Financial advisor/planner? where to start

[Anonymous]

Anonymous wrote:

Anonymous wrote:There seems to be a large variance among folks on how much money one actually needs to earn. Basing your needs on how much your friends make doesn't seem like a good place to start. I don't know how much my friends make with the exception of the Feds since I know their gs level.

I just find it interesting. My husband and I combined make less than the guy who makes $190k. We max out one 401k and an IRA. We are doing a two year pre paid university plan for our two kids and we make extra mortgage payments every year. I feel like we eat out a lot. We do have fairly cheap vacations since we tend to crash at family and friends vacation houses, but I really don't feel like we are ever stressed for cash. Not even when our hot water heater broke.

What kinds of expenses do people have that they make such large amounts and can't achieve adequate savings and lifestyles? The only thing I can think of is if someone has an especially demanding job requiring a nanny and overtime pay. I just use a daycare center, but even we have a cleaning lady. Perspective people!

I am in exactly your boat. We make $127k combined and I feel like we are living on air. We are so flush, it's ridiculous.

BUT. Our housing costs are the same as they were when we made $70k combined. So I imagine that's a big difference - we kept our housing costs the same as our income rose, we weren't keeping up w/ the Joneses.

You know how much luck plays into this, people? When did you buy your home, Ms. $127K "so flush, it's ridiculous"? Not all of us had great timing - not always something you control. When I lost my job now 10+ years ago (2001 in what now seems like a minor recession - didn't feel that way at the time!) we had to move cities & take a loss on our home for the next job (which came with a pay cut). Has taken a long time to work our way back, and it meant that we didn't have the cash to get into the DC market just as it was poised to take off - instead got in at its last peak in 2005. Not a question of keeping up with the Joneses.

Your situation is definitely difficult. But you are not the 32 yr old who makes $190k and is jealous of the 40 something couple making $400k are you? That person's post very much seemed like a keeping up with the Joneses-type person. Are you saying that you need to make $400k to make things work? No! If you were making much less but on a steady and regular basis, wouldn't that be enough? Your issue is that you were laid off and had trouble buying a house. But I can assume you as a home owner in the DC area, you do not need to be making $400k to buy a nice house in a nice neighborhood with good schools and amenities. However that depends on your personal definition of nice. Some people think they need a whole lot more than other people think they need.

[Anonymous]

Anonymous wrote:

We have a similar story to OP, except we were in somewhat dire financial straits three years ago and due to job switches for both of us, are in a startlingly better position now. We started this process last fall with Morgan Stanley in Bethesda. Some things we've done:
- refinanced twice, once to get two loans into one and then to reduce the rate on that loan;
- got Maryland College Investment Plans with T. Rowe Price started for both kids - put a big chunk in for each and set up automatic monthly contributions;
- rolled over old 401Ks into IRAs;
- started new 401K at new firm;
- moved our brokerage account to them from my husband's college friend whose wife is divorcing him because he suddenly started smoking a lot of weed, daily;
- met with an estate planner to finally get wills in place

Still need to do - increase life insurance

I might be forgetting something but that is a good start. There is an initial consultation fee and they take a very small percentage of the assets under management, both if which we have felt were very, very well worth it.

OP here. You list several things we need to do here (including the wills). I am lawyer, I know it's disgraceful that we haven't done this yet. Do you have a specific person @ Morgan Stanley to recommend? Will they be interested in us? (We don't have much in the way of cash to invest currently).

PP back again. We're with John Yetman's group at Morgan Stanley and our broker is Steve Lohman. We didn't have a lot to invest either - we had less than $50K in the pothead broker's account and around $200K in the old 401Ks, but they are worth calling to see. Don't guilt yourself about the wills, just get it done. My husband is a lawyer too and had this fantasy that he was going to do it himself even though he's a financial litigator. Our kids are well past preschool and we are finally getting the basics into place.

And another PP reminded me that we also got an umbrella policy - my husband has been named personally in a lawsuit related to his practice before and I have my own business so it seemed like something we should do, and it's cheap. But PP who is SAHM with no life insurance, you should have some because your role will take $$$ to replace if your kids are younger than teenagers.

[Anonymous]

Anonymous wrote:

We have a similar story to OP, except we were in somewhat dire financial straits three years ago and due to job switches for both of us, are in a startlingly better position now. We started this process last fall with Morgan Stanley in Bethesda. Some things we've done:
- refinanced twice, once to get two loans into one and then to reduce the rate on that loan;
- got Maryland College Investment Plans with T. Rowe Price started for both kids - put a big chunk in for each and set up automatic monthly contributions;
- rolled over old 401Ks into IRAs;
- started new 401K at new firm;
- moved our brokerage account to them from my husband's college friend whose wife is divorcing him because he suddenly started smoking a lot of weed, daily;
- met with an estate planner to finally get wills in place

Still need to do - increase life insurance

I might be forgetting something but that is a good start. There is an initial consultation fee and they take a very small percentage of the assets under management, both if which we have felt were very, very well worth it.

