Root Financial Partners
Hi, I'm James Conole. When I was younger, I was confused about money and felt ill-equipped to one day manage it on my own. After spending years studying finance and working in the financial services industry, I now know that I wasn’t the only one that felt this way.
When you lack control over your finances you tend to feel like your future goals are out of reach.
That’s why I developed a framework that helps clients get organized, create a plan, and take ownership of their financial future. I walk clients through this process and then partner with them along their journey to achieve their goals.
BS, Business Administration, Pepperdine University
MBA, Finance, Pepperdine University, Graziadio School of Business
Assets Under Management:
All information herein has been prepared solely for informational purposes, and it is not an offer to buy or sell, or a solicitation of an offer to buy or sell any security investment or instrument or to participate in any particular trading strategies.
Securities and investment advisory services offered through Root Financial Partners, LLC , a Registered Investment Adviser.
Root Financial Partners
Here is what I would recommend:
- Make minimum payments on your student loan.
- Pay as much as possible towards your credit card first. This gets rid of high-interest rate debt and will then allow you to attack your student loan more aggressively.
- Once the credit card is paid off then you can increase your student loan payments again.
Regarding your invests - I would stop making HSA and Roth IRA contributions for the time being too. The best thing you can do to build wealth over time is stay out of debt. By temporarily shutting down investment contributions you are going to put yourself in a wonderful position to save even more aggressively once you're out of debt.
I would make my first priority getting out of credit card debt as soon as possible. Then pay off that student loan and before you know it you'll be making substantial contributions to all of your retirement accounts. Nice work!
Good question. You always want to make sure that your advisor's fee is transparent and that you fully understand it.
If your bill is based on the amount you have invested with your advisor then it's typical to have that amount deducted right from your investment account. That being said, it's not a bad thing to pay these fees by check instead. It's just not what you might typically expect.
A 1% annual fee is fairly standard. Usually, one-fourth of this fee is billed quarterly. But being billed one-twelfth of this amount monthly works just the same.
Bottom line - as long as you feel that you're getting good service and advice from your advisor then it does not appear that you are being taken advantage of.
I'm sorry to hear about your uncle. You're smart to save and invest rather than spend all of your new inheritance money.
If you're new to investing, then likely the best thing to do with your inheritance at this point is nothing for a month or two. Before doing anything, make sure you fully understand what your options are and what you want that money to do for you.
Once you understand what you want to do, then here are some different options:
Pay down any debt if you have any. Although debt pay down isn't the same as investing, it builds a great foundation for you and frees up cash flow that can put away for more long-term investing.
If you don't have debt, then generally here's how I would recommend investing:
1. If you have one, then invest in your 401k up to your employer's match.
2. Then max out a Roth IRA (limit for 2017 and 2018 is $5,500. It's $6,500 if you're 50 or older).
3. Once you have maxed your Roth IRA then go back to saving to your 401(k) until you've maxed that out.
In your situation inheritance money can't be directly contributed to a 401(k). You may want to look at investing in an Individual Account instead.
Because an individual account does provide any tax shelter like a 401(k) and Roth do, be sure to invest in mutual funds and ETFs that have low turnover. This will help to minimize the taxes that you have to pay on the growth of your investments.
You can set up an account at Vanguard or at a company like Betterment who will help you create a well-diversified portfolio for a very low cost.
I'm going to give you a quick overview of what I recommend. But more importantly, I'm going to give you a resource that might be the most important thing you ever do for your future.
Step 1 - Cut up your credit cards. Yes I know it sounds crazy, but don't allow yourself to dig your financial hole any deeper than it already is.
Step 2 - Build up your emergency fund to $1,000. Emergency expenses are going to come up. Having $1,000 set aside to pay them will prevent you from borrowing more on your credit card to pay them.
Step 3 - Start paying down your credit cards like your life depends on it (it does!). Don't start with the highest interest rate. Start with the lowest balance card. Paying off debt is all about momentum, and paying off low balances first gives you a sense of momentum and motivation to keep moving.
Step 4 - If you don't have enough income to do this with your current job, then get another part-time job until your debt is paid down.
For further reading and inspiration, I would HIGHLY recommend Dave Ramsey's "Total Money Makeover". You will hear stories of countless people who were in the same position as you and were able to get out.
I can't tell you how highly I recommend this book. Reading it could be one of the best things you ever do. It has been for myself and many other people who have read it and used the principles it teaches.
I believe you can do this!
Over the long-run, you might expect to earn 8% - 10% when you invest. This isn't guaranteed though and you could go through long periods of time where your investments don't grow at all for you. Just to use a recent example, the S&P 500 lost an average of 1% per year from 2000-2009. I would hate for you to invest money now and have a similar experience over the next 10 years.
But let's assume you do earn 8% over the next several years while you are in school. That's a decent rate of return, but it's all before taxes are taken into account. Once you're out of school you're likely going to be in a high tax bracket considering your career track. So 8% pretax might be the equivalent of 6.5% or so after-tax. Is this enough to offset the interest you will be paying on your student loans? If your student loan interest rate is 6.5% or more then it's probably not.
If I were you then I would strongly consider using your savings to pay for tuition and other expenses along the way. This money won't be growing for you of course, but it will reduce the amount you have to borrow as well as the amount that you accrue interest on along the way.
You're going to be in a position in a few years to make significant contributions to your long-term investment accounts. In the meantime, I think the best thing you can do is reduce the amount of debt that you take on over the next several years.
If you do decide that you are going to invest then just be sure to stay away from any type of retirement account. You can't typically access money in retirement accounts until age 59.5 without penalty and taxes, so look to open up an individual investment account and invest in low-cost index funds.