Case Study: Professionals

Patrick and Amy

Building a Foundation for Their Family

Case Study: Patrick and Amy, 38 and 42, respectively, are working professionals in the San Diego region. Patrick is a senior engineer at Qualcomm, and Amy is a data scientist at a small biotech company.

Their Goals

Patrick and Amy would like to save for their daughter’s college education, but they are unsure how much they should set aside for this goal. Furthermore, Amy has a significant number of restricted shares (RSUs) in her company and wants to know when and how to liquidate it. She has stated that her company is considering going public in 2-5 years. Finally, they would like to explore the idea of purchasing an investment property before they retire in their early 60s.

Resources & Facts

  • Patrick’s base salary is $275K/year, and Amy’s base salary is $225K (not including RSUs).
  • Their primary home is worth $1.2MM with a mortgage balance of $710K.
  • They both have retirement plans with a combined balance of $435K and brokerage accounts worth $650K.
  • They contributed to their 401(k) plans and saved any cash surplus every month into a taxable account.
  • Amy’s restricted stock is worth $150K with significant upside potential.
  • They have a 529 plan with a $35K balance.

Our Recommendation

Our first goal was to ensure that Patrick and Amy had a well-funded emergency fund. While this was not an immediate goal, we found that their liquid cash balance was too low. We also recommended that they begin to defer the max amount to their 401(k) plans and invest a specific budget surplus amount to a taxable trust account. We determined that their current 529 plan contribution amounts were too low and recommended increasing this amount to $851/mo for their daughter as they wished to pay for four years at a private college.

Regarding Amy’s restricted stocks, we believed that it was too early to begin liquidating her shares. Because Patrick and Amy were on track to fund their financial goals, any upside potential to these shares would only be a positive benefit. However, because financial plans are a living document, we planned to revisit this strategy annually.

Given Patrick and Amy’s cash flow needs, we also determined that they can begin to look at investment properties in 2-3 years. We plan to assist them by creating cash flow projections and valuation analysis’ on future potential properties.

Patrick and Amy should:

  • establish an emergency fund
  • defer the max amount to their 401(k) plans
  • increase their current 529 plan contribution amounts
  • begin to look at investment properties in 2-3 years