, 2024 8:27 am A) He cannot afford to buy a house. If he buys a house, nothing else matters.

B) Please ask him why he can afford to buy a house when he is only saving 20+K in the 401K per year.

C) And, if he is only saving 20+K per year, how could he be only spending 7K per month?

D) Gross income = 240K. Assume taxes at 80K per year (very high estimate) and annual saving of 30K per year, his annual expense is estimated to be 240K - 80K - 30K = 130K per year. This is before buying a house.

KlangFool
What makes you think he is only saving 20+K in the 401K? Sure the deductible contribution limit is only $23,000/yr in 2024, but the TOTAL allowable limit is $69,000 (including employer contributions). Of course, not all plans allow for after-tax contributions but many (including mine) do. This also leads into one of OP's other questions regarding backdoor and MBD Roth. As we know the ability to make after-tax contributions in the 401K provides opportunity for tax-deferred growth, but it also opens the door for MBD Roth conversion of those after-tax contributions (depending on the rules of the particular 401K plan).

Also, don't forget that OP indicated that there is an additional $310k sitting in a savings account in addition to the various 401K balances (of course, we don't have the information on the magnitude of those 401K balances either). I'll certainly stipulate that it would be best if OP could provide further detail to elucidate the situation a bit more.
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slippinsurlies
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Re: Relative asked for help

Post by slippinsurlies »

I wouldn’t “tell him what to do” with his money. What if there is a 40% drop in the market tomorrow? You might have the stomach for that. Will he? Or will it torpedo your relationship?

Instead, think about what you learned that gave you the confidence to do this yourself. Then, think about how you learned it. Reading books, participating in this forum, reading blogs, messing around in Excel, or whatever you did.

Guide him on a journey, using the things you used to learn the skills and confidence that you have.

Then he can do it himself.

If that is still too much work for your friend, then help set him up with Vanguard or similar. I’ve heard good things about their robo-advisor.
“Don’t do something. Just stand there.” -Jack Bogle
KlangFool
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Re: Relative asked for help

Post by KlangFool »

scophreak wrote: Tue Jun 11, 2024 1:17 pm
KlangFool wrote: Tue Jun 11, 2024 8:27 am A) He cannot afford to buy a house. If he buys a house, nothing else matters.

B) Please ask him why he can afford to buy a house when he is only saving 20+K in the 401K per year.

C) And, if he is only saving 20+K per year, how could he be only spending 7K per month?

D) Gross income = 240K. Assume taxes at 80K per year (very high estimate) and annual saving of 30K per year, his annual expense is estimated to be 240K - 80K - 30K = 130K per year. This is before buying a house.

KlangFool
What makes you think he is only saving 20+K in the 401K? Sure the deductible contribution limit is only $23,000/yr in 2024, but the TOTAL allowable limit is $69,000 (including employer contributions). Of course, not all plans allow for after-tax contributions but many (including mine) do. This also leads into one of OP's other questions regarding backdoor and MBD Roth. As we know the ability to make after-tax contributions in the 401K provides opportunity for tax-deferred growth, but it also opens the door for MBD Roth conversion of those after-tax contributions (depending on the rules of the particular 401K plan).

Also, don't forget that OP indicated that there is an additional $310k sitting in a savings account in addition to the various 401K balances (of course, we don't have the information on the magnitude of those 401K balances either). I'll certainly stipulate that it would be best if OP could provide further detail to elucidate the situation a bit more.
scophreak,

It is very simple.

Before someone buys a house, the person should make sure that they have enough savings/investment while renting. Or else, they would not have the money to support the increased housing expense after buying the house. I do not think you disagree with that.

At this moment, this person does not provide enough information to indicate that he can afford to buy the house.

KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
delamer
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Re: Relative asked for help

Post by delamer »

sailaway wrote: Tue Jun 11, 2024 1:08 pm
DressSock wrote: Tue Jun 11, 2024 12:10 pm
retired@50 wrote: Tue Jun 11, 2024 9:00 am
DressSock wrote: Tue Jun 11, 2024 8:57 am
climber2020, retired@50, SevenBridgesRoad: Trust me. I've told him about the site and to come read to see what would suit him best. He's not interested in that. This is the main reason he was going to hire a financial advisor.
In that case, send him to Vanguard Personal Advisory Services or Vanguard Digital Advisor.

See link: https://investor.vanguard.com/advice/pe ... bo-advisor

Vanguard will help him avoid the pitfalls of many advisers. Those pitfalls being high costs and complicated portfolios.

