Reader Profile: MB

The following is the latest post in my "Reader Profiles" series. Each post in this series details the financial situation and challenges of an FMF reader. The purpose of this series is to help us all identify with people like us (in similar situations -- not all will be, of course, but eventually I'm sure you will find someone like you here), get to know the frequent commenters on the site, and hear some financial wisdom/challenges from people other than me.

If you're interested in contributing to this series, then drop me an email. The series seems to be very popular with readers and I need a steady stream of new ones to keep it going.

Next in the series is FMF reader MB. He answered my questions (in red below) as follows:

Please tell us a bit about yourself.
 
I am 65 and live in northern Minnesota very close to the Canadian border. I have two bachelor's degrees, one in Oceanography and one in Chemistry.  I also have two master's degrees, one in Systems Technology and one in Tax (more about that later). 

I retired from the U.S. Navy 22 years ago with the rank of Commander.  I then spent 5 years self-employed as a futures/options trader in the spring wheat pit at the Minneapolis Grain Exchange. My income from that venture was a little too volatile for a guy with a wife and 3 kids so I retired again. I did a lot of volunteer work with youth soccer including coaching and duties as club registrar and treasurer.  With all the kids in school and my registered nurse wife working, I was bored and looking for something meaningful with a paycheck.

I ended up enrolling in a Master's of Business Taxation program and taking all of the accounting courses for an accounting major.  The school required this because I had no accounting background.  After the second semester I also picked up a position doing some special tax/engineering work so I worked full-time and went to school full-time.  I graduated, passed the CPA exam first try, and am now looking to retire from my position as Director of Tax at a manufacturing firm after 12 years.
 
Describe your financial situation (who works in your family, how your income is (general), how your expenses are, etc.).
 
I am working full-time but planning on retiring from full-time work in August.  My wife works part-time and we still have one child in college.  My salary and bonus is currently around $180K, the wife about 20K, and the military pension brings the gross to about 230K.  We live a modest lifestyle, seldom eat out, not much for entertainment, etc. Our biggest expense is travel, helping kids get started on their own, and college.

For one daughter, I make her $300 a month student loan payment.  For my son, we provide a house (all paid for) at minimal rent.  For another daughter, college expenses.  All the kids are 2.5 hours away so travel costs are substantial.  We also travel 8 hours each way about every 6 weeks to visit my wife's elderly mother. 

Even with all that, we live on about $6,000 per month.  Everything over our living expenses goes to 401k, savings, and paying down the mortgage.  We drive old cars which are all paid for. Oh, and except for the mortgage, we are debt free and have been for years.
 
What are the current financial issues you're facing (saving, paying off debt, etc.)?
 
Our main issue is to pay off the mortgage as soon as possible.  I put bonus checks and $2,000 extra principal each month towards that goal.  It would have been paid off by June with this plan but two years ago I refinanced the mortgage to purchase a house for my college son to live in.  It was a good deal that required some fixing (which my son mostly did).  He is done with college and may be moving this summer in which case I will sell the house and pay off the main mortgage. 

We are also saving for a new retirement travel car and are about 2/3 there.  The last item is saving for a trip to India and one to Denmark.  My youngest daughter will be studying next year in India and we plan a 3 week visit.  Two years ago we had a foreign exchange student from Denmark for the school year and we plan on visiting her and her family with some northern Europe touring thrown in.
 
What are your plans for the future (retire early, build your career, etc.)?
 
I am retiring from full-time work in August.  My pension, social security, and a do-it-myself annuity out of the 401k will cover all expenses so I think it is a good time to start a new business.  I am considering taking the exam for certified financial planner and adding that to my CPA/tax expertise as a business.  My area is lightly populated and remote by urban standards so I think it can be a part-time business.  I really just want to stay busy, current with my professional standards, and be helpful to people.  I have enough money and don't need much more!
 
I also have an interest in hydroponic food production and will have time to experiment with harvesting tomatoes in January in norther Minnesota. This could work into a nice business over the long term.
 
