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 earn more than $124,000 a year together. Currently, their goal is to tackle their student debt. Right now they don’t have children, but they are considering starting a family soon. They max out contributions to tax-advantaged retirement accounts and are actively trying to change their financial habits so that they are ready for a possible family and for retirement. (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.
Laura and Leon’s Net Worth Statement
Laura and Leon’s Income Statement
Comments and analysis from Laura
The month of February saw the largest month-to-month jump in our net worth since we started keeping track around December 2012. This is mostly due to the fact that the markets went up quite a bit and we received our tax refund of $1,355 between federal and state.
There’s also a possibility that due to a peculiarity in how Mint processes our accounts, I may or may not have been counting my 2nd monthly paycheck in our net worth on previous months. This could account for as much as a $1,700 swing from one month to the next. I will try to be more consistent from here on out but I think this is a good lesson: even with great tools you still have to apply some critical thinking to your finances in order to make sure everything makes sense.
In other news, I was granted a raise starting February raising my salary to an even $64,000 a year, though this was below the 2% baseline extended to the department in general. My boss was frank that I had some performance issues last year, and though I am improving, I need to step it up a bit more. He agreed that we could revisit salary if I reach a point where my PE stamp has demonstrable value to the company.
I’ve only been working with the company for about two years, but I’m wondering if it’s time for me to start looking for a place more suited to my career desires. My current job relies heavily on project management, and engineers at this company function as jacks-of-all-trades-but-masters-of-none. I personally prefer the more scientific side of applying engineering theory to a design.
I recently ran into a friend of the extended family who is an established engineering consultant in the area and we had some really great conversations. I may start by contacting him to see if he can recommend me to anyone in the area who would be willing to hire and mentor a new PE. The hard part is that I suspect no one will be able to offer nearly as much in compensation as I’m earning now, so this is really going to take some serious thought about what I/we really want for career and family.
Now on to our topic du jour, insurance. My philosophy on insurance is to consider what would happen if the item or person in question were lost. Would it be financially devastating or could I weather through it?
As a good example, if our apartment were to catch fire, the costs to replace all our furniture, clothes, electronics, kitchen essentials and other items would be beyond what we could afford without disrupting our life goals. For that reason we carry renter’s insurance which covers a bit of liability plus household replacement up to $20,000. Conversely, I don’t pay to carry extra insurance on my engagement ring; even though there is tangible worth to this item, the real loss would be sentimental, not monetary.
Our auto insurance coverage falls somewhere between these two extremes. The one car is a salvage with very limited resale value and we only carry liability for it. The other car is currently covered with collision and comprehensive insurance; it wasn’t that long ago that losing and replacing this car would have been highly financially detrimental. However, as I look at our current numbers, I believe we would be able to buy a reasonable replacement without breaking the bank, so I think I’m going to drop this coverage level when our contract renews in the next few months.
We’re also at a point where it doesn’t yet make financial sense for either of us to carry the big million-dollar life insurance policies. We each have equally lucrative careers and a lifestyle that can be reasonably supported on just one income. Our employers offer some complimentary and optional group rate insurance, so I have about $190,000 on myself and Leon has about $100,000 on himself. While it would be emotionally devastating for one of us to lose the other, this level of payout is plenty for the survivor to adjust to life and move forward without disrupting any financial goals. If we were to start a family or a relative became dependent on us, we would increase our coverage immediately.
For health insurance we have a High Deductible Health Plan (HDHP) with an attached Health Savings Account (HSA). Our deductible is $3,000 and our annual out-of-pocket maximum is $6,100. My employer also contributes $2,600 annually to our HSA as part of our benefits, which is more than enough to cover our usual health expenses. I like the HDHP because our medical bills are really simple (just pay with the HSA debit card) and I know we could afford that maximum if we had to.
I have a suspicion, though, that if we wanted to start a family, it would be better to at least temporarily switch to my husband’s more traditional health plan for the pregnancy and first year of child care. His open enrollment will come around August, so I’ll run the numbers again at that time and we’ll see if it’s worth pursuing.
Feedback from Roger Wohlner, CFP
Regarding your employment situation, I concur that it is time to look for another position, especially given your boss’s comments. I suspect that if your employer needed to downsize, you would be near the top of the list. Further, if the position is not to your liking (which is what I gathered from your comments), I’d offer the same observation I’ve given to my kids: “It really stinks to go to a job you don’t like everyday.” I get the money part, but at some point if you aren’t happy it will be reflected in your performance, consciously or not.
I also agree on the life insurance, but should you decide to start a family, certainly buy coverage for your husband, and for yourself as well (if you plan to continue your career). You should look at a minimum of $1 million in term life on each of you. The only argument for buying it now is to make sure you are covered in the event of any future health issues which might prevent you from getting a policy — or at least a decent rate on your coverage.
I didn’t notice any mention of disability insurance. At this stage of life, disability is probably more important than life insurance. This is “lifestyle insurance,” and you should both take as much as you can get at work.
Feedback from Luke Landes
Congratulations on your biggest net worth jump since you began tracking! Whether it’s due to the stock market, a tax refund, or day-to-day choices, it’s still a nice accomplishment.
I understand your frustration in your job. I can’t speak to the culture in your company specifically, but when raises and bonuses are on the line, suddenly middle management is more critical of employees’ performance. It’s worth exploring your options to find a job that’s more satisfying.
The fact that you’re thinking ahead regarding your health insurance coverage as you plan your major life decisions — specifically, starting a family — is a great sign for your future financial stability.