Tag Archives: Drew Snider

Which Financial Independence Path is Right for Your Family?

Financial independence is a hot topic, but with so many different paths (FIRE, leanFI, FatFIRE, slowFI, etc), it can be difficult to figure out what's the best path for you. 

Today we dive into some of the most popular ‘flavors' of financial independence and weigh the pros and cons of them. We’ll also get into how you can begin to calculate your FI number! 

Is Financial Independence a Smart Path for Your Family? 

Be honest with me, what do you think of when you hear the term financial independence? 

Do you think of a certain number, maybe when you’d like to be retired by? Maybe travel on your own schedule not having to worry about a 9-5 again? 

Do you think of it as the ultimate security blanket – an amount you have tucked away in investments or some income stream where you don’t have to worry about the bills or maintaining a certain lifestyle? 

Do you see a family with very good income living a life where they’re depriving themselves of vacations, eating out, and having fun just to retire faster? 

Talk to different people and you’ll get different answers. 

What I'm curious about is how young families can take key principles from the financial independence space and use them to reach the goals that matter to them personally. 

Sure, maybe it’s retiring or maybe it’s making sure the essentials are taken care of so you can spend more time with your family. 

Two components to figuring out how it could work for you is know first off how much you need to be financially independent and what is the timeline you're looking for.  

In this episode, we’ll go into that. We’ll jump into:

  • The different paths to financial independence
  • How to begin figuring out how much you need to retire
  • Choose an FI path That fits Your family

Let’s get started!

Handy Resources for Families Looking at Financial Independence

Thank You to Our Sponsor Coastal!

Support for this podcast comes from Coastal Credit Union!

If you live in the Triangle area of North Carolina and you’d like someone to work with you on your goals, you really want to check out Coastal’s Wealth Management team.

They’d love to help you start investing for retirement and more!

How Much Do We Need to Retire? 

One of the things I get to see writing about personal finance and my site are some of the questions people have about money. 

Over the years certain topics may come in, depending on if there’s a shift in the big picture like a recession or maybe it’s a certain time of year – summer where you get people asking about getting a good deal on a family vacation. 

And then there are topics that perennial – year in, year out different families with of different sizes, backgrounds, and incomes type into google to get an answer to a question that’s weighing on them. 

One of those questions is ‘How Much Do We Need to Retire’?

Now there are some solid back of the napkin calculators, but can you really use them for your family’s financial future? 

I decided to chat with Drew Snider who’s part of Coastal Credit Union's Wealth management team to see what families need to consider when figuring out how much they need to retire. 

More Than One Way to FI

Let’s define financial independence because even that gets mixed up with a related idea, FIRE.

Financial Independence: Financial is where you have enough money saved and invested that you can cover all of your expenses with.

FIRE: The difference with FIRE is there is a focus of leaving or retiring from your work. I’ve noticed that many in the community do point out how FI is the root, however, the RE is what’s the hook. 

  • LeanFIRE: You have enough stashed away to take care of your essential expenses.
  • FatFIRE: ”It's a level where you get to live your life at the same level as your highest-earning years, while not having to work a day job.” – Financial Samurai
  • SlowFI: As you move towards financial independence you make adjustments for more quality of life choices even if it slows you down towards your FI date. – The Fioneers
  • CoastFI: With CoastFI, you've reach a threshold where you have enough to retire at a traditional age. You can now use this ‘leverage' to align your lifestyle towards what you want during your FI years. We're at this point and love the options that have opened up for us.
  • Barista FI: With health expenses being a concern for many, I’ve seen a take on FI where you maintain a part-time job you enjoy for the insurance benefits. 

As you can probably guess from the podcast name Simplify & Enjoy, FatFIRE isn’t really a priority for us.

I recently came across an article online about one family in their thirties looking at financial independence

One sentence stuck out to me –  

Your “FIRE number” can be an age, date, or net-worth amount when you reach financial independence and no longer have to work if you don’t want to.

And I think that can be so helpful when you're deciding on your path – what do you consider to be your FI number?

Choose a FI Path That Fits Your Family

So I’ll let you in on a secret- when I was working out the site name, I was sure I didn’t want financial independence in it.

The reason is even though how we manage our finances qualify as taking a financially independent path, it’s not the end goal. It’s simply the tool. 

