Planning for Our Financial Future

Summary

Podcast Summary: Planning for Our Financial Future
Jill on Money with Jill Schlesinger
Release Date: January 7, 2025

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Introduction

In the episode titled "Planning for Our Financial Future," host Jill Schlesinger, CFP®, engages with Kay, a 41-year-old listener, to delve into comprehensive financial planning tailored for middle-aged families. The conversation emphasizes strategic saving, retirement planning, debt management, and preparing for future educational expenses for children.

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Guest Introduction: Meet Kay

Jill welcomes Kay to the show, highlighting her distinctive southern accent and setting the stage for an insightful discussion.
Jill Schlesinger [00:00]: "Welcome to the Jill on Money Show. It's Tuesday, January 7th and we are here answering questions from you, our wonderful listening audience."

Kay [03:27]: "Hey there. Thanks for having me."

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Financial Situation Overview

Income and Employment

Kay and her husband, both aged 41, present a balanced financial household with diverse income streams.
Kay [03:45]: "My husband and I are both 41. He is the primary breadwinner and he's self-employed as a photographer... his average income has been about $115,000 a year."
Kay [04:11]: "I work for a small nonprofit and I'm only making about $45,000 a year, but it's a great work situation for me."

Their employment statuses highlight a dual-income household with one partner in a higher-earning self-employed role and the other in a steady nonprofit position.

Health Insurance

They maintain a high-deductible health insurance plan, managing costs out-of-pocket while keeping premiums affordable.
Kay [04:24]: "We have a pretty high deductible health insurance plan that we just pay for out of pocket, but the monthly premium's not bad."

Family and Housing

Kay and her husband are raising two children, aged 9 and 11, in a public school system.
Kay [04:36]: "Yes, we have two children and they are 9 and 11... they're in public school."

They recently purchased a home at a favorable price during a market downturn, resulting in minimal remaining mortgage debt.
Kay [05:49]: "We bought our house for a great price... we only have about $4,000 left on our mortgage."
Jill Schlesinger [06:22]: "And you only have $4,000 left on the mortgage?"

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Retirement Planning

Husband's SEP IRA

Recognizing the importance of retirement savings, Kay and her husband established an SEP IRA five years ago, accumulating approximately $210,000.
Kay [04:57]: "We started an SEP IRA... now we have about $210,000 in that."

Kay's 401(k)

While Kay doesn't have a current retirement plan through her nonprofit, she maintains two old 401(k) accounts totaling around $40,000. Kay [05:25]: "I have a couple of old 401ks from when I had other jobs and there's about $40,000 in there."

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Mortgage and Home Ownership

Kay proudly shares their near mortgage-free status, having paid down their house significantly.
Kay [05:38]: "We have been paying down on it and so we only have about $4,000 left on our mortgage."
Jill Schlesinger [06:32]: "I remember when my father paid off my parents mortgage... you're going to stay in this house Even though it's 100 years old, right?"

The strategic mortgage reduction has provided them with financial flexibility, freeing up approximately $500 monthly once fully paid.

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Emergency Fund

Maintaining financial security, Kay and her husband have an impressive emergency reserve fund of around $80,000.
Kay [07:11]: "We have about $80,000 in our emergency reserve fund."

This substantial safety net is particularly prudent given the husband's self-employed status, ensuring stability in uncertain times.

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Education Savings for Children

Despite their strong financial foundations, Kay acknowledges the need for guidance on saving for their children's education.
Kay [07:11]: "We haven't done anything yet... should we start college funds or just help them out when the time comes?"

Jill recommends proactive measures to secure their children's educational futures.

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Life Insurance and Estate Planning

Kay and her husband currently hold life insurance policies but recognize the necessity to increase coverage and establish essential estate planning documents.
Jill Schlesinger [11:32]: "Get term life insurance... you just have to get it done."
Kay [11:59]: "We have to do that. We have not done that."

Jill emphasizes the importance of wills, power of attorney, and healthcare proxies, advising Kay to seek professional assistance or utilize online resources to complete these critical documents.

