Thanks, NAPFA! It's a pleasure to work with all of you, as well. This is truly a great service.
And thanks, Bobbie. I'm sure a lot of young adults can learn from that advice. Here's a question from Bruno.
Bruno, I understand your frustration as many planner only work with higher net worth individuals. But take heart. There is a large group who will do hourly work. If you go to the NAPFA planner search, you can find someone hourly in your area. As an extra filter, look for planners who are members of Garrett Planning Network, a grgarrettplanning.comoup that specializes in hourly planning. garrettplanning.com
Thanks, David. That's great advice. Here's a question a tough question from Ty B.
Bobbie, this next question comes from Mario.
@ Tom, teams of advisors can offer some distinct advantages but don't overlook solo practitioners who often have many ways to network with other planners for good solutions (for instance, NAPFA planners can communicate with each other).
Hi, I am Debbie Frazier and happy to be with you today.
Hi Debbie, thanks for joining us!
How about you start with this question from Tjmc1.
Great, thanks David. We had several questions last week about whether it's best to pay off student loans or save for retirement.
David, here's the next question from Bob Mann.
Mario, I often suggest that new couples visit a planner for an hour or so to work out issues like this. Money can cause huge issues in relationships and we want to be sure that you move forward on the same path with an agreed focus. Now, how to split the expenses....equal and fair are not the same thing. I suggest you come up with a budget for the expenses you share...household, vacations, big purchases. Each month both of you deposit into a shared checking account to cover the household expenses. Open a savings account and make monthly deposits for irregular things like the vacations, holidays, furniture...you get the idea. Once you come up with an amount for each, I suggest that you split it up between you. This could be done on a pro-rata basis depending on your income. That said, if one of you makes MUCH less than the other, even funding their share could be a big burden. If so, the higher earning person may contribute even more because they have more disposable income. You need to have a very open discussion about this, write down what you agree to, and then review it perhaps once every 3 to six months. Any amount that is not used for the joint accounts can remain in individual checking accounts for personal use (haircuts, gifts, clothing, etc). Good luck!
Having a high credit score is important in house purchase as most lenders offer their best rates if you have a high score. You said that you score is low, probably because you have not been working and building credit for very long. Paying blls on time and not having high balances is the best way to have a good score, BUT that takes time. Pull your credit report and review all of the particulars. You said in your question that you didn't want to incur debt, but getting a low interest rate card that you can use and pay the balance each month may help.
@Ty, when you get out of medical school you are going to have some big loans. That is when you can make some really good decisions. Don't go right out and buy the big house or nice car because you deserve it. Add a little of the new income to lifestyle but continue to be frugal and try to beat those loans down as quickly as possible.....perhaps 5 years.
Thanks, Debbie. Some good advice there. Here's a question from Jules
I'm ready for a question.
If you have access to a credit union, they often have the best interest rates for savings accounts. I would not invest any of this money, but look at a CD coming due around the time you need the money. The market and even bonds are too volatile to use for money that you will need within a year.
Thanks, Bobbie. Sorry about that! You really do have some lightening-fast fingers. Here's the next question from Brian.
And Debbie, here's one from Phcastil.
@ Jules, I've been self employed for years and remember when I used to hide my quarterly payments in a book:-) The big thing is not to comingle it with money that is spendable.
Brian, I can't say enough about the need to buy long term disability. There is a MUCH greater chance that you will use it than that you will ever use the term life insurance. So get it. Usually if you can get it via your employer, the rates are good. If you have to buy a private policy, it is pricey. BUT you need it. NOTE: If you pay the premium, through payroll deduction or check, the benefits are not taxable. If your company pays the premium for you, the benefits will be taxable. As for life insurance, be sure to get some coverage for your wife. You might be very surprised by how much it would cost to replace her role in the family, especially once you have children.
Some good advice on allocation, thanks David. Here's our next question from Greg.
Phcasti, we get this question from clients alot. The money that you are investing NOW, has 5 years to grow. That money could be invested in a balanced fund (look at Vanguard funds), then you could invest the next couple of years savings in a short term bond fund, again using Vanguard. But once you get within a year or two, it should all be put into a money market fund. Good luck! Just imagine how awful you would feel if it was 2007 and your money lost 30% or more just before you were buying your new home.
Davids adivce on asset placement is very important and spot on. By putting the right investments in the best account for them, you can increase your after tax income in retirement significantly.
The lesson of planning ahead :). Thanks, Debbie. Here's a question from Bilboshire about budgeting.
Bobbie, are you looking for a question? If so, here's on from David.
I apologize if I'm not sending questions fast enough!