The principles of financial independence that I appreciate include: 

  • Define Your Essentials and Must-Haves 
  • Cut Out Noise and Status Symbol Spending
  • Pursuing More Options, Typically Fewer or No Debts
  • Work Optional (Type/Flexibility)

Next Week's Episode: Kids and Financial Independence

Speaking of aligning your money with who and what matters most to you, next week we’re seeing how kids fit in with financial independence. 

Matt Miner, a financial advisor and father, shares his take and some practical advice on designing and weaving more options when it comes to finances and advice. 

So if you haven’t already, make sure you’re subscribed. You don’t want to miss that episode. We’re on iTunes and wherever you get your podcast from! 

Our music today was from Lee Rosevere and Music for Makers. 

And thank you for your support!

If you have any questions or ideas for the show, please email me or join our free and private facebook group Thriving Families. We’re all about encouraging one another with our goals.

I hope you have a wonderful week, take care! 

How to Optimize Your Family Budget

Each week on the podcast I'm talking to financial experts and digging in from our own experience and those in the community to share one thing you can do to move your finances closer to your goals.

This week I had the pleasure of talking with Drew Snider. He's the Director, Financial Planning, CFP® over at Coastal Credit Union's Wealth Management team.

You can watch the video directly below or you can get the edited transcript underneath it.

Optimize Your Family Budget This Week

Elle Martinez: What's something families can do that can put them in a better spot with their finances? It doesn't have to be complicated. Just something that's going to get them moving forward.

Drew Snider: Yeah, I think if a couple sat down and had a family meeting, take an hour and in that meeting if they had their pay stubs and their latest bank statement and credit card statement in an hour, I think they could probably figure out how much money they have coming in.

And then from that, subtract what their goals are. If you want to be saving for retirement, make sure you're saving 15 percent or 20 percent of your income to retirement.

If you're saving for college, make sure you're putting away at least two hundred dollars per child. Right?

We could do some calculations to figure out the exact number, but if you just want to spend an hour doing something, you could just use those numbers to quickly come up with those two goals right away.

And if, of course, if you have other goals that you're trying to accomplish – let's say it's building up a cash reserve or something like that. That's a pretty easy calculation, too.

Once you [have] those three or four goals are and subtract those out of your income, you have your pay stub right there. It's already taken out all your taxes, your health care costs, all those premiums. And then what's left over? You know, sit down and talk about, well, how do we want to spend the leftover money? And sometimes when you subtract the goals from your income, it's a negative number. Right. That means you probably need to readjust your goals because it's got to tighten the belt. Yeah. There's nothing left for the soccer league fees and the coffee.

So you might need to either improve your income is obviously one way to do it or you may have to readjust your goals.

Maybe you're retiring at 55, isn't in the cards, but retiring at 60 or 62 might work for you. And then you don't need to save as much per month for that goal.

But most people are probably going to find that they have a positive number after this, subtract out their goals that they're dedicated. And then really it's up to the couple who probably have differing interests and ideas about how to spend that money. But to sit down and come to an agreement as to what they're going to spend that money on. And obviously you have to keep the house going with electricity and things like that. But you should be able to come down to what the fund money is.

That's precisely why you have your bank statement there, because you'll probably see where you're spending the money on cable. You know, if you still have a landline, Netflix, Amazon Prime, Hulu, you know. Yeah, it's all right there on your credit card and bank statements. So you'll probably realize, like my wife and I recently did, they were still paying forty five dollars a month for a landline just to get crank calls and robo calls. So we're canceling that soon. But I'm sure other people can find other things that they forgot that they probably have a regular subscription to a magazine or something that they don't even read anymore or something they're not doing anymore. So that's that would be my tip of the week is really to have that little brief one hour meeting. If you have the paystub and your statements, you you could get a lot accomplished.

Elle: Yeah, I think that's wonderful to really sit down and review because too often I don't know about you, but with like two little ones, we have one eight, the other four. It's like your day to day. You're so busy sometimes. Sometimes those subscriptions that you've been paying for, it keeps going, but you're not actually using it. So, you know, even if you, you know, take time, you know, once every month to make sure, like, are we still enjoying this? Is this something that matters to us and kind of redirecting that money? I love that, Drew. And if I took away something from this conversation, it is that personal finance, as cliche as it sounds, is really personal. The online calculators can be handy. You know, they kind of get you something to shoot for. But if you really want something tailored, you have to focus on your family's particular needs and goals. So, guys, if you're listening right now and you want to have a plan that's made for you and your family, please check out coastal good bank better dot org. Drew is part of Coastal's Wealth Management Team. They're dedicated. I've talked with a lot of them. All of them are not just financially savvy, but real people that are interested in not just having you have a perfect budget, but a budget for real life, a budget where you're enjoying life and still hitting your goals.

