This is a follow-on episode and the second installment of a two-part series on how we manage our own finances. In episode one, we covered organization and tracking, managing debt, and prioritizing/allocating cash flow. In this second episode, we discuss investing, risk management (estate planning & insurance), and the big picture and putting it all together. Hopefully, our discussion provides some useful insight on how there are different ways to manage your finances successfully, and how the approach can (and often does) differ depending on each person’s unique situation.
Outline of this episode
- The fourth category: Managing investments [0:59]
- The fifth category: Protecting our risks [7:28]
- The sixth category: Tying it all together [12:37]
How we manage our investments
When it comes to investing there shouldn’t be any surprise that our approaches are similar. We can say one thing… neither of us invests based on a Reddit forum! Now that we have that out of the way let’s talk about how we DO approach investing. After taking care of the most important part, which is having a plan, it makes the how to invest a lot easier.
When Jen and Trent were saving for their current house they kept the money in cash since they care more about having it available when needed than potentially missing out on higher investment returns. For the college savings goals, their oldest son is six, so they know they have roughly 12 years until he starts college, therefore, they feel comfortable being more aggressive in the way they invest the money. For the 529 plan, the money is invested mainly in stocks with a mix of exposures across US stocks, international developed markets, and emerging markets. Down the road, as college gets closer they will start to reduce the percentage of stocks and increase the percentage of bonds to smooth the ride and avoid the possibility that there’s a big stock market correction right when they need to withdraw the money. This same strategy can be applied to many things you need to save for over time like a house or retirement.
How we assess and protect ourselves against risk
Now on to the less exciting, but still important part of our overall financial plan, which is about protecting our risks. Jenny and Andrew had less risk that they were worried about covering since both of them were working and had no debt. That all changed when they had Grant and bought a house because now they have other goals they’re saving for. They also want to make sure Grant is taken care of in the event something happened to both of them so making sure that they had an estate plan in place was important. The biggest reason for this is because they wanted to specifically name Grant’s guardians versus letting the state decide. In the episode, we talk about other areas of risk planning including life insurance and disability insurance, and how we weigh those risks and insure ourselves so listen if you’d like to hear more.
Tying everything together
On to this last topic, we’ll discuss tying everything together. We’ve mainly touched on the financial side of things, but an equally important part is having the right mindset toward money. We encourage everyone to strike a balance of enjoying life along the way and saving enough for the future. Working with clients earlier in their career through the later stages of their life has given us a unique perspective on money. We’ve been able to see and hear things that people either regret or are happy they did. This has shaped how we view managing our own finances along with how we advise clients on theirs.
The biggest thing for both of us is not to have to worry about money. This is easier said than done. It’s not just worrying about having enough money in the future, but also about not worrying about it on a day-to-day basis or letting it dictate too much of our decision-making. There are enough things going on in life and our family and other areas where we want to focus our time and energy that we don’t want money to be a big focus or a source of stress, which many of you can probably relate to.
Resources & People Mentioned
- Download our guide: The Toolkit for Optimizing Your Finances as an Employed Physician
- Download our guide: The Financial Checkup