This is the fourth in a series of stories following three families through a Financial Fix-up. It appeared in The Forum Jan. 19, 2011.
For every worksheet financial counselor Morgan Almer suggested Nathan and Brenda Richman fill out to fine-tune their finances, Brenda showed him a similar one in her file, already completed.
The Moorhead couple is one of three families taking part in The Forum’s Financial Fix-Up. They’d started looking at their finances more closely last summer after a career change four years ago by Nathan, now an addictions counselor, depleted their savings. The Richmans, both in their 40s, say they had strayed from their financial values.
So by the time they met with Almer at the Village Family Service Center, they’d already tracked their weekly and periodic expenses, the first thing Village financial counselors suggest. They’d also stopped using their credit cards and now operate on a cash envelope system, another suggestion by the Village to rein in spending. The Richmans’ current financial goals are to pay off a car loan, save a three- to six-month emergency fund, and invest 15 percent of their income for retirement.
They’re in great financial shape, Almer said. “None of the debt you have is what we call ‘toxic’ debt,” he said, noting they had no credit card debt. They’d recently refinanced their home to a 4.375 percent rate.
According to the Richmans’ figures, they bring home $5,510 each month, with monthly expenses of $5,165, leaving a $345 surplus. “An ideal, good goal for the time being would be to take that surplus and plow it into that car loan,” Almer said. “In less than six months that car loan would be gone.” Then they’d have a monthly surplus of $655 that they could use to pay down the mortgage or save. He showed them some different calculations using www.powerpay.org. The free website shows how quickly debt can be paid off – or money saved – by “snowballing” payments.
Almer also helped Nathan and Brenda, parents of two teens, think about their financial priorities in the face of upcoming college bills and eventual weddings. “You’ve got to think about it this way, too … You can borrow to go to college, but you can’t borrow to retire,” Almer said. “You want to do what’s best for your kids. But we should make sure the retirement is going to be where you want it to be when you need it.”
The Richmans have several retirement accounts floating around, which Nathan said can be confusing. “It would be a lot easier to have it consolidated into one,” Almer agreed. One way would be to “roll over” old 401(k) accounts into a traditional IRA. This provides more control and investment options. They also could then choose to convert to a Roth IRA, which allows the investments to grow tax-free. “Anytime you separate from an employer it’s almost always advised to roll it over,” Almer said.
Almer suggested the Richmans meet with a financial adviser at a bank to review their retirement investments and risk tolerance. “I had never before felt the need to meet with somebody to look over our retirement,” Brenda said after the session. “That really would be a good idea to get a professional opinion and consolidate our things that are all over the place.”
On Monday, Nathan and Brenda met with Tyler Stedman and Paul Jarvis, financial planners at State Bank and Trust in Fargo, who will review their current investments and provide projections to answer the Richmans’ lingering question: How much will we need to retire?
Readers can reach Forum reporter Sherri Richards at (701) 241-5556