Regards,
Thank you. I think I will go this route, but still let him consider an adviser if that's what he truly wants to do. I'll provide it as another option for him to look at.
toddthebod wrote: Tue Jun 11, 2024 10:23 am Well, which is it?
I phrased it poorly. He doesn't invest his money or keep in a high yield savings account. He simply lets it sit in his savings account which has accumulated to $310k.
$1200/pa on $310k is nearly 4%. Assuming you were rounding, that sounds like it is a HYSA.

If someone isn't interested in educating themselves for DIY, the next best is a Vanguard, Fidelity or similar low fee advisor that isn't going to move things around and invest in high fee funds.
4% per annum on $310,000 would be about $12,000 not $1200.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
scophreak
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Re: Relative asked for help

Post by scophreak »

KlangFool wrote: Tue Jun 11, 2024 1:36 pm
scophreak wrote: Tue Jun 11, 2024 1:17 pm
KlangFool wrote: Tue Jun 11, 2024 8:27 am A) He cannot afford to buy a house. If he buys a house, nothing else matters.

B) Please ask him why he can afford to buy a house when he is only saving 20+K in the 401K per year.

C) And, if he is only saving 20+K per year, how could he be only spending 7K per month?

D) Gross income = 240K. Assume taxes at 80K per year (very high estimate) and annual saving of 30K per year, his annual expense is estimated to be 240K - 80K - 30K = 130K per year. This is before buying a house.

KlangFool
What makes you think he is only saving 20+K in the 401K? Sure the deductible contribution limit is only $23,000/yr in 2024, but the TOTAL allowable limit is $69,000 (including employer contributions). Of course, not all plans allow for after-tax contributions but many (including mine) do. This also leads into one of OP's other questions regarding backdoor and MBD Roth. As we know the ability to make after-tax contributions in the 401K provides opportunity for tax-deferred growth, but it also opens the door for MBD Roth conversion of those after-tax contributions (depending on the rules of the particular 401K plan).

Also, don't forget that OP indicated that there is an additional $310k sitting in a savings account in addition to the various 401K balances (of course, we don't have the information on the magnitude of those 401K balances either). I'll certainly stipulate that it would be best if OP could provide further detail to elucidate the situation a bit more.
scophreak,

It is very simple.

Before someone buys a house, the person should make sure that they have enough savings/investment while renting. Or else, they would not have the money to support the increased housing expense after buying the house. I do not think you disagree with that.

At this moment, this person does not provide enough information to indicate that he can afford to buy the house.

KlangFool
I agree that there isn't enough information provided, but it cuts both ways. There isn't enough information provided to indicate that he CANNOT afford to buy a house. I'm simply pointing out that you have made clear statements/assumptions in your replies in spite of not having information to support those contentions. Just a couple of examples are:

1) He is only saving $20k+ in the 401K: nothing in the OP indicates this. As I have already mentioned, it's absolutely possible that "maxing out" the 401K is actually $69K in total yearly savings if after-tax contributions are allowed and made.

2) There is not sufficient savings to afford to purchase a house: not supported by the known facts and we simply don't have enough information to make a judgement either way. All we know for certain is that there is a) a current 401K of unknown magnitude with at least $23k in yearly savings (i.e. maxing out deductible contributions), but possibly up to $69k in yearly savings, b) at least 2 other 'old' 401K accounts of unknown magnitude from previous jobs, c) at least $310k in liquid cash, and d) $240k in yearly income with only $84k in yearly expenses.
KlangFool
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Re: Relative asked for help

Post by KlangFool »

scophreak wrote: Tue Jun 11, 2024 1:49 pm
KlangFool wrote: Tue Jun 11, 2024 1:36 pm
scophreak wrote: Tue Jun 11, 2024 1:17 pm
KlangFool wrote: Tue Jun 11, 2024 8:27 am A) He cannot afford to buy a house. If he buys a house, nothing else matters.

B) Please ask him why he can afford to buy a house when he is only saving 20+K in the 401K per year.

C) And, if he is only saving 20+K per year, how could he be only spending 7K per month?

D) Gross income = 240K. Assume taxes at 80K per year (very high estimate) and annual saving of 30K per year, his annual expense is estimated to be 240K - 80K - 30K = 130K per year. This is before buying a house.

KlangFool
What makes you think he is only saving 20+K in the 401K? Sure the deductible contribution limit is only $23,000/yr in 2024, but the TOTAL allowable limit is $69,000 (including employer contributions). Of course, not all plans allow for after-tax contributions but many (including mine) do. This also leads into one of OP's other questions regarding backdoor and MBD Roth. As we know the ability to make after-tax contributions in the 401K provides opportunity for tax-deferred growth, but it also opens the door for MBD Roth conversion of those after-tax contributions (depending on the rules of the particular 401K plan).