Thank you, Drew, for coming back on. I always enjoyed our conversation!

Smart Ways to Save for Your Kid’s College Education

Most parents want their kids to not get stuck with a mountain of student loan debt. Learn the best ways to save now for your kid's college or trade school!

How to Save for Your Kid's College / Trade School Education

With student loans seeming like a weight on many college grads, I think most parents who kids are thinking about either college, trade school, or vocational schools are trying to find ways to ease the burden by saving ahead.

And the advice typically given is to save ahead.

How do you do that when you juggling your current family expenses and saving up for other goals?

To help me out today is Drew Snider. He’s a director in Financial Planning at Coastal Wealth Management.

He’s also a parent of a 12-year-old daughter and yes, he’s been thinking about this as well. So he’s looking at this from both sides.

In this episode, we’ll get into:

  • The rising costs of college and why its harder for kids to work through college
  • What options you have to save to and invest
  • How you can start saving now

Let’s get started!

Resources to Start Saving and Paying for College

If you want to save something for your kid's education, here are some handy resources to get you started!

Thank You to Our Sponsor Coastal!

Support for this podcast comes from Coastal Credit Union! If you’re living in the Raleigh Durham area and looking to bank better, come check out Coastal today!

They have a Wealth Management team focused on helping you reach your financial goals as well as accounts to help you save for college!

Cost of College is Rising Fast

Elle Martinez: When my husband and I went to college, we received a combination of scholarships and financial aid, but they didn't cover everything. So we took on some student loan and both my husband and I worked through college.

Going to school full-time and working part-time was a bit of a challenge with time management. But it wasn't impossible.

And actually, looking back, we both appreciate it. It made us be more disciplined with our time and also our priorities.

Now, it's almost given that college keeps getting more expensive. But you may not be aware of how expensive it can be at some colleges.

Drew Snider: We're hearing a lot of parents, especially, I would say parents in their 40s and 50s over the past 10 years or so who claim that they didn't need to save for their kid's college because they paid for their own way through. And what I don't think people who have that mindset have realized is that the cost of college has gone up so much more than what a kid can earn to pay his or her way through college that it's almost impossible to do that anymore.

Just as an example, I went ahead and looked up some information on UNC-Chapel Hill, and I found that from 1986 to 2016, the cost of tuition went up eight-point one five percent. And the minimum wage, which is what someone could expect to earn if they're a college student, only went up two point six percent.

Well, so what that means is if you're working in 1986 you could have worked 34 hours a week and paid tuition and room and board and pay for college and your ex and your you know, your food and housing.

In 2016, in order to pay for tuition and your room and board, you would have to work 52 hours a week!

Finding Ways to Make College More Affordable

Elle Martinez: Okay. Working 52 hours a week isn't good for anybody, especially if you're going to be studying full time for a trade or getting a college degree. But I do think that this brings up a good point. Do you know the cost of going to college right now with the good schools or solid schools in your area?

You can run a what-if scenario. What if they don't have scholarship or financial aid money to cover the costs? How much would they have to work if they wanted to graduate debt-free or close to debt-free?

If you claim that the number is enormous, then there are several options that you can look at.

One being maybe switching schools or directing their attention to a school that is affordable and that can help them still get whatever training or degree that they're looking for. Just being aware of the costs can have a tremendous impact.

You can begin having these conversations with your kids that way. They understand what options they have ahead of them and can prepare accordingly. Remember, we want them to not only get the training that they're gonna get at trade school or in college, but we also want to make them financially savvy.

Paying for College

Elle Martinez: Speaking of finances, there's another concern that Drew has with how parents are planning to pay for college.

Drew Snider: On the other side of that is a lot of parents choose to borrow money for college or a lot of people take 401(k) loans or home equity loans to pay for college and not save for college.

And so the other calculation I did, I wanted to find out what would it cost you out-of-pocket cost if you started saving for 10 years. Vs. waiting. And then just borrowing money?

