Prudent Financial Planning
Patrick Logue, CFP® professional, is a fee-only Financial Advisor and founder of Prudent Financial Planning LLC. He specializes in College Planning and has completed the Capstone College Partners Course in College Planning. Pat is passionate about helping families plan for college while working towards retirement. He is a member of the National College Advocacy Group (NCAG), XY Planning Network, and National Association of Personal Financial Advisors (NAPFA). With 20 years of experience in financial services, including 3 years in the Development Office at a non-profit, Pat is intimately familiar with Investments, Tax Planning, and Charitable Giving Strategies. Pat also provides expertise in Wealth Management, Inter-Generational Wealth Transfer, and Estate Planning. He enjoys hiking, running, coaching, and spending time with his wife, Erin, and their 2 children.
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Disclaimer: Prudent Financial Planning LLC (“PFP]”) is a registered investment adviser offering advisory services in the State of Florida, Illinois, and in other jurisdictions where exempted. Registration does not imply a certain level of skill or training. The presence of this material on the Internet shall not be directly or indirectly interpreted as a solicitation of investment advisory services to persons of another jurisdiction unless otherwise permitted by statute. Follow-up or individualized responses to consumers in a particular state by PFP in the rendering of personalized investment advice for compensation shall not be made without our first complying with jurisdiction requirements or pursuant an applicable state exemption.
All written content on this site is for information purposes only. Opinions expressed herein are solely those of PFP, unless otherwise specifically cited. Material presented is believed to be from reliable sources and no representations are made by our firm as to another parties’ informational accuracy or completeness. All information or ideas provided should be discussed in detail with an advisor, accountant or legal counsel prior to implementation.
Congratulations on your scholarship. I specialize in College Funding, and Student Loans. I can't say if your money is in the right place as I do not know the current allocations of your portfolio or how much risk you are taking. But, what I can tell you is that the cost of college tuition is inflating at about 6% per year. This means that if you plan on attending a school that costs $50k per year in today's dollars, that same school may cost you an average of $63,000 per year in just 3 years.
I can also tell you that you may have to pay taxes on your stocks and mutual funds when you sell them to pay for college (assuming they are held in taxable accounts). There is a silver lining here though. First, if your income stays close to $20,000, you will pay 0% on your Long-Term Capital Gains (stocks and mutual funds you hold for more than a year before you sell). Also, you will only have to pay 12% tax on your Short-Term Capital Gains. This would be for stocks and mutual funds that you sell if you have not held them for at least one year.
You could consider funding a 529 Savings Plan as the funds you invest will grow tax-deferred and they can be withdrawn tax-free as long as they are used at a qualifying institution for Qualifying Higher Education Expenses. Check to see if your home state has a 529 Plan and if they offer any tax incentives. You may want to contact a Certified Financial Planner® and take a Risk Tolerance Questionnaire. This will help determine how much risk you are comfortable taking. They can also assess how much risk you are currently taking. The final piece of the puzzle will be determining how much risk you need to take with your investments to meet your goal. I hope this helps. Feel free to visit my website to learn more about who I am and how I help clients reach their goals.
This is a great question. I just hosted a seminar on Studnet Loans and this was one of the questions from the audience. In order to answer this question, we would take a look at your discretionary income, Student Loan balance and monthly payment, and your credit card balance and interest rates. We would also look at your Emergency Fund too.
This type of question is right in my wheelhouse. Feel free to visit my website to learn more about me and the services I offer. I would want to look at your Student Loans first to see if they are private or Federal Loans. Then we could look at refinancing vs. consolidating and forgiveness options. It would be helpful to know where you work too. Does your company have a qualified retirement plan? If so, do they offer a match?
You have several options if you want the safest (low risk) way to earn a higher interest rate. You can use FDIC insured CD's to earn about 2.78% per year over 3 years or 3.0% annually if you have a 5-year window. One of the factors to consider will be your tax bracket. If you are in a higher tax bracket, you may want to consider muni bonds though these will increase your risk.
