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Financial planning checkup: Total net worth, goals, etc


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So, this thread might take off, or it might die with just a few views, let's see.

 

It's end of year so my wife and I sat down last week for our annual financial check-up and set goals for the next year to make sure we are on track for our 5 year goal of completely owning our dream house, and our 10 year goal of full retirement.  We have a spreadsheet that lists out all of our debts (down to 2 mortgages!) and assets (home, land, rentals, emergency savings, business savings, etc), and therefore gives us our total net worth.

Comparing where we are at with what our goals were at the end of year, we are about 10% ahead, mostly due to stock market growth.  Some of our goals changed mid-year (original goal was to save money to buy property, but this year we found our dream land and bought it, putting about half down so now we have another mortgage), but we can still track how we are doing overall by looking at the total net worth.  

Also, with the additional debt we took on when we bought this land (and the house we will build) we determined I need more life insurance, so that's on my to do list this week.

Does anyone else do this? If not, why not?  Do you know what your total net worth (what you HAVE minus what you OWE) is?  Do you have financial goals set out for the next year, five years, and ten years?  

If not....why not??

If so, would you care to share your goals??

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Yes, I do. We own our home here in N. Texas, as well as our two vehicles. I will qualify for a second pension through my current employer if I stay till 9/1/20. That, plus a prior pension, and SSI would alone bring in about what I’m netting now. Factor in that I have a budget for retirement already planned out which allows for my cancellation of disability insurance, malpractice premiums, and other expenses so I should be doing fine. My wife also qualifies for a pension and partial SSI. This does not take into account our maxing out our Roth IRA’s and adding to our 457b contributions. My budget allows for a monthly car payment so that we’re never in a vehicle more than eight years old. We both already have LT care insurance. The only hangup is that neither of us qualifies for Medicare supplemental coverage through our employers. Bottom line, I think we will be fine as long as we enjoy good health but that’s where the LT care insurance picks up. We could also downsize from our 2200 sq ft home to about 1200 sq ft.

 

In some respects it’s harder to plan since we will have the lifetime pensions which don’t have a fixed financial value. I’ve allocated for Medicare premiums in my budget based upon what my elderly mother pays.

 

I update my budget monthly by making changes for monthly revolving utility costs as I do for my current year budget. This also includes property tax payments since we don’t have a state income tax.

 

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We do something similar, but it is not as in depth simply because we are in our late 20's with no kids (hopefully changing soon!) and I've only been out of PA school for 1 year - we don't have any property at the moment, so net worth = retirement + cash - student loans...thankfully we are already far into the black and the only reason my student loans aren't paid off is because my employer is paying them!

Lifetime Goal: "achieve financial freedom" - this is nebulous, but for us we defined it as simply meaning having the funds that allow us both to stop working whenever we want and live only on "passive income." I honestly don't plan on ever completely stopping working but maybe as I get older that will change.  We have a number in mind, but the current number would not offer much in the way of extras beyond the basics so hopefully we can develop a nest egg that far exceeds our baseline goal.

- every year we look at different insurances we have/need...currently since we're both working and no kids we don't have life insurance outside of what jobs provide - any other insurances people would recommend for two healthy late 20 year olds without kids?

- We are looking to buy/build a home in the next year.  We will definitely have a mortgage and I don't plan on paying it off early unless my interest rate is significantly higher than current rates.  I just don't see the point in paying off early with interest that is the equivalent of ~3.0% after calculating tax deduction/inflation/etc. when that extra money could be making me significantly more in investments.  Of course there is risk with this approach (a la 2000 and 2008...), but it's a risk I'm willing to take.  For example, I made over 22% return on my investments in 2017 and my investment portfolio looks like a 60 year olds (wife doesn't like much risk).  Since 2014 I've made over 14% return (started investing when I was young, but didn't actually pay attention to annual returns until January 2014).

- Both cars are 100% paid off, and don't ever plan on financing a vehicle

- Assuming kiddos happen, will immediately get life insurance (during wife's pregnancy) and begin education funds for kids (thinking about future college costs makes me want to vomit)

- We follow a semi-Dave Ramsey plan, so I guess we're on Baby Step 7 (again employer is paying off my only debt), but with addition of home and kids in future we'll be stepping down to Baby Step 5/6.

 

Happy New Year to all!

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I’ve used Quicken and its predecessors for the past 20+ years. Assumptions change as goals change, but it’s been helpful. The estimate of investments needed to support our lifestyle has been useful and surprisingly accurate.

As they say, a plan is useless (because it always needs to be changed), but planning itself is priceless.