Also, don't forget that OP indicated that there is an additional $310k sitting in a savings account in addition to the various 401K balances (of course, we don't have the information on the magnitude of those 401K balances either). I'll certainly stipulate that it would be best if OP could provide further detail to elucidate the situation a bit more.
scophreak,

It is very simple.

Before someone buys a house, the person should make sure that they have enough savings/investment while renting. Or else, they would not have the money to support the increased housing expense after buying the house. I do not think you disagree with that.

At this moment, this person does not provide enough information to indicate that he can afford to buy the house.

KlangFool
I agree that there isn't enough information provided, but it cuts both ways. There isn't enough information provided to indicate that he CANNOT afford to buy a house. I'm simply pointing out that you have made clear statements/assumptions in your replies in spite of not having information to support those contentions. Just a couple of examples are:

1) He is only saving $20k+ in the 401K: nothing in the OP indicates this. As I have already mentioned, it's absolutely possible that "maxing out" the 401K is actually $69K in total yearly savings if after-tax contributions are allowed and made.

2) There is not sufficient savings to afford to purchase a house: not supported by the known facts and we simply don't have enough information to make a judgement either way. All we know for certain is that there is a) a current 401K of unknown magnitude with at least $23k in yearly savings (i.e. maxing out deductible contributions), but possibly up to $69k in yearly savings, b) at least 2 other 'old' 401K accounts of unknown magnitude from previous jobs, c) at least $310k in liquid cash, and d) $240k in yearly income with only $84k in yearly expenses.
scophreak,

Question:

Without sufficient information, is it safer to assume that

A) The person cannot afford to buy the house

Or

B) The person can afford to buy the house

Which one is a better advice? With (A), the person is forced to reexamine his numbers. With (B), the person proceed without further thought.

That is the philosophical difference. You do you. There are too many overly optimistic folks out there. Someone needs to wake others out. I had seen too many people financially destroyed by their houses.

KlangFool
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sailaway
Posts: 8636
Joined: Fri May 12, 2017 1:11 pm

Re: Relative asked for help

Post by sailaway »

delamer wrote: Tue Jun 11, 2024 1:46 pm
sailaway wrote: Tue Jun 11, 2024 1:08 pm
DressSock wrote: Tue Jun 11, 2024 12:10 pm
retired@50 wrote: Tue Jun 11, 2024 9:00 am
DressSock wrote: Tue Jun 11, 2024 8:57 am
climber2020, retired@50, SevenBridgesRoad: Trust me. I've told him about the site and to come read to see what would suit him best. He's not interested in that. This is the main reason he was going to hire a financial advisor.
In that case, send him to Vanguard Personal Advisory Services or Vanguard Digital Advisor.

See link: https://investor.vanguard.com/advice/pe ... bo-advisor

Vanguard will help him avoid the pitfalls of many advisers. Those pitfalls being high costs and complicated portfolios.

Regards,
Thank you. I think I will go this route, but still let him consider an adviser if that's what he truly wants to do. I'll provide it as another option for him to look at.
toddthebod wrote: Tue Jun 11, 2024 10:23 am Well, which is it?
I phrased it poorly. He doesn't invest his money or keep in a high yield savings account. He simply lets it sit in his savings account which has accumulated to $310k.
$1200/pa on $310k is nearly 4%. Assuming you were rounding, that sounds like it is a HYSA.

If someone isn't interested in educating themselves for DIY, the next best is a Vanguard, Fidelity or similar low fee advisor that isn't going to move things around and invest in high fee funds.
4% per annum on $310,000 would be about $12,000 not $1200.
Huh, I missed a decimal place TWICE.
scophreak
Posts: 521
Joined: Tue Jan 12, 2016 12:17 pm

Re: Relative asked for help

Post by scophreak »

KlangFool wrote: Tue Jun 11, 2024 2:49 pm
scophreak wrote: Tue Jun 11, 2024 1:49 pm
KlangFool wrote: Tue Jun 11, 2024 1:36 pm
scophreak wrote: Tue Jun 11, 2024 1:17 pm
KlangFool wrote: Tue Jun 11, 2024 8:27 am A) He cannot afford to buy a house. If he buys a house, nothing else matters.

B) Please ask him why he can afford to buy a house when he is only saving 20+K in the 401K per year.

