Next-Gen Accumulator / Young Savvy Saver – A Case Study
In this ‘Next Generation’ new client scenario, you’ll learn how Braun-Bostich & Associates (BBA) leveraged its expertise in educating professional start-up savers, helping them to establish a foundational financial life plan. With BBA’s ongoing guidance, Michael and Lindsey Davis* have since built upon their base plan to consistently increase their net worth. Here’s how the relationship started…
As a young professional couple who’ve accumulated considerable assets, and are now beginning to expand their family, they realize that “we need a financial plan.” Given their start-up situation, our advisors initially focused on cash flow planning and budgeting for Michael and Lindsey Davis.
Cash flow planning and budgeting often go hand in hand. Whether you’re a business, an individual, or a family planning out how your cash flow is going to match your spending needs, cash flow planning is in direct correlation with an effective budget. Whereas a cash flow plan focuses on long-term finances, a budget is much more helpful on a micro scale. Budgets also lend themselves to the formulation of a plan for finding where you can save for the future and retirement.
Note: This BBA strategy is used for a variety of next generation clients in many different personal and financial situations, including people like Michael and Lindsey. BBA’s role is to help identify what their savings goals are and to establish a practical pathway for them to achieve those goals.
*Names have been changed for privacy.
Personal and Financial Profile
Age: Michael , Lindsey 
Occupation: Michael [Architect], Lindsey [Marketing Director at Fortune company]
Location: Mostly virtual
Children: None yet, but one on the way!
Interests: Sustainability, travel, health, hiking, biking, gardening & farmers markets, coffee shop hopping
Income: $108,000 [Michael], $140,000 [Lindsey]
Retirement Savings: 10% of gross income
Taxable Savings Rate: 0%
Debt Payoff Rate: 2%
Total Cash: $150,000
Total Investments: $460,000
Total Debt: $80,000
Michael and Lindsey are high-achievers and earners. Besides being focused on growing their professional careers, they prioritize health, relationships, and life’s many adventures. However, the one thing that they can’t seem to pin down is their collective grasp on finances. They feel as if their approach is individual and disjointed, rather than cohesive, and wonder if that’s going to hinder their finances and financial life plan in the future.
Financial areas of interest / potential obstacles they may face:
To get the ball rolling, Lindsey would like to discuss savings vehicles for children – remember, there’s one on the way. She wants to know if saving in a custodial account or through a 529 plan is better. Michael wants to invest portions of their large cash balance but he’s not certain how much to keep in the bank versus positioning in an investment portfolio.
Michael and Lindsey were raised in a different ways. Michael grew up in a family that openly discussed household finances. His parents owned and operated a small business together. They had frequent conversations over the dinner table about how the family was doing financially. After having their introductory meeting with their BBA advisor, Michael realized that his upbringing allowed for him to directly discuss finances with Lindsey. However, he also recalled being young and feeling the anxiety of money weigh on he and his family when times were tough. As such, he is determined not to burden their future children with this type of stress.
Lindsey, on the other hand, grew up in a well-to-do family setting. Her parents never spoke openly to her about money matters. Right or wrong, she always felt as though it was a protective measure they purposely put in place for her. Lindsey actually appreciated the fact that her parents shielded her from financially stressful conversations but can’t help wondering if that’s why every time she and Michael start to discuss finances, she moves quickly to end the conversation. Lindsey was also privileged enough to have her parents pay for her college education. As noted above, this is something she wishes to do for their future kids but came to realize during their discovery meeting that she and Michael had never really discussed what each would want for their children.
Post Discovery - Situation Analysis
Michael and Lindsey sat down virtually with their BBA advisor to develop a joint cash flow plan and budget. The purpose of the cash flow plan is to uncover where their money is going. In this meeting Michael and Lindsey start to figure out:
- Where are their paychecks going?
- What’s the purpose of each bank account? [single, joint, savings, checking, etc.]
- How much are they currently saving?
- How much goes towards paying down debt?
- How much goes towards paying bills and fixed costs?
- How much goes towards variable expenses they incur?
- What’s leftover or what’s in the red?
Results and Recommendations
Michael and Lindsey leave their first post discovery meeting visit with their BBA advisor feeling much more informed about what’s “collectively” going on in their financial lives. They understand that it will take some time to establish their preferred unified approach, but they finally have the direction they wanted. Their BBA advisor helps to create and implement concrete goals for the two of them. Michael and Lindsey now have a solid grasp on how much and how often they need to save in order to cover, at minimum, 50% of the estimated college costs needed for their first child - an amount they’ve both now agreed upon. They also feel much more confident in their taxable savings situation. With the guidance of their BBA advisor, they decide to set aside $50,000 in their savings account which will fund their monthly expense needs for 4 months in case of an emergency. With that portion of the cash allocated, they can now confidently invest the balance of their cash [$100,000] into a joint taxable account in order to continue to expand their net worth. Once their baby is born, they will start to invest in a 529 plan a little each month
Now that Michael and Lindsey are on solid financial footing, their BBA advisor starts prioritizing the other aspects of their financial plan. Braun-Bostich & Associates incorporates financial technology to help provide a transparent picture of Michael and Lindsey’s net worth and cash flow. Technology that also integrates personal task functionality to keep Michael and Lindsey on track and accountable for the actions required to realize their goals, i.e., transferring that cash balance to an investment account.
The fundamental components considered in the Davis’ plan included:
- Reviewing Goals, Expenses and Budgeting
- Review of Income Sources
- Banking & Credit Management
- Review of One Time Expenses
- Planned Large Expenses
- Emergency Funding
- Dollar Cost Averaging
- Mortgage Review
- Lines of Credit & Debt Management
The partnership doesn’t end there. This was simply Michael and Lindsey’s first step in working with Braun-Bostich & Associates to build a lasting relationship and life-long financial plan. In the next phase of their plan, their BBA advisor will follow the same detailed approach to incorporate the couples advanced planning needs, including risk management and insurance planning, tax planning, stock option analysis, estate planning and more.
If Michael and Lindsey's situation sounds similar to your own, we would love to explore your situation and discuss how BBA could help alleviate your issues and pain points, and ultimately help you build confidence in your financial future. Please do not hesitate to reach out and schedule a free consultation with one of our advisors. We look forward to hearing from you soon!