I've always heard that it's a good idea to keep several months' salary readily available for emergencies. Up until now we've done so, keeping it in a money-market account. A financial planner suggested that another option would be to use the cash reserve to make a larger down payment when we buy a house - which we plan to do soon - and obtain a line of credit using the house equity for emergencies instead of keeping it on hand. Is this a good or not-so-good idea in your opinion?
The problem with taking out a home-equity line of credit for emergencies is that you have to pay the money back, plus interest. In a real crisis - you lose your job, say - you might not be able to make the payments, and you'll risk losing your house. How much better psychologically to have a pile of cash you can draw down, without having to deal with a bank's loan department.
My wife and I are seeking professional tax advice. We've always done our own taxes, but lately things have gotten complicated and we're not sure if we are making the best use of our money. Between stock options, 401(k)s, Roth IRAs, various vehicles in taxable accounts, tax credits, a home business and a high income, tax planning has become a bit of an art that neither one of us feels comfortable with. Our problem is trying to find the right professional and knowing what questions to ask.
Bravo for recognizing that it's time to get some help. Although most reasonably intelligent people can wade through simple tax returns, the situations you face - stock options, a home business, high incomes - would call for a professional consultation.
You can find lots of information about selecting a financial adviser at www.latimes.com/finplan. Because you may need both tax advice and financial planning, consider hiring a certified public accountant who has a financial planning credential, such as a CFP (certified financial planner) or PFS (personal financial specialist). You can find information about the CFP credential at www.cfp-board.org and about the PFS credential at www.cpapfs.org.
One of the keys to hiring financial help is making sure the adviser specializes in dealing with people like you. Get references from friends in similar situations, and ask about experience with options, home businesses and high-income planning before you hire anyone.
You recently told an aunt who wanted to give a financial book to her niece that you didn't think investment books were an appropriate gift for an 11-year-old. We bought our son books on money and investing when he was that age because he showed quite an interest in the subject. Today he is a stockbroker and well off, so we think you should reconsider your advice.
If your son had been interested in a career as an entomologist, you probably could have given him a jar of bugs for Christmas without repercussion. That doesn't mean any other 11-year-old would be delighted by the same gift.
When it comes to gifts, intent is all. Your concern should be to delight the recipient, not improve him or her. That's why a cookbook can be a wonderful gift for a gourmand and an awful one for the daughter-in-law you suspect feeds her family solely on takeout.