Reader Profile: WV

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.

Also, please leave constructive comments, questions, and so forth. Simply telling someone what a mess they have, how they have made poor decisions, and so forth is not helpful. There is a way to say, "That was a mistake, but here's what you can do to correct it" that both acknowledges the problem and offers a solution. It's this sort of feedback that this series is intended to solicit.

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

Please tell us a bit about yourself.

I am 30 years old living in the northeastern US with my 28 year old wife, 3 month old daughter, and two dogs.  I am an investment manager who trades mortgage backed securities at a small company owned by myself and my business partner.  My wife worked at a consulting firm until recently going on maternity leave.   We plan on having more children over the next few years.

Describe your financial situation (who works in your family, how your income is (general), how your expenses are, etc.).

I have worked in finance since graduating from college in 2005, first for a large hedge fund and now for myself.  I have worked from a home office for the past 3 years which I really enjoy.  If I were to go back to a traditional job I would need to commute approximately one hour to the large financial center in my area.  I really would prefer to continue working from home or potentially exploring a more local job although that would limit my options considerably.  My wife is on maternity leave from her job, we are discussing her future work plans now.  She is looking into part time consulting work she could do from home or possibly leaving her job completely until our kids are grown.

My wife makes approximately $50k per year currently.  My own income has been more volatile as my business has grown, in 2011 I made $250k and for 2012 I will report $350k.   Given the varying fee structures we charge this could move considerably in either direction, with our current size the absolute floor is approximately $125k annually.  Our firm bills most clients semi-annually and since I don't draw a salary and only take 2-3 distributions a year managing liquidity is a high priority for us.

Our high earnings have made us lax on sticking to our budget so what follows is our actual 2012 expenses in various categories.  I'm fairly comfortable with this approach although I always feel the like we should be spending more wisely.

Approximate Annual Expenses:

• Donations: $3,100 (Does not include a 10% tithe gross income)
• Gifts: $5,800 
• Baby: $2,500 (My wife was pregnant last year so this contained many onetime purchases, maternity clothes,  car seat, furniture etc.)
• Eating Out: $3,000 (50% of this is from the wife going out for lunch and coffee while at the office, 50% was actual lunch or dinner together)
• Shopping: $1,900 (Uncategorized spending, clothes, home decor, postage etc)
• Entertainment: $700 (Netflix, movies, video games etc)
• Gas: $2,800
• Grocery: $7,800 (Includes the cost of food, personal care, consumable home products etc)
• Hobby: $400 (Books, scrapbooking etc)
• Home Imp.: $3,800 (Furniture, landscaping supplies etc)
• Medical: $1,700 (Lots of copays for the pregnant one this year, includes the dog vet bills)
• Monthly Subs: $350 (AAA, Amazon Prime, newspaper etc)
• Vacation: $1,300
• Transportation: $2,000 (Car Insurance, parking stickers, public transportation)
• Utilities: $6,000 (Oil, electricity, cell phone, internet, maintenance)
• Mortgage: $17,000 (Property tax and insurance included)
• Total: $60,000

These numbers don't include a 10% tithe we make on our gross income and the purchase of a new car we made this past year for $27k.

There's obviously a lot of room to cut back in there if we found it necessary.  If my wife stays home permanently our transportation, eating out, and gas expenses will drop considerably.  I also expect our grocery expense to fall as she has time available to more efficiently plan and purchase goods.  I track all these expenses but I'm not a stickler for the categories.  I think the grocery expense is probably highly inflated, I'd estimate the true value is closer to $6,500 with the difference really falling into hobbies, shopping or another category.

We have only owned our home for three years and have a newborn baby so there are quite a few large expenses that really should be amortized over time, a new set of furniture for the living room, a lawn mower, a backup generator, furniture for the baby's room etc.  it all came to well over $3,000 this year.   If you back out our expenses for donations, gifts to others, and large expenses we're hitting about $48k or $4k per month.  I wish that were lower but it's not outlandish for our high cost of living area.

Long Term Assets:

• Home: $270,000
• Car 1: $23,315 (2013 SUV with 11k miles
• Car 2: $1,500 (2001 Accord 140k miles)
• Personal Loan: $4,450
• My 401k: $77,000
• My SEP: $74,000
• HSA: $7,200
• Wife's 401k: $67,000
• Lending Club: $7,500
• Firm Inv.: $375,000

Liabilities: Mortgage - $204,000

Short Term assets are approximately $15k in cash and short term liabilities are approximately $10k in credit card goofing around arbitrage.