C) And, if he is only saving 20+K per year, how could he be only spending 7K per month?

D) Gross income = 240K. Assume taxes at 80K per year (very high estimate) and annual saving of 30K per year, his annual expense is estimated to be 240K - 80K - 30K = 130K per year. This is before buying a house.

KlangFool
What makes you think he is only saving 20+K in the 401K? Sure the deductible contribution limit is only $23,000/yr in 2024, but the TOTAL allowable limit is $69,000 (including employer contributions). Of course, not all plans allow for after-tax contributions but many (including mine) do. This also leads into one of OP's other questions regarding backdoor and MBD Roth. As we know the ability to make after-tax contributions in the 401K provides opportunity for tax-deferred growth, but it also opens the door for MBD Roth conversion of those after-tax contributions (depending on the rules of the particular 401K plan).

Also, don't forget that OP indicated that there is an additional $310k sitting in a savings account in addition to the various 401K balances (of course, we don't have the information on the magnitude of those 401K balances either). I'll certainly stipulate that it would be best if OP could provide further detail to elucidate the situation a bit more.
scophreak,

It is very simple.

Before someone buys a house, the person should make sure that they have enough savings/investment while renting. Or else, they would not have the money to support the increased housing expense after buying the house. I do not think you disagree with that.

At this moment, this person does not provide enough information to indicate that he can afford to buy the house.

KlangFool
I agree that there isn't enough information provided, but it cuts both ways. There isn't enough information provided to indicate that he CANNOT afford to buy a house. I'm simply pointing out that you have made clear statements/assumptions in your replies in spite of not having information to support those contentions. Just a couple of examples are:

1) He is only saving $20k+ in the 401K: nothing in the OP indicates this. As I have already mentioned, it's absolutely possible that "maxing out" the 401K is actually $69K in total yearly savings if after-tax contributions are allowed and made.

2) There is not sufficient savings to afford to purchase a house: not supported by the known facts and we simply don't have enough information to make a judgement either way. All we know for certain is that there is a) a current 401K of unknown magnitude with at least $23k in yearly savings (i.e. maxing out deductible contributions), but possibly up to $69k in yearly savings, b) at least 2 other 'old' 401K accounts of unknown magnitude from previous jobs, c) at least $310k in liquid cash, and d) $240k in yearly income with only $84k in yearly expenses.
scophreak,

Question:

Without sufficient information, is it safer to assume that

A) The person cannot afford to buy the house

Or

B) The person can afford to buy the house

Which one is a better advice? With (A), the person is forced to reexamine his numbers. With (B), the person proceed without further thought.

That is the philosophical difference. You do you. There are too many overly optimistic folks out there. Someone needs to wake others out. I had seen too many people financially destroyed by their houses.

KlangFool
Again, what I'm saying is that it's best to NOT make assumptions, but simply note that there is not enough information to give an informed opinion. That is a FAR more useful reply than giving a recommendation that may or may not be supported by the facts of the situation. As they stand, your initial responses were categorical that this person 1) did not save enough yearly and 2) had insufficient retirement savings and could not afford to purchase a home. If you insist on giving opinions without the relevant information, it would at least be helpful to give the caveats as to why you are making such statements or what information might be needed to provide an informed answer.

I will do me, and of course you are free to do you.
tibbitts
Posts: 24488
Joined: Tue Feb 27, 2007 5:50 pm

Re: Relative asked for help

Post by tibbitts »

DressSock wrote: Tue Jun 11, 2024 8:57 am climber2020, retired@50, SevenBridgesRoad: Trust me. I've told him about the site and to come read to see what would suit him best. He's not interested in that. This is the main reason he was going to hire a financial advisor so he can, in his words, "give my money to someone to handle."
Then you are done and should move on. He earns enough to pay any reasonable AUM or other fees for advice.
dbr
Posts: 46716
Joined: Sun Mar 04, 2007 8:50 am

Re: Relative asked for help

Post by dbr »

tibbitts wrote: Tue Jun 11, 2024 3:09 pm
DressSock wrote: Tue Jun 11, 2024 8:57 am climber2020, retired@50, SevenBridgesRoad: Trust me. I've told him about the site and to come read to see what would suit him best. He's not interested in that. This is the main reason he was going to hire a financial advisor so he can, in his words, "give my money to someone to handle."
Then you are done and should move on. He earns enough to pay any reasonable AUM or other fees for advice.
Sometimes we forget that if a person has the money and wants to spend it that this is a choice for that person. Then the issue becomes a consumer advice issue -- who can you pay that gives value* for money and is not a charlatan, a parasite, or even actually a crook.

