#adulting through financial planning

Photo credit @ Lauren Denise Photography

#adulting   |   The last few months I have taken a dive into the world of financial planning for the future, #adulting. And, might I add, #migraine. Personally, this is not a strong area for me. I did not go to school for anything remotely related to finance or numbers period; until recently, I have been naive and highly uneducated on the subject. After getting the initial bug to get on the “adulting” bandwagon, I bought a Dave Ramsey package. It came with two books, two DVDs, and some other paper material and downloads. Overall, I like Dave Ramsey’s program. I personally know people who have had wonderful success with his program. But, after reading the material I still felt overwhelmed and realized I needed to hand over the reins to someone who could give me tailored, individual help for my financial future.

After debating on several financial planning companies, I decided to go with Northwestern Mutual. After making such decision, I was then heavily encouraged by my own father to stick with that decision (he personally works with the same company). This process is not what I have expected it to be. Initially, I thought I would have a meeting, go over some options, get a game plan, and sign up for whatever options I chose. I was wrong, very wrong. I have been so pleasantly surprised by the time, consideration, and effort the Northwestern Representative I have been working with has put forth on my plan. Several meetings later, a complex plan has been laid out in an easy format for me to understand; the language of finance has been translated to one my ears can pick up on. I have never felt pressure to make certain choices, “hand over money”, or like I was just another number on his client roster. Instead, I feel a sense of relief; this huge, daunting task has just been handed over, and someone will be there to help coach and guide me through it now. My shoulders feel lighter in the most positive way.

Some of my choices  |  Everyone is different, therefore everyone’s financial choices and priorities are different.  Personally, the goal of my plan was flexibility; a plan that would allow me to dip into funds without penalty for whatever reason (education, medical expenses, house purchase, etc.). My two primary priorities are retirement and my daughter’s education. Technically, I am considered self-employed. Because of this, I do not have (and am not offered) a 401k retirement savings options through my work. So, I have chosen to currently plan for my retirement through the use of a Roth IRA. This kind of retirement account is funded with post-tax income, so I can’t deduct what I initially put into the account on my income taxes (unlike a Traditional IRA). However, once I have put funds into the account, any future withdrawals within the Roth IRA guidelines are tax-free. This is why I have chosen to currently use a Roth IRA:

  • When I put funds into a this IRA, it is my money–not a tax-subsidized gift from Uncle Sam–so, I can tap into my contributions (not earnings) at any time, tax-free and penalty-free.
  • Because of my current tax bracket, I won’t miss the upfront tax deduction of a Traditional IRA. Instead, I will benefit from decades of tax-free, compounded growth.
  • Unlike Traditional IRAs, Roth IRAs don’t have required minimum distributions. Because of this, if I get to the point of retirement and plan to pass this investment on to my child(ren) rather than use it, I can leave my money untouched to continue to grow and then pass along.
  • I can contribute to this investment is a very flexible way, there are multiple options. Personally, I plan to contribute to this fund on a monthly basis, and with a larger sum on a semi-annual basis.
  • We broke out the calculator and did the math. If I wait even five years to start saving, I would miss out on hundreds of thousands of dollars. The numbers are shocking. The time is now, a new car can wait. A person doesn’t have to be rich to start planning for tomorrow.

All investing for my daughter will be in some form of, or similar to, a UGMA (Uniform Gift to Minors Act) or UTMA (Uniform Transfer to Minors Account) accounts; meaning, they are custodial accounts in my daughter’s name which I control. Furthermore, if something should happen to me these assets of hers will be placed in her trust and controlled by trustees until she is of the controlling age defined by her trust. With respect to planning for my daughter’s future education, I chose to go with a 529 account because:

  • No income limits, age limits, or annual contribution limits.
  • Earnings of a 529 will be tax-free. Contributions to a 529 don’t have to be reported on my federal tax return.
  • The named beneficiary of this account has no legal right to it, I remain in control of it regardless of my child’s age. So, though this is not a typical UGMA account, I still remain in charge of these assets.
  • If these funds are not used, I can transfer the account to a different beneficiary (i.e any other children I should have, or grandchildren).
  • I can withdraw funds at any time if I should need to.
  • A 529 is low-maintenance investing at it’s finest and requires very little from me once set up.
  • In 2018, deposits up to $15,000 per individual (double if filing jointly as a married couple) will qualify for the annual gift tax exclusion.
  • I can change my 529 plan investment options twice per year if I would wish.
  • I can roll over these funds into another 529 plan one time a year if I should wish. (i.e. There isn’t a federal limit on the frequency of such changes if I replace the account beneficiary with another qualifying family member at the same time.)

Final points   |   In addition to planning for my retirement and daughter’s education, I have taken this opportunity to make some changes to my current life insurance plans. I currently have more than one term-life insurance policy out on myself; one to cover the cost of my college debt, and the other to leave to my daughter. That being said, I was beyond thrilled to find out I could receive double the coverage for half the price with Northwestern. No one had to talk me into, or twist my arm, to sell me on that bargain! Northwestern’s insurance rates are so competitive, I can get double the coverage on myself, whole-life insurance on my daughter, and disability insurance, for the price I am paying for one of my current policies with another company (which, I will add, was already low, to begin with). So, making that switch was a no-brainer. Plus, for me, it will be nice to have all of these different financial planning components under one roof.

The world of finance can be scary and overwhelming. For me, it has been worth the time and effort to have someone help through this life learning curve. Undoubtedly, there is more (and will continue to be more) I will learn as time passes. But, for now, I can rest a little easier at night knowing there is a plan in place for the financial future and security of myself and child. This is just one more way I can continue to help take care of and protect my baby-cakes for today, tomorrow, and years to come. One day I will get the hang of this little thing we call “adulting.” But in the meantime, I’ll say cheers to one more positive-parenting decision (giving myself a pat-on-the-back if I do say so myself 🙂 )!

Look details:  Ted Baker top (additional links here and here)  |  Kate Spade handbag (similar styles here, here, and here)  |  Kate Spade earrings (additional links here and here)  |  Marc Jacobs watch (similar styles here, here, and here)  |  Banana Republic pants (additional link here and similar style here)  |  black pumps (similar styles here and here)  |  Kate Spade sunglasses (additional links here)  |

Happy Planning Everyone!

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