Net worth is approximately $705k in various classes of liquidity/taxability.  Of the investments held at my own firm approximately $50k is in cash and accessible intraday, the other $325k is invested in assets with roughly 30 day liquidity.  As I mentioned above managing liquidity is a large part of our financial plan, right now we're just about as low as we ever get.  I plan to wait until mid March and transfer another chunk to my personal accounts.  We generally stay between $10k-$40k in personal cash.

These numbers are not counting a significant asset I'll discuss below.

What are the current financial issues you're facing (saving, paying off debt, etc.)?

Our immediate concern is deciding whether my wife will return from maternity leave to her previous job.  She is very unlikely to do so full time, she will probably seek a part time position at home, a part time consulting gig elsewhere, or stay at home full time.  Depending which option she chooses we might have to purchase health insurance for ourselves as we are currently covered by her employer plan.

Other short term issues are finally growing up and writing a will and getting some life insurance.  We have no good reason for delaying on either aside from laziness.

The last issue is a good one to have but is taking a lot time and effort to sort through.  I will have significant income this year from a major account that is billed on a non standard fee structure.  This is subject to market pricing, hurdle rates, etc. but valued today is worth approximately $1.5MM (pretax).  I'm trying to decide what to do with such large amount of money earned all at once.  I'm looking for suggestions both specific (where do I put it) and general (what do I want to do with my life).

What are your plans for the future (retire early, build your career, etc.)?

As I just said my major plans for the future are tied up in what I will do with a very large amount of income earned this year.  I have no interest in raising my standard of living.  I have no interest in being wealthy for its own sake.  I enjoy my job as it is now, it doesn't require an excessive amount of my time or energy.  I have no interest in building our company any large than it is currently.  At some point I'd like to consider changing careers to something more enjoyable, maybe a teacher or financial advisor who knows.  I feel like it would be a little tough to transfer from the world of high finance to something more every day.  I'm not sure how well my intimate knowledge of subprime securitizations will apply to a retirees asset allocation.

What's your best piece(s) of financial advice and/or your general philosophy on personal finances?

The best advice is simple, spend less than you earn that alone will resolve the majority of financial issues people face.

Remember that in every financial transaction you make your counterparty is not your friend.  They're interests are always contrary to yours, if you do better they do worse.

Lastly risk aversion is expensive, there is a real cost to lowering your risk.  I think personal finance blogs on average are far too conservative in the advice they give and financial strategies they promote.  If you want to lower the volatility of your future wealth you will pay by being less wealthy on average in the future.  Those costs are greatly underestimated and the benefits overestimated by many bloggers and commenters.

Comments

[My Financial Independence Journey]

$1.5MM coming at you is a nice problem to have. I can tell you that if you wrote that check to me, I would immediately invest it to create passive income streams. Couple that with the salary that you make and all your expenses could be covered by investment income in a few years. That would ensure your entire lifestyle against layoffs. Maybe you could even switch to part time or no-time and spend more time with your family, if that is something that appeals to you.

[Paul]

it's easy to pay less attention to your budget, the more you make. but if you'd like to become a teacher or something later on, you need to be saving now.

you've got a high income, and a have good problem to have. but you can't assume everything will continue.

you'll want to become more conservative as you get older. or perhaps if your wife stops working and your family grows.

did i miss life insurance?

[Young Limey]

Really interesting profile, thanks for sharing! It sounds like you have things very well balanced between work and personal, when you say your job does not include an excessive amount of time or energy. Seems like a good postion to be in, especially with the success you are seeing recently. That definitely opens up a lot of possibilities for the future. Best of luck to you.

[Wise Spending]

Pay off all Debt with the $1.5MM . Work at becoming debt free. www.daveramsey.com

I posted erlier, but not sure what happen to post. God Bless,

[Apex]

As an investment manager I presume you already know this but you will only get to keep about half of that 1.5MM (unless this qualifies as carried interest, it doesn't qualify as that does it?)

With the new tax rates that the President has succeeded in getting passed your beginning federal tax rate on nearly all of that money (since your salary will mean almost all of it is in the top bracket) will be 39.6%. Then there is the 3.8% Obamacare surplus medicare tax which starts in 2013 and goes on top of that (as a self employed person you pay the full thing or the firm pays part which is still you). Then there is state income tax. That puts you up to pretty much a 50% income tax in the Northeast outside New Hampshire (no state income tax) and a little higher in the money center states.