*Value not meaning outperformance but simply implementing a good plan and doing the work.
backpacker61
Posts: 1648
Joined: Wed May 20, 2020 6:36 am

Re: Relative asked for help

Post by backpacker61 »

I agree with the recommendation to suggest Vanguard Portfolio Advisory Services.

PAS would be a good fit for anyone that doesn't want to mess with it himself.

https://investor.vanguard.com/advice/co ... ent-advice
“Now shall I walk or shall I ride? | 'Ride,' Pleasure said; | 'Walk,' Joy replied.” | | ― W.H. Davies
LotsaGray
Posts: 1511
Joined: Sat Mar 25, 2023 2:08 pm

Re: Relative asked for help

Post by LotsaGray »

Just don’t. You do not want to tell him what to do. You can help him implement HIS lans but you really do not want to formulate that plan. At most you can help him learn enough to develop a plan but you need to be clear you are presenting info for him to use. You are not trying to tell him or even suggest what he should but only help him figure out what that is. You need him to own the success or failure of what is done.
LotsaGray
Posts: 1511
Joined: Sat Mar 25, 2023 2:08 pm

Re: Relative asked for help

Post by LotsaGray »

KlangFool wrote: Tue Jun 11, 2024 2:49 pm
scophreak wrote: Tue Jun 11, 2024 1:49 pm
KlangFool wrote: Tue Jun 11, 2024 1:36 pm
scophreak wrote: Tue Jun 11, 2024 1:17 pm
KlangFool wrote: Tue Jun 11, 2024 8:27 am A) He cannot afford to buy a house. If he buys a house, nothing else matters.

B) Please ask him why he can afford to buy a house when he is only saving 20+K in the 401K per year.

C) And, if he is only saving 20+K per year, how could he be only spending 7K per month?

D) Gross income = 240K. Assume taxes at 80K per year (very high estimate) and annual saving of 30K per year, his annual expense is estimated to be 240K - 80K - 30K = 130K per year. This is before buying a house.

KlangFool
What makes you think he is only saving 20+K in the 401K? Sure the deductible contribution limit is only $23,000/yr in 2024, but the TOTAL allowable limit is $69,000 (including employer contributions). Of course, not all plans allow for after-tax contributions but many (including mine) do. This also leads into one of OP's other questions regarding backdoor and MBD Roth. As we know the ability to make after-tax contributions in the 401K provides opportunity for tax-deferred growth, but it also opens the door for MBD Roth conversion of those after-tax contributions (depending on the rules of the particular 401K plan).

Also, don't forget that OP indicated that there is an additional $310k sitting in a savings account in addition to the various 401K balances (of course, we don't have the information on the magnitude of those 401K balances either). I'll certainly stipulate that it would be best if OP could provide further detail to elucidate the situation a bit more.
scophreak,

It is very simple.

Before someone buys a house, the person should make sure that they have enough savings/investment while renting. Or else, they would not have the money to support the increased housing expense after buying the house. I do not think you disagree with that.

At this moment, this person does not provide enough information to indicate that he can afford to buy the house.

KlangFool
I agree that there isn't enough information provided, but it cuts both ways. There isn't enough information provided to indicate that he CANNOT afford to buy a house. I'm simply pointing out that you have made clear statements/assumptions in your replies in spite of not having information to support those contentions. Just a couple of examples are:

1) He is only saving $20k+ in the 401K: nothing in the OP indicates this. As I have already mentioned, it's absolutely possible that "maxing out" the 401K is actually $69K in total yearly savings if after-tax contributions are allowed and made.

2) There is not sufficient savings to afford to purchase a house: not supported by the known facts and we simply don't have enough information to make a judgement either way. All we know for certain is that there is a) a current 401K of unknown magnitude with at least $23k in yearly savings (i.e. maxing out deductible contributions), but possibly up to $69k in yearly savings, b) at least 2 other 'old' 401K accounts of unknown magnitude from previous jobs, c) at least $310k in liquid cash, and d) $240k in yearly income with only $84k in yearly expenses.
scophreak,

Question:

Without sufficient information, is it safer to assume that

A) The person cannot afford to buy the house

Or

B) The person can afford to buy the house

Which one is a better advice? With (A), the person is forced to reexamine his numbers. With (B), the person proceed without further thought.

That is the philosophical difference. You do you. There are too many overly optimistic folks out there. Someone needs to wake others out. I had seen too many people financially destroyed by their houses.

