Securing Your Future: Richard & Monica’s Approach

I want to introduce you to Richard (42) and Monica (40).  Richard works in financial services and Monica works for a small technology company.  They’re incredible savers and very goal focused.

  • Retire by 55?  (YES, on track)
  • Max out Health Savings Account?  (YES, every year like clockwork)
  • Fund 529 College Savings Plans  (YES, on track to fund two Ivy tuitions)
  • Estate Planning  (YES, completed)
  • Life Insurance & Disability Insurance  (YES, in place)
  • Emergency (cash) Fund (YES, beyond fully funded)

They’re funding, have funded, and set-up accounts to meet all their long-term goals.  However, they struggled with one very important aspect of financial planning: “How do we fund enjoying more life today?”

In our conversations it came up that Rich and Monica wanted to take some vacations and make some improvements and updates to their home, but lacked the mechanism to fund it.

For those of you that know us, know one of our beliefs at Know My Plan is that we strive and emphasize creating balance in your life today, while also responsibly funding the future you desire and dream of tomorrow.

Were there areas in Rich and Monica’s financial plan that we could adjust to help them do more today while maintaining their responsible future plan?

First, we created a new account titled the “Experience Account.” We’d use this account for just that, to slowly establish a lump sum of money that we could use to enjoy family experiences and other items on their list. However, given the structure in their current financial plan and allocations, where would the money come from to fund this new account?

We could peel off a little more from their current income and allocate it to the “experience fund,” but that would be a slow build. So we looked at their RSUs, which were both earmarked and assumed assets that they’d hold over time and figure out what to do with them later.

Both Rich and Monica are receiving Restricted Stock Units (RSUs) and we decided that maybe they fund the “experience account?”

Their specific RSUs vest over a four-year period, and as luck would have it, they began vesting this year.  As we reviewed the rules, we discussed how they would be taxed at ordinary income when exercised. Together we decided that the best use of these RSUs would be to liquidate the shares and allow them to be the original funding mechanism for Rich and Monica’s “experience account.”

Could we have held the RSUs and borrowed from their emergency fund? Sure, but there’s a reason we establish that account (emergency).  In the event they need the emergency cash, it’s incredibly important that it’s available, whereas depleting the emergency account and continuing to hold the RSUs creates unnecessary risk, as who knows the future direction of that stock.

The result, Rich and Monica now have an “Experience Account” that they can fund with ongoing allocations, and a decent lump sum of money to serve as the foundation for the account.

Now it’s time to dip into it (and I have on good authority that some a combination of Aruba, Italy, RV’ing across the western United States, or Disney’s Polynesian Resort are on horizon).

Financial planning is so much more than just picking out the “best” investments.  Often times financial planning is about restructuring and helping families find a way to take an extra vacation.

Time with your loved ones is always a great investment.  A reminder that leaving a legacy goes far beyond money.  We help families create the life they love.

If you or someone you’re close to is a high-achieving professional that could use help aligning their finances and establishing a financial plan, please reach out to us, we’re accepting new clients and eager to help.

Cheers, Nic

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