Financial Planning

For the last couple months, I’ve been working with Financial Planners to make sure that my financial life is on track. The following is what I’ve learned from that experience. If you are interested in speaking with a financial planner, I’d highly recommend the two I’ve been working with from Mass Mutual Financial Group (CA Insurance License #0G37944):

Quan Nguyen,, 415-370-7919.
Shinta Lim,, 415-290-9095.

The first discussion we had was about how they are paid. There are two types of financial planners, those you pay, and those who work on commission. Quan and Shinta work on commission from the products that they sell me. Of course, I get to decide on whether or not I accept those products. For example, I bought the life insurance, but they couldn’t find me a better deal for auto/home/umbrella than I already had. The more referrals they get, the better chance they have of selling something, and so, the more they can make me happy, the better their chance of getting referrals. Thus, I’m a happy customer, so I’m telling you all about their services. I didn’t have to pay a thing for their help.

The following is what I’ve learned in the last few months while working with them. There are three main things to consider: today, tomorrow, and disaster.


This is the part I’m always concerned about because it affects me today. Do I have money in my bank account to buy a new computer? Can I pay my monthly electric bill. Can I afford to fix the window on my car that doesn’t want to go down all the way (the difficulties of a seven-year relationship). There are a couple of things I have to remember to keep this part of my life stress free.

Keep 6-9 months of salary in savings.
The general rule of thumb is that I should have six to nine months worth of salary in savings. The money can be stored in any funds that I can turn to cash within a week. Stocks are okay, CDs and long-term bonds aren’t. I never know when something is going to happen and I will be out of work for a while.

Be able to pay off credit cards regularly
Credit card balances are okay in order to build credit, but I should pay them off every few months to minimize interest rate charges. I should never charge more than I can actually pay off.

My monthly bills should not exceed monthly income

Sounds simple, right?

I eat out too much. Spend too much on haircuts. Gas is expensive. Telecommunications are expensive.

So what am I doing about it? To start, I’m going to try to eat out less, and when I go out, I should bring home leftovers so I can spread out the cost over two meals. Food is my biggest expense after my housing. This is where I need to cut the most.

My haircuts are expensive, but are sacred. I managed to go three months instead of two months between cuts. One plus side is that my hair was longer. This will be hard for me to cut back. We all have our financial Achilles heel. This is mine.

I own my car and don’t plan on getting a new one anytime soon, so I don’t have a car payment. But I do have some expensive repairs occasionally because of its age. I need to plan for those. I haven’t been riding my bike because I forgot the combination to the lock on my locker. So the other day I had some cute guy in Facilities cut the lock off for me. Then I biked to work. It was tough biking home in the cold and dark, but biking means I save on gas and on electricity by showering at work. And the bonus is that I get exercise. The downside is that I really need better lights. The ones I have are legally adequate, but I don’t want to get hit. I’m going to bike to the grocery store as soon as I’m done with this post.

I turn lights and electronics off when I’m not using them, and the lights I have are low-wattage to save my electricity bill. A couple of years back, I switched my thermostat over to a programmable one. When I’m not home or asleep, it is set to 60 degrees. When I’m waking up, or home after work, it is set to 68 degrees.

I have a landline in case of emergency, but it is set to the lowest rate I can get. I have Internet and they include basic cable in it. I would cut back on my Internet, but I share it with my neighbor in exchange for free cat sitting when I travel. I’d turn off cable and use the antenna on top of the building but I only have one line coming in and I need it for internet. The cable company is required to give me the HD channels that are free over the air. I am trying to figure out how to get my TiVo to know about them. Supposedly, I can get a CableCard for free. I’ll look into that.


I’ve tried to plan for the long-term. This includes things like investing in real estate and retirement. Retirement, still seems so far away, but the best advice I ever got in my 20’s was to start investing for my retirement then. So I did and have been ever since. My retirement accounts have survived two down economies and are going strong. My financial planner said I’m doing well in this department.

Home ownership
I failed at buying a home. I bought at the height of the bubble, so of course, my home is underwater as far as my mortgage. Where I won is that when the original mortgage broker had offered interest-only loans, or loans that were much more than I could afford all on my own, I passed them up and stuck with a 30-year fixed that I could afford to pay every month.

Since I can’t afford to sell, I’ve been doing some remodeling to increase the value and to enjoy being home. I remodeled my kitchen almost two years ago. That was significant in encouraging me to start cooking and eating out less.

