Financial Fitness Contest Winner No. 80


resources. “My mom was always good about squirreling away something.” Now the onus is on him to be the financial standard-bearer. While he doesn’t have everything figured out yet, he’s optimistic, “I’ve been able to accumulate in a few years what it took my parents their entire career to accumulate.”

The Advice
To help Hawkins work out his elder care and financial planning issues, Michael Smith, a certified financial planner with Phoenix-based ProFocus Inc., analyzed his situation. Here is his advice:

Discuss critical issues now. It’s a little late to explore long-term care insurance for his parents, says Smith; because they are over 60, it would cost about $4,000 to $5,000 a year for a $100 per day lifetime benefit for the both of them. Still, it’s never too soon for adult children to have tough conversations about end-of-life issues with their parents. This can be an uncomfortable conversation, but it’s critical that adult children discuss what role they may need to play in assisting their parents financially so that they can plan appropriately. Hawkins should seek full disclosure from his parents so that they can work together to ensure that everyone’s interests are protected. “You need to talk about getting a living trust with healthcare provisions. Designate who will take care of your parents,” says Smith. “[Hawkins] and his future wife must be in agreement about his financial support [of his parents,]” says Smith. “He must tell her about his responsibilities long before the wedding.”

Don’t let history repeat itself. Hawkins should get even more aggressive about saving and investing. Smith says Hawkins should use his $2,000 contest winnings to open a Roth IRA and invest in exchange-traded funds (ETFs) such as the Wisdom Tree Pacific Ex-Japan Total Dividend Exchange Traded Fund (DND). A key benefit of ETFs is their lower expense ratios. In addition to the roughly $5,000 a year he socks away in his 401(k), Smith would like to see Hawkins put $500 a month into two no-load value mutual funds: Tweedy, Brown Global Value (TBGVX) and RS Value (RSVAX), which have posted five-year annualized returns of 16.6% and 25.0%, respectively.

Consider becoming a landlord. If Hawkins’ townhouse is low maintenance, he should keep it and rent it, says Smith. The rental income should be equal to or higher than the mortgage payment. Once the market improves or if Hawkins gets an attractive offer, selling could be an option too, he adds.

Smith is positive about Hawkins’ potential, particularly if he keeps everything in perspective: “Quency must realize that eventually his future wife and own family will be the priority. If he doesn’t remain financially stable, he can’t help anyone.”

In the meantime, “With proper planning and investment discipline, his net worth could triple over the next couple of years.”

Financial Snapshot:

HOUSEHOLD INCOME

Gross Income $75,000
ASSETS  
Market Value of Home $125,000
401(k) Account 38,000
Money Market Account 13,025
2001 Toyota Celica

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