Since you are saving for a down payment on a home, you may want to start working on your debt to income ratio and your credit scores to make sure you will qualify for the best rates. You may also want to run some calculations to see the difference in your payment if you wait 5 years and interest rates rise substantially. For example, for every $100,000 you borrow, if interest rates rise by 1% then your monthly principal and interest payment will rise by about $60 and you will pay about $20,000 more in interest over the life of the loan. On bankrate.com, the 30-year mortage rate is about 4.5% now but it was only about 3.5% just a year and a half ago.
Let's say you want to purchase a home that is worth $375,000 today. You would have to put down $75,000 if you want to put down 20%. Let's assume that your 30-year mortgage rate would be about 4.5%. Therefore, your monthly payment of principal and interest would be about $1,520 and the total interest you would pay over the life of the loan would be about $247,000. Now, if you wait 5 years and the property appreciates at 2% per year, the value of the house would increase to $414,000. In order to put 20% down, you would now need $82,800. If interest rates also rise by 1%, then your monthly payment would be $1,880 and you would pay $345,000 in interest over the life of the loan.
It would be helpful to know when you plan to retire and review a snapshot of your overall portfolio. But it sounds like you are getting close to retiring. You will need to run a projection to see how much income you will need each year in retirement. Then you can work backwards and determine how much you need to save by the time you retire.
The pros of stocks would be the potentially higher returns they would offer which will help you to keep up with inflation and make your money last longer. The drawback to investing too heavily in stocks is the inherently higher level of risk associated with stocks but this can be mitigated through the process of diversification and portfolio construction.
The pros of annuities is the fixed income aspect which some find comforting. The downside of annuites can be the high fees, lower returns, and potential surrender charges should you need access to your money. Please consult with a CFP® who is fee-only (not fee based) as they can provide you with unbiased investment advice. These advisors do not sell products or earn commissions and the are held to an oath to always put the best interest of their clients first. I have seen and heard of many investors who are roped into putting ALL of their savings in high-fee annuities and then they can't access their money or get out of these products without paying high surrender fees. There are times when an annuity makes sense and there are some reputable companies out there selling a good product with low fees. You just have to do your homework.
I applaud you for seeking unbiased advice. Can you clarify what type of business you want to own? Is it the same type of business your family currently owns? Or, is it in a separate field? What are the advancement opportunities at the bank? You may want to sit down with your supervisor and ask him/her where they see you in 1 year, 3 years, and 5 years. Then you can assess how much you could potentially earn in the next 5 years if you were to work at the bank.
The next step would be to compare your Total Compensation over that 5-year period to what you could earn in the family business. Remember to include all benefits at the bank including healthcare, retirement contributions, and any other fringe benefits. How much vacation time will you get at each job? How does that increase each year in each business? What about sick days? Does your family business pay you for those? Do you accrue time off? If so, can you roll over unused time to the next year or can you get paid for the days you didn't use?
What is the commute like for each job? Will that be a factor in your decision? What hours/day will you work for your family? Will you have weekends off? Is the job done when you "clock out" or would you have to take your work home with you? Bank hours are pretty standard and you typically don't have to take your work home with you.
When you say you would be the "low man on the totem pole" what does that mean? Are there 50 people ahead of you or are there 10? How long does it take for someone in your family to become a partner in the company? How much capital do you need to buy in? Can you build "sweat equity"? Are there older owners in the company who might be retiring in the next 5-10 years? If so, could you work out a plan to buy some of their shares?
Now you need to ask yourself "what does it mean to be successful"? Then, look at the older owners of your family business and see if they possess the traits, assets, net worth, etc. that you would consider successful. Are the partners in the family business financially independent, meaning: could they stop working today and support themselves for the rest of their lives? What type of risks are involved in this family business? Take a look at the financials of the company. Is the company growing? Assess the assets and liabilities and determine how profitable the company is now. What does the future look like for the company? What kind of challenges will the company face from competition? Will business be hurt if they economy slows down?
Many people don't realize that many Financial Advisors go the extra mile now. Some will even help you appeal for higher compensation at your job based on statistics. I just listened to a podcast by a fellow XYPN member who helped his client successfully appeal for $30,000 more in salary based on statistics. That is Per Year!
Feel free to check out XYPN by clicking on this link. It is a group of 700 advisors who specialize in working with younger clients and are all fee-only. This means we do not sell any products nor earn commissions. We take an oath to always put the client's best interest first.