This year, I’m working on remodeling the bathroom. The cabinet doors are starting to fall apart, the sink has a chunk missing out of the surface. The drain is rusting. There are permanent mold stains in the calking around the bathtub that have been there since I moved in. There are cracks in a couple of tiles. The linoleum on the floor is starting to wear through in the high traffic area. The fan is annoyingly loud. Time for a change, don’t you think?

As a bonus, I got free tiles from a neighbor who remodeled her bathroom and had leftovers. I think I’ve found a way to work them into my remodel to save a little cash.

But the money isn’t going to come out of nowhere. My financial planner has taught me that if I want to spend more in one area, I need to figure out how to cut back in another.

One of the things I (conveniently) forgot to mention in the Today section is that my biggest yearly expense after housing is travel. I am addicted to traveling. This year, I have worked really hard to control my urges to fly around the country. I am going to do a stay-cation for the holidays, so expect lots of blog posts of the local scene. The money I would have spent on vacations is going into the long-term investment of my bathroom. The rest of the money will come from my stocks.

Self investing
You are allowed to invest a certain amount (depending on your income) every year into a tax-free Roth IRA. I had one going for a while, but never seemed to get enough money into it to make it work for me. My financial advisors helped me run the numbers on it and another retirement account I have from teaching. For the long haul, by paying the taxes on the retirement account and rolling it into the tax-free Roth IRA, it will give me more tax-free options in the future.

Tax rates today are at historical lows. They probably will not get lower. Thus, it is a good idea to hedge my bets by having both taxed and tax-free retirement funds for the future. Might as well pay taxes now on some of it rather than later.

Take advantage of work provided investments
I used to max out my 401k, but have diverted some of that money into my mortgage. But the rule is to always put in enough so that I can get the maximum amount that my employer matches. Don’t ever pass up free money. This investment is pre-tax, so it helps to lower my taxable income each year.

I invest in our Employee Stock Purchase Program by investing money for six months straight from my paycheck. At the end of that six months, I get company stock. The price is 85% of the lesser of the starting and ending price over the six month period. In the worst case, I make 15% by selling it that day. If I can hold it for at least a year, then the taxes I pay on the amount are only long-term gains tax, closer to income tax, rather than short-term gains tax which is pretty high.

This coming year, I get the option of investing in a Health Savings Account. This is a tax-free way to save for impending health expenses. Work will contribute an amount of money into the account and I can invest more up to a specified amount. The money can only be used for health-related expenses. The catch is that this account can only be used with high-deductible insurance plans and the account is used to pay for the deductible and other uncovered health-related expenses. I rarely go to the doctor because I’m fairly healthy. So I should be able to have a surplus that I will then be able to invest for my health related expenses in the future. This brings us into the third stage of our financial health…


The biggest lesson I learned from my financial planners was how to cover my assets. This is where I hadn’t done much planning.

Protect investments
Since we live in a country where everyone likes to sue for everything, it is important that I protect myself against such loses. I have car and home insurance, but what happens when those policies aren’t enough to cover the expenses of someone being injured in my home or my water heater exploding and leaking into the unit below me? In the worst case, their lawyers would come after my home, my stocks, and my 401k. This is where an umbrella policy comes in to play.

An umbrella policy is there to protect me from this kind of disaster so that I don’t lose my home and my savings from an accident. But like I said earlier, I’m trying to reduce my monthly expenses. So in order to afford an umbrella policy, the financial planner encouraged me to increase the deductible on my home and auto insurance. They convinced me that I have the money in the bank, so a low deductible isn’t really worth what I’m paying for it. The money I saved in home and auto insurance was enough to cover the price of an umbrella policy.

Prepare for death
It happens to the best of us, and the last thing I want is to have my family cursing me upon my death for leaving them with a mortgage on a piece of real estate that is underwater. I have term life insurance through work, but it isn’t enough to cover my mortgage. And term life insurance means that as soon as I leave the company, I no longer have life insurance. So what is the alternative?

My financial planner suggested whole life insurance because it stays with me for my whole life, but I only pay premiums up to a specified age, in most cases 65. By starting a policy at age 36, my monthly premiums are much lower because I’ll be paying for it longer. The other reason for starting it now is that I’m healthy. Life insurance policies are based on health. Seems I’m a prime candidate for health insurance because I’m going to live forever.

So I got a plan that is worth X amount. X amount, along with my term life insurance is enough to cover my mortgage in the case of my unfortunate early demise. I was told that it will be worth nothing if I commit suicide in the next two years. I explained that if it looks like I committed suicide, then they had better start the manhunt for my killer because it was obviously staged. But I digress.

