exercises in compound storytelling

Friday, October 31, 2008

free financial advice

My wife and I went in for our first session with her accountant yesterday. That sounds like more than it is: she has a small business with two employees (think Joe the Plumber, but different), that she bought from someone else, so there's an outstanding business loan with a balloon payment due next year.

We're trying to consolidate our houses and preserve any gains we might have made, so we talked mostly about which loan (home mortgage, business loan, and home equity line) we should pay off first, and how to sell houses without having to pay any more capital gains taxes that necessary.

Yesterday's surprise: the rate on the loan determines its priority regardless of how we own it: in our case, he suggested paying off her business loan before looking at paying off one mortgage or the other. The secondary surprise was that there's no limit on the Roth 401(k). I guess I should have paid more attention to that.

Now for the free advice:
  1. Get out of debt. Taxes or no taxes, in difficult economic times it's best to be out of debt. This is a tough one, since I prefer investing in e.g. stocks because making money in the stock market makes me feel smart.
  2. Save, don't spend. Think of being debt-free as a lifestyle choice. People without mortgages rarely lose their homes.
  3. Get out of stocks gradually; older people should not still have half or more of the money they're going to depend on to fund their retirement in stocks. Retired people need a small amount of stocks to avoid losing all their buying power to inflation, but they should mostly be in bonds, preferably government or government-backed bonds.
  4. Pick a job you can do until you die. Forget Social Security and forget the stock market. If you can find a job you can do until you die you don't need to retire. Most of the things retirees do are wildly overrated anyway.

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1 comment:

Stacy said...

Not for nothin', but if an accountant told me to find a job I could do till I die so I don't have to retire, I'd fire him on the spot.

Retiring isn't something anyone ever HAS to do (although I have to say that if I were forced, I'd rather be forced to retire than work till I die). One can always find work if one wants. What retirement is about, though, is being at choice about how to spend your twilight years, rather than being chained to a desk.