Over the course of our meetings here is what Jim, Pam and I covered:

Emergency Fund Establishment – Pam and Jim already had a high yield savings account. However, they had a lot of cash on hand. We agreed upon an amount that would work for their emergency fund, given some risks that were specific to them. We decided the rest could be invested for retirement. I detailed those recommendations in their Investment Worksheet.

I estimated that investing excess cash would earn them over $10,000 over the next 10 years. Of course, there are no guarantees. Those investments are exposed to risk and in a down market the account value could drop to an amount that is much lower than if they kept their money in cash. They were relieved to have parameters so that they knew how much to keep in their emergency fund and how much went toward retirement savings.

Savings and Spending Plan – Pam had their accounts linked to an online budgeting app but she hadn’t paid much attention to it and we realized they needed to re-categorize expenses. I recommended setting up automatic savings to better manage near term cash flow. This took some trial and error. We started with preliminary automatic savings figures and increased those numbers after our third meeting because cash was building in their checking account. They loved having a dedicated account for travel so that they didn’t have to feel guilty about taking vacations.

Life Insurance – We had a number of changes to make regarding life insurance. Jim’s insurance had features that were not cost effective. I reviewed the policy and recommended they put a different type of coverage in place. I recommended coverage amounts and we discussed the timing of making the policy switch. The new policy provided more coverage for a slightly lower premium. They felt frustrated they had been paying into a policy that hadn’t been saving them as much as they thought, however, they were glad to be on the right track now.

Pam didn’t have any life insurance, which was a missing piece of their plan. I explained why I think it is important they both have insurance and they agreed. I gave them resources so that they could request competitive quotes and put the right kind of coverage in place. I suggested particulars about a policy that would be right for Pam. They asked a few questions and began moving forward to put coverage in place.

They are relieved to know that if something happens to either of them they’ll have money to cover their mortgage, college for their children and some living expenses. They know they would still have a non-financial hardship and financial adjustments to make but at least this coverage will ease their financial burden if a tragedy were to occur.

Employee Benefits Review – I reviewed the employee benefits offered through Dunder Mifflin. A match was offered in the 401(k) which Jim was taking advantage of but it turns out Pam wasn’t. I recommended she contribute enough to get the full match immediately. This increased her compensation by over $1,000.

They were also offered an account that would help them pay for childcare expenses in a tax advantage way. I recommended they max this out, which I estimated would save them over $500 in taxes each year.

Disability Insurance – Jim earns quite a bit more than Pam, so it was important to focus on his disability coverage first. The quotes for coverage were expensive and we discussed different aspects of the policy. We decided on coverage that struck a balance between the cost of coverage and having protection. They bought a policy that we felt was appropriate for them. Jim started moving forward with underwriting to put coverage in place.

Investment Review and Recommendations – I reviewed Jim and Pam’s accounts and noticed they had quite a bit of cash on hand as well as a meaningful amount of money all in one stock, inherited from Pam’s grandmother. The rest was in two current 401(k)s at Dunder Mifflin, an IRA which Jim couldn’t remember the details about because he had contributed to it a while back and two Roth IRAs at different institutions that they both contributed to, in the past, but didn’t know if the investments were any good.

I made recommendations for where to transfer these accounts to better organize them. We also discussed my investment philosophy as it applied to their situation. I coordinated the investment options offered to them through their current employer with their other accounts. Six accounts was a lot to coordinate but I gave them specific funds and dollar amounts for each account, in their Investment Worksheet so they knew exactly what to do. I let them know I would be happy to help them implement these instructions and they decided to give it a try on their own first. Transferring the accounts was a pain but once everything was in one place it wasn’t as hard as they thought to execute my instructions and make the trades.

They are relieved to have a coordinated investment strategy across all their accounts that are invested appropriately for the long run. We’ll make adjustments annually to make sure they maintain their portfolio to keep it in line with the Investment Parameters I created for them.

Education Planning – We discussed the potential cost of college and strategies that might help them cover such a large expense. I recommended 529 Pennsylvania College Savings Plans for both their children and the investments within those accounts. With retirement savings and other demands they didn’t have a lot to contribute at this time. However, they decided to make consistent monthly contributions, even if they are small.

Cash Flow Projection / Financial Independence – I created a long term projection and found that at their current savings rates Jim and Pam are on track to be financially independent in their sixties. We discussed that a lot can change between now and then and that it would be prudent to revisit these figures periodically. In addition to their current savings, I also encouraged them to continue to save raises and bonuses as they have been doing. They understood they will need to continue saving and were comforted to know they were on track. This also made them feel less guilty about their current expenses.

Tax Guidance and Additional Items – I took taxes into consideration when making investment recommendations. Particularly, with the sale of the stock they inherited from Pam’s grandmother. I also recommended account types that gave them a tax advantage.

They asked me about potential tax advantages of Pam starting a side business selling arts and crafts online. We discussed how that could work, from both a small business perspective and a tax perspective. I shared some ideas and recommended some resources that they found helpful.

After reviewing information about their mortgage I thought they could save money by refinancing and still be on track to pay off their loan by the time they retired. They confirmed they would indeed be eligible for such a loan and started the refinancing process. Lower monthly payments allowed them to increase savings to their 529 accounts without making any changes to their spending.

Estate Planning Guidance

I emphasized the importance of estate planning because they have young children. I gave them referrals so that they could work with an estate planning attorney to put needed documents in place.

Per my suggestion, Pam and Jim set up a weekly time to make progress with action items. They didn’t make it every week but still were able to make meaningful progress. I reminded them to update me between meetings and they always do. They know its ok if not everything is complete because we are moving things forward. They feel they are being responsible adults now that they have an understanding of what they need to do as well as written action items to help them do it.

This example is meant to give you an idea of my approach to financial planning, my general process and the value of a holistic planning prospective.