The nice thing about life insurance is that it is also a tax-free investment. The life insurance is guaranteed a specified return every year that is reinvested. On good years, it can be higher. When I get to retirement age, I am allowed to take tax-free loans out on my life insurance, which by then, should be worth a lot more than X if the company invested well. And the loans don’t have to be paid back, they just lessen the amount in excess of X that my beneficiaries would receive.

The goal for long-term retirement investing is to have tax-free and taxable investments. I should never touch the principal amount of these investments, only the interest they produce each year. During good economic years, the interest on my 401k should cover my yearly costs and I’ll pay the taxes on what I use. During down economic years, like the ones we’ve been having, I can take out of my life-insurance. Because it is tax-free, I can take out less because I won’t be paying the taxes on it.

Hopefully, by the time of my demise, I’ll even still have some left over to leave to my loved ones.

Of course, buying a life insurance policy is another monthly expense. So my financial planner has been helping me to refinance my mortgage to lower the interest rate and save enough monthly to be able to pay for my life insurance. Sadly, this has yet to be successful, but we are still working on it. I did get a raise this year that should cover the monthly increased cost, even if we can’t get my mortgage refinanced. Again, in doing all this, it was important not to be spending more than I already do each month.

Also, they have told me that since my place appraised so low, I should be able to get my place re-appraised through the city and get my property taxes lowered. That will also help to cover the cost of the life insurance.

And Beyond
The afterlife is one place where I have been completely lax because I’m convinced I’m going to live to be 102 and have plenty of years to plan. My financial advisor suggested I have two options: a will or a trust.

A will is fairly simple, and I think work offers me a free service to set one up. But a will still needs to go through probate and takes time to deal with after my death. I don’t want to be a burden to my family, so I’m going to check into the other option.

A trust doesn’t have to go through probate because all of my assets would actually be owned by the trust instead of me as an individual. But setting up and maintaining a trust can be expensive since each change requires paying a professional. So I’m waiting to straighten every thing out, and then I’ll look into this option. Until then, I should probably set up a will.

This is what I have done to help make sure that I am becoming financially secure, but everyone’s situations are different. I highly recommend speaking with a professional who can help guide you in the right direction. And remember, you are the only one who can decide to make changes in your financial health. It takes some self-discipline, but in the long run will be worth it!


5 responses to this post.

  1. I wish I were as financially advanced as you are. I never learned good financial management from my parents, never took an economics class at school. I learned a lot from managing grant projects at work–all expenses must be carefully planned out, choose options that are economical in the short and long run, never spend more than you have–but applying those lessons to life has come slower.

    Eating out is an enormous expense. For the first month or two after saying goodbye to my job in NYC, which had pretty much required that I eat out for most meals, I was continually astounded by how little money I was now spending on food. Eating at home is so much cheaper! Just take the coffee example: I now spend about $4 a month on coffee. When I was commuting to NYC, it was more like $40 a month.

    Beyond that, well… let’s just say there room for improvement!

    I also bought my house at the height of the bubble, and I also have a fixed 30-year mortgage. I’m not in a posh neighborhood, but my mortgage is less than renting, gives me tax write-offs, and gives me piece of mind knowing that this is my home and no landlord can tell me what to do with it.


    • The tax write-offs for the mortgage interest is definitely a help. And I agree that being a home owner definitely has its advantages.


  2. Have you ever read “The Wealthy Barber”? It’s a good book, and I recommend it to everyone.


  3. K, I’m a Christian. I believe Jesus took one for the team. That said, The Bible is only the 2nd most important book I’ve ever read. Dave Ramsey’s “Financial Peace” is THE MOST IMPORTANT BOOK I’VE EVER READ. Ever. I’ve bought numerous copies of Financial Peace for probably upwards of a dozen people. I can’t say I’ve ever bought a bible for anyone. Yes, it is THAT important of a book.

    If you e-mail me your mailing address, I’ll buy the stinking book for you if you promise to read it. I received it as a gift from a friend, and only 24 months later, I have had more fun than I’ve ever had, yet gotten more financial traction in my life than ever before too. I’m happy to pay that gift forward. I sound like an effin infomercial, so forgive me if I sound insincere. I wouldn’t leave this comment on your blog if I didn’t think it was THAT IMPORTANT of a book. And I’m spent. Carry on.


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