KlangFool
They are equally bad because a) they are both done wo nearly enough info and b) both propose you are able to tell them something they need to decide. Not buying outcomes can be equally bad as buying. The reality is with $310k savings and $240k income they COULD afford to but a house but it might require major changes they are not willing to do. Ofc it also depends on how much house they need or want.
Irene
Posts: 36
Joined: Sun Jun 09, 2024 9:39 pm

Re: Relative asked for help

Post by Irene »

I know the housing crisis is real, but good gravy, a single man who is making $240K a year and has $300K in cash can afford to buy some damn kind of house. That $7000 per month includes quite substantial rent, I'm guessing.
CoAndy
Posts: 998
Joined: Thu Jun 06, 2013 4:45 pm

Re: Relative asked for help

Post by CoAndy »

DressSock wrote: Tue Jun 11, 2024 8:57 am
climber2020 wrote: Tue Jun 11, 2024 8:13 am Tell him to come here and ask questions so he can learn for himself.

If you manage his money and stocks crash soon after, all of a sudden you're the incompetent family member who lost all his money.
retired@50 wrote: Tue Jun 11, 2024 8:21 am Welcome to the forum.

Teach him.

If you share this site, and maybe suggest some reading he'll be able to get there on his own.

Discuss with him the various concepts. Safe money for the house down payment, invest the rest.

He's a 48 year old man who earns six figures annually, which means he's smart enough to figure this out (with your help :happy ).

Regards,
SevenBridgesRoad wrote: Tue Jun 11, 2024 8:38 am Don't get drawn into being his portfolio advisor. This falls into the category of "no good deed goes unpunished". Encourage him to learn and discuss what he has learned. That's the best path for both of you.
climber2020, retired@50, SevenBridgesRoad: Trust me. I've told him about the site and to come read to see what would suit him best. He's not interested in that. This is the main reason he was going to hire a financial advisor so he can, in his words, "give my money to someone to handle."
KlangFool wrote: Tue Jun 11, 2024 8:27 am DressSock,

A) He cannot afford to buy a house. If he buy a house, nothing else matters.

B) Please ask him why he can afford to buy a house when he is only saving 20+K in the 401K per year.

C) And, if he is only saving 20+K per year, how could he be only spending 7K per month?

D) Gross income = 240K. Assume taxes at 80K per year (very high estimate) and annual saving of 30K per year, his annual expense is estimated to be 240K - 80K - 30K = 130K per year. This is before buying a house.

KlangFool
A, B) Honestly I'm not sure myself.

C) I didn't ask the full details of his expenses. The 7k is a number he mentioned during the discussion. I think he will have to take some time and sit down to calculate the actual numbers.

D) I'll ask him for more information. The conversation we were having was one in passing. The information I provided was what I knew without asking questions directly to him.
smitcat wrote: Tue Jun 11, 2024 8:34 am I think you need to post a whole lot of additional data and also clean up the information already posted.
Examples:
- you say single 48 yo guy but then say 'their' concerning numerous other items (is this a pronoun usage or a numbers mistake)
- if more than one person what are the numbers for each and total
- for expenses what are the curent numbers for rentals for each and totals
Really just a large list of unknown and unclear numbers so far. Please help.
Their is a pronoun usage mistake (went back and corrected it). It's only him. Monthly rent is $2500. I do agree more information is needed. The topic came up in passing and we didn't dive into the full details of it.
Well, he has a big chunk in a savings account so I am guessing he is saving a lot more than the 401(k). Do you know how long it took him to build that up?
Dottie57
Posts: 12642
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Location: Earth Northern Hemisphere

Re: Relative asked for help

Post by Dottie57 »

KlangFool wrote: Tue Jun 11, 2024 8:27 am
DressSock wrote: Tue Jun 11, 2024 8:06 am
  • He's a single 48 year old guy looking to buy a house.
  • Income is $240k and monthly expenses are $7,000.
  • He maxes out his 401k, but nothing else for savings or investing. They have 401k's from previous jobs, but haven't moved them.
DressSock,

A) He cannot afford to buy a house. If he buys a house, nothing else matters.

B) Please ask him why he can afford to buy a house when he is only saving 20+K in the 401K per year.

C) And, if he is only saving 20+K per year, how could he be only spending 7K per month?

D) Gross income = 240K. Assume taxes at 80K per year (very high estimate) and annual saving of 30K per year, his annual expense is estimated to be 240K - 80K - 30K = 130K per year. This is before buying a house.

