What Comes Next After Establishing Personal Finance Basics?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
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Topic Author
skinsfan
Posts: 27
Joined: Sat Jan 05, 2013 1:14 pm

What Comes Next After Establishing Personal Finance Basics?

Post by skinsfan »

I am looking for advice on what comes next after establishing the basics.

Background: Married (both 31). One baby (we may have more kid(s)).
Combined Income: 220-270k depending on bonuses. 1st income very stable government job, 2nd income relatively stable megacorp job making a little more than the government job.
Debt: None. We currently rent but might buy within next couple years. We have enough cash saved for downpayment, closing costs, surprise expenses, in addition to our emergency fund.
Investments: Max out 401ks and roth IRAs (index funds, 80/20 stocks/bonds). We also have a couple thousand in a 529 (target date fund).

We also just purchased term life insurance (enough to cover if we have more kids and buy a house). We definitely feel fortunate that we've been able to build a solid foundation. My question from people more experienced is what comes next from a personal finance standpoint?

Some follow up questions:
What do we need to do to protect our assets?
How do I know when I need to hire a fee-only financial adviser, accountant, and/or other financial professionals?
Any good resources about setting up a will and/or trust?
Is there anything I should be doing beyond index investing?

Thanks in advance for any advice or resources that are provided.
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JoeRetire
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Re: What Comes Next After Establishing Personal Finance Basics?

Post by JoeRetire »

skinsfan wrote: Tue Jul 24, 2018 2:58 pm Some follow up questions:
What do we need to do to protect our assets?
How do I know when I need to hire a fee-only financial adviser, accountant, and/or other financial professionals?
Any good resources about setting up a will and/or trust?
Is there anything I should be doing beyond index investing?
With these kinds of questions, you certainly could benefit from a fee-only fiduciary financial adviser. That person could help you answer these questions and more.

You might wish to find a few and set up a discussion with each. Ask your questions and see if the answers make sense.
It's the end of the world as we know it. | It's the end of the world as we know it. | It's the end of the world as we know it. | And I feel fine.
H-Town
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Re: What Comes Next After Establishing Personal Finance Basics?

Post by H-Town »

Start with reading this book. It might have all the answers you're looking for:

https://www.amazon.com/Bogleheads-Guide ... dpSrc=srch
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Meg77
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Re: What Comes Next After Establishing Personal Finance Basics?

Post by Meg77 »

You definitely need a will. I'd just ask other attorneys or financial professionals I know for a reference.

You probably don't need a financial advisor at this point (and I am one). As long as most of your assets are personal (home, cars) and retirement (401ks, IRAs), there is not much incentive for most financial advisors to work with you since most still charge by assets under management. You could pay one who charges by the hour if you have a specific question at some point; others target folks your age with monthly retainer fees versus AUM fees. But it's really not needed unless your financials get complicated (you own or plan to start a business; your estate is approaching the estate tax exemption limit; you have a special needs child and want to set up trusts or qualify for benefits; you're trying to figure out when to take social security and how to establish a retirement income stream, you have unique investing needs due to an inheritance or trust or concentration from stock options or RSUs, etc.).

You don't need to do anything extra to protect your assets besides keeping good home/auto, life, health and disability policies in place (your employers may offer disability). An umbrella policy may become worth it once your net worth is over $500K; otherwise basic liability policies are usually sufficient.

A few options for you and your extra cash:

1. Make it a goal to pay cash for a house and just continue piling up extra cash for a few years.

2. Go ahead and buy a house now since you have the down payment; rates and prices are likely to rise over time. You don't have to buy the dream house where you plan to raise the kids; you can buy a condo or townhome near where you are, or get a starter house and move again when the kids are school aged if school district becomes more important. Or go ahead and buy the "forever" house if you can afford it of course.

3. Fully fund a 529 plan for the baby and check college off the list.

4. Start investing in brokerage accounts and wait for opportunity/inspiration to strike. Buy a rental property, buy or launch a business, retire early, or any other thing that strikes your fancy.

5. Make a list of your goals and values with your spouse and pick a few things to spend more on that align with those. A vacation cabin, yoga classes, organic food, a car upgrade, some extra trips, a night nurse, whatever.

:sharebeer
"An investment in knowledge pays the best interest." - Benjamin Franklin
soccerrules
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Re: What Comes Next After Establishing Personal Finance Basics?

Post by soccerrules »

General thoughts.
It appears you are saving about 20% of your gross income. You could stretch to save more now over the next 9-10 years (say to 40) than perhaps ease back to 20%(?). Getting the money in the market sooner will allow the 8th wonder of the world to work in your favor "Compound Interest".

Might consider an Umbrella policy as a layer of protection above and beyond auto/home insurance. Some point to a NW north of $1M is a good marker to consder Umbrella, unless you have unique circumstances where you might want/need to soon (business owner)

Will- I would look at a simple one at a minimum to make sure things are in place in the event of your/spouses untimely passing.