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1 hour ago, mgriffiths said:

Lifetime Goal: "achieve financial freedom" - this is nebulous, but for us we defined it as simply meaning having the funds that allow us both to stop working whenever we want and live only on "passive income."

I think the saying is "A goal without a plan is just a dream", or something like that.  I guess one of the reasons I wanted to start a thread like this is to encourage people to move from dream ("achieve financial freedom") to goals and plans so that they could better achieve their dream.   

My dream for 20 years has been to retire from the military, go to PA school, get my dream house on 50+ acres of beautiful land, and then only work when I want to.  We are very close to achieving that dream (on a lot more than 50 acres), but only through careful goal setting and planning!

Do you have a goal for how much you would have to have to achieve financial freedom?  

 

1 hour ago, mgriffiths said:

I just don't see the point in paying off early with interest that is the equivalent of ~3.0% after calculating tax deduction/inflation/etc. when that extra money could be making me significantly more in investments. 

Wait till you pay off your house.  We paid off the mortgage on our primary home about a year ago and it was WONDERFUL!  We still had a mortgage on an investment house, but one that we have already "sold" on a land-contract, so it's kinda weird situation.

Now we just bought our land and have another "primary" mortgage, and I absolutely HATE IT!  We are throwing huge amounts of money every month at it just to kill it, and we can't WAIT to completely own it.  We will have to take out another mortgage when we build our dream house in 2 years or so, but we plan on having that paid off in 3 years or so.

 

1 hour ago, mgriffiths said:

my student loans aren't paid off is because my employer is paying them!

Are you, in exchange, obligated to your employer for paying them?  If so, that adds another "type" of debt, and the risks associated with it (what if you HAD to leave?).

1 hour ago, mgriffiths said:

Both cars are 100% paid off, and don't ever plan on financing a vehicle

Never a good idea to go into debt for something that goes down in value!

1 hour ago, mgriffiths said:

any other insurances people would recommend for two healthy late 20 year olds without kids?

Maybe disability insurance.  It's probably very cheap for you being healthy and 20s, so you might want to get it now.  It is exorbitantly expensive for me.  They initially told me it was pretty cheap, but then they got my medical records and they wanted something like $1500/month in premiums, and would have to pay 6 months of premiums before I would be covered  (I broke a lot of things in the service).

You sound like you're doing very well, glad to hear a PA is killing it like you are!!

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Lifetime Goal: we have a number that would/should provide the minimum basics (house, food, gas, medical, etc.), but have not yet set the goal for what our "dream" would be.  The basic number is a simple calculation based on a bare bones budget and only drawing a tiny percentage of investment return annually.  I have my ideal number, but my wife struggles with that type of somewhat abstract thinking when it comes to finances and so doesn't have her number (and probably never will...).  The reality is that we are currently saving FAR beyond what is required to reach my ideal number by 55 at this point.  It's unlikely that we'll be able to maintain that as we have children, but the more we can save now the greater effect that will have with compounded interest.

Mortgage: totally understand, and I'm sure there is a wonderful sigh of accomplishment/relief with that final payment, but just can't see myself actually doing it - but who knows, once we buy again we will definitely have the conversation...have I mentioned I hate renting.

Student Loans: there is an obligation, but it is reasonable.  They pay $10,000 per year of student loans.  I currently have almost exactly $50k left.  So, that is essentially 5.5 years (taxes - the loan payments are considered income).  The agreement is that I must pay back the last 12 months of payments if I leave. So if I left 6 months after payments finished, I would only owe 6 months of payments.  Obviously it would be nice to get an extra $10k/year for nothing, but not reality.  I plan at my 1 year review to request an increase in annual loan payments - maybe $15,000/year - to speed up the timeline. I think I have a leg to stand on, since for the last 4 months I have been the number one producer for the clinic and I started halfway through June 2017 - and it's not even close.  We have a bonus system based on RVUs and for some reason both NPs that I work with moan and groan about any walk-ins or extra patients that come in.  Me, I smile and just collect more RVUs - we're not overloaded on a daily basis.  I get a full 60 minutes for lunch, and walk out the door at 15-20 minutes after the close of clinic almost every day with my desk completely clear.  Somehow both NPs see 5-8 patients less than me per day and are still at the clinic finishing with patients and charting for at least an hour after I leave...and my charts are very detailed per myself and several of the physicians I work with who review them since I'm "newish."

Insurance: I have some disability through my work, but have considered getting disability.  Probably should look into that some more.

Thanks Boatswain2PA

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I think we are in pretty good shape, although I continue to invest in my retirement. Don't plan for an early retirement, because I like my work. will probably work at least per diem until 70 or 72.

job#1 had a pension. I was there 13 years. big company. won't fail. not a huge chunk of change every month at 65, but not bad

job #2 had an employer funded 401k to the tune of 25% of gross per year. I was there for 15 years.