My wife is 14 years younger than me, likes her work, and plans to keep up her part-time job as long as it suits our lifestyle.  We also look forward to more travel to see family.
 
What's your best piece(s) of financial advice and/or your general philosophy on personal finances?
 
Be debt free!!

Here are 6 tips for a wonderful life:

• Spend less than you earn.
• Put your money to work.
• Educate yourself.
• Develop lasting personal relationships.
• Work toward a dream that you are passionate about.
• Stay in shape.

And finally, "Have Faith" and "Count your blessings".  They are many.

Comments

[Ed]

Love to read about other tax guys. I am a director of tax as well, although you have about 30 years on me. Sounds like you are doing just fine financially but I am wondering why you have chosen to pay your daughter's student loans? We have young kids but it is something my wife and I have discussed in theory a number of times. I put myself through grad and undergrad by working in order to remain debt free and she did the same, although at this point she would think nothing of paying for our children's student loans, if it ever came to that. Me on the other hand feel that paying for my own education was probably the most valuable lesson I have ever learned. I will say we fully fund college funds every year so I guess that is more or less the same. Something else I have been thinking of investigating is the possibility of simply levering the college fund when the time comes depending on what rates looks like and what out financial position is in 15 years.

Good luck.

[Luis]

How much money do you have in retirement? How much do you have in investments? What does your pension bring in every month/ your annuity? When will you pay off your home and what will your new monthly expenses be after that? When do you plan to draw social security?

What was the best money decision you've made? What was your worst?

[I Am 1 Percent]

Why are you paying your daughters student loans? If she's still in school, can't they be deferred? If not, does she really need to go to India to "study"? Can't that money be used to pay back the loan?

[minimalist]

MB stated that his youngest daughter is going to India to study; I'm guessing that he is paying for his older daughter's loans.

MB, are you comfortable sharing your net worth?

[JP]

Was wondering about the financial assistance to the kids as well. You might want to read the Millionaire Next Door's chapter on economic outpatient care.

[tl]

I for one, think the amounts supporting the kids are fine. Northern MN kids tend to be very hard working, well grounded kids. This is coming from a fellow Minnesotan.

I really like the purchase of a house for your son's use in college. My best friends Dad did the same, and we lived there all through college while fixing it up. I learned a lot. He then rented it out (near college) for several years before selling it for a profit. I'm guessing it is cheaper than a dorm room and your kid is learning a lot.

$230K income and $60 expensesis a pretty wide differential for northern MN. You've done well for yourself. Congratulations and enjoy retirement.

I'd also recommend the CFP to comlement your CPA. It could be a nice "as busy as you want to be" retirement career. Expenses would be low to start it up. I've had my CFP for almost 10 years and although I don't actively practice, I don't regret it. Take a week long review course through Kaplan, or one of the others. It was very helpful.

[Old Limey]

I agree with JP, there's a time to cut the umbilical cord. Personally, when they decide to leave home seems appropriate, and then after that some assistance if special circumstances warrant it. In general we believe that children are best helped by being encouraged to stand on their own feet. Our children each had jobs through high school, did not get allowances. and when they wanted to buy a used car I gave them an interest free loan and a payment book. That really taught them all about living within your means.

Later in life I helped my son financially on a couple of occasions. When he and his wife bought a home we contributed to the down payment. Another time when he bought a condo at a ski resort, his loan was not coming through in time to close escrow so I loaned him what he needed and he paid me back when it came through. With one daughter I gave her a small amount to help her through a divorce.

The greatest help of all I have given our three children has been to manage their investments for them. That didn't cost me any money and very little in time because I have always kept them in the same investments that I was in. Two are now multi-millionaires and the third is getting close to $1M.

[jim]

Very interesting career path there. I wonder how many people have degrees for : Oceanography, Chemistry, Systems Technology and Taxes? 1? 2? ;)

[jim]

I don't see anything wrong with the money spent on the kids. It all seems related to college for the most part. The son is now paying rent (though minimal) but they're talking of selling that house. MB's paying college expenses for one daughter. We don't know why he's paying student loans for the other daughter but that might be a PLUS loan he took out or some other commitment on his part to pay for the daughters education.

