By far, my favorite part of Yield & Spread is engaging with students and seeing their success. I’ve met so many amazing, unique and inspiring people. I want to celebrate YOU GUYS by sharing your stories of personal finances and life’s challenges.
So, I’ve launched the Student Stories.
Every so often, I’ll introduce you to a fellow student who has taken the course. While there are guiding principles taught in Yield & Spread, I know there is no “one-size-fits-all” strategy when it comes to personal finance. I’m hopeful these stories will highlight students’ varied choices and show that we have a lot to learn from each other.
We'll be kicking the series off with my very own future brother-in-law, Michael!
Michael is passionate, driven, and simply hilarious. He is a clergyperson in the Episcopal Church, incredibly devoted to his community, a loving husband and father to newborn twin girls, an awesome brother-in-law, and a seriously (I mean, seriously) fast runner. In other words, Michael has got it together.
But just like all of us, Michael was flip flopping back and forth when it came to his financial plans. While he had intentional long-term goals, he and his wife Theresa were having a hard time cementing a roadmap to get there. They struggled with many of the questions we all have: Will we move cities? Will we buy a house? When will we have children? And these unanswered questions were holding Michael and Theresa back from taking a step forward with their investments.
I should also note that as a clergyperson, Michael has an extremely unique work arrangement when it comes to benefits and housing. This added one more layer to the onion of financial planning making it even harder to take a step forward.
Michael tells us, in his own words, what inspired him to start investing and how he is choosing to navigate life’s uncertainties.
What was your financial strategy before you took the course?
When Theresa and I got married 4 years ago, I was still in grad school, and we were both living off her modest income. Luckily, our expenses were very minimal, and we were living on my school’s campus at an affordable monthly rate. We had always planned to start a family and possibly buy a house. So we saved as much as we could so that in the next 5 years we would be ready for both kids and a home down payment, as close to 20% as we could.
Theresa and I have been fortunate (and frugal) enough to watch our net worth increase in a relatively linear manner – we were setting aside something like 50-70% of our monthly income in our savings account.
But we took the “cash is king” strategy. By saving cash each month we felt like we were doing “good enough” and were, statistically speaking, in a far better financial place than most Americans. But we were nervous to do any real investing in case we needed the cash when the time came to purchase a home.
Tell us about your unique vocation & financial situation.
As a clergyperson in the Episcopal Church, the benefits I receive are great but they also come with some uncertainty.
The Episcopal Church is one of the few remaining institutions that offers its employees a generous pension after 30 years of service. I’m also allowed to set aside a portion of my annual income as tax-exempt housing allowance. These dollars can be used on any expenses related to rent, mortgage, home upkeep, furniture, etc. A huge benefit as we continue to pay rent.
Additionally, a clergyperson may be invited to live in a “rectory” on the church’s campus at, more or less, no cost. This is also a really exciting potential benefit.
Sounds like some good benefits! What was holding you back from moving forward?
In many ways, Theresa and I have felt that we need to “sit and wait” to see what might come next for me vocationally before deciding what to do financially.
The future possibility of moving into a rectory has made our family’s home ownership plans more complicated and unpredictable as we consider my next job. We continued to flip flop back and forth on whether or not we should put our savings towards a home down payment or invest the money for something else.
I also harbored fears about putting too much money towards my work’s retirement plans, especially because I would likely receive pension. All these things made investing more complicated and I was afraid of over-contributing towards retirement resulting in me not being able to access my investments readily or I would be subject to penalties in the future. (PSA: For those of you with the same fear, make sure to read my previous newsletter on how to access Roth IRA funds early)
What convinced you to finally take the plunge?
When our twin girls were born, I was desperately aware of the fact that our income would need to be stretched further than before and that our savings plans had to be far more deliberate. Theresa and I realized that our vaguely possible short-term goal of home owning was too unpredictable to simply keep waiting, and that we were doing ourselves no favors in missing early years of retirement contributions.
What we were certain about was that we wanted to do our best to prepare for our girls' future. We wanted them to be able to afford an education when the time came. We also wanted to ensure that we were safe in our old age with a healthy retirement nest egg so that our girls wouldn’t have to take care of us financially.
So what did Michael & Theresa do?
(Back to me, I’ll outline the steps they took.)
In between baby feedings and naps, Theresa, Michael, Joe and I sat down and made a plan. Michael & Theresa had $70,000 in cash saved up (amazing!). This was generally set aside as an emergency fund and for house hunting. We ultimately focused on kids and retirement first, and then homeownership next.
Increased Michael’s contribution rate to 10% in his 403b Fidelity account
Deliberately moved cash to a separate Emergency Fund. Opened up a High Yield Savings Account with Marcus and transferred $20,000 to it (~6 months expenses).
Contributed $6,000 to both Michael and Theresa's existing Roth IRAs
Set up 529s in Pennsylvania for the twins, contributing $10,000 to each
Transferred $1,000 to an existing Regular Brokerage Account with Charles Schwab and invested it. This we decided to do to keep Michael in the habit of investing regularly and more aggressively.
Moved the remaining $17,000 leftover to a designated home buying fund, also to the High Yield Savings Account with Marcus
Check out the 30 year outlook on Michael & Theresa's updated investment strategy:
In 3 hours worth of work (plus the Y&S course), Michael and Theresa grew their prospective net worth by nearly $225,000. And this assumes they never contribute another dollar to their investment portfolios again (which we all know is unlikely to happen!). It also doesn’t include Michael’s increased 403b contribution impact which will certainly bring him much financial security in his old age! I should also note we also spent some time moving Michael from higher-cost target date retirement funds to lower cost index funds using the 3-fund portfolio strategy I teach in class. If you haven't tackled this yet, make sure to set aside time this month to do that. (Ok, back to Michael!)
How did you feel during the process when Joe and I helped you? How do you feel now that you've made the investments?
Honestly, it was exhausting (but everything has been since the girls were born!) but by the end of the process I was disproportionately relieved by the decisions and work we had done. For the past few years, I have been acutely aware of the gaps in our financial planning. In one sense, I was extremely active in our savings plans even though I had made very few tangible long-term savings plans. It takes an undue amount of headspace and worry to continually set aside enough dollars each month/bimonthly for goals that are never fully concretized.
Now, Theresa and I can be much more passive in our savings plans. We’ve charted a course, committed some initial capital to multiple savings outlets, and have a basic sense for where we want to designate future capital. We’ve been amazed at the way one afternoon’s work (with much prior deliberation) is already yielding returns for our girls’ future and our retirement with little thought and worry on our end.
Any advice for other students?
One thing that Rebecca has long encouraged of Theresa and me is the notion of starting small with your financial planning. If you have a sense of what your financial goals are but are hesitant to take the plunge, the best thing to do is simply start. For us, this meant purchasing a few dollars’ worth of a single index fund through Charles Schwab. This helped Theresa and I get over the initial hesitation of making a long-term decision, increased our familiarity with Schwab’s fund trade symbols, and made us more adept at using a financial institution’s website to manage our investments. Sometimes handling these small steps can drastically lower the barrier for entry. It certainly did for us.
I want to give a HUGE thank you to Michael for sharing his story! We hope you have learned some valuable lessons from him.
Boost your Wallet. Wellbeing. World.
Wanna take part in our student stories? We'd love to hear about you.
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