Job #3 with typical 401k with 9% of yearly, splint 6% me, 3% company.

not counting on social security, but assume there will be something coming from that angle.

no school debt for me or the wife. only debt is 1 mortgage mostly paid off and 1 car loan with 2 years left on it.

have set aside money every month for kids college their whole lives, so that should be funded when they get there in a few years.

we don't buy boats and expensive toys and we live in a small house and have a small condo(paid off) near a per diem job on the coast.

have life insurance and disability policies.

also my grandfather invented something that is in every American home, so funds from inheritance trust have helped a lot through the years when big expenses come up.

We are not wealthy, but I think we will be ok.

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18 minutes ago, EMEDPA said:

also my grandfather invented something that is in every American home.....

We are not wealthy, but I think we will be ok.

Care to share what that thing is?

What is the definition of "wealthy"?  I guess I used to think a millionaire was wealthy, not really sure of that anymore.  But then see so many people (even high income earners) struggling to pay bills....

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humm not formally but likely should

 

have about 20% of income going into roth/401k

have a commercial building which will be paid off in 9 yeras

have a dream house with 27 yr left on mortgage, but paying off around yr 15

 

these are all long term set ups that require no attention

We save, and spend what is left....

 

probably should put more energy into it (and I have a pension at my job.....)

 

 

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12 hours ago, mgriffiths said:

- Assuming kiddos happen, will immediately get life insurance (during wife's pregnancy) and begin education funds for kids (thinking about future college costs makes me want to vomit)

 

Don't forget to include cost of child care in your planning. We have 2 kids and the monthly cost of their childcare is more than our mortgage. I can't wait for the day when they're in full time school and we can apply some of that money to something, anything else!

I'm writing a check tomorrow to pay off my car, our other car is already paid off. I have to say, it feels good to get rid of debt.

 

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11 hours ago, Boatswain2PA said:

Care to share what that thing is?

What is the definition of "wealthy"?  I guess I used to think a millionaire was wealthy, not really sure of that anymore.  But then see so many people (even high income earners) struggling to pay bills....

the stainless steel gauge on every modern fire extinguisher. the old ones were disposable. he figured out a way to design the coiled stainless spring so it could be used multiple times. the original ones uncurled and would not recurl. once you used it, you had to throw it out.

I don't have a million dollars in savings/retirement yet, but will someday. I think the key is to live within your means, both while working and in retirement. pay off debt and stay out of debt. I am not planning on buying silly stuff when I retire like a boat, a jet ski, a 10,000 dollar TV, etc

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Not seeing folks commenting on college expenses much. We bought into Texas Tomorrow Fund back in early 90’s where they actually covered tuition fully. Cost was $16K lump sum and for 100 hours or so used it paid out about $38K as I recall. We had saved for remainder of $62K so in total, 4 years at UT-Austin was right at $100K. She got out debt-free.

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6 hours ago, ALC0313 said:

Don't forget to include cost of child care in your planning. We have 2 kids and the monthly cost of their childcare is more than our mortgage. I can't wait for the day when they're in full time school and we can apply some of that money to something, anything else!

I'm writing a check tomorrow to pay off my car, our other car is already paid off. I have to say, it feels good to get rid of debt.

 

Our current plan is that my wife will stay home with any and all kiddos, but if she did go back to work and we needed child care it would be covered by her income as we currently budget off mine and save 100% of hers.  It is crazy how much childcare costs.  My wife used to nanny back in college and she actually made more then than she makes now as an elementary school teacher...obviously having a nanny is a massive luxury, but daycare is still expensive.

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We do something very similar. 

Most PAs are in a 'terrible' tax bracket and often have a big tax burden, so we always try to pre-pay just enough to not have penalties or need a refund!  

We always put some $ into metals (monex is a great website) or a basic savings to avoid spending it. We have been doing the 529  program for college savings as well.  

We have 2 of 3 vehicles paid off, and are nearing the end of our mortgage. 

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https://www.whitecoatinvestor.com/

While it is physician oriented, much applicable advice to PAs.

Founder did a podcast on ER Cast at end of year, worth a listen to for good general advice.

Summary: Live below your means, much like you did as a student, for 3-5 yrs after school and pay off the debt. Save 20% of your income and take full advantage of employer savings contribution. If you know nothing about saving, investing, insurance, find a financial planner that does and can walk you through everything.