It's still a great problem to have but 750K doesn't sound quite as "take this job and shove it" kind of money as 1.5MM does.

[Rick Francis]

WV,

You are in a great financial position- but I wouldn’t delay on getting large life and disability policies so that you can be sure your wife and child will be taken care of in the unlikely event something would happen to you.
If you want to change your career I’m sure you can make it happen even if it involves some retraining… However, it sounds like you have found an amazing niche. Your current income is far larger than you can reasonably expect in almost any other field. A floor of $125k with $350K possible for a job that “doesn't require an excessive amount of my time or energy” is phenomenal. I would love to take over such a job. Why not hire additional help so that you can work part time and do part time volunteer work in a more fulfilling area? That also opens up possibilities which you couldn’t earn a living from.
> I'm trying to decide what to do with such large amount of money earned all at once.
Do you HAVE to take it as income all at once? At the very least could you spread the distributions between two tax years? Alternately could you instead re-invest it into your company, so that you build equity instead of distributing it as income? Could you use it to provide stellar health care coverage?

-Rick Francis

[Apex]

@Rick,

Spreading the income over multiple years may help a little but he is in such a high bracket based on his income already that it will not help much.

Keeping it in his company does not help his tax situation. If he is a S-corp or LLC it all gets taxed as income whether he distributes it or not. If he is a C-Corp then it gets taxed as corporate income if he doesn't pay it out as wage income. There is no such thing as hiding money from the IRS in a company. Well, not in a U.S. based Company anyway. :)

Potentially he could expense it by buying a lavish health care plan but why do that? He currently has health care through his wife. Even if he has to buy his own why buy "stellar" coverage if there is a more economical choice. You are not better off by giving extra dollars to your health care provider to keep from giving 50 cent pieces to Uncle Sam.

Taxes are bitch. Pay 'em. Every scheme I have heard to avoid them is simply a way to end up with less in money the end (again, except for non U.S. based entities if you are inclined to endeavor down that path).

[Jake]

I would max the contribution to your (and your partners) SEP @ 51k for 2013. This assumes you have no other employees.

Also, if you and your partner have spouses, I would think about having your business hire each of them. In times that you have these big pops, you could pay each 200k and then make them each take the 51k contribution for the SEP. You might lose on the FICA battle though since the employer has to contribute the 6.2 + 1.45. You would have to run those numbers.

You might also look at some Sec 179 deductions that would qualify for your business - vehicle or software etc. I would only use that if you actually have SOME need for what you are buying.

Otherwise, spend it on wine, women and horses and waste the rest!

[Apex]

@Jake:

"You might also look at some Sec 179 deductions that would qualify for your business - vehicle or software etc. I would only use that if you actually have SOME need for what you are buying."

That last sentence is exactly right. People justify doing all kinds of goofy things to "save money on taxes." What they really should be saying is blow money on things they don't really need or maybe even really want that much simply to get a tax deduction.

I know of a woman who said her accountant told her she had to buy an SUV (a big monster behemoth by the way) to save on taxes. Now I don't know what her accountant really told her but whether he said it like that or she was just using him to justify it I don't know but people get high incomes and go crazy trying to "blow it" so that the IRS doesn't confiscate it. Except when you "blow it" its 100% gone and when the IRS "confiscates it" its only 50% gone. As easy as that math is to compute its nearly impossible to get across to many people. Many people justify not paying off a mortgage early because you are "wasting" your tax deduction if you do. There are plenty of investment based reasons to consider not paying off your mortgage early but "wasting" the tax deduction is not one of them. That can certainly be used as part of the calculus but so many people just see tax deduction and that's the end of the story, gotta do it, tax deduction.

That is just terrible thinking.

You are certainly right about the SEP though. Any money he can put into deferred income vehicles should be used to the absolute maximum based on his tax bracket. That is not actually a tax scheme, its a tax deferral that always makes sense for high income earners, because you are not blowing the money on something where the money is gone, you are simply choosing to delay taxation until a later date when you will be in a lower rate environment and allowing the money that would have been taxed to earn you a return until a future date.

That is very different from doing expenditures to get out of tax. Those only make sense when you need to spend that money for your business anyway.

[SR]

I disagree with the following point:

"Remember that in every financial transaction you make your counter party is not your friend. They're interests are always contrary to yours, if you do better they do worse."

Not every transaction is a zero-sum game.

