Naked With Cash is an ongoing series at Consumerism Commentary in which readers share their households’ finances with other readers. These participants benefit from the accountability that comes from tracking their finances publicly and the feedback of the four expert Certified Financial Planners (CFPs).
This year, we have four participants who will share their financial reports, exposing the results of their financial choices. Each participant is paired with one of our Certified Financial Planners. The experts will provide insight and guidance that will help our participants take their finances to the next level by the end of 2014. Learn about this year’s participants and experts.
Laura and Leon, together, earn more than $125,000 a year. Their main focus right now is paying off student loans, and they want to have that done in order to be better ready to start a family. Laura and Leon hope that they can focus better on their finances, and learn to manage their money more effectively. (Read last month’s update.)
After reading Laura and Leon’s comments, you can read commentary from Roger Wohlner, CFP. Roger Wohlner appears courtesy of The Chicago Financial Planner. This month, there is a focus on emergency preparedness.
Laura and Leon’s Net Worth Statement
Laura and Leon’s Income Statement
Comments and analysis from Laura
This is a pretty big update for us. I have just accepted a position with a consulting firm in another state. We’ve both been at our current jobs long enough to know that they really don’t fit what we want in the long term. This new job is in a field I like, better suited to my experience and skillset, and in a city better suited to lifestyle preferences. My new salary will be $71,000 a year, with a 3% employer match in a SIMPLE IRA and full health insurance for myself. Leon doesn’t yet have a job lined up so it’s up in the air how this really affect us long term.
As with any new job and relocation, there is an enormous amount of information to consider. For the sake of brevity, I will limit this particular update to how this is likely to affect our existing accounts and what my plans are for the next month. However, Leon and I are currently going crazy trying to find a residence in a new state. I know of all the normal “rules” for buying/renting but I don’t know if the particulars of our situation loosen or tighten how those rules apply to us.
Checking accounts: Our current banks are regional banks that do not have branches where we will be moving. Ultimately we will need to close these accounts and open something more useful in our new home town. I’m considering opening a fully online bank account so long as they can offer good ATM rates and easy deposit systems.
Taxable investments: These accounts are earmarked for down payment on a house when we’re ready. A good portion of it is allocated in funds that provide a state tax benefit. We will either use this to buy a house at this time or reallocate the funds to better fit our needs.
401(k)s: Both our accounts are fully vested, so there’s no risk of losing this amount. I have about $15,000 in my 401(k). Since the management and fund fees are relatively low, I will probably leave this amount where it is. Leon’s 401(k) has higher fees, so we’ll probably roll it over to a low-fee IRA when he leaves.
Company profit sharing: This amount won’t vest for a full nine months as of this writing so I will forfeit it when I leave. At only 1% of our total assets, this amount is not worth postponing our future. It’s a shame our net worth will take a slight hit but in some ways I was already cheating by including it in the first place.
HSA checking: My current employer pays the fees associated with this account so long as I’m their employee. Once I leave, there is a monthly $5 fee if the average balance is less than $1,000. If we continue to pay for medical costs at our current rate (something we won’t know for sure until I know more about our new health plans) we will quickly fall below that fee-free level. It might be worth taking all our accumulated out-of-pocket receipts and reimbursing ourselves.
HSA investment: This account comes with a $2.90 per month fee regardless of balance. Since we won’t be eligible to continue contributing, we’ll be stuck with roughly an additional 0.5% annual fee indefinitely. While it would be nice to leave this amount alone as an alternative retirement account, these costs make it seem less worthwhile. We might just cash out of the investments to extend the longevity of our fee-free period in the HSA checking.
Student loans: Our current goal is to contribute a minimum of $2,000 per month and up that to $3,000 per month starting in November. Whether we can continue this goal or not largely depends on how successful Leon is in his job search. We have paid ahead so far in this loan that our next official due date isn’t until September 10th 2017, so if we run into a cash flow crisis anytime in the near future, this is likely one of the first areas we’ll cut spending.
Mortgage: We don’t have one now but we are considering buying. Every metric we’ve looked at shows that in this area, buying is always better than renting. If we do buy right away, it will be something we can afford on my income alone. If nothing suits us in that price range, then we will continue to rent until Leon has a secure job as well.
Our topic of the month is open enrollment and healthcare. I’ve always gone with whatever plan my employer has provided. Ideally, this means a healthcare plan that protects us against a worst-case situation. I’m not worried about shelling out hundreds or even thousands of dollars in the short-term as long as it means we’ll be protected in the event of a really terrible and financially burdensome scenario. I’ve really liked the high-deductible health plan we’ve been on for a few years now, especially since it included employer deposits directly into our Health Savings Account.
As we move forward, I’ll have to run the numbers to see if it would be best for us to get benefits from my new employer, his current employer, one of each, or the open market. The NWC series will actually be a big help in figuring out our best option. Since I’ve been keeping track of all our expenses, I now will have a much better idea about what is the best value for us.
Feedback from Roger Wohlner, CFP
With regard to the move, my basic answer would be not to stretch for a move to a new state or down the block. If you need a reason just look at the performance of real estate during 2008-2009. Yes, it’s coming back in some areas, but anyone who stretches to buy for sure is a complete fool in my opinion. Add to the is the fact you are moving for a new job. What if it doesn’t work out? Is this new state where you want to be, or will you need to sell the house and move?
My main concern here is not about the “math” but rather about moving to a new state and immediately buying your first house. It might make sense to rent for a year and get the “lay of the land” before buying.
Feedback from Luke Landes
Congratulations to Laura on the new job offer! Moving to a new city for a new job always entails some risk. Sometimes you just have to hold your breath and dive in, if the opportunity seems right. But changing your life and your surroundings for a job, especially when you are a couple or have a family, puts a lot of faith in a new job. What if you don’t like it? What if it doesn’t work out. Jobs are fickle, and employers offer no loyalty. Maybe an employer would even pay your moving expenses, but if they let you go, they’re not going to pay your moving expenses to go back to the life you loved.
But that’s a personal decision. I see you have already decided this is the best path for you, and many times it can be. The only question you have with regard to moving is whether to buy or rent. You may have been discussing this privately with Roger over the course of the month, and I think I share his opinion. I’ve asked this question myself as I look for other places in the country (or world) to live; it’s better to rent for some time before buying a house in a new location unless you are sure you’re going to be sticking around for a long time. With Leon’s lack of a job offer currently, the possibility of needing to move in the short term is something you should consider.
That doesn’t mean that buying a house is going to be a bad idea. You’ve run the numbers and you’re happy with the finances of buying, but life sometimes has other plans. Would you be able to find another job in the area? Do you have family or friends for emotional support nearby?
The other decisions you’re making about your finances tied to the job change all make sense.
- I like having one bank with a brick-and-mortar location, even if most of my banking is accomplished online and with online-only banks. But I’m only just getting into the habit of using remote (mobile) deposit for the checks I receive, yet I know that when I need to open a business account, I can walk into a branch where I already have a relationship.
- As good as HSA plans are, they’re a great tool for keeping HSA custodians in business. They’re always collecting fees from someone. I would try to use the funds for qualified expenses — a fair number of random expenses qualify — before you need to begin paying fees. That way you can avoid a penalty or tax for non-qualified withdrawal.
- Keep us posted regarding your health insurance benefit options!
Best of luck with the move!