Given the income level we're talking about the kids would not have qualified for any financial aid. Probably not even subsidized stafford loans. So unless the kids got themselves merit scholarships (not so easy) then dad would really have had to help out with college or the kids couldn't afford it or they'd end up with giant loan debt. So I don't see anything wrong with MB helping paying for college. And theres nothing here that says his kids didn't work jobs and help pay for the college or other expenses.

[Mark]

The question of money to kids is interesting. Assuming you have sufficient, then they either get it now or when you die.

The only reason I can see to NOT give (again assuming you have more than you need) is if it will encourage laziness or complacency that will make them worse off later. Otherwise, why not make their life better when they benefit most (theory of diminishing utility of money).

Personally, I chose a career based on a tradeoff between my interests and my ability to fund my college costs. Much later I found what I really wanted to do. If my parents had been able to fund that in the first place, it would have saved me a lot of money and trouble.

As noted by jim, if your income is high, need-based aid goes away. So if I help my kid, it is no different from the school giving her aid. In fact, one reason her tuition is so high is porecisely so the school can fund other people's need-based aid!

[Rick Francis]

MB,

The only thing I can suggest is that you give money to your kids in a way that encourages them to achieve more. For example you could match contribution to a Roth IRA. Or Match additional payments toward their mortgages.

-Rick Francis

[Leigh]

It sounds like you have an incredibly rich career - thank you for sharing your story. The variety in your degrees made me smile! I hope that I will be doing as well as you did when I am your age.

[MB]

From MB:
I suppose this is the easiest way to answer questions.
The loan payment is for my oldest daughter. She won enough scholarships that, in addition to college savings, she paid most of her way through 4 years of college. We added about $5,000 on the way. She then continued for two years for her Master's degree and that is where most of the debt was incurred. She worked during college, saving most of it. She married halfway through graduate school and they used his and her savings as a down payment on a starter home. She got herself elected to the local school board and her husband to city council. Their work is interesting but not yet high paying but enough. The loan payment is more of a thanks for her hard work and frugality during college.

My son did some nice work on the house. It was a wreck with rotted floor joists, unsafe electrical, etc. We both learned some nice renovation lessons. It was indeed cheaper than the dorm. The house is 2.5 hours away so when he moves I'll sell. Rental property that far away would not work well.

My youngest daughter won a 4 year full tuition and fees scholarship in high school so, along with savings, it set for 4 years of college. She works full time in the summer, saving about 70% for the extra cost of the study abroad.

My daughters are both hard working and independent. They definitely appreciate any help from parents but they don't ask for it so I don't have a problem in helping them when I am able. My son has not always made the best financial decisions and knows that in a few months his help stops; rent goes up or find an apartment! I have told him that I won't let him starve.

On Roth IRAs; all of my kids worked in high school and they put 30% in a Roth IRA, 30% in college and the rest was theirs. Sometimes they got a tax refund and I snuck that into the Roth too.

Yes, my career and life have been rich, varied, and full of blessings.

[MB]

From MB on net worth:
My net worth is $800K to $1 million depending on how the properties are valued. About $500K is liquid. I could calculate the present value of pension and social security but, at today's low interest rates, it would be a useless exercise.

We can have a nice retirement without an income from working as long as we are reasonably frugal. Having been that way all of our lives, I don't see that changing.

[joe]

your degrees are "varied".Seems like you are a jack of all "trades".Are those degrees of any use,i mean real use,did they help you make any money?

[MB]

Joe,with the two bachelor's degrees,I went from U.S. Navy enlisted to commissioned officer. About a 40% increase in pay. The Systems Technology degree probably helped with Navy promotion. The Master's in Tax gave me a 50% increase in pay within 2 months of graduation and 4 times the pay after about 10 years.