Certified financial planners from the National Association of Personal Finance Advisors (NAPFA) took your questions about retirement, taxes, insurance, saving for college and more on Thursday, July 19 from 1pm to 3pm ET.
The planners answered questions in the order they came in. You can read through a transcript of the chat below.
Welcome to today's Jump-Start Your Financial Plan live chat!
Hi, Rich Frazier CFP from Wilmington NC.
We have five NAPFA advisors with us this afternoon: David John Marotta of Marotta Wealth Management in Charlottesville, VA; Bobbie Munroe of Fraser Financial in Atlanta, GA; Debbie and Richard Frazier of Frazier Financial Consultants in Chapel Hill, NC; and Bill Cuthbertson of Fiscalis Advisory, Inc. in San Juan Capistrano, CA.
Thanks for helping out! Is everybody here?
It looks like a couple of the advisors are having technical difficulties, but we're going to get started with Rich and David.
Rich, could you take this first question from Kate?
And David, here's a good basic question from Brenda.
Hello, I'm Bobbie Munroe, CFP, a fee only financial advisor with offices in Atlanta and Tallahasse, FL. I look forward to speaking with everyone today.
Hi Bobbie! Glad you're in. I'm going to send you a question on student loans from cofc06.
Kate, you are correct in that having no credit will hurt your chances to get favorable rates for mortgages and the chance to even get a mortgage. A good way to establish credit is to get utilities in your name and keep up on the payments. Also, get a credit card and keep the balance low and make payments timely. You need to establish that you are one who pays your debt and does not let it build.
Brenda: We recommend living off 65% of your take home pay and putting 15% toward retirement (10% in retirement and 5% in taxable savings) allocating 10% to unknown emergencies and 10% to charitable giving.
Rich, any tips on what kind of credit card a young person like Kate should get?
Thanks David! Are there any budgeting sites or apps you'd recommend?
Brendon: And for software, we recommend either Mint (which is free) or Quicken. Of the two I like Quicken better because it allows for manual entry of purchases and makes it easier to track every account.
Im not sure as to what cards are best, but you can start by getting a card with a low limit, like $1,000, and then you can make sure its something you can handle. Look for a card that has a low rate and some will give you no interest for a year.
Great, thanks David and Rich. Rich, I have a rather complex question for you from "kayakerdude." And David, here's one from Cyndi.
cofc06, this is how financial hardship is defined:
Partial Financial Hardship
A circumstance in which the annual amount due on your eligible loans, as calculated under a 10-year Standard Repayment Plan, exceeds 15 percent of the difference between your adjusted gross income (AGI) and 150 percent of the poverty line for your family size in the state where you live.
kayakerdude, you are correct in that you have a wonderful start for your age. I agree that the next steps would be to pump up the emergency fund to $20,000, you could invest some of that in a short term bond fund such as Vanguard offers. As to the aggressive nature of investments, that all depends on the client and their risk tolerance. You should put the riskier assets in your retirement plans as you cannot access them for 30+ years.
Finally able to log in, Debbie Frazier from Chapel Hill, NC ready.
Bobbie, here's another question for you, from Larry:
Welcome, Debbie! We're so glad you made it. I have a question about about IRAs for you from Tom.
Thanks Rich! Now we're going to swing to the opposite side of the spectrum -- here's a Social Security question from PJHALL.
Tom, it is not too late but you must look to see what the benefits will be for you. Mainly it is not having to take money out at age 70.5 as you do with traditional retirement accounts and if you do need to withdraw money, it is tax free. So, again, you are not too old and I would encourage you to fund your ROTH IRA to the extent that you are able.