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Young Family Case Study

Starting a family isn't just about getting married, having kids, and buying a house. It's about getting organized, being on the same page financially, protecting against financial failure, and setting your family up for financial confidence.

It is no secret that money can cause a lot of stress in a relationship. In fact, many studies have been done on the topic, and it has consistently been at the top of the list of stresses for couples and one of the leading causes of divorce. The last thing a newly married couple wants to do is head for either of those.

So how do we start on the right foot, and stay there? Communication - something we all know, but sometimes tough for us to do.

When I got married back in 2017, and being in the financial world, I wanted to make sure my wife and I were on the same page financially. It's something I think every couple should openly discuss in a relationship to make sure they are on the same page and their goals are aligned. It may not always be the easiest thing to talk about, especially if you have some credit card debt or a large amount of student loans. When you enter a marriage, you become a team. You and your spouse are both working to get to the same end goal. Some of the goals along the way will have to be worked out and discussed (like a house or where you live, where kids go to school, how much risk to take when investing, etc.), but for most people the end goal is going to be the same. We want to retire!

As I help my clients start to plan, I like to begin with the end in mind. My role is to be a coach for my clients. To be an independent third party for families, and when there are differences in opinions, to help determine a plan for achieving both. It takes time, and it takes communication, however it is something that we can accomplish.

Many families have the following questions:

  1. How much should we be saving? (or, how much are we really saving?)
  2. How do we balance paying down debt and saving money?
  3. Are we saving into the right places?
  4. When should we get life insurance, wills, and disability insurance?
  5. How should we structure our wills, living wills, and powers of attorney? When do we start a trust?
  6. How do we start investing? Where should we start investing? How much risk should we take?
  7. When are we ready to buy a home? How much should we put as a down payment? And what type of mortgage should we pick? 
  8. At what point can we start a business, or buy a rental property?
  9. Should we file taxes joint, or file married but separate? 
  10. When should we start saving for college? Where are the best places to save for college? What are the "gotcha's" with 529 plans?

These questions only begin to scratch the surface of the many things that young families are thinking about as they begin combining their finances and mapping out their financial journey together. The reality is, there's no one-sized-fits-all approach. Everyone is a little different. Some of my clients put very little into their retirement accounts, others max it out. Some of my clients have very complex estate planning, others have something more basic. The answer to many of the questions is, and should be, "it depends", because it truly does. If a family has a focus on getting out of high-interest debt, maybe we shouldn't be contributing much to retirement. It just depends.

Here is what I strive to achieve for my clients as they are working towards building wealth:

  1. Create a system to save the amount of money that is right for your unique situation over time, while taking a strategic approach to paying down debt.
  2. Have money to spend and enjoy throughout the year, without conflicting with your savings goals, and your month-to-month expenses.
  3. Protect what you have today, and what you will build in the future. We can help you avoid financial failure on your journey to financial independence.
  4. Develop a plan that is flexible, but pushes people to do more than they thought was possible. If we are not seeking growth, we become stagnant and inevitably start to decline.
  5. Hold my clients accountable to the goals and objectives they set for themselves, and their family. If it is important to you, then I will do everything I can to help you achieve it.

The funny thing about personal finance is everyone wants it to be really exciting. People may chase rates of return, or try to jump in on the next stock. That is what is exciting and gets people's blood pumping. That's what you talk to your friends and co-workers about (only if you made money, of course).

The reality for me though, I want my finances to be boring. I'll do other things in life that give me excitement - like skiing in the Rockies, going to Braves games, being outdoors and camping, travelling around the country and the world. I don't want my finances to be exciting. I want my finances to provide certainty, confidence, and clarity so I know my plan can be relied upon, not based on a hope that I pick the right stock, or that I have to get the highest rate of return each year.

What if I can get to the same point, but with much less risk along the way?




Young Family Case Study

Let's use a hypothetical example of a family that has gotten married in the last few years, they have recently bought a house, and they are now thinking about starting a family. We'll assume in this example that both spouses currently work, but may decide to have one stay home after kids. To help with our examples of numbers below, we'll also assume this family has a household income of $240,000 before taxes.