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Jill's Recommendations

Roth IRA Contribution

Jill suggests Kay initiate a Roth IRA to complement their existing SEP IRA, enhancing their retirement savings strategy.
Jill Schlesinger [09:27]: "Why don't we start a Roth IRA for you? To me, it's kind of a no brainer..."

529 Plan for Education Savings

To prepare for their children's education expenses, Jill advises exploring 529 plans, especially if their state offers tax deductions.
Jill Schlesinger [09:43]: "Look, Mark, do you agree with the Roth IRA before the 529 plan? Mark: Yeah, 100%."

Maximizing Retirement Contributions

Jill encourages both Kay and her husband to maximize their retirement contributions by utilizing Roth IRAs and considering additional brokerage accounts for non-retirement investments.
Jill Schlesinger [14:38]: "You would just open up a separate brokerage account at Vanguard and throw some index funds in there and go to sleep at night."

Life Insurance Adjustment

Jill underscores the necessity of updating life insurance policies to reflect current needs, suggesting term policies with durations aligned to their children’s growth.
Jill Schlesinger [11:44]: "Get term life insurance. You don't have to get it for that long... get like 15-year term policies and be done."

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Conclusion: Key Takeaways

Kay's financial journey demonstrates the effectiveness of proactive planning and disciplined saving. By addressing retirement accounts, reducing mortgage debt, and establishing a robust emergency fund, Kay and her husband are well-positioned for future financial stability. Jill's expert advice further guides them to optimize their savings strategies, enhance life insurance coverage, and initiate education savings plans, ensuring a comprehensive approach to managing their financial future.

Notable Quotes:

• Kay [03:34]: "I'm trying to plan ahead for the future, but I'm trying to do so in an even more forward-thinking way."
• Jill Schlesinger [09:27]: "Why don't we start a Roth IRA for you? To me, it's kind of a no brainer..."
• Jill Schlesinger [11:32]: "Get term life insurance... you just have to get it done."
• Kay [13:39]: "If we really just went hard at saving and investing... our lives would look a lot different maybe 10 years down the road."

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Final Thoughts

This episode of Jill on Money serves as an invaluable resource for listeners navigating similar financial landscapes. Kay's story, coupled with Jill's actionable advice, offers a blueprint for effective financial planning, emphasizing the importance of retirement savings, debt management, and preparing for future educational costs.

For more insights and personalized financial guidance, visit jillonmoney.com.

Transcript

[Jill Schlesinger]

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[Kay]

Hey there. Thanks for having me.

[Jill Schlesinger]

See that? Hey there. I like that. What brings you to our our airwaves?

[Kay]

Well, I just, I'm trying to plan ahead. I've started planning ahead for the future, but I'm trying to do so in an even more forward thinking way. So.

[Jill Schlesinger]

All right, so tell us about yourself.

[Kay]

Okay, so my husband and I are both 41. He is the primary breadwinner and he's sel employed as a photographer. So he, you know, he's out there hustling all the time and he has done great, way better than we thought. So I'd say for the past few years, you know, his average income has been about $115,000 a year, which for where we live. Yeah. And for where we live is great.

[Jill Schlesinger]

Fabulous.

[Kay]

Yes. And I work for a small nonprofit and I'm only, you know, I'm making about $45,000 a year, but it's a great work situation for me.

[Jill Schlesinger]

And do you get your benefits through you?

[Kay]

No. So we have, you know, we have a pretty high deductible health insurance plan that we just pay for out of pocket, but the monthly premium's not bad. So.

[Jill Schlesinger]

Okay. All right, that's good. And is it just you two? Are there some kids or animals or anything like that?

[Kay]

Yes, we have two children and they are 9 and 11.

[Jill Schlesinger]

Great. Are they in public or private school?

[Kay]

Right now they're in public school and they'll be staying in public school forever until they're 50.

