Mission accomplished (Our financial planning voyage — Part 3)

As has happened before in this process, after making a bunch of progress, I dropped the ball for a couple months. I don’t recommend doing that. It’s tough getting the momentum back. But if you’re like me and you’re allergic to just finishing things, all you can do is pick yourself up and gin up the motivation to get things moving forward again.

Estate planning

Our financial advisory has an affiliated law firm who we worked with to do our estate plan. We didn’t have to work with that firm, but we asked a couple other lawyers we know whether their quote was competitive (I try to get multiple trusted opinions on everything), and it made sense for us. We decided on a revocable trust, as opposed to a basic will. I will say that in our situation, it’s a toss-up. Our finances are not complex enough that a trust will definitely pay off, although we hope they eventually will be. But our law firm recommend trust and it seemed like, why not just do it the “right way” to begin with?

Aside: If I could do it again, I’d probably choose to just do a comprehensive will. This would have been easier to get over the finish line, significantly cheaper, and would have covered all the most crucial things. That said, I feel just a little more secure, so I wouldn’t say it was a waste. YMMV. Another option would have been to use a robo-lawyer service. I know folks who have done that, too.

As with everything else in our planning process, I’ve found that the single task of “getting our estate plan right” unfolded into many subtasks, which have their own subtasks, and so on. But here are the major points:

  1. You’ll have to decide what should happen with your assets when you die.
  2. If you are a parent, you’ll have to make decisions on custody, if your kids are minors when you die.
  3. There will be several calls with your chosen attorney to put all this together.
  4. You’ll have to sign and notarize the documents.
  5. You’ll have to do various things with copies and originals.
  6. If you have a revocable trust, you’ll have to fund it with your assets.

Step 2 is hard, if this is something you don’t normally talk about explicitly. It’s tough discussing with your partner, and even more awkward discussing with your family members and/or chosen guardians. But you’ll feel a load off your shoulders when you know that if disaster strikes, you’ve done your best to organize your affairs for your loved ones. I found it to be a surprisingly peaceful feeling.

Step 4 is where I went off-track and procrastinated for weeks. I never got anything notarized before, and in my mind, it was something that would take time to figure out. It wasn’t that bad. My wife and I went to our bank and spent an hour signing, dating, and handing things off to the bank rep and witnesses. It didn’t cost anything and it took about an hour.

Life insurance

Another major related goal of this process was to get the right life insurance policies in place. Our advisor was really helpful in walking us through the process of calculating our insurance needs with respect to our goals and plans.

There was one surprising recommendation I’ll share in case it’s helpful to other folks. He recommended that we get 10-year term life insurance. That only takes us to our 40s, and certainly not until college for our daughter. But the logic is that if we’re executing on the other parts of the plan, at that point, we should be able self-insure. Score one point for having someone thinking about the holistic plan. We’re free, of course, to be more conservative than that, but that was the recommendation. We decided to go a bit more conservative than that and opt for 15 years.

Like the estate plan, I procrastinated in getting this in place. But it wasn’t so bad. I used an aggregator to find plans 1. Term plans are said to be fairly interchangeable, so I felt comfortable basically just choosing the most attractive rate. The application process was really streamlined. It took about 10 minutes online with a 15 minute follow-up call to verify info. They scheduled a nurse come to our house to do our physicals. Once that’s done, there will be a few weeks’ delay while the underwriters do their thing. If all goes well, we’ll start paying our premiums and be covered.

Tip: the period between the exam and getting your policy confirmed is not a good time to do doctor’s visits, because that will require more back and forth between you and the insurer. 

Meanwhile, in the rest of planning land

We go a lot of stuff set up, but we also had a bunch of other questions. Should we pay down our mortgage aggressively or put more money in the market? How much cash should we hold out of the market? If we buy a car in a year, should we finance it or save up for it now? Having an advisor has been helpful for reaching confident decisions to these questions.

Mission: Accomplished

I can’t tell you how much better I feel about my household’s financial situation now. I had a basic knowledge of all of the components of financial planning coming in, but I felt completely unqualified to make specific choices and tradeoffs. Now, I’m confident that all my family’s core planning pillars are in place, so that 20 years from now, we’ll be in position to reap the benefits. Or to make the best of disaster, should it strike. Here is a subset of what’s been accomplished:

  • Developed a single dashboard of all of our finances.
  • Consolidated a tangled web of bank accounts.
  • Built a lot of education on personal finance topics
  • Enlisted professional planning help.
  • Refinanced student loans at much better interest rates (in some cases, half of the original rate).
  • Set up a professionally designed investment strategy into a socially responsible, low-fee portfolio.
  • Put excess cash into the market.
  • Executed an estate plan, including a revocable trust.
  • Diversified a large holding of a single stock.
  • Got our retirement planning strategy in place, maximizing tax-advantaged accounts.
  • Picked a strategy between Roth and traditional retirement savings.
  • Enrolled in life insurance policies that match our financial situation and goals.
  • Set up modest strategy for paying down mortgage principle more quickly.
  • Decided what to do about the stock options from my previous employer.
  • Established an emergency fund of appropriate size.

That would be a lot if all of those items were independent. But they’re actually interrelated in ways that were intimidating for me to untangle. I found professional help to be well worth it.

…Well, not so fast

We’re not done yet. This is really just a milestone of having the biggest, hairiest action items completed. This coming year, here are some  of the things I’ll be working on:

  • Reevaluate our planning relationship. Our situation will be a good deal less complex moving forward, significantly changing the value proposition. 
  • Deal with a relatively complex tax year.
  • Critically examine our cash flow to see where we can be more efficient. There are surely ways to spend where we find value, while also accelerating our savings.
  • Establish path to positive liquid net wealth (first excluding home value, then excluding retirement). AKA financial independence.
  • Fund education savings.
  • Plan for future major purchases.
  • Have a coherent philosophy/budget on charitable donations.
  • Make active investments in enterprises I believe in, knowing our nest egg is separate and well funded. 

That’s a lot, but I have to say, all of that seems quite manageable by comparison to 2018. If you’ve read this whole series, thanks for following along. I hope that it helps others achieve the same peace of mind, and hopefully with fewer hiccups.

And with that, the core trilogy is over. But I may continue posting supplemental stuff as my planning voyage evolves from here.

A special thanks

I gotta give a shout out to the /dev/color community. A big part of that program is goal-setting, and having this as one of my big 2018 goals gave me the extra push of motivation to get this done. Beyond that, at the beginning of the year, when I realized how many “unknown unknowns” I had, I reached out to the /dev/color network to ask people where I should start. The resources I got gave me the foundational knowledge to put together my initial checklist. The funny thing is, it took a while for the idea of simply asking for help to occur to me.

1 I don’t generally name my chosen providers, because I don’t feel comfortable with the appearance of endorsement. Maybe it’s possible to get a better deal getting quote directly from insurance companies and negotiating. However, the aggregator found a plan that was a significantly better than what I had found getting quotes on my own, so I’d say they earned whatever commission accrues to them in the process.

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