3 Things I Learned Through My Financial Coach Training
Now that my coach training has officially come to a close (Yay!!), I just wanted to take a few minutes and make note of some of the things I learned myself through this process. We were trained to help teach OTHERS during this training, but I learned a LOT myself along the way. These are a couple things that I learned, that we will be taking action on in the year to come...
1. It's never too early to get your affairs in order
Okay, this first point starts out a little...dark. I mean, no one wants to think about death, and what others will have to deal with after your gone. But, dealing with a death (not even talking about the emotional side here) can be difficult. If something were to happen to me, I want to know that my family will be taken care of. I don't want them to have to struggle to figure out where all the important documents are (since I'm the one that handles those things), or to struggle financially. So, there's a couple things I'm making sure we get it order ASAP.
First, I'm going to make sure to have a "legacy box" in place - something that includes all our important documents - life insurance policy information (side note, if you don't already life insurance, get it NOW!), birth certificates, social security cards, passports, marriage certificate, log in information for various bank and retirement accounts, vehicle titles, wills, and I'm sure I could think of more if I wanted. But, you get the idea. Try and think of all those important documents in your life, and put them all together. As time goes on, just remember to keep looking in the box, and make sure it's still up to date. Maybe you've added a new account somewhere - make sure you add it. Maybe you had a chance in an insurance policy - make sure you update it. Maybe you've had a child - time to update the will. That brings me to my second point...
We need to write a will. It doesn't have to be anything complex, and we won't need to pay a fortune to get one drawn up. But, we do need to get something in place. My husband and I do own almost everything jointly, with the exception of our "fun money" ban accounts. So, if one of us were to pass, the surviving spouse would inherit all those that are jointly owned. But what if both of us would pass? It could create a mess for our families, and we don't want that. By drawing up a will, we can clearly state what our wishes are for all our assets. If you have children, you should also list who would become the guardian for your children. That way, the courts don't get to make that decision for you.
2. Establish a 529 plan for your children
First of all, what is a 529 plan? It's essentially a tax-advantaged savings plan that you can use to help pay for your dependent's higher education expenses that is authorized by Section 529 of the Internal Revenue Code. Parents can contribute money to the account that can be invested in mutual funds, and the money can be taken out and used for higher education purposes (tuition, room, and board). The money invested in these accounts can grow tax-free, and at a higher rate than in a traditional savings account. For more information on how these accounts work, please talk to a tax professional or financial advisor.
I plan on opening up a 529 plan for our child(red), so we can slowly start building up that account. I would love to be able to fully cover the costs of our children's education one day, and college isn't cheap! The average tuition (JUST counting tuition, not room/board or books), is nearly $10,000 a year for an in-state public, 4 year college. That jumps to about $32,500 for a private 4 year college. That can be a lot of money to shell out over a 4 year period. But, if you start when your child is born, you have 18 years to grow that amount.
Say you want save up enough for a 4 year, in state college for your child. If you start the year they are born, and save $185 a month, that adds up to $2,220 a year, and $39,960 over 18 years. I don't know about you, but I find it a lot easier to find $185/month versus $40,000, 18 years from now! Plus, some colleges offer "pay in full" discounts, so if you walk into the financial office ready to pay, you may not even NEED the $10,000 a year.
Another benefit of these accounts is that you can roll it over for another child. Say you saved $50,000 for child number one, and they went to a community college for much cheaper! You can roll over the existing money in the plan for the next kid. Keep in mind, you don't want to grow these accounts TOO much, because any money that is saved up and NOT used for educational purposes, you will be taxed on all the earnings you've accrued over the years. So, just do some planning, and adjust your contributions as things change.
2. Who says I have to wait to age 65 to retire?
Retirement isn't just what automatically happens when you hit a certain age. Sure, you might be able to collect Social (in)Security at that time, but if you do enough planning and saving on the front end, it's up to you when you decide to retire! Retirement isn't an age, it's a financial number.
I would LOVE to be able to retire before I'm 60. But, that's going to take some planning...I know it. But, by getting a plan in place now, I can make sure invest enough now to make that dream a reality. Plus, I understand the concept of compound interest, so I understand that money invested today is truly more valuable than money I invest 10 years from now. It is NEVER too early to start saving and planning for retirement.
Maybe you have no clue where to start creating that plan. Check out this handy-dandy retirement tool I was introduced to in our training: The Retirement:IQ, or R:IQ (https://www.chrishogan360.com/riq/). It will ask for your annual income, how much you want to withdraw each year during retirement (considering how you plan to live - if you want to travel a lot, you may need more than you currently earn each month. If you plan to spend quiet days at home, you could probably live off less), how many years until you want to retire, and how much you currently have saved up. It will take all these pieces of information, and tell you how much you need to start saving per month NOW in order to get you to your dream. Don't rely on Social (in)Security, and do what you can now to set yourself up for success.
After I did these calculations, I decided I want to increase my monthly retirement contributions. It's crazy that just a slight increase, starting now, can result in a SIGNIFICANT increase in the overall amount of my retirement fund by the time I'm 60. I'm already taking full advantage of my company's 401(k) match, so I plan to look for other investing options outside of that. Sure, I can contribute more to that account, but I'm going to start doing research on various mutual funds that can get me a larger return than my 401(k) is currently getting.
These are 3 of the biggest take aways I found to apply in my own personal life, but I learned SO much more than this! If you have any questions on how you can apply these things in your personal life, feel free to ask! I'd love to put my new skills to use :)
Thanks for reading!