OP here. You list several things we need to do here (including the wills). I am lawyer, I know it's disgraceful that we haven't done this yet. Do you have a specific person @ Morgan Stanley to recommend? Will they be interested in us? (We don't have much in the way of cash to invest currently).

We also use Morgan Stanley in Bethesda.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:There seems to be a large variance among folks on how much money one actually needs to earn. Basing your needs on how much your friends make doesn't seem like a good place to start. I don't know how much my friends make with the exception of the Feds since I know their gs level.

I just find it interesting. My husband and I combined make less than the guy who makes $190k. We max out one 401k and an IRA. We are doing a two year pre paid university plan for our two kids and we make extra mortgage payments every year. I feel like we eat out a lot. We do have fairly cheap vacations since we tend to crash at family and friends vacation houses, but I really don't feel like we are ever stressed for cash. Not even when our hot water heater broke.

What kinds of expenses do people have that they make such large amounts and can't achieve adequate savings and lifestyles? The only thing I can think of is if someone has an especially demanding job requiring a nanny and overtime pay. I just use a daycare center, but even we have a cleaning lady. Perspective people!

I am in exactly your boat. We make $127k combined and I feel like we are living on air. We are so flush, it's ridiculous.

BUT. Our housing costs are the same as they were when we made $70k combined. So I imagine that's a big difference - we kept our housing costs the same as our income rose, we weren't keeping up w/ the Joneses.

You know how much luck plays into this, people? When did you buy your home, Ms. $127K "so flush, it's ridiculous"? Not all of us had great timing - not always something you control. When I lost my job now 10+ years ago (2001 in what now seems like a minor recession - didn't feel that way at the time!) we had to move cities & take a loss on our home for the next job (which came with a pay cut). Has taken a long time to work our way back, and it meant that we didn't have the cash to get into the DC market just as it was poised to take off - instead got in at its last peak in 2005. Not a question of keeping up with the Joneses.

Your situation is definitely difficult. But you are not the 32 yr old who makes $190k and is jealous of the 40 something couple making $400k are you? That person's post very much seemed like a keeping up with the Joneses-type person. Are you saying that you need to make $400k to make things work? No! If you were making much less but on a steady and regular basis, wouldn't that be enough? Your issue is that you were laid off and had trouble buying a house. But I can assume you as a home owner in the DC area, you do not need to be making $400k to buy a nice house in a nice neighborhood with good schools and amenities. However that depends on your personal definition of nice. Some people think they need a whole lot more than other people think they need.

I'm the $190K guy (and the poster above is not). I'm not actually much of a keep up with the joneses person oddly enough - my house is decidedly modest and I dont drive a fancy car at all.. My problem is I want to 1. Travel a lot with my kids, see the world (and there I do tend to spend lavishly), 2. I want to retire by 50, 3. As a function of #2, I have some fairly aggressive savings goals ($100K a year). Item #1 is somewhat in-congruent with #2 and #3. I'm living just fine on $190, but when I hear my friends are at $300K its hard not to want that because it would make my three goals all very easy. (Right now, they take a lot of effort to pull off).

[Anonymous]

Anonymous wrote:

Anonymous wrote:There seems to be a large variance among folks on how much money one actually needs to earn. Basing your needs on how much your friends make doesn't seem like a good place to start. I don't know how much my friends make with the exception of the Feds since I know their gs level.

I just find it interesting. My husband and I combined make less than the guy who makes $190k. We max out one 401k and an IRA. We are doing a two year pre paid university plan for our two kids and we make extra mortgage payments every year. I feel like we eat out a lot. We do have fairly cheap vacations since we tend to crash at family and friends vacation houses, but I really don't feel like we are ever stressed for cash. Not even when our hot water heater broke.

What kinds of expenses do people have that they make such large amounts and can't achieve adequate savings and lifestyles? The only thing I can think of is if someone has an especially demanding job requiring a nanny and overtime pay. I just use a daycare center, but even we have a cleaning lady. Perspective people!

I am in exactly your boat. We make $127k combined and I feel like we are living on air. We are so flush, it's ridiculous.

BUT. Our housing costs are the same as they were when we made $70k combined. So I imagine that's a big difference - we kept our housing costs the same as our income rose, we weren't keeping up w/ the Joneses.