KlangFool
Spot on. At 48 I had about 450k in 401k and I was making around 90k and a paid off home.

Your friend is Waaaaaay off on expenses. Until he knows his expenses, he doesn’t have much chance of putting more into investments.
User avatar
vnatale
Posts: 3931
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Location: Montague, MA

Re: Relative asked for help

Post by vnatale »

DressSock wrote: Tue Jun 11, 2024 8:06 am I was talking to my cousin this weekend and they told me they were going to get a financial advisor. I said that's not necessary and explained how I have my financials set up with Vanguard TDFs, 75% VTI / 25% VXUS, and a HYSA.

Well that lead to them asking me what they should do. They want me to tell them what to do with their money. What I know about him:
  • He's a single 48 year old guy looking to buy a house.
  • Income is $240k and monthly expenses are $7,000.
  • He maxes out his 401k, but nothing else for savings or investing. He has 401k's from previous jobs, but hasn't moved them.
  • He has $310k sitting in a savings account getting very little interest. Like $100 a month! My jaw dropped when he told me about it.
Based on that, these are initial my suggestions/questions:
  • Keep 6 months expenses in a checking/savings account he can easily access as an emergency fund.
  • Put the estimated amount of a house down payment in a HYSA. Since he lives in NYC, would VUSXX be best for state income tax purposes?
  • Open a tax advantage account, but would a TDF be best? Would 2035 or 2040 make sense?
  • Because of his salary, he can do a backdoor Roth correct? Or would Mega backdoor Roth make more sense? I know he can do both. I haven't done either so I'm not familiar enough to advise him in this area.
  • If he still has money to invest, then invest in VTI-VXUS-BND in a split of 45-35-25. That's my initial thinking because it would reduce the most risk for him at his age. However, it's purely guessing on my part.
I'm open to hear any suggestions and advice. I know what I did for myself wouldn't be 100% applicable to him and I feel a bit more nervous since it's not my own money I'm handling here.

Thanks!
Definitely VUSXX if its dividends would not be taxed by New York State or New York City (if it has income taxes) or both.
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
cmr79
Posts: 1501
Joined: Mon Dec 02, 2013 3:25 pm

Re: Relative asked for help

Post by cmr79 »

LotsaGray wrote: Tue Jun 11, 2024 5:32 pm
KlangFool wrote: Tue Jun 11, 2024 2:49 pm
scophreak wrote: Tue Jun 11, 2024 1:49 pm
KlangFool wrote: Tue Jun 11, 2024 1:36 pm
scophreak wrote: Tue Jun 11, 2024 1:17 pm

What makes you think he is only saving 20+K in the 401K? Sure the deductible contribution limit is only $23,000/yr in 2024, but the TOTAL allowable limit is $69,000 (including employer contributions). Of course, not all plans allow for after-tax contributions but many (including mine) do. This also leads into one of OP's other questions regarding backdoor and MBD Roth. As we know the ability to make after-tax contributions in the 401K provides opportunity for tax-deferred growth, but it also opens the door for MBD Roth conversion of those after-tax contributions (depending on the rules of the particular 401K plan).

Also, don't forget that OP indicated that there is an additional $310k sitting in a savings account in addition to the various 401K balances (of course, we don't have the information on the magnitude of those 401K balances either). I'll certainly stipulate that it would be best if OP could provide further detail to elucidate the situation a bit more.
scophreak,

It is very simple.

Before someone buys a house, the person should make sure that they have enough savings/investment while renting. Or else, they would not have the money to support the increased housing expense after buying the house. I do not think you disagree with that.

At this moment, this person does not provide enough information to indicate that he can afford to buy the house.

KlangFool
I agree that there isn't enough information provided, but it cuts both ways. There isn't enough information provided to indicate that he CANNOT afford to buy a house. I'm simply pointing out that you have made clear statements/assumptions in your replies in spite of not having information to support those contentions. Just a couple of examples are:

1) He is only saving $20k+ in the 401K: nothing in the OP indicates this. As I have already mentioned, it's absolutely possible that "maxing out" the 401K is actually $69K in total yearly savings if after-tax contributions are allowed and made.

2) There is not sufficient savings to afford to purchase a house: not supported by the known facts and we simply don't have enough information to make a judgement either way. All we know for certain is that there is a) a current 401K of unknown magnitude with at least $23k in yearly savings (i.e. maxing out deductible contributions), but possibly up to $69k in yearly savings, b) at least 2 other 'old' 401K accounts of unknown magnitude from previous jobs, c) at least $310k in liquid cash, and d) $240k in yearly income with only $84k in yearly expenses.
scophreak,

Question:

Without sufficient information, is it safer to assume that

A) The person cannot afford to buy the house

Or

B) The person can afford to buy the house

Which one is a better advice? With (A), the person is forced to reexamine his numbers. With (B), the person proceed without further thought.