The numbers that I came up with. And this is just saving for twenty-five thousand dollars, so one year of college, if you saved one hundred and fifty-two dollars a month for ten years and got a 6 percent rate of return.

You would have twenty-five thousand dollars at the end of that ten-year period. You're out of pocket. What you actually invested was eighteen thousand two hundred forty dollars.

OK, now let's wait and take this other couple who decides they don't want to save. They're gonna go to Disney World instead. And then it's time for their child to go to college. It's twenty-five thousand dollars.

So they're gonna borrow that and they're gonna pay it back over 10 years and pay 6 percent interest.

Their out-of-pocket cost is thirty-three thousand three hundred sixty dollars. So basically it costs someone about fifteen thousand dollars more to wait and borrow to pay for it.

Where Should We Invest for Our Kid's College Fund?

Elle Martinez: So you might be listening to this and thinking, OK, we need to start saving for college. But what's the best option for us? Drew says that there are three key things to consider to make sure you're getting the best option for you and your family.

Drew Snider: When you think about where you're going to say if your kid's college, you kind of have three things in mind. One is what are the tax issues or benefits of different accounts? The second is, who's the owner? Who's the owner of that account? Is it the child or the parent? And the third thing you want to consider is the investment choices that you're going to have within that account.

Elle Martinez: In the two popular options for parents, we're saving for college 529 plans in Coverdell Education Savings Accounts (ESA).

529 Plans and ESAs

Drew Snider: When you look at the 529 plan and the Coverdell Education Savings Account, they both have great tax advantages. You can invest in investments within those accounts. They grow tax deferred. And then when you take them out for college expenses, they come out tax-free.

So all the earnings that you've made over the years, you don't ever pay taxes on those. If they're used for qualified college expenses. So there are some very nice benefits there. Yeah.

The IRS doesn't give away things for free, though. The catch is if you don't use it for college expenses, then there is a 10 percent penalty on withdrawals from the account and are not used for that purpose.

Elle Martinez: And they're both solid plans that you can use to save for your kid's college education fund. There are some big differences. You need to know about.

Compare Different States' 529 Plan

Drew Snider: The truth is most people are saving to the 529 plan. And part of the reason for that is there's virtually no limit on how much you can invest in there and how much you can contribute.

The truth is there are some limits and you should talk to your financial advisor about that. But they're limited by the gift tax rules, which is pretty high. So you can put a lot of money in the Coverdell account is capped at two thousand dollars per year for contributions. So that alone, I think, keeps some people from doing it and are using the Coverdell account.

The other issue with the Coverdell account is your income has to fall within certain or under certain limits for you to be on that account. And that can keep you from doing it just for your information out there.

For a joint couple filing jointly. There is a phase-out range between one hundred and ninety and two hundred and twenty thousand dollars of income. And if you're single, it's ninety-five thousand to one hundred and ten thousand dollars of income.

So the point there is if you're over one hundred ninety as joint filers as a couple, then you're going to be phased out and potentially can't even contribute the two thousand.

Elle Martinez: If you decide to open and use a 529 account to save. There are some things you need to be aware of.

Drew Snider: 529 plans are established by state. Each state has their own plan and they choose who the investment company is that's going to run the investments within their plan.

As an individual deciding which plan to use, a couple of things you need to think about are one, do you get any tax advantages from using your state's plan here in North Carolina?

We used to have a tax advantage. We would get a tax deduction or a credit actually on our state taxes for contributions that ended met several years ago. So if you're a North Carolina resident, there really isn't an advantage from a tax standpoint to use the North Carolina plan.

Most states allow out-of-state residents to use their plans and so that really frees an individual up to pick which states plan they want to work with.

I think a lot of people choose based on the investment choices and who the investment manager is through. Coastal we have access to many different plans across the country.

I personally use the Virginia plan that uses American funds as the investment company. I like the flexibility of the investment choices. Performance has been good ease of service. They have a great online portal account. Add money to it. It's excellent.

But I've also used the North Carolina plan back when you got a tax credit for our contributions. They're mostly Vanguard funds, which I think a lot of listeners are probably familiar with, which are low cost.

I'll be honest with you, there aren't as many choices through the North Carolina plan. So. But it's up to the individual to do their research to find the plan. That's that's right for them.

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Music Credit

Like the music in this episode? Music is by Lee Rosevere and Music for Makers.