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Naked With Cash: Brian, June 2014

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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).

For more information, read this introduction.

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.

Brian and his wife have two young children. Not too long ago, Brian’s wife began staying home with the kids. They have very little credit card debt, since they usually pay off their credit card balances every month. They have student loans and a mortgage. Brian and his wife want to help their children pay for college, but they know that building up retirement has to come first. (Read Brian’s update from last month.)

After reading Brian’s comments, you can see video commentary from Jeff Rose, CFP. Jeff Rose appears courtesy of Good Financial Cents and Life Insurance By Jeff.

Brian’s Net Worth Statement

Brian’s Income Statement

Brian - Naked With Cash

Comments and analysis from Brian

This month is about college planning. Since we have two kids, we are starting to plan for college. Our priority is retirement first, so I do not think I will have enough to pay for the entire college bill for my kids, like I was given by my parents. If it happens, I would feel great to give my kids the boost of not starting their careers in debt. We have set up 529 plans for each of our kids, and try to put money into them at least once a year.

Our goal for these accounts is to fund much as we can.

When our kids are close to college age, I would like to have a discussion with them, and agree what money is available, how much support we will provide, and how much we expect our kid to provide to help determine there path. I have read online that a Roth IRA may be a better option. That way, if the your kids do not go to school you will not have to take the penalty to use the funds for non-education. Kind of curious for other opinions on this.

I still think college is the way to go in most situations. College is an investment. Just like investments, you want a positive gain, this could be salary or experiences. You want to make sure there is a good chance you will gain more than the money you pay for college. I do not think college is for everyone, though. There are plenty of well-paying jobs that college training isn’t required for. There are also many people who do not learn very well in a structured manner, and tend to struggle and waste money by attending college. I think every student should explore what do they want to do for a career, and what path will get them to that goal.

June was a pretty good month. A couple of unplanned expenses sent us over a little. But I am very pleased at the spending levels of our major expenses. I hope to continue to improve in July.

Feedback from Jeff Rose, CFP

Jeff offers insight into trying to figure out how to pay for college for kids, while at the same time making retirement a priority.

Feedback from Luke Landes

Your net worth reports are very inspiring. You’re growing your bottom line significantly every month. If you take your “debt payments” category out of your income statement, which is an account-transfer, not necessarily an expense, you see you have net income every month.

That negative bottom line on your income report does reflect your cash flow. And that it a little concerning, as I’ve mentioned in prior months. You want your cash flow to be positive, if possible, because you need a solid cash cushion in the event of an emergency. With more than $10,000 in checking and savings, you might be okay for three or four months based on your expenses and debt payments today in the event of suspended income. But a three-month unemployment event could clear out your cash and necessitate more debt.

I’d try to expand that cash cushion, if just a little, especially considering your comment about unplanned expenses. And although your net worth is increasing, this month is was due to your investments (which probably includes some contributions) and the jump in your house’s estimated market value. Aim for your net worth increasing due to things more within your control, if possible, so when the things beyond your control (market-driven appreciation, for instance) are good, you’re great, and when they’re bad, you’re still safe.

You have clearly defined your long-term priorities: your retirement first, then your children’s education. That’s a common approach, offered as advice routinely by financial planners to their clients. And it’s a solid philosophy. The main reason behind this approach doesn’t have much to do with greediness or with showing children they have an opportunity to pay for college without parental support, but because borrowing money for college is easier and more affordable than borrowing money for retirement. If you have to borrow money for something, it’s better to borrow from taxpayer-subsidized, government-backed lenders, in theory.

Thanks for making it halfway through the year with Naked With Cash! I’m looking forward to following your progress in the second half of the year.

Published or updated July 29, 2014.

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About the author

Luke Landes is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about Luke Landes and follow him on Twitter. View all articles by .

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