[Jill Schlesinger]

They're going to stay in school. Does your husband have a retirement plan that he uses for for his self employed employment income?

[Kay]

So probably about five years ago it just sort of hit me over the head and I was like, oh, well, we need to think about all this. So then we started an SEP ira. And so, you know, in the past several years we've tried to contribute to that in a pretty meaningful way. So now we have about $210,000 in that.

[Jill Schlesinger]

Wow, that's great. And what about you through the small nonprofit, do you also have a plan?

[Kay]

No, I don't have anything like that, but I do have a couple of old 401ks from when I had other jobs and there's about $40,000 in there.

[Jill Schlesinger]

Are they still at the 401k plan provider or have you rolled them into IRAs?

[Kay]

They're still at the plan provider.

[Jill Schlesinger]

Okay, so a couple like two.

[Kay]

Yes. Yeah.

[Jill Schlesinger]

And you said 40, right?

[Kay]

Yeah.

[Jill Schlesinger]

Great. How about a house? Do you live somewhere or do you live in a cave?

[Kay]

Yes.

[Jill Schlesinger]

Okay. In a cave.

[Kay]

Yes, we live in a house. And we were very blessed to buy this house when the market was really ditched. So we bought our house for a great price. And even though I know this goes against your advice, we have been paying down on it and so we only have about $4,000 left on our mortgage.

[Jill Schlesinger]

Well, I can't tell you anything to do because you've already done it.

[Kay]

What's the house worth now at this point? It's where. I mean, it's a hundred year old house, so it's got its issues. But I mean the market in our neighborhood now it's probably worth about 300,000.

[Jill Schlesinger]

And you only have $4,000 left on the mortgage?

[Kay]

Yes.

[Jill Schlesinger]

Are we gonna have a big party when that's done?

[Kay]

I don't know. It's weird. I mean, you know, I'm proud of us, but then you don't want to brag.

[Jill Schlesinger]

You can brag to us. You can totally brag to us.

[Kay]

Yes, I'll write to you. My mother, my real estate agent, but exactly.

[Jill Schlesinger]

I remember when my father paid off my parents mortgage. He took the mortgage, the last mortgage, the mortgage document, and he put it in the fireplace. He was so happy. He was so proud of himself. So you're going to stay in this house Even though it's 100 years old, right?

[Kay]

Yes. I mean, hopefully once we get it paid off and I can maybe wear my husband down a little, we could start dumping some money into some improvements.

[Jill Schlesinger]

But okay, how, how do you like when you think about the kids, are we putting it, Are you guys putting any money away for education for them or are you going to do this out of cash flow? What's your view on education?

[Kay]

That' one thing that we need some advice on because we haven't done anything yet. You know, that's, that's one thing that I need to know. Like should we start college funds for them? Or, you know, can we get ahead of things enough since they're still pretty young that maybe we can have enough money to just help them out when the time comes?

[Jill Schlesinger]

Right, right. How much money do you have? Like in the bank, the emergency reserve fund, around $80,000. Oh, that's good. And I, I presume it's sort of like that. You keep it on the high side because he is self employed and you want to be careful.

[Kay]

Yeah, exactly.

[Jill Schlesinger]

Right. Okay. The mortgage is going to get very shortly. How much more money is going to get freed up when you don't have a mortgage payment?

[Kay]

I mean, that's probably just going to be maybe. I mean, the mortgage part that we're paying is like $500 a month.

[Jill Schlesinger]

Is there anything else besides the SEP, your old 401k or the emergency reserve fund? Do you have other money that's socked away?

[Kay]

No, that's it.

[Jill Schlesinger]

Okay, got it. It's good. It's all good. When you think about these kids getting older, do you think you'll be working more as they get older?

[Kay]

I think so. I mean, I think right now I'm gonna stick with my job because I have two small children and the schedule is very relaxed and I have, you know, like, I basically don't have bosses.

[Jill Schlesinger]

So I love that. I love those kinds of bosses. The ones that don't exist.

