In the series Naked With Cash, seven Consumerism Commentary readers share their financial progress on a monthly basis. They are joined by Certified Financial Planners who provide feedback on their journey. Read this introduction to learn more about the series.
Anne and Matt are twenty-seven years old, living in the Midwest, with two children. Read their bio here for background about their financial situation. Anne and Matt are on Team Neal, with Certified Financial Planner Neal Frankle. Review their August update for last month’s progress.
Their goals are to strike a balance between putting aside money for the future and enjoying the present and to save enough for retirement. Keep reading to see their net worth report, comments about the report and their progress, and thoughts from Neal Frankle.
Anne’s comments and analysis
Big news at Anne and Matt’s house this month: our baby is here! Mama and baby are healthy and home and we couldn’t be happier being a family of five.
My cash tally is a little lower than it would have been otherwise, since I pulled numbers on October 2 rather than the last day of the month like I usually do. So, some bills for October are already deducted from the cash flow. No big deal.
Matt finally has a work-based retirement plan! And just in time for us to make contributions for 2013. We have 6 paychecks to make our own contributions for the year, and we are intending to contribute the maximum $12,000.
Since this has a time deadline and an immediate tax benefit, we have to be aggressive with it.
To help provide a cash buffer, I’ve temporarily stopped our Roth IRA contributions since if we needed to, we could contribute to those accounts until April 2014. I plan to just transfer our normal contribution to a savings sub account at our bank for the next few months. That way, the money is there for our regular expenses if something weird happened and we needed it, but it’s also earmarked for our IRAs so we can just transfer it over soon.
This month, we’re talking about estate planning. Back before our second child was born, we met with an attorney who drew up our wills. If one of us dies, all assets would flow to the surviving spouse. If we both went at the same time, our assets will be equally divided among our children (and the wills were worded so that if we had more children in the future, that child would also be included without re-writing the wills).
We designated guardians and an executor, and back-ups for both.
Personally, I think each parent should have a will in place. Of course, we don’t want the document to be needed for a very long time, but it’s just not worth the extra stress and trouble to put on our loved ones if we died without a will. You can’t assume that assets would automatically flow to the spouse or children. It would likely go to probate first.
Meeting with the attorney was surprisingly easy. He asked us some questions, created a draft, we reviewed it and signed it. The expense was covered under a benefit at Matt’s employer, but without it I think it would have cost just a few hundred dollars. Maybe $200 to 300, but my memory is hazy. I’d gladly pay that fee again to be sure to have a solid will, rather than paying a cheap fee to do myself and not have that assurance.
We each have term life insurance policies. Mine is $1.4 million and Matt’s is $1.5 million. The premiums are affordable and we figure the amount would go a long way to providing the other parent with a secure future for a time. I think we could have gone higher, but we are comfortable with these amounts and hopefully we will outlive the policies anyway.
Feedback from Neal Frankle, CFP
Congratulations on the baby! That is wonderful. I am amazed that you are able to give birth and still manage to post an update. Talk about multi-tasking! Also, I see that all your hard work paid off working on that retirement plan. That’s fantastic. Glad to see you taking advantage of it.
Sounds like you take the issue of estate planning seriously. Bravo! I am really glad you met with an attorney but I have a question or two. Why didn’t the attorney suggest a trust? Did he or she discuss the drawbacks associated with probate? Did they explain that a will must be probated? Also, one other question: Did you set up health powers of attorney or health directives? This is also a super-important issue. When you do a trust, that is typically included. With a will, I have no idea.
Feedback from Luke Landes
First of all, congratulations! Considering the addition to the family, your finances are staying right on track, and that’s excellent. Will you make any changes to your plan with your 529 to account for the baby? At what point do you make those decisions?
Neal asks good questions regarding the option to forming a living trust.