Accountant ? Financial Professional ? -- up to you. I have done my taxes on Turbo Tax for years so I've never used an Accountant. I had a FA paying 1% AUM for 7-8 years but left them to DIY last year . You could hire a fee for service FA to review your portfolio and then provide help with longer term planning. THEN bring the input here for FREE advice.

I would start to consider financial plans
House
Retirement Desires (relo ? )
College funding
larger EF with family (job losses happen, life happens, having some extra cushion helps with transitions)

you appear to have a good start - Congrats
Don't let your outflow exceed your income or your upkeep will be your downfall.
Topic Author
skinsfan
Posts: 27
Joined: Sat Jan 05, 2013 1:14 pm

Re: What Comes Next After Establishing Personal Finance Basics?

Post by skinsfan »

Meg77 wrote: Tue Jul 24, 2018 3:29 pm You definitely need a will. I'd just ask other attorneys or financial professionals I know for a reference.

You probably don't need a financial advisor at this point (and I am one). As long as most of your assets are personal (home, cars) and retirement (401ks, IRAs), there is not much incentive for most financial advisors to work with you since most still charge by assets under management. You could pay one who charges by the hour if you have a specific question at some point; others target folks your age with monthly retainer fees versus AUM fees. But it's really not needed unless your financials get complicated (you own or plan to start a business; your estate is approaching the estate tax exemption limit; you have a special needs child and want to set up trusts or qualify for benefits; you're trying to figure out when to take social security and how to establish a retirement income stream, you have unique investing needs due to an inheritance or trust or concentration from stock options or RSUs, etc.).

You don't need to do anything extra to protect your assets besides keeping good home/auto, life, health and disability policies in place (your employers may offer disability). An umbrella policy may become worth it once your net worth is over $500K; otherwise basic liability policies are usually sufficient.

A few options for you and your extra cash:

1. Make it a goal to pay cash for a house and just continue piling up extra cash for a few years.

2. Go ahead and buy a house now since you have the down payment; rates and prices are likely to rise over time. You don't have to buy the dream house where you plan to raise the kids; you can buy a condo or townhome near where you are, or get a starter house and move again when the kids are school aged if school district becomes more important. Or go ahead and buy the "forever" house if you can afford it of course.

3. Fully fund a 529 plan for the baby and check college off the list.

4. Start investing in brokerage accounts and wait for opportunity/inspiration to strike. Buy a rental property, buy or launch a business, retire early, or any other thing that strikes your fancy.

5. Make a list of your goals and values with your spouse and pick a few things to spend more on that align with those. A vacation cabin, yoga classes, organic food, a car upgrade, some extra trips, a night nurse, whatever.

:sharebeer
Thanks Meg! Lots of great advice for us to think about. It sounds like my most immediate need I'll work on is the will.
il0kin
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Re: What Comes Next After Establishing Personal Finance Basics?

Post by il0kin »

If you're considering a will, you might as well establish a revocable living trust for you and your wife when you speak with an estate attorney. It's easier to add things into the trust as you purchase them rather than re-deed and re-title things later on. This allows you to avoid probate and have complete control of where/how things go were you to die (hopefully not an issue for many many years).
Topic Author
skinsfan
Posts: 27
Joined: Sat Jan 05, 2013 1:14 pm

Re: What Comes Next After Establishing Personal Finance Basics?

Post by skinsfan »

il0kin wrote: Tue Jul 24, 2018 9:03 pm If you're considering a will, you might as well establish a revocable living trust for you and your wife when you speak with an estate attorney. It's easier to add things into the trust as you purchase them rather than re-deed and re-title things later on. This allows you to avoid probate and have complete control of where/how things go were you to die (hopefully not an issue for many many years).
I'll look into that since I don't really know the difference of a will and the revocable living trust (although I've seen the term tossed around on the forum). Thanks for the advice!
il0kin
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Re: What Comes Next After Establishing Personal Finance Basics?

Post by il0kin »

skinsfan wrote: Tue Jul 24, 2018 9:19 pm
il0kin wrote: Tue Jul 24, 2018 9:03 pm If you're considering a will, you might as well establish a revocable living trust for you and your wife when you speak with an estate attorney. It's easier to add things into the trust as you purchase them rather than re-deed and re-title things later on. This allows you to avoid probate and have complete control of where/how things go were you to die (hopefully not an issue for many many years).
I'll look into that since I don't really know the difference of a will and the revocable living trust (although I've seen the term tossed around on the forum). Thanks for the advice!
There are plenty of articles you can find pretty easily. My grandpa died this year and his trust has made administering everything so much easier for my uncle, who is the executor. Everything is spelled out exactly how he wanted it and there is no probate to drag things out and slow things out by getting the state involved.