[Kay]

Yes, exactly. So I think that's worth a lot. But I do think I could sort of segue this into a job where I could see, you know, my, my earnings increase.

[Jill Schlesinger]

Mm. Okay. I mean, look, there's a few things. First of all, congratulations, because you really have set yourselves on a great path forward. I'm wondering if maybe for yourself, what might be helpful would be, why not, why don't we start a Roth IRA for you? To me, it's kind of a no brainer because I'm like, oh, house mortgage goes away. And then you'll be in the habit of doing that. Now if you got another job, if you got a full time job and all of a sudden the money's sort of cranking in, then I think beyond that, what you would be thinking about would using a retirement plan for yourself that's offered through work, and then if you've got extra cash flow, maybe if I ranked it, I'd say keep doing your SEP, put your money in a Roth IRA for you, and then let's look into a 529 plan. I don't want to out you on your state, but if your state offers a plan that has A tax deduction it might be worth looking into to at least begin the process of putting a little bit of money away. Right. Mark, do you agree with the Roth IRA before the 529 plan?

[Mark]

Yeah, 100%. And from what I can tell, that state does not have a tax deduction.

[Jill Schlesinger]

Yeah, okay, so if you don't, you know, so if you wanted to. But again, I wouldn't go crazy with this. Do you think your kids are going to be like public college kind of kids?

[Kay]

I mean my older child, it's hard to tell my second one because she's only in third grade. My older child is a real go getter, real smart, very academically driven. So I really have a lot of hope that she could get scholarships.

[Jill Schlesinger]

Yes, I like that. I already have. I like go getter. That's my kind of word. I would like her to be able to, you know, sort of get there and get where she wants to go. But you know, if she's a real go getter and if she's a good student, given the income that you have, Remember if I'm, if I'm a college and I'm looking at you guys right now, I don't see 115,000 plus 45,000. Remember, I look at 115 and I say 115 less the $30,000 you're putting into the retirement account. So I look at you from a financial aid perspective and say you actually might qualify for something pretty interest thing. I think you keep doing what you're doing. Look, there's two things reasons why I think would be great for you to actually have a full time job. Number one, benefits man. Oh my God. Like you guys must. I know it's not that terrible right now, but you know, as you get older, you know it gets tougher. Right. And so we'd love to see you have like a nice fat benefit plan and maybe listen, if you stay in the non profit world, may not pay a lot, but they have great benefits in many places. So maybe I would keep that in mind as you start thinking about cycling out of part time into full time. Like hey, maybe I'll shop around. Not for the highest pay, but I'll look at flexibility and benefits which are really important to me. So that would be where I go. Do you guys have life insurance?

[Kay]

We do, but we need to increase our policies. I know because we got them when our kids were really little.

[Jill Schlesinger]

How much do you have?

[Kay]

I think my husband, it's like 500000 and I'm like just 250,000.

[Jill Schlesinger]

Get term life insurance. You don't have to get it for that long. I mean, your kids are now, you know, they're sort of a little bit older, so you really could get like 15 year term policies and be done. Now what about a will and a power of attorney and a health care proxy?

[Kay]

Well, yeah, we have to do that. We have not done that.

[Jill Schlesinger]

Okay, Come on now.

[Kay]

I know, I know.

[Jill Schlesinger]

I mean, what are you thinking here, girl? You're not. Do you think that you just. You. I'm not gonna die. I love when people say that. Well, it's. I, I don't think that's gonna happen. Well, it may not, but it may. Do you have any friends? You know, like, this is what I do. I go find a friend of yours who like either works in a law firm or is a lawyer and just be like, is there anyone who can help me out with this? And if not, you can just go online and just do something very basic. You know, the, the thing that's important here is that you just have, you know, you have to figure out a guardian, which somehow or other we seem to have been talking to people lately who have really big fights with their spouses about guardianship. So if you have somebody that's in mind, great. If not, just pick the next best person. Don't go crazy about this and get it done. That's it.

[Kay]

Yes. Okay, I'm going to do that. I know I have to do that.

