Our first question of the month is from Brian from Michigan:
Hi!
After reading one of your millionaire interviews, I found your debt freedom story and your path sounds like mine.
My wife and I have gotten serious about paying off our debt after we learned she was pregnant 6 months ago. We are now nearing the debt-free finish line. Only two more months to go and we’ll be student debt free, car debt free and credit card debt free … really all debt free outside of our mortgage.
All in all, we’ll have about $600 extra each month when we’re done. Outside of going on a weekend getaway to celebrate (no drinking because of the baby *snap*), we want to keep building wealth. Any suggestions for the extra cash each month that will keep moving us forward?
Thanks for putting together those interviews. They are inspiring to read. Thanks for your help.
Brian
Solid debt crushin’ Brian! Way to go! And congratulations on your upcoming fatherhood.
It’s really a fun conversation to have … What do you do with your money after you’re debt free?
I remember feeling so excited when we paid off all our debt. The stress melted off my shoulders. I loved it. Brian, I’m sure you, your wife and your new addition are going to love it too.
Not surprisingly, I have 5 wealth-building considerations for you when you’re debt free.
1. Build Up Your Savings
I don’t know exactly how much liquid savings you have, but given that your wife is pregnant and you’re in “protect and grow the family” mode, it couldn't hurt to have more.
Nicole and I have always felt good with our savings totaling 3 months of expenses. Some people like a year’s worth of expenses saved up and others like 6 months. There are even folks who feel fine with one month of expenses saved.
Find the flavor that works for you.
There is no one right answer here. Honestly, there are only positives to having a large amount of liquid savings in my opinion.
2. Reassess Your Insurance Coverage
Sometimes when we’re paying down our debt, we limit a lot of our expenses to get the job done fast. Now that you’re debt free (or nearing the finish line as you say), I would reassess your insurance coverage.
Do you personally have term life insurance, Brian? If not, get some!
I’ll make an assumption that you’re working and providing an income for you and your wife. If your wife lost you, she and your newborn baby would be in a rough spot. For a young healthy guy, you can more than likely get a very inexpensive rate on term life insurance today.
I have a $1,000,000 policy and I pay about $55/month. A smart and safe investment in my opinion.
Not all insurance carriers are equal of course. Two companies that I like are Quotacy and Selectquote. They shop for the best deals on term life on your behalf.
Related Podcast: Protect Your Family With Hassle-Free Term Life Insurance
3. Increase Your Retirement Savings
Depending on where you and your wife work, you both might be able to take advantage of some nice matching 401k dollars.
Check with your benefits rep if you don’t know about the 401k match at your office. This could be free money you’re missing out on.
If you do have the opportunity for matching money, I would increase your 401k contributions to take full advantage of the match. That’ll be more money for you and your wife to have a nice cozy retirement. If you take advantage of compound interest and it’ll take care of you!
Outside of the 401k, you can look at increasing retirement savings in a Traditional or Roth IRA. Maximum contributions for 2018 is $5,500 so with your $600 per month you could max out an IRA if you want and still have some a couple grand left over!
4. Start Saving for a 529 College Account
College costs for your little one are going to be bonkers in 2036 (that’s when your baby is going to college). Think of the flying cars, AI robots and $300,000 college costs! AHH!!
A way to prepare for the nutty college costs is getting a 529 college savings account started early. That way you’re taking advantage of 18+ years of compound interest in the market
Brian, you can’t get a 529 yet until your baby is alive and has a social security number. I know crazy right!?
What you can do is start putting money in a separate savings account (we like Ally) so that once your baby is screaming, poopin’ and cooin’, you’ll be ready to start an account with a healthy initial deposit.
Nicole and I did this. We saved up $10k for Zoey’s fund and started it a month after she was born. Calvin got the shaft though. I think we only had $2,000 for him. (Sorry Calvin!)
Related Article: Why More Parents are Getting 529 College Savings Accounts
5. Make Extra Mortgage Payments a Habit
If the idea of mortgage freedom sounds liberating to you, begin making extra principal payments starting today.
The amount is up to you. You can play with a mortgage calculator and see what an extra monthly principal payment will do to the amount of time you have a mortgage.
These calculators can be a fun motivator! It helped Nicole and I reach our mortgage freedom at 35.
Those are 5 ideas for you to consider with your extra dough post debt freedom, Brian!
I’m glad to hear you’re setting aside time to celebrate with your wife. Enjoy this time together! This is a really special moment in your lives. You’re doing incredible work together building your wealth, you’re in love and you’ve made a baby. What else could you ask for?!
Money Master of the Week
Sherwin from Florida recently hit the $100,000 mark in his 401k!
He leveraged his office benefits, received a 401k match, took advantage of compound interest and let it grow year after year. According to Northwestern Mutual, Sherwin now has more money in his 401k than 50% of Americans!
His future goals have him hitting $200,000 in 3 years (2021) and then becoming a “401k millionaire” before his 50th birthday. That's how you become wealthy my friends!
Sherwin from Florida is our Money Master of the Week!
If you have a financial victory you want to share on this show, please leave me a voicemail (or email) and include the following: name, location, your big win, how you did it and your plans for the future.
Your story will inspire others to save more, make more and plan for their family’s future.
FinTech Spotlight
Check out Zelle to learn more about their peer-to-peer payment service.
Our Featured Guest: Melissa Lowry
Melissa Lowry leads marketing and brand strategy for Zelle®, a person-to-person (P2P) payment solution offered by Early Warning.
Throughout the past year, she has played an instrumental role in the company’s launch of Zelle, leading the marketing strategy and execution with banks and consumers. Lowry is a frequent contributor on topics ranging from payments and marketing and has been quoted in publications including American Banker, The Atlantic, Mashable and San Francisco Chronicle.
Lowry joined Early Warning in 2016 following the company’s acquisition of San Francisco-based clearXchange, where she served as Head of Product & Marketing helping to grow the consumer base by over 200% year-over-year to more than 25 million registered users. In addition, she has held senior leadership positions in payments and innovation at Wells Fargo and started off her career as an investment banking analyst at Lehman Brothers.
Lowry is the co-inventor on five mobile wallet patents. She holds a bachelor’s degree in Business Administration from Idaho State University and an M.B.A. from Stanford University.
MKM Podcast Resources
Young Family Wealth Playbook (FREE): 7-Steps to Solidifying Your Family’s Future Wealth
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Questions?
I’d love to hear from you!
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Carpe Diem Quote
“Financial freedom is available to those who learn about it and work for it.”
―Robert Kiyosaki
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