A financial adviser weighs in on what their priorities should now be

By:  Demetria Gallegos, Wall Street Journal featuring Vincent Birardi, CFP®, AIF®, Wealth Advisor at Halbert Hargrove

With a baby on the way, Dan Sullivan and Gabriella D’Agostino are rethinking their housing plans. 

Dan Sullivan, 32, and Gabriella D’Agostino, 30, live in Boston where he works in sales for a fintech company and she is in marketing with a sports-and-fitness company. Together, they expect to earn nearly $300,000 this year.

In 2019, they bought undeveloped land in the Adirondacks, near Lake Placid, N.Y. They recently paid off the $105,000 purchase price in full and were at the design phase for a 3-bedroom home they’d like to build there for about $500,000. The plan was to use it for vacations and rental income.

But now their first baby is due in December, and the couple are wondering whether they should instead buy a home in Boston (they rent for $3,950 a month), and how else to give priority to financial goals as their family starts to grow.

D’Agostino is still paying off student loans of about $86,000, most of it at 8.5% interest. That’s the couple’s only debt.

They both save enough in workplace retirement accounts to earn full matching funds from their employers. Sullivan puts 6% in his Roth 401(k). D’Agostino contributes 5% to a traditional 401(k). The value of the two accounts combined adds up to about $67,000. Each also has a small investment account to which they try to add regularly. Those currently total about $14,000. Their largest asset is the Adirondacks land, now appraised at $113,000. Their car, a 2023 Hyundai, is paid off.

The couple has an emergency fund currently worth $11,000.

They describe themselves as “typical millennials” who, up until now, have traveled and pursued experiences, some of them costly. “With a child coming,” says D’Agostino, “it does feel like an inflection point for us to have a broader conversation.

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Advice from a pro

The couple is cash-positive, says Vincent Birardi, a certified financial planner and wealth adviser with Halbert Hargrove, an investment-management firm in Long Beach, Calif. After expenses, they generate about $5,000 a month that can be used to build their emergency fund up to $30,000. This should be their priority, he says, and they ought to make minimum payments on the student loans until that goal is met.

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The emergency fund should be a high-interest savings account that could be earning nearly 5% right now, he says. Once $30,000 is reached, the same account could be used to raise money for a home down payment, enough to cover 20% of the home purchase price to avoid costly mortgage insurance.

For now, Birardi cautions against developing the Adirondacks land and buying a home in Boston at the same time.

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The first year with a newborn is likely to be hectic, and that would lock down too much of their net worth in real estate. They also may need a second vehicle with a baby at home.

He would like to make sure they are aware of the advantages of using Roth and traditional IRAs and 401(k)s. Roth accounts can serve as backup emergency savings or as home down-payment vehicles, once the money has been deposited for five years. Birardi says Sullivan should maximize a health savings account (HSA) he has through work. HSA contributions can be made pretax, and grow tax-free, to pay for qualified medical expenses.

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