Sorry for the dramatic headline. Most of you that know me are aware that I’m pretty conservative and not one for grandstanding. Don’t worry—I’m definitely not qualified to write for the National Enquirer, and no, I won’t be discussing the Kardashians.
But now it’s time for me to put my cards on the table. I’m not talking about playing today’s favorite pastime game—Texas Hold’em. I’ll admit that in my youth I played some cards, but nothing serious. These days whenever I turn on the TV, which isn’t frequently, there’s a bunch of guys (and gals) wearing sunglasses sitting around the table having cards dealt to them. Even my son is in on the action—he’s got his own set of chips and a table set up in the basement. With that said, I guess it’s time for me to fess up……Inevitably many people I meet will eventually get around to asking me, “If you were me, what would you do?” And I politely have to tell them that I’m not you—I’m me. We all have different goals and objectives. Everyone will have a different plan.
It’s not too difficult to sit at my keyboard, produce this newsletter, and dispense advice. Reality—well, that’s another story. So what has gone right and where am I lacking a little?
Let’s start with my mortgage. My wife and I have a fixed-rate mortgage. When we moved into our home, we had a variable rate. Then one day it dawned on me that while interest rates will vary, it appeared they were only going to vary in one direction—up. So, it was time for us to get a fixed rate mortgage, and I’m happy we did. In this interest rate environment if you have a variable rate mortgage, I would suggest taking a hard look at getting a fixed rate mortgage. As you know, interest rates will fluctuate. If you have a variable mortgage, it’s OK when interest rates fluctuate down. It’s not so pleasant when interest rates rise. We also have a home equity line of credit that we’ve used periodically. Trust me—this has not become our own personal ATM machine like some people have used them the past few years. Essentially, the home equity line of credit is a backup to our cash reserve fund. This allows us to maintain a lower cash reserve fund. It has also been used for some home improvement projects. If it was indeed a rainy day and we really needed some money, we could access this. Although we don’t need financial rainy days, we know we will likely have them at some point. We try to plan for the worst and hope for the best.
College Education Funds
Unfortunately, our college education funds are not what they should be. Why is this? Well, like everything else in life this can be simplified. I paid for a significant percentage of my college education. Don’t worry—I’m not going to bore you with walking three miles to school uphill both ways in a snowstorm. The truth of the matter was I usually biked to the Broad Brook Grammar School and I was able to bike home for lunch.
At any rate, when you go to college and you’re paying your own way, you tend to be a little more focused and work a little harder. When I went to college a couple of hundred years ago, my tuition was about $4,000 a year. Things have changed a little bit since then. Now it costs over $40,000 a year. Where I went to school it used to be called Bryant College. Now it is a “University.” Universities must be more expensive. Yikes! I’m sure glad I went to a college.
However, we are sticking with the 50-50 Club. This means we will pay half of their college education and they will pay the other half. They know that their membership in this club expires four years after high school graduation. And yes, whether they pass or fail, we are only paying for each class once. There is no mulligan allowed here.
We keep working towards our retirement funding. However, this continues to be a moving target. The bad news is that thanks to inflation, the “number” keeps going up. Also, unfortunately, we won’t ever be seeing a pension check. We don’t take any solace in knowing we aren’t the only ones in this boat. If you are going to be getting a pension, make sure to have a toast to your employer! As I’ve said before, retirement as we know it will change dramatically in the future.
We have all of the appropriate estate planning documents. This includes a will, trust agreement, power of attorney, and healthcare proxy. This is always fun to do. Actually, most of this was easy except for the “if both spouses die at the same time, who gets the kids” conversation. This seems to be a pretty big stumbling point for most of you with minor children as well. It appears that a lot of people start but don’t finish their estate plan. Remember—you don’t get any points for starting your estate plan, just for completing it. We also have reasonable insurance coverage. However, we don’t own a long-term care policy yet. This is probably the only time I can say we’re “too young” and really mean it. But, once again, I’m just rationalizing. The fact of the matter is that anyone in their mid 40’s (unfortunately, I graduated without distinction like all of my graduations from this club) should start to look at long-term care insurance. Now it’s back to priorities again. After health, life, disability, auto, homeowners, and umbrella, we decided we’ve invested enough on insurance. We will, however, be revisiting long-term care insurance again in a few years.
What’s the bottom line? Well, as you know, it’s all about priorities. Stay focused, and don’t beat yourself up if you come up a little shy of your goals. If you have some “True Confessions” you would like to discuss, give us a call at (860) 645-1515 or e-mail: Thomas.Scanlon@Raymondjames.com
The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Thomas F. Scanlon, CPA, CFP® and not necessarily those of RJFS or Raymond James. Expressions of opinion are as of this date and are subject to change without notice. You should discuss tax or legal matters with the appropriate professional.