By The Trust Company on March 11, 2016
Start Small, Save Big
Young professionals can get a head start with the Wealth Builder Program
Who doesn’t want to become a millionaire? Don’t we all dream about a comfortable retirement where all of our wants and needs are met?
The trouble is, in a society where consumerism is king, we are constantly tempted by the instant gratification of material things. And we’re rarely encouraged to trade off that temporary excitement for the potential of long-term wealth and security.
“There are times when people shoot themselves in the foot because they want instant gratification. That new thing doesn’t stay new for very long, and then they’re on to the next big thing…but still have ongoing payments from the first thing,” said Polly Reynolds, CPA, CTFA, Vice President and Trust Officer at The Trust Company. “Everyone has the potential to become a millionaire. You just have to start early, have a plan and be disciplined.”
Reynolds works with several young professionals who have decided to take charge of their financial futures. Many of them have had success with The Trust Company’s Wealth Builder Program.
“A typical investment management account requires a fairly substantial amount of assets,” she said. “But with the Wealth Builder Program, you get the same level of investment management and financial advisory services as higher-asset accounts, as long as you commit to putting money into your accounts every month.”
Making Wise Choices
“He is a saver,” said Reynolds. “He spends, but I think he makes wise choices. He’s not the type to spend every last dime in his checkbook. He couldn’t believe that he was eligible to use services like ours.”
Unlike so many of his peers, Welek prefers not to use credit cards; when he does, he immediately goes online and pays off the balance to avoid interest payments. He also doesn’t see the need for a shiny new car.
“I don’t get a lot of joy out of buying a brand new car. I bought a used car that’s new to me — a Honda CRV with 138,000 miles. My attitude with my car is, if it gets me from point A to point B and back, that’s all I care about,” said Welek.
“I feel like I do everything I want to do. My hobbies are running, watching football, hanging out with friends. There’s not much that I need, or that I really think is worth the money that you sometimes have to pay.”
“I’m really proud of him. He came to me pretty disciplined, but he also listened to the things I had to say,” Reynolds said.
Recently, Welek purchased his first home without tapping into his investment accounts.
“He could have bought a much more expensive house, but he bought a modest house and renovated it,” said Reynolds.
He enlisted his father to help with remodeling, and he hopes to rent out the lower level so he can put the extra money toward paying down his mortgage.
Welek suspects his urge to create a strong financial foundation runs in his family.
“My grandfather bought his house outright with cash. If he didn’t have the money, he didn’t take out a loan. Maybe I get some of that from him.”
Wait — I Have an Estate?
“He didn’t realize he had an estate. If you own anything — a car, a checking account, anything of value — you have an estate,” she said. “Making sure all of your assets are properly titled and that a will is in place can save your loved ones a lot of time, money and stress in the unfortunate event of your death.”
When a person dies, his or her estate must go through probate. If that person passes without a will (“intestate”), the court appoints an executor, and assets are distributed according to state law. If he or she dies with a will (“testate”), the assets are distributed according to the will.
Reynolds was able to help ensure that her client’s assets will be distributed according to his wishes.
“Polly taught me that if my checking account was just in my name, without “transfer on death” or “payable on death,” state law and a judge would determine who would inherit it. That is something I definitely wouldn’t want,” Welek said.
Insuring the Future
Life insurance is another topic that younger clients sometimes don’t think they need to discuss. However, it’s a necessity for anyone who has dependents or unsecured debt.
“Usually when I talk to people about life insurance, I say you don’t need it unless you have people depending on your income, or if you have unsecured debt, like credit cards,” said Reynolds. “Your house can be sold to pay off the mortgage upon your death, but if you don’t have enough assets to pay off the credit cards, you need to have life insurance to pay them.”
Many employers automatically provide group life insurance, which generally does not require a medical exam or health questionnaire. Still, it may be a good idea for a young professional to obtain an individual term life insurance plan while young and healthy.
“An unforeseeable event, like a major illness or disability, may prevent you from obtaining individual life insurance in the future,” Reynolds said.
The Wealth Builder Program gives you the same level of investment management and financial advisory services as higher-asset accounts, as long as you commit to putting money into your accounts every month.
Overall, Reynolds is thrilled with her client’s dedication to ensuring his financial wellbeing.
“He listens, and wants to understand why we do the things we do. I’ve always felt that with young professionals, our biggest job is to educate them. Sean started young, put a plan together, and he’s dedicated to it.”
In return, Welek said, “Having a relationship with Polly and being able to pick up the phone and ask questions has been a big benefit to working with The Trust Company.”
As for his long-term goals?
“I’d like to retire at 62. I’ll continue saving, because you never know what’s going to happen. Having some money in the bank, instead of debt, gives me peace of mind that I’m prepared for whatever might be in store for me.”