[Bill]

Thanks for all the replies, I appreciate the time people took to make comments.

I won't be paying down my mortgage with any of my income, that would be a negative expectation trade. With my assets I am not concerned about short term cashflow and so I want to have that money available to invest elsewhere.

@Apex I believe this will be taxed as a carried interest although I haven't gotten confirmation from my accountant on that. If it is not I will spread the income over 2013/14 since my income from other sources will be closer to the 200-250 range for 2013. I was under the impression the 3.8% Medicare surtax was only on investment income. No matter how it comes out the taxes hurt.

@Rick Hiring additional help wouldn't provide any benefit, the bulk of my effort goes to making investment decisions and that's not something I could use something else for. If my wife does stay home permanently we will be purchasing health insurance through my company for the tax benefit, won't be an issue as my partner is already doing this. I will spread out my income over two years if necessary and if possible. I'm applying for life insurance now, I've just been lazy about it.

@Jake Thanks Jake, I have been maxing my SEP contributions since 2010, the balance looks low because I haven't yet made my 2012 contribution. I'll think about hiring the spouse, don't think it would have made sense prior to now since she was already employed.

[Bill]

@SR My statement didn't say that every transaction is a zero-sum game. There can be mutual benefit from trading but you still have to decide how that gets allocated between the two parties.

[Apex]

@Bill,

if it is carried interest lucky you!

No the 3.8% is on all income, investment and otherwise. Now there is already a 2.9% medicare tax on normal wages that has no cap so this just ups that to 3.8 instead of 2.9 for income above 250. The employer pays 1.45 and the employee pays 1.45 and would now pay the extra .9 by themselves with no help from the employer. But since you are self employed one way or another you are paying the whole 3.8.

But again, if this is carried interest you just saved about 20% right there. What a difference that will make. I don't personally find the treatment of this type of income as if it was capital gains for carried interest purposes to be valid but hey, if the IRS allows it I would be all over that too.

[GranTorino]

WV- nice post, and I would hope Old Limey responds. I apologize in advance if I missed something, but why not use the 750k to 1million (depending on tax issues) to pay off all debts/mortgage, and then go on and set up some 529s for each child you have planned (say 150k-200k). Yes, I know the 529 restricts your uses, but as far as I know regardless of income you get tax free growth.
This is ultra conservative and boring, but it allows you a nearly impenetrable financial bedrock, After all, with your home and children's education covered, and sensible living, the cake is baked, all the rest is icing (however thick you want to apply it:)
Obviously I am not a financial advisor, but I assume your job is based totally on the US dollar and the US economy, and specifically, the finance world. As such, consider the opposite for 529s or retirement investments- foreign stocks, maybe foreign corporate bonds (not sovereign bonds since many govts seem to be in a currency race to devaluation), and a lot of emerging markets. Within each of these then focus on dividends, to allow for growth of your wealth without ephemeral "capital gains." It likely is boring to you, but Wisdomtree has several of these items in etf form. (disclosure- I own shares in a Wisdomtree etf but no interest in the company.)
My dad is a retired farmer and he once said after watching a financial show, "those hedge fund managers may be masters of the universe, but mother nature, bullets, and time sometimes change the universe....."
Lastly, to allay your psyche, give yourself 50-100k to "play with" and do all sorts of speculative things. It will ease your boredom.
Good luck, and as usual the advice is worth what you paid for it:)

[Finest]

New reader to the site here:

Can WV or anyone else please explain to me what in the heck "trading mortgage backed securities" is?? Keep up the good work WV.

[Bill]

@Apex Right I follow you now, I was confusing your 3.8% comment with the extension also to investment income. My bad.

@Grantorino I won't be paying down my mortgage because I think that is a negative expectation trade. I believe I will earn more significantly more by investing that money than I would save in interest expense on my mortgage. 529s are a possible idea, I don't think I'll end up using them though. I personally don't believe that a private college education is a wise investment for the majority of students and I believe that it will likely become more overpriced in the future. For this reason I don't see myself paying a significant amount of money toward my children's college expenses and so am not very interested in tax advantaged college savings plans. I'll admit I haven't made a firm decision in that area though.

[Apex]

Holy Cow Bill, someone with serious money who thinks education (especially private education) may be overpriced and for some people, over-rated. I think we probably view the world in a similar fashion. I also have no interest in 529s and it's funny because I had a discussion with a few others about that exact topic on a different thread here a week or so ago. And I am guessing you probably have a good education too right?