[Jill Schlesinger]

All right, very good. All right, well then that's it. What else, what else can we do for you?

[Kay]

Well, I was wondering. So, you know, it just kind of occurred to me several years ago, like, oh, if I started paying extra, we could get our house paid off. So I started doing that. And so it's kind of occurring to me at this point in my life, like, if we really went crazy on not doing any extraneous spending, if we really just went hard at saving and investing, you know, our lives would look, I feel a lot different maybe 10 years down the road, and especially since my husband is self employed, I would love for him to not have to keep hustling the way he does for the next 15, 20 years, you know?

[Jill Schlesinger]

Yeah. I mean, look, if you. The thing to remember is if he's maxing out his sep, you're then putting money into a Roth ira. He can also put money into a Roth ira. He can do both. So you could, if you really wanted to, like, hustle. What I would say is you do the SEP, you both do Roth IRAs. When you start getting, if you get a full time job and you could put money into a 401k or a Roth 401k, remember that gives you a much bigger contribution limit that you could access and that is how you supercharge your savings. That's really what you do. I mean look, if you, if it's very important to you to have that as flexibility, you know, again, if it were, if you are still working part time and he's got the seven, let's say you've got, he's maxing out his sep, you put six in your Roth, he puts six in his Roth and you still have extra money and you don't want to necessarily do college to the same extent, then you would have a non retirement brokerage account. Where is your SEP held?

[Kay]

Vanguard.

[Jill Schlesinger]

So you would just open up a separate brokerage account at Vanguard and throw some index funds in there and go to sleep at night. If you want to come and join us and talk through whatever's going on in your life that has a financial implication, just go to jillonmoney.com, click the contact us button and let us know if you would like to join us live while you're on the website. Don't forget we've got a lot of content that lives there. We've got the free weekly newsletter and of course we have my book the Great Money Reset. And I always find that in the beginning of the year people are looking to reset their lives. So Maybe you need 10 bold steps to turn chaos into opportunity. If that's you, then you can go to the website and you'll see a link to the book. You can subscribe to us on the Odysee app or wherever you find your favorite podcast. Please leave us a rating and review. Wherever you listen and do something nice for someone else today. Change your work, change your wealth, change your life. Thanks for listening. We'll talk to you tomorrow. Hi, this is Jill Schlesinger. Being a business owner means you're always on adapting, innovating and making big moves. To take your vision to the next level. You need solutions that match your pace, offering flexibility, rewards and tools to help you keep going strong. That's where the American Express Business Platinum Card comes in. A partner for navigating today's business world. You can have a flexible spending limit that adapts with your business, plus the ability to earn 1.5 times Membership Rewards points on select purchases so you earn rewards that can take your business further. See how the American Express Business Platinum Card gives business owners like you the tools and rewards to do more of what they love. Not all purchases will be approved. Terms and points cap apply. Learn [e-mail] AmExBusiness Hey, I'm Ben Stiller.

[Mark]

I'm Adam Scott and we make a.

[Ben Stiller]

TV show called Severance. On January 17th, Severance is back for season two on Apple TV plus and we can't wait for you guys to see it.

[Mark]

And and before the premiere, Ben and I are going to be binging Season one and putting out daily recap podcasts.

[Ben Stiller]

Yep, each weekday beginning January 7th, we'll be dropping an episode featuring exclusive behind the scenes tidbits and brilliant insights from our cast and crew and us Patricia.

[Mark]

Arquette, Britt Lauer, Zach Cherry, John Turturro. The list goes on.

[Ben Stiller]

All your favorite Lumen employees, their friends, families, enemies in your feed every single weekday.

[Mark]

And here's the best part. After that, we're going to keep going. Tune in weekly as we recap every episode of Season two. The podcast drops on the same day the episode comes out.

[Ben Stiller]

It's the Severance Podcast with Ben and.

[Mark]

Adam on Apple Podcasts, the Odyssey app, or wherever you get your podcasts.