Case Study: Laura – Just Getting Started

While each family’s financial situation is unique, you likely share many of the same challenges as others we’ve helped. The following case study illustrates how we help clients develop and implement solutions unique to their situation.

What to do when you have lots of debt and are just getting started?

Background

Photo by kaibara87Laura (29) is just starting her career as a dentist.  Between undergraduate school and dental school, she has incurred lots of student loan debt, an auto loan, and some credit card debt.  Last year she accepted a position with a dental group in Columbus, OH.  She has been living in an apartment, but would like to purchase a home soon.  She’s not sure how to go about tackling all the debt and she wonders how important it is for her to be contributing to her company’s 401k plan.  Her questions for us were:

  • How much home can I afford?
  • How should I go about paying off my debt?
  • How much should I save into my company’s 401k plan?
  • Are the employer benefits I selected sufficient to meet my needs?

How did Laura go about hiring Accountable Financial Planning LLC?

After discussing her unique situation and goals with Andy Kerns, CFP ® during a free initial consultation, it was agreed that an hourly service agreement with Accountable Financial Planning LLC would be the best arrangement to meet her current needs.  Soon after the initial consultation, Andy followed up by sending her an hourly contract to review and a list of information for her to gather.  Two days later, she returned the signed contract, dropped off the requested information, and scheduled a planning meeting with Andy.

How did Accountable Financial Planning help?

  • Increased Financial Awareness
    • We developed a balance sheet, listing her assets, liabilities, and net worth.
    • We created a debt summary detailing the interest rates and terms of her various loans.
    • With Laura’s input, we developed a cash-flow statement, showing how her income was currently being directed.
  • Prioritized Goals
    • Through discussions with Laura, it was determined that building up an emergency fund, paying down high-interest credit card debt, and contributing enough to her 401k plan to get the maximum employer match, should take precedence over buying a home right away.
  • Developed a Plan for Building Emergency Fund and Reducing Debt
    • Using the cash flow statement, we set a goal for how much she should direct on a monthly basis towards debt reduction and building up an emergency fund.
    • We reviewed the debt summary and identified which loans to pay down first and which loans to only make the minimum payments on.
  • Optimized Portfolio Strategies
    • We developed a well diversified target portfolio based on her investment time horizon and tolerance for risk.
    • We reviewed her 401k plan investment options and make specific recommendations for how she should direct her future contributions.
  • Eliminated Unnecessary Insurance Costs
    • Through discussions with Laura, we agreed that she currently had no need for life insurance and that she should drop the voluntary supplemental life policy that she signed up for when she was first hired.
    • We reviewed her renters and auto policies and made recommendations for modifications to her current coverage.  We obtained quotes from other quality carriers to compare costs.  Even with the cost of the umbrella liability policy which we recommended, the total premiums with the new carrier were less than what she was currently paying, so she switched carriers.

How is Accountable Financial Planning LLC helping now?

Laura contacts Accountable Financial Planning LLC periodically when she needs help with a financial-related decision.  Since she is an hourly client, we invoice her periodically as services are provided.  We also help her with the preparation of her income tax returns (under a separate agreement) during tax season.  Laura realizes the value that our relationship provides and appreciates having an advisor she can trust and who can offer insight and objective guidance on all kinds of financial issues.  Once Laura is in a better financial position and begins to add more to her investment portfolio, she plans to enter into an annual retainer agreement with Accountable Financial Planning LLC and have scheduled planning meetings and portfolio reviews twice per year.

Disclaimer:

This Case Study is hypothetical in nature and is not intended to be a testimonial or endorsement of Accountable Financial Planning LLC. The scenario presented is intended to illustrate services available at Accountable Financial Planning LLC, but does not necessarily represent the results or experience of actual clients. The strategies discussed are not appropriate for everyone and should not be considered investment or tax advice. Clients should review their unique situation and financial needs with a qualified advisor and inquire about the various benefits and risks involved with specific services and strategies.