[Bill]

@Finest

A mortgage backed security is a bond collateralized by mortgage debt. A mortgage lender makes a large number of loans to homeowners, they then take that pool of loans and put it in a trust, the trust sells bonds whose payments are comprised of the aggregate payments made on the underlying mortgage loans. All different types of debt are securitized in this fashion, residential mortgages, commercial mortgages, car loans, credit card debt, student loans, you name it. In practice the securitization structures can be quite complex with many different bonds or "tranches" being sold from a single pool of loans. Some tranches may pay off sooner than others, some may have seniority over others in the event of defaults, or some may have structured coupons.

A tremendous amount of this debt was securitized between 2000 and 2007. When the housing market crash began in 2008 the non-agency (not government guaranteed) mortgage market crashed with it. Of course it was a chicken and the egg situation, both were intrinsically linked. Given the incredible size of the market and the incredible complexity of the bonds within it pricing of these assets became extremely inefficient. This stuff is the subprime debt, Alt A loan pools, toxic waste you probably read about for the past five years. "Trading mortgage backed securities" is essentially investing in the cheap asset class that is distressed securitized mortgage debt and making specific investment decisions based on the relative pricing of different bonds within that market.

[Bill]

I fit the "good education" bill, I double majored in physics and economics at an ultra top tier school.

The market can change but for now I agree that education is both overpriced and overrated for a large fraction of the people attending. I would limit that statement to secondary education however. I do plan on home schooling or sending my kids to private schools for K-12. I think that a private K-12 education is more valuable on an absolute basis than private secondary education and is certainly far cheaper on a relative basis.

[Mike Hunt]

Hi Bill,

I'd say take the windfall and invest it now or later... for me I am interested in buying dividend paying stocks at good valuations. Have made a few entries but am still waiting for the market valuations to get a bit cheaper. Believe there will be opportunities for this in the coming year and next year.

The nice thing about good dividend stocks is the dividends increase faster than inflation. That and good rental incomes are very stable sources of cash flow.

-Mike

[Nick @ ayoungpro.com]

The first thing I would do with that windfall is pay off all of your debt. I know conventional wisdom suggests that you can get a better return by investing it elsewhere, but nothing beats being debt free and there will still be plenty left to invest.

[jim]

Personally I don't thinmk paying full retail tuition at a private school is better than paying in state tuition at a good public school. That should be a no brainer for most people. But then most people don't pay full tuition anywhere and most people get some amount of financial aid. I wouldn't just say 'private is overpriced' but look at the net price after financial aid for each student at each school.

Yes I certainly think many kids are getting degrees that aren't a good use of their time and money. A lot of that is based on choice of major and far too many people thinking they 'need' a 4 year degree. I think we should steer 25-33% of the kids away from bachelors degrees in low demand fields towards associates degrees in more useful trades.

[Luis]

@ Rick, Apex, Bill

IRS code does not allow one to spread windfalls across tax years. Bill, whatever your accountants recommend I'd do my own homework if I were you because ultimately you will be the one legally responsible and on the hook for filing your taxes incorrectly.

[Apex]

@Luis,

Obviously you can't just "choose" to spread. I am assuming a little more common sense than that. If the money is spread that would mean he worked out an arrangement with the client to pay part of it in one year and part in another.

Certainly any money received in a given year has to be reported in that year. Spreading happens by deferring the dates when you take possession of parts of the money.

Many people do exactly that all the time. In fact many upper level executives have access to deferred compensation plans where they can choose to defer part of their compensation to a later year to spread their tax bills. Taxes are due when you take possession of the money, not when it is promised to you or even when you do the work that earns it. It's when you get paid which means check in hand.

[Apex]

@Nick

"but nothing beats being debt free"

Plenty of things beat being debt free. It depends on what the debt is and what it is for. I have 7 figures of debt and would gladly have 8 if I could get it. The more I have the more I make.

[Bill]

@jim I agree, college will be a gametime decision depending on the exact terms available.

@Apex, Luis The client actually has two separate accounts of equal size which will make it trivial to spread the income over two years.

@Nick I disagree about the mortgage payoff. This is actually one of the major disagreements I have with the majority of personal finance writers. I mentioned it specifically at the end of my post. Risk aversion has a real cost associated with it. Paying off my mortgage will make me less wealthy and given the amount of debt I have relative to cashflow and assets the reduction in risk is negligible. Declaring yourself debt free has real emotional benefits but I don't manage my finances based on emotion.

