The 30ish Minute Financial Plan

June 28, 2013


This week on The Money-Guy show, Brian and Bo run through a list of items that will help keep you on track throughout your financial marathon. They hit topics from estate planning to negotiating service rates. This is a great show to help establish future plans and to create a checklist to ensure you reach your financial goals.

* Estate planning

  • Protect yourself from the falling piano or being hit by a bus:
    • Have a will (especially if you have children)
    • Life insurance- general recommendation is 10x your annual income in coverage.
      • If you have debt make sure you are adequately insured so the insurance will pay off the debt and also fulfill your long-term goals (Children’s education, Mortgage or Car).
      • www.michaelgassesagency.com – Great link to a free website to get an insurance quote with no personal info.

* Disability insurance

  • Make sure you have adequate coverage of at least 60% of your income, and you pay the premium with after tax dollars so that, if you need the benefit, it is tax free. There is a 25% chance you will become disabled for at least one year between the ages of 20-67.
    • Own occupation- Cannot perform the regular duties of your own profession, but could enter into another profession.
    • Any occupation- Cannot perform the regular duties of any profession – Covers you if you become totally disabled.

* Emergency Reserves

  • Have at least enough money to cover your living expenses for 3-6 months. Where do you fall in that timeline? It depends! If you lost your job, how long will it take to find a new job? If you can find a new job quickly, 3 months should be sufficient. If you work in a highly specialized field, then you should have additional months set aside, more than 6 months may be necessary.
    • Earn interest on you reserves: Some internet based banks will pay close to 1% on cash.
  • Check out these website for great rates:

* Debt management

  • Try to get debt under control as fast as possible. Prepare a detail of all your debt. List the outstanding principal, interest rate, and minimum payment amount. This will allow you to visualize how to establish a plan in order to accomplish your debt repayment goals. Be strategic with your debt repayment. It does not have to be an all-or-nothing.
    • Brian and Bo share some personal stories of individuals they have worked with and how those individuals’ views on debt repayment were somewhat askew.
    • Nice cars are much more expensive than what you see on the surface. Think about the cost of premium gas, oil, tires, and preventative maintenance.
    • Operate in stealth mode: the expenses are much less. Don’t fake success! It is better for people to think that you’re going broke when you’re not, rather than people thinking that you’re rich when you are actually broke.

* Retirement Planning

  • Take the free money in your 401k. It’s cash sitting on the table for the taking. Employers will often give you 3% or more of your income for free, just for contributing to your own retirement.
    • If it is going to cost you to have access to a personal investment account, it may make sense to put more money into the employer sponsored plan in order to get access to cheaper.
    • Once you exceed the 25-28% tax rate, the opportunity cost associated with Roth contributions begins to increase. You will likely have better ability to control your tax rate in retirement than you do now, so sometimes it makes sense to take advantage of current year tax incentives.

* College Savings

  • It is extremely hard to find a retirement loan but rather easy to get a student loan. On top of that, you can even qualify for a tax deduction for the interest you pay!
    • Avoid moving into Jr.’s basement by not going broke trying to finance your children’s education.
    • Utilize either a Coverdell ESA or a 529 plan for incentivized education savings.

* Income Planning

  • Set short and long term goals- Write them down and review them often.
    • Net Worth statement- If something should ever happen to you it is invaluable. It provides an inventory and dollar values for your assets. Make sure you write down insurance info along with important login credentials. Documenting everything makes life easier (for you and your heirs).

* Negotiate with “ungrateful” service providers

  • If you do not shop around, prices go up!
    • Look for new prices on your property and casualty insurance along with your auto insurance. Insurance companies often have great incentives for new policies but do not give existing customers the same deals.
    • Utilities- Natural gas prices are insane; negotiate the price every few months to get lower rates.
    • Negotiate, negotiate, negotiate!

* Analytics do not drive everything

  • Dollar cost average rather than dumping large lump sums of money into the market.
  • Even if you can borrow money dirt-cheap, a great goal is to be debt free when entering retirement. It has a huge psychological benefit.

* Things that you should be thinking about

  • Plant your seed today so that you can watch the tree bear fruit in the future.
  •  There is a good chance that you are the most financially responsible person in your circle of influence, solely because you’re listening to a financial podcast.

* Action Steps

  1. Establish emergency reserves
  2. At a minimum get the full employer match from your retirement plan
  3. If possible, max out your Roth
  4. After that it’s a great idea to go back to your 401k to max it out and even consider making Roth contributions.
  5. If you want additional savings, a brokerage account may be the best option. Don’t overlook Target Date funds or a total stock market index fund in these accounts. They will give you diversification and management at a price.


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