When we take a high level picture of this family, let's assume they have actually worked with an advisor in the past. They have an investment account, a retirement account through work, $500,000 of life insurance, Roth IRA's, a joint checking for monthly bills, but a separate checking and savings because they want some independence. They've picked off the low hanging fruit, they've checked off most of the boxes that people say you need to have:

  • Save for retirement
  • Start investing early
  • Have a joint account for expenses
  • Get life insurance while you're young
  • Start a Roth IRA

This is what many people have done, and it is a good start. My job is to take people from good to great, to bring more confidence and clarity to a family's financial life, to help them mitigate risks along the way, and to build wealth to give them a fighting chance at the future they truly desire. So let's see how we can do that.

We must start by getting organized. Taking inventory on where we are today, and where we want to go. This is our map. It allows us to see the curves and road work along the way. It shows us the storms on the horizon. It also shows us the areas that we may need to double down on, the things we are doing really well. So once we have a clear picture, the next step is to begin building. 

When you build a house, you always start with the foundation. Without a strong foundation, everything comes crumbling down. We always need to focus on the foundation - your cash flow. Money in, and money out. In order to have money, you must first make it, and then you must have a system to help you keep it. Think about the last time you saw an ad..5 minutes ago? An hour ago? Companies spend billions because they know you have it and they want it. That's what I am up against. Without a system in place, it becomes tough to save money as more and more pressures mount. Systems keep you on track, without having to do much thinking. It's why the military uses systems - failure is not an option. The system I teach, if you are disciplined and diligent, can help give you the opportunity to save more money without sacrificing your lifestyle.

Once we have that system, we then get into protecting our financial home. Storms of life occur, and risks are everywhere. Sticking our head in the sand is not a financial plan. It feels good until you face adversity, and then it can be devastating. For my clients, financial failure is not an option. And in order to avoid financial failure, we have to make critical decisions. We must have auto, home (or renters), and umbrella insurance. We must have health, dental, vision, disability, and life insurance. BUT we can't just "get them" in order to check the box. We must make sure they are structured properly, because if you need them, you don't get a re-do. You don't get another chance to get different or more coverage. They must be done right BEFORE you need them. We also need to make sure our legal documents, like Wills, Living wills, and powers of attorney are drafted correctly, signed, AND notarized in order for them to be a legally binding document.

Then, after we have built a cash flow system, we have planned for life's curveballs, we start getting into building wealth. Many families hear of "asset allocation" and "diversification", buzz-words that the financial industry likes to talk about, however there are a few things that may be overlooked. Asset location is also important. Which assets should you hold in investment accounts vs retirement accounts?  We also need to discuss risk and return - how it is measured and how it is defined. Many people don't understand risk outside of something feeling "risky". That's normal. We need to review all accounts to eliminate overlap. We need to rebalance portfolios over time. We also need to understand how money works, and how different assets can compliment one another in a wealth building strategy.

We must look at every aspect of your finances because everything is connected. When you throw a pebble into a pond, there are ripple effects. "Having an investment account" or "having a retirement account" isn't a financial plan. It's one of many accounts that can be used to accommodate your financial plan, but there are many critical aspects that go into "having a plan."

After a few months of working together, here are some examples of what my clients can expect:

  1. Confidence. You should have much more confidence, not only in your financial position and where you are going, but in your ability to make wise financial decisions.
  2. Working as a team with your spouse. Being on the same page financially, working as a team, communicating about where you all want to go, and understanding the moving parts in your finances will help to relieve some of the pressures that many families face with their finances.
  3. You have the ability to save more money than you ever expected. With a system to help you prioritize your dollars and be intentional about your saving and spending habits, you can find inefficiencies that many people never knew existed.
  4. Your asset protection strategies will provide clarity that no matter what life throws at you, you can be prepared to avoid that threat from devastating your family, your income, and your future.
  5. Remember what I said earlier about wanting finances to be boring? My clients don't have to hope for rates of return to save them. They don't have to hope for an inheritance to fall into their lap. They don't have to hope social security is around to get them over the hump. My clients take control of their finances, do the little things that add up to big things, and have more time for "adventures" in other areas of their life.