[Jonathan]

Apex,

You always say exactly what I am thinking (and sometimes a lot more, and I learn some things!) and much more articulately than I could! I'm definitely on the same page regarding debt (and sounds like Bill is also, at least as far as his mortgage).

[Jake]

@Bill

Would have to agree with you here. With your flow and balance sheet, paying off the mortgage makes little sense. Plus it sounds like you need to be in cash and cash equivalents for the trading biz.

One other thing I would be at least cognizant of to is the quarterlies for 2014. They may come back to bite.

Love this quote: "Declaring yourself debt free has real emotional benefits but I don't manage my finances based on emotion."

The funny part about a lot of PF stuff out there (and I exclude FMF from this group because he CHOOSES to be debt free and HE acknowledges differing viewpoints on the subject) is that they will ardently refer to debt as "evil" but won't give thought to the associated costs with paying off low interest debt.

Granted, if you are running up thousands of debt each month on your credit card bill buying wants, it is a totally different situation. In your case, it makes little sense to pre-pay the mortgage.

[Mark]

Regarding 529 plans - they can be used for public or private colleges. Keep in mind that with this level of assets, there wil be NO need-based aid. Most high-end private colleges give very little merit-based aid.

Also - public colleges are not free either. And if you go outside your own state, then it is almost as expensive as private.

As your kids grow older, you may very well find you want to encourage them to go to an ultra-expensive school.

I don't have as much as you expect to have when yours go to college, but I was totally OK with spending the money to send my daughter to the school of her choice. Yes I spent $250,000 on that decision, but so what? If you have the money, the only reason not to do it is if you think the exposure will somehow make your kids worse people rather than better.

By the way - I agree 100% on the mortgage versus investment. If you can get a 30 year fixed rate, take it and pay the minimum each month. 20 years from now you, Apex and I will be the geniuses who beat inflation.

[Apex]

@Mark,

"but I was totally OK with spending the money to send my daughter to the school of her choice. Yes I spent $250,000 on that decision, but so what?"

That statement sounds heavy on emotion and light on analyzing the prudence of the situation. I am not saying there are not very prudent reasons to make the choice but "my daughter wants to go there" doesn't really have any element of prudence in it.

I commented on this a couple times now in the last couple weeks here. Why is the school of the child's choice the key element that I hear so many parents key in on?

Do you let your child make other quarter million dollar decisions with your money based on their whims?

Again I don't know if it was whims or not, its just that you didn't list any analysis of why it was a good decision. You just stated that it was her choice. Many 17 year old's don't often have weighty analysis to their choices. Recent studies have shown the frontal cortex responsible for critical thinking and risk analysis is not fully developed until age 30. That's why the young think they are invincible. Their brain doesn't actually work fully yet. They need help or they will be handicapped in making a wise decision.

[jim]

Hopefully Marks daughter made a good choice and it wasn't a whim.

I would agree with Apex that most 17 year olds don't really know much about picking a good college or what the best choice for them really is. Looking at the schools I applied to I can see in hindsight that some of them wouldn't have been good choices. I lucked into a good school out of necessity (couldn't afford the others).

I think first the first generation to go to college can have more difficulty. My generation was the first to go to college in my family and my parents and their siblings didn't know much about selecting a good school.

[Bill]

There are many reasons to not pay for an overpriced education for your children. There are an infinite number of other things that $250,000 could be spent on. A college degree doesn't have to have a net negative effect on the student for it to be a poor decision, if it isn't worth the marginal cost over competing options it's a bad trade.

I personally went to an ultra high end school, my wife went to a state college that cost about 15% of my tuition. My opinion at the present is that I'd rather my kid follow her path instead of mine. Maybe that will change, I'll never say never, but for now I don't see a 529 as a wise place for my money.

[Apex]

@Bill,

For many paths the elite education doesn't seem to be of much use. However for your path it seems like it might have played a crucial role.

I have heard that it is difficult to get a path on Wall Street or related money management at top firms without the elite education that you have (and by elite that doesn't just mean expensive private but very specific institutions and those pursing those paths know which institutions those are). Do you think you could have taken the path you took career wise without the elite education?

[[email protected]]

I'm glad I read your last comment, Apex; otherwise, I was going to make the exact same point. I, too, have worked in the finance field, in i-banking and private equity, and no way in hell I would have gotten the jobs without the top tier education to get me through the door. Just not possible these days with the immense number of university graduates coming out of the best 20 schools in the country.