Hagen Financial LLC
Financial Coach | Consultant
Fan of the outdoors, adventure-seeker, animal-lover, squash player, financial coach, life-long student, blogger.
Derek is the founder of Hagen Financial LLC, a financial coaching and counseling firm that helps clients develop a healthy relationship with money and find the motivation to change their behavior. He is is the founder of the Money Health blog which helps readers increase their financial health. He spent most of his career working as a Vice President of a registered investment advisor helping clients develop investment strategies that help them meet their financial goals. Most recently he worked as the Director of Wealth Management at a financial planning firm.
In his free time he enjoys all things outdoors, especially camping, hiking, and running with his wife, Katie and dog, Bingo.
Graduate Certificate, Behavioral Finance and Financial Psychology, Creighton University (expected)
Bachelor of Arts, Economics, Summa Cum Laude, Minnesota State University Moorhead
Certified Financial Behavior Specialist™, Financial Psychology Institute (expected
Certified Financial Planner™, CFP Board
Chartered Financial Analyst, CFA Institute
Certificate in Investment Performance Measurement, CIPM Association
My wife, Katie, and I are active people who value adventure, outdoors, and fitness. She teaches physical education and anyone who knows us can attest that she is much more athletic that I am. So I had to learn quickly how to "lose to a girl." We love camping in our 17-foot fiberglass trailer. We also love hiking, running, and cross country skiing. We take advantage of the Minnesota summer and go exploring with our camper as much as we can.
I have some hobbies that some people are surprised to learn about, including playing squash, practicing kung fu, card magic, juggling, playing the drums, and learning how to play the guitar.
I am originally from Moorhead, Minnesota, which is right across a river from Fargo, ND. Yes, I have seen the movie (and the TV show; both are excellent!). I moved to the Twin Cities (Minneapolis-St. Paul, MN) in 2005 after graduating college. I didn't attend college right out of high school like normal people. I grew up in an environment where not many of us went to college. Some didn't even graduate high school. I am lucky that I was able to attend a technical college and then transfer to Minnesota State University Moorhead (MSUM).
In technical school I studied mechanical drafting, which means that in an ideal world I would have gotten a job drawing plans for engineers. It was fascinating and came easy to me, but I got a job drawing toilet stalls. Since 1) that wasn't very intriguing to me, and 2) because I was drawn to the liberal arts classes that I had to take, I transferred to MSUM.
After moving to the Twin Cities after college I got a job working in what they call Investment Operations (working on making sure systems are updated for the decision-makers), and eventually moved my way up to Vice President at an investment advisor in Minneapolis. From there I entered semi-retirement. I am a fan of working retirements so from there I started my first firm, Fireside Financial, to try to bring financial advice to people who don't have a million dollars to invest. Shortly after starting Fireside I took a job as the Director of Wealth Management at a financial planning firm in the suburbs. That role wasn't satisfying my desire to help regular people so I started Hagen Financial. Hagen Financial is a financial coaching and counseling firm that helps people attain a better relationship with money. I also started the Money Health blog, to increase readers' financial health.
BA, Economics, Minnesota State University Moorhead
Behavioral Finance | Financial Psychology, Creighton University
It sounds like your son wants to buy a home but doesn't have the credit needed to get a mortgage, and you are interested in buying the home for him.
I would not advise doing this for several reasons. Your son can likely still rent an apartment and be happy. While renting, he can save money for a down payment and work on repairing his credit. You don't want to jeopardize your retirement to purchase someone else a house. Your retirement account is likely tax-deferred, so you would have to pay taxes on any withdrawals that come out of the account, and if you are under 59.5 years old you would have a penalty on top of that. Your son has more time than you do. Taking a withdrawal from your retirement account could mean you would have to work longer than you would want to. Lastly, consider what your son did in order to get bad credit. I don't know the backstory, but it's common to hear that kids in this situation have bad spending habits. So if that's the case her and your plan was for your son to pay you back, you have to at least consider the scenario where he doesn't or can't pay you back.
I am happy to hear you have taken steps to make smart decisions with your money. Great work.
It sounds like you want to take some of your savings and try to get a better rate of return. You may know this, but I'll point out that greater returns come with greater risk, meaning that the investments could fall in value. If you keep the long run in mind and study a little bit of market history, this shouldn't be too much a problem for you, though. Don't put any money into the stock markets that you might need within a few years.