You know how much luck plays into this, people? When did you buy your home, Ms. $127K "so flush, it's ridiculous"? Not all of us had great timing - not always something you control. When I lost my job now 10+ years ago (2001 in what now seems like a minor recession - didn't feel that way at the time!) we had to move cities & take a loss on our home for the next job (which came with a pay cut). Has taken a long time to work our way back, and it meant that we didn't have the cash to get into the DC market just as it was poised to take off - instead got in at its last peak in 2005. Not a question of keeping up with the Joneses.

5/1 - 7:50 here. Are you the one complaining about not making enough at $190l? No? Then I'm not talking to you. In fact, I was saying that $127 is PLENTY to live on in this area, because it is. I am VERY grateful for all the opportunities I've had. I'm just saying people who gripe about $190k "not being enough" need to STFU.

[Anonymous]

Anonymous wrote:We have a similar story to OP, except we were in somewhat dire financial straits three years ago and due to job switches for both of us, are in a startlingly better position now. We started this process last fall with Morgan Stanley in Bethesda. Some things we've done:
- refinanced twice, once to get two loans into one and then to reduce the rate on that loan;
- got Maryland College Investment Plans with T. Rowe Price started for both kids - put a big chunk in for each and set up automatic monthly contributions;
- rolled over old 401Ks into IRAs;
- started new 401K at new firm;
- moved our brokerage account to them from my husband's college friend whose wife is divorcing him because he suddenly started smoking a lot of weed, daily;
- met with an estate planner to finally get wills in place

Still need to do - increase life insurance

I might be forgetting something but that is a good start. There is an initial consultation fee and they take a very small percentage of the assets under management, both if which we have felt were very, very well worth it.

All of these are all good steps, but none of them are something that requires a financial advisor. There was a recent Frontline on the powerful effect of fees (both asset management and mutual fund fees) on your overall earnings in retirement accounts. People like to think that investing is so complicated that it should be left up to a professional, yet, study after study has shown that most professionals do not beat the market over the long term. At any rate, now that you have more money, your financial decision in a way become simpler – simply put, you make enough (and it looks like your mortgage is low enough) to be able to max out your retirement accounts and save for college. Max out your 401ks, open IRAs and max those out; open 529s (we are also in MD and put in the max that we are allowed to deduct on our taxes). None of these things is that complicated, it just requires some time on your part. If you feel like consulting with an advisor would lead you to actually following through, then it may be worth it, but I would not approach the matter from the assumption that you do not know enough to do it on your own.

[Anonymous]

Anonymous wrote:

Anonymous wrote:We have a similar story to OP, except we were in somewhat dire financial straits three years ago and due to job switches for both of us, are in a startlingly better position now. We started this process last fall with Morgan Stanley in Bethesda. Some things we've done:
- refinanced twice, once to get two loans into one and then to reduce the rate on that loan;
- got Maryland College Investment Plans with T. Rowe Price started for both kids - put a big chunk in for each and set up automatic monthly contributions;
- rolled over old 401Ks into IRAs;
- started new 401K at new firm;
- moved our brokerage account to them from my husband's college friend whose wife is divorcing him because he suddenly started smoking a lot of weed, daily;
- met with an estate planner to finally get wills in place

Still need to do - increase life insurance

I might be forgetting something but that is a good start. There is an initial consultation fee and they take a very small percentage of the assets under management, both if which we have felt were very, very well worth it.

All of these are all good steps, but none of them are something that requires a financial advisor. There was a recent Frontline on the powerful effect of fees (both asset management and mutual fund fees) on your overall earnings in retirement accounts. People like to think that investing is so complicated that it should be left up to a professional, yet, study after study has shown that most professionals do not beat the market over the long term. At any rate, now that you have more money, your financial decision in a way become simpler – simply put, you make enough (and it looks like your mortgage is low enough) to be able to max out your retirement accounts and save for college. Max out your 401ks, open IRAs and max those out; open 529s (we are also in MD and put in the max that we are allowed to deduct on our taxes). None of these things is that complicated, it just requires some time on your part. If you feel like consulting with an advisor would lead you to actually following through, then it may be worth it, but I would not approach the matter from the assumption that you do not know enough to do it on your own.

Agree 100% with ^^. I think you need more cash, up to $50K. Then definitely max out IRAs for another 11K this year. If you don't have time to research, get an account at TDAmeritrade and get a Vanguard index. Go with an advisor, if you need the follow-through, but make sure it's fee-only. Read blogs like Get Rich Slowly, or spend $150 for a Motley Fool Stock Advisor membership, which will take you a couple of hours of reading, then spend 15 min/month for individual stock recommendations. Definitely also get your estate docs done. We used Aidan Jones 202/331-9306.