That is the philosophical difference. You do you. There are too many overly optimistic folks out there. Someone needs to wake others out. I had seen too many people financially destroyed by their houses.

KlangFool
They are equally bad because a) they are both done wo nearly enough info and b) both propose you are able to tell them something they need to decide. Not buying outcomes can be equally bad as buying. The reality is with $310k savings and $240k income they COULD afford to but a house but it might require major changes they are not willing to do. Ofc it also depends on how much house they need or want.
I have made this point to KF on multiple prior occasions, and all I've ever succeeded in doing is sidetracking the conversation.
hoofaman
Posts: 1056
Joined: Tue Jul 14, 2020 3:39 pm

Re: Relative asked for help

Post by hoofaman »

climber2020 wrote: Tue Jun 11, 2024 8:13 am Tell him to come here and ask questions so he can learn for himself.

If you manage his money and stocks crash soon after, all of a sudden you're the incompetent family member who lost all his money.
+1

I am careful to only give general information when asked, but never specific advice or any suggestions, I also point everyone to bogleheads forum.

Even a comment like: "Buy broad market ETFs, such as VTI" can be dangerous because the person might buy it, then sell it a few months later when it dips 5%. Now the person might believe it's your fault they bought an investment you recommended that "lost money"
Lazareth
Posts: 338
Joined: Tue Nov 01, 2016 9:21 am
Location: USA

Re: Relative asked for help

Post by Lazareth »

climber2020 wrote: Tue Jun 11, 2024 8:13 am Tell him to come here and ask questions so he can learn for himself.

If you manage his money and stocks crash soon after, all of a sudden you're the incompetent family member who lost all his money.
I agree 100%. Absent a market crash, any simple annoyance in their investment picture will be your fault either directly or by some contrived connection to your "advice". Instead, point them to this website or give them a book, perhaps by John Bogle or similar, and let them take it from there.
a/70, retired, married, enjoy p/t employment. Simplified our portfolio to a single all-in-one target-date balanced index fund for easy withdrawals and no-stress asset allocation.
TN_Boy
Posts: 4253
Joined: Sat Jan 17, 2009 11:51 am

Re: Relative asked for help

Post by TN_Boy »

DressSock wrote: Tue Jun 11, 2024 8:06 am I was talking to my cousin this weekend and they told me they were going to get a financial advisor. I said that's not necessary and explained how I have my financials set up with Vanguard TDFs, 75% VTI / 25% VXUS, and a HYSA.

stuff deleted
I commend you for trying to help, and concur with the many suggestions to help the cousin learn to help themself. High level ideas are great also.

But when the cousin said this:
I was talking to my cousin this weekend and they told me they were going to get a financial advisor.
And you replied:
I said that's not necessary and explained how I have my financials set up with Vanguard TDFs, 75% VTI / 25% VXUS, and a HYSA.
you were incorrect or at least incomplete. A financial advisor is not necessary ... for you .... But your cousin is not you.

I've never used a financial advisor. But I have friends -- friends who are quite happy with their financial situation and seem to be doing just dandy -- who have financial advisors. And some of these people are smart professionals without spending issues.
spencer99
Posts: 501
Joined: Thu Apr 01, 2010 5:17 pm

Re: Relative asked for help

Post by spencer99 »

DressSock wrote: Tue Jun 11, 2024 8:57 am
so he can, in his words, "give my money to someone to handle."
Fixed that for you.
CookieDough
Posts: 246
Joined: Sun Dec 25, 2022 1:07 pm

Re: Relative asked for help

Post by CookieDough »

an_asker wrote: Tue Jun 11, 2024 10:18 am
climber2020 wrote: Tue Jun 11, 2024 8:13 am Tell him to come here and ask questions so he can learn for himself.

If you manage his money and stocks crash soon after, all of a sudden you're the incompetent family member who lost all his money.
Exactly!!
Agreed.

OP, I think what you should do is back away slowly. Keep directing him to resources he can use for learning. If he doesn't want to learn and prefers to hire a financial planner, point him toward online resources about how to pick a financial planner, and what questions to ask.

It's okay that he doesn't want to manage his own money. Let him do it the way he wants. Just point him to information. Don't take responsibility for any part of his finances.
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