Index investing is an efficient way to gain exposure to stocks. Props to you for knowing that. The first thing I would suggest is figuring out what areas of the market you are comfortable with. You can invest in an all-U.S. index or in an all-world index. I would suggest looking for funds that are broadly diversified. You should be able to find which index each fund tracks and find out what kinds of companies and how many companies are in that index. A good indicator is to look at the number of holdings (if you are looking for exchange-traded funds you can use ETF.com to find these data). Ideally this number will be very high. You also want to look for funds with low expenses. Look at thinks like the expense ratio, which is how much to pay to the fund company, and the turnover ratio, which indicates how much the fund buys and sells stocks. You want both of these number to be low.
If you have a brokerage account open (like at Vanguard, Schwab, Fidelity) than you can buy ETFs in your account. I would suggest looking at fund companies like Vanguard, Schwab, iShares, or SPDRs.
This is a personal decision. Consider, though, that the cost of a 4-year public school is around $25,000 per year and by the time your child goes to college in 15 years that number could be as high as $50,000 per year. That's the case for continuing your contributions to the plan.
There are some drawbacks, however. If you child decides not to go to college or goes to a community college or other less-expensive route, you would have a large amount of money built up and would be unable to use all of it on your child's education. That's not the worst thing in the world - you won't have to pay penalties or taxes on the amount of the contributions, and on the gains in the account you will have to pay taxes and a penalty if you were to withdraw that money for non-education expenses.
One thing to note is that you can always change the beneficiary on 529 plans. So if you decide to have more children you can change the beneficiary to them. Some people keep the accounts for their grandchildren. You can even change the beneficiary to yourself if you wanted to go back to school for any reason.
If you are able to contribute to a Roth IRA in addition to your retirement account at work, you might consider redirecting your contributions to the Roth IRA. With a Roth, you can take withdrawals to pay for eduation without paying penalties (although you would have to pay taxes on the gains if you are under 59.5 years old when your child went to school).
I hope that helps. Great work establishing an education fund for your child!
It sounds like you have an aggressive portfolio, and you recognize that the classic advice would have you reduce your stock exposure as you get older but you have concerns about bonds.
There's an old saying that personal finance is more personal than it is finance. Determining a stock-bond-cash mix for yourself involves 1) your financial goals, and 2) your tolerance for risk - including your ability, willingness, and need to assume risk. These are different for every investor.
1. Your financial goals: Many would advise that you shouldn't have any money in stocks that you will need within the next five years (some might even say longer). This is because you can't afford to have the stock markets crash at the same time you need the money. It could be the case that you dont' need much from your investment if you have a pension, Social Security, or other income to use.
2. Your ability to assume risk: This is related to your financial goals. If you need a large percentage of your investment in a relatively short amount of time, you don't have the ability to assume risk. If you don't need much money from your investment, then you have more ability to assume risk. You'll have to determine how much you'll need to determine your ability to assume risk.
3. Your willingness to assume risk: This is how you feel. If you watch the news or check your account statements and feel awful every time you lose money, then you have a low willingness to assume risk. If you don't care or if you understand the long run nature of stock returns, then you have a higher willingness to assume risk. This is important to get right, because the biggest risk to achieving your financial goals is sticking to your allocation. If you would feel awful when the next stock market crash happens, then you have a higher likelihood of wanting to sell your investments because of your level of discomfort with the stock market swings.
4. Your need to assume risk: If you have all of your needs met, then you don't need to take any risk. Why play the game if you've already won? Since risk and return are related, if you don't need the return, then you don't have to take the risk.
The classic advice calling for you to change your allocation from stocks to bonds assumes that you will need to rely on your investment in retirement so you'll want less exposure to the stock market. That may or may not be the case. But I wouldn't keep money in stocks just because cash is paying zero and some experts think bond prices will go down. In the long run, higher interest rates are good for you even if your bonds lose some value in the short run. Plus, a dollar invested in stocks can easily go down to 50 or 60 cents. A dollar invested in bonds might fall to 95 cent. Keeping money in stocks is still more risky than bonds even if interest rates go up (but remember that they can stay low for a long time).
You might consider taking a loan out on your 401(k) and paying off your credit cards with the funds. Then you would continue to contribute your normal amount into your 401(k) that you have been doing, plus contribute the amount you are currently paying toward your credit card debt. I would even urge you to consider finding a way to contribute more. You mentioned you just got a raise - one recommendation would be to put your raise money toward the 401(k) loan.
I hope that helps.