Many successful businesses began with a loan from a family member but many families have had problems with business loans. So it’s best to be cautious. Whether a relative has asked you for a loan, or you’re the one who wants to borrow, here are some guidelines. [Read more...]
Sudden wealth—whether from a gift, inheritance, business sale or other source—can be overwhelming if you’re unprepared. Careful planning can mean the difference between preserving your wealth and watching it evaporate. [Read more...]
Are you part of the “sandwich generation,” caring for both parents and children while mapping out your own retirement? Planning for your parents’ elder care is probably low on your to-do list, but the sooner you begin talking and planning, the better for everyone. Mid-crisis is not the time to gather information or make important decisions. Here are some suggestions to ease the process. [Read more...]
Is your estate plan current? Your financial needs and personal situation will change over time. A regular checkup of your estate plan can remind you to take care of certain important details, such as revising your will or changing beneficiary designations, and will help prevent unintended consequences.
Here are some common situations or events that should prompt you to review your estate plan.
Change in Asset Values
Your estate may include assets that have grown in value since you established your estate plan. Perhaps you have acquired more property or sold your business. Your present plan may no longer accomplish the objectives you originally intended, such as protecting particular assets and minimizing taxes. If that is the case, you may want to give more to charity and/or increase the amount you plan to leave to loved ones. An estate plan review can help put your plan back on target.
You should also review your estate plan if the value of your estate has decreased or if you’ve made specific gifts in your will of assets that you no longer own. After all, you don’t want to leave any of your intended beneficiaries empty-handed.
Change in Family Size
Births, deaths, marriages, divorces—any of these events could change how you want your assets distributed. While a birth or marriage may add a potential beneficiary to your estate, a death or divorce is likely to have the opposite effect.
Making the transition to retirement provides an ideal opportunity to review your estate plan. Although your retirement may not have an immediate impact on your estate plan, it will have an eventual effect. Instead of adding to your retirement savings, you may begin withdrawing assets for retirement income. Knowing your retirement income resources can help you decide when, and if, it is possible to transfer property to your family and other beneficiaries.
Relocation to a Different State
State and death tax laws differ from state to state. If you move to another state, you should find out the rules of your new state and have your plan revised accordingly.
Tax Law Changes
Changes in the tax laws can render your estate plan outdated. Make sure your estate plan is compatible with current law and that it adequately reflects your wishes.
Major life events and changing tax laws make it a priority to have your estate plan reviewed by a professional on a regular basis.
No, not marriage. Money. Some couples have trouble discussing money, not because they don’t do it, but because of how they do it. Whether you’re a comfortable, well-established couple or new lovebirds, you might appreciate some tips to keep your financial conversations calm and strategic, instead of emotional and reactive. [Read more...]
If you were to die tomorrow, how would your family carry on financially?
Financial preparedness is especially important if you (or your spouse) are the sole breadwinner. According to the Bureau of Labor Statistics, in 2007 there were 58 million “married-couple families” in the U.S. In just over half of them, both husband and wife worked. That percentage has been falling ever since. The Center for American Progress found that in 2010 alone, more than 1 million two-earner married couples were reduced to one earner.
With more American families now relying on one income, it’s important to plan for the unlikely and unexpected death of the sole breadwinner. The last thing you want to do while grieving the loss of your spouse is sell the family home, get a second job, or impoverish yourself to pay for medical bills and living expenses. Here are some steps you can take now to help avoid a financial crisis during an emotional tragedy.
The Truth About Life Insurance
Most people have life insurance, and most life insurance policyholders believe they have an adequate amount of coverage. Unfortunately, many policyholders are wrong. Only a minority of surviving spouses describe their life insurance payouts as adequate.
The problem is one of perception. Many people have life insurance through their employer. Because these families know they have at least some insurance, they believe they’re prepared. But employer-sponsored life insurance is rarely enough to help a family maintain its standard of living. Once the life insurance proceeds are gone, most families with only employer-sponsored coverage have to start making serious changes in how they live and work.
Assess Your Needs
You can begin with an objective look at what your family needs right now to get by. Do you have dependents, such as young children, a non-working spouse, or parents? How much money do you need to pay the bills and send your kids to college?
When planning for a tragedy such as the premature death of a spouse, it’s particularly important to establish this baseline because a terminal illness could drastically increase your expenses. The death of your spouse also means the loss of that spouse’s health care coverage.
When considering how much life insurance you need, you should also factor in lifestyle changes you anticipate in the near future. Do you plan to have a baby or buy a larger home? Are your aging parents becoming increasingly dependent? Are you considering sending a child to private school? Perhaps you anticipate a more sophisticated lifestyle in the future as your income increases.
You can’t anticipate every future lifestyle change, but you can provide your family with life insurance coverage sufficient to meet their needs. You can review your policy riders, options, and beneficiary designations at regular intervals and purchase additional coverage or make changes as needed.
Evaluate Your Resources
Life insurance may not be your only source of support. