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Character: Sam Merlotte (Sam Trammell)
Sam Merlotte is a restaurant owner. After stealing $100,000 from a supernatural creature, he opened Merlotte's, a bar and restaurant in the small Louisiana town where he lives. When the owner of the money demanded repayment and ultimately wanted his life, he was severely injured. Instead of a savings account, Sam has a habit of keeping large sums of cash in a safe in the bar, which isn't as secure as a bank.
- Maintaining an emergency fund.
- Finding a safe place to park his cash.
- Borrowing money wisely at reasonable rates.
- Health and life insurance.
- The right savings vehicle for his emergency fund.
- Borrowing money wisely.
- Health insurance.
- Start a 401(k) plan for his business.
Advised by: Jim Wright, chartered financial analyst, president and chief investment officer at Harvest Financial Partners in Paoli, Pa.
Finding the right savings vehicle for an emergency fund
Obviously, if Sam is worried about his family stealing his money, he needs to keep it somewhere other than in a safe in his bar.
Whether that is banks or CDs or short-term bonds, they are all better places for an emergency fund. We think everyone should have an emergency fund, probably with six to 12 months' worth of your spending needs readily accessible.
He should also keep some money accessible in savings or checking accounts, and short-term CDs of maturities between one and six months. They need to be accounts he can access relatively quickly should something happen. He could even try some short-term investments: high-quality stuff that will mature fairly quickly in case he needs it.
If some of it is money he wants to grow, he can take a little risk if he doesn't need it for five or 10 years. He could think about putting it into the stock market through stocks, mutual funds or ETFs.
Borrowing money wisely
Next time Sam borrows money (he should refrain from stealing it), he should make sure it's a low-cost loan.
Sam owns a home and we recommend that people have a home equity line. It's part of that emergency reserve, and he can tap into it if he needs it. Rates are very low, so he could borrow on it pretty reasonably. We wouldn't recommend living off it because he would be borrowing equity in his home, but if something happens and the heating system blows up or there's a hole in the roof, it's a good place to tap into.
We've been fans of these high-deductible health savings accounts. They might be very appropriate for a healthy, young guy like Sam.
Ultimately, the way they are structured, they tend to have much lower premiums on a monthly basis. After the deductible is met, either all of your health care costs are covered or there are modest copays. It's great for young people because of the low premiums and protection against catastrophic events.
Start a 401(k) plan for his business
Sam is a small-business owner and my understanding is that he's a nice guy and cares a bit about his employees, so it might not be a bad idea to set up a 401(k) plan.
With a 401(k), Sam and his employees can begin putting money aside for retirement. Also, as a business owner, he may be able to put aside up to $49,000 per year in a retirement plan, but there are some rules to get to that amount.
He should look to put together a low-cost 401(k) plan -- one without lots of administrative costs. They can be expensive, so he should put one together that has low administrative expenses and a healthy helping of low-cost index funds.