I was discussing not too long ago with another Boglehead that they handled all of the setup with a local lawyer through their company legal plan. Mine is $18/month and I plan on activating the benefit for the next calendar year and setting up our will and trust. They said it worked essentially like an health insurance plan, the local lawyers contract with the legal coverage and get reimbursed by it for providing services, no out of pocket costs. Of course every plan will vary, but you might check and see if your work has this coverage, it will save you a lot of money vs. paying $2500 or so directly to a lawyer. You own the trust, so you can always pay a lawyer cash to adjust/modify it in the future.
iasw
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Re: What Comes Next After Establishing Personal Finance Basics?

Post by iasw »

OP mentioned they are renting, so they don't have homeowner's. I'm assuming you have renters insurance, yes?

Perhaps an Umbrella policy will make sense to increase your liability coverage on your autos? idk.
MrJones
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Re: What Comes Next After Establishing Personal Finance Basics?

Post by MrJones »

il0kin wrote: Tue Jul 24, 2018 9:03 pm If you're considering a will, you might as well establish a revocable living trust for you and your wife when you speak with an estate attorney. It's easier to add things into the trust as you purchase them rather than re-deed and re-title things later on.
Is this a good step to take before buying a house?

Also, does a revocable living trust apply only to property and such or to investments as well?
il0kin
Posts: 341
Joined: Mon Feb 26, 2018 8:19 pm

Re: What Comes Next After Establishing Personal Finance Basics?

Post by il0kin »

MrJones wrote: Wed Jul 25, 2018 2:22 pm
il0kin wrote: Tue Jul 24, 2018 9:03 pm If you're considering a will, you might as well establish a revocable living trust for you and your wife when you speak with an estate attorney. It's easier to add things into the trust as you purchase them rather than re-deed and re-title things later on.
Is this a good step to take before buying a house?

Also, does a revocable living trust apply only to property and such or to investments as well?
In retrospect, I wish we had established a trust prior to purchasing our home. We will have to re-deed it into the trust when we establish it next year.

Revocable living trusts apply as a vehicle to manage any asset you choose. Home, land, checking account, investment account, IRA, cars, CDs, you name it - all can be placed in the custody of the trust. You also generally set up the trust as the beneficiary of any insurance policies, so when the cash is paid out you control how the money is disbursed after death. As I understand it,the way it works is you are the trustee and everything functions exactly the same as before it was in the trust except you the checks as "MrJones, Trustee" while alive. Trusts are really designed for making things easier after death, and I think there may be some other benefits as far as taxes/legal protections but I am not well versed in those and cannot speak to them.
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Sandtrap
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Re: What Comes Next After Establishing Personal Finance Basics?

Post by Sandtrap »

skinsfan wrote: Tue Jul 24, 2018 2:58 pm I am looking for advice on what comes next after establishing the basics.

Background: Married (both 31). One baby (we may have more kid(s)).
Combined Income: 220-270k depending on bonuses. 1st income very stable government job, 2nd income relatively stable megacorp job making a little more than the government job.
Debt: None. We currently rent but might buy within next couple years. We have enough cash saved for downpayment, closing costs, surprise expenses, in addition to our emergency fund.
Investments: Max out 401ks and roth IRAs (index funds, 80/20 stocks/bonds). We also have a couple thousand in a 529 (target date fund).

We also just purchased term life insurance (enough to cover if we have more kids and buy a house). We definitely feel fortunate that we've been able to build a solid foundation. My question from people more experienced is what comes next from a personal finance standpoint?

Some follow up questions:
What do we need to do to protect our assets?
Estate planning. Seek legal counsel. Will or Trust. >> Umbrella insurance.
How do I know when I need to hire a fee-only financial adviser, accountant, and/or other financial professionals?
When you are financially savvy enough to choose the "right" advisor, . . . you won't need one. It's not rocket science. Immerse yourself in the forum "Wiki" for a free in-depth education. You're already on a good start. Congratulations.
Any good resources about setting up a will and/or trust?
Seek legal counsel for estate planning that fits you perfectly. Forum input = suggestions. Personal legal counsel will advise on what fits "you".
Is there anything I should be doing beyond index investing?
Have a balance between establishing and maintaining a solid financial foundation and plan going forward (you do have an IPS Statement right?) and quality of life and family.

Thanks in advance for any advice or resources that are provided.
Congratulations on your new baby and working hard for a solid financial foundation.
:sharebeer
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MrJones
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Re: What Comes Next After Establishing Personal Finance Basics?

Post by MrJones »

il0kin, thanks for that quick intro. I've been meaning to look into trusts for a while.
Topic Author
skinsfan
Posts: 27
Joined: Sat Jan 05, 2013 1:14 pm

Re: What Comes Next After Establishing Personal Finance Basics?

Post by skinsfan »

Thanks everyone for your feedback!
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