6 Tips to Manage Your Family's Finances From a Personal CFO

By Amy Zimmer on August 7, 2014 7:14am 

 "I want to know as much as a client is willing to share since everything, for better or worse, is connected to your finances," said Rachel Gottlieb, a New York-based Personal CFO from UBS.
"I want to know as much as a client is willing to share since everything, for better or worse, is connected to your finances," said Rachel Gottlieb, a New York-based Personal CFO from UBS.
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DNAInfo/Amy Zimmer

MANHATTAN — Rachel Gottlieb occupies a growing niche for the city's high-income earners: She's a personal CFO.

She helps families organize and manage their expenses — from nannies and tutors to mortgages and private school tuition — while keeping them focused on their long-term financial goals.

"Every family has different amounts of wealth, but they all need to understand their budget and make sure they have a strategy to save," said Gottlieb, a senior vice president-wealth management advisor at UBS, who is also a certified financial planner and divorce financial analyst.

She manages roughly $350 million for her clients.

DNAinfo New York asked Gottlieb for some pointers for families looking to create a financial plan.

1. You're never too young to have a will

Many people don't like to talk about "what if something bad happens," so they often neglect making wills or keeping them updated, Gottlieb said.

It's especially important for families to have a will that names a guardian for their children and a trustee, she noted. 

"The guardian is providing care for the children and the trustee will be making investment and financial decisions," she said. "You want to have checks and balances."

She also advises clients to continuously review IRA beneficiaries since they will take precedence over a will.

2. Stay on top of your 401(K)

For those in the "accumulation" stage, put the maximum allowable amount in your 401(K), Gottlieb suggested.

"One benefit is that the contributions are pre-tax and therefore you can reduce your taxable income," she said. "Many companies match contributions, so it would be forfeiting additional compensation to not take advantage."

When changing jobs, it's easy for 401(K)s to be "out of sight, out of mind," said Gottlieb, who urges clients to roll over their 401(K)s. She also often advises people to switch from 401ks, which typically put money in mutual funds, to IRAs, which give more "investment control."

3. Put your paycheck into your savings account instead of checking.

Gottlieb advises clients to set up an automatic direct deposit from their paycheck into a savings account and than transfer money to a checking account for expenses.

"If the money isn't in your checking account, you are less likely to spend it," she said.

4. Public versus private school: Think about what you can "comfortably spend"

Deciding whether to send your kids public or private is a "big budgeting question," and sometimes it comes down to whether families are willing to give something up to afford a private education. She urges against ponying up for tuition if it results in diminishing a family's savings.

"I see it all: clients that can do it all, those that move apartments to be zoned for a more favorable public school, and clients that make cuts in other areas to make it work," Gottlieb said. "Many decide to move to a suburb where they may be paying equivalent in taxes for one or two children with a better public school option and more space."

5. There's no perfect way to save for kids' college tuition

The various accounts you can open for a small child — a 529 plan, UTMA (Uniform Transfer to Minor) or a trust — all have different caveats and different tax implications, Gottlieb said.

With UTMA, for instance, the money legally becomes the child's upon reaching the age of majority.

"I've had situations where a grandparent put money in and the child, now 21, decides to drop out of school and leave town and wants the money," Gottlieb said.

With a trust, you can stipulate when the child can access the money, but it can be expensive to do that.

And while a 529 account is not taxed, if it's not used for higher education its earnings are not only taxed but also subject to a 10 percent penalty, Gottlieb noted.

"The benefit is that if you're a New York State taxpayer and owner of a New York 529 Plan, there is a state income tax deduction of $5,000 ($10,000 for married couples filing jointly) and the money grows federal and income tax free," she said, explaining that you can also use the account for culinary school or other classes. You can also change the beneficiary to another child if one child doesn't use all the funds or go to college.

6. It's not always better to buy a home

Look at the apartment price and how much you can afford to put down, Gottlieb advised. Analyze the mortgage, plus taxes and maintenance versus monthly rent.

The critical question is, "How long do you plan on being in the home?" she said.

A client of hers, who was deciding whether to rent or buy in 2009 — "right after the recession [when] people were generally feeling a little less confident in the market" — opted to rent even though the analysis favored buying.

"Their apartment would have more than doubled if they were to sell it today," Gottlieb said. "But that’s the benefit of 20/20 hindsight."

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