My personal goals: See above, though I am now 20 yrs out of school but do have everything paid off loan wise. 10 yrs to go on mortgage. Save, save, save. Stop buying sh&t. Work less, make more (keep abreast of salary surveys). Stop comparing to others, no idea what their true situation is. Part time work by early 60s but work into late 60s if scheduling can allow.

Investigate associated interests to determine if any can become a side gig.

Good luck. George

 

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On 1/3/2018 at 10:02 AM, ventana said:

these are all long term set ups that require no attention

And that's kinda the point I wanted to bring up in the thread, to get people to pay attention to this stuff.  To find out where they currently stand, and then set written goals.  
Up until 5 years ago we had goals, but they were not clearly written down. We didn't even have a precise understanding of exactly how much we owed.  I think it started out at the end of 2012 when i started adding up how much in interest we were paying on various debts and was staggered by it.  That caused me to create my detailed spreadsheet, I realized we were WAYYY in debt (with some positive equity).  Once I laid it all out, we started setting yearly and quarterly goals on which debts to pay off, and then we started hitting them hard and are now doing very, very well.  

On 1/3/2018 at 1:19 PM, EMEDPA said:

the stainless steel gauge on every modern fire extinguisher

Nice!!!!

On 1/3/2018 at 2:09 PM, GetMeOuttaThisMess said:

Not seeing folks commenting on college expenses much.

College expenses are killing America.  If the federal government stopped guaranteeing them, the credit would dry up and the false economy there would correct itself.  Did you see the poster here with >$200K in debt!  WOW!!!

 

11 hours ago, gbrothers98 said:

https://www.whitecoatinvestor.com/

...... If you know nothing about saving, investing, insurance, find a financial planner that does and can walk you through everything.

I like WCI.  But I disagree with getting a financial planner.  If you're smart enough to practice medicine, you're smart enough to handle your own money.  Saving, simple investing, life insurance, disability insurance, and LCI insurance isn't that difficult to understand.  

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We tore into our house mortgage and paid it off.  Best...feeling....ever!

Pay your property taxes and no one can ever take your house.  At least in Texas (unlimited homestead protection)....401k's I have, not much in them but some.  Other investments are flapping in the wind for liability in case god forbid I get tagged.  It's another reason why we invested almost everything into our house.  

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59 minutes ago, GetMeOuttaThisMess said:

In my statement I was referencing the saving of income for offspring college expenses.

Oh, yeah...missed that!

 

28 minutes ago, Cideous said:

At least in Texas (unlimited homestead protection)....401k's I have, not much in them but some

Absolutely, we should ALL take steps to protect our assets from bankruptcy due to lawsuits.  Fortunately most states, including Texas, allow you to maintain your primary home and retirement accounts through bankruptcy.  https://www.thetaxadviser.com/content/dam/tta/issues/2014/jan/stateirachart.pdf

As an additional protection, my rental properties are owned by our LLC.

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Cool to see like minded people on this forum and the great planning!

I have seen so many docs in the mid to late 60s, that hate practicing medicine but cannot retire because they just live extravagantly, it is kind of sad.  I think it's great if you WANT to continue to practice, but to be making a Physician's salary for over 30 years and not be able to retire has honestly been a great lesson for me.

Husband is active duty Air National Guard, has 7 years left, will retire as an officer, so that has involved sacrifice on both of our parts, but will give us option to retire quite early.  We also are maxing out my 401k,  his TSP at 18k each per year, doing Roths and some into 529s for the kids.  Just in the last 5 years our income has increased to where we can save this much.  Trying to also budget for nice vacations with the kids, did Florida over Thanksgiving and Bahamas in a few weeks, using credit card points, etc....  The key has been for us as our income has grown we have not upsized our home or cars or bought a vacation home.  It has been tempting, but so far I am so glad we have not. We have a very nice home on an acre, full brick in a low cost of living area, but at 2000 sq ft, I guarantee you that we have the smallest home of anyone in our income bracket.   We are on track to be able to retire at around 50 if we want to.  Of course the best laid plans, barring something catastrophic in health or a 10 year bear market.... cannot control these things though, so just staying the course, investing in low cost index funds and waiting for the magic of compounding to happen. 

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On 1/5/2018 at 6:07 PM, Boatswain2PA said:

I like WCI.  But I disagree with getting a financial planner.  If you're smart enough to practice medicine, you're smart enough to handle your own money.  Saving, simple investing, life insurance, disability insurance, and LCI insurance isn't that difficult to understand.  

When I hear investing, I immediately think stocks (I know absolutely nothing about investing). When you say "simple investing", are stocks what you're referring to? Investing seems to be a common theme in this thread, and I don't really have a grasp on what that means. I'm 24 and generally haven't been future-minded in terms of saving, but reading this has made me realize I should be. 

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