Case Study #2: How to Get Financial Organized
RN age 28
Married with 2 young kids
Student Loan: $22,700
Mortgage balance: 327,000
Savings/checking account balance: $4,512
401(k) balance: 427,000—8% contribution with 6% match
Credit Card debt: 0
A Nurse came with the objective of getting financially organized and getting a plan in place that would address her and her family’s life. She is married and spouse earns a salary as a high school teacher.
Plan that was implemented
A discussion around complete holistic planning addressing the 4 major areas of finances (Protection, assets, liabilities and cash flow) occurred and it was quickly disco covered that her paychecks were critical to the family’s ability to maintain current lifestyle and being the bread winner there was a realization that her ability to work was critical. Her employer only provides the 401(k) benefit along with health insurance so a discussion around adding disability income insurance was had and we quickly found out that she was insuring her car, house and even her valuable personal property but that she did not have any income protection. We decided together that protecting her income was valuable and we issued a disability income policy on her life that would pay her about 60% of her salary tax free until age 65 in case she would be unable to work.
We also discussed that her savings/emergency money of $4,512 was a little too low and that we recommend at least 6 months of liquid savings. We lowered her 401k contribution to 6% for now to help build up short term savings and we decided that once she has accumulated closer to $20,000 in emergency savings we would consider saving more towards the 401k again.
Another piece that was put in place was a term life insurance to make sure that her human life value was covered, in case of her death we would want to make sure that the family would be able to continue paying for the mortgage and continue paying for school and every other monthly expense. A policy with a death benefit of 2,000,000 was put in place to cover her family. We discussed that we may consider converting a portion to a permanent policy in the future when emergency savings and student loans are where they need to be. A final review of the student loans were done and interest rates were very low so we decided to keep paying the minimum on those and revisit it again when saving are closer to $20,000.
All scenarios and names mentioned herein are purely fictional and have been created solely for training purposes. Any resemblance to existing situations, persons or fictional characters is coincidental. The information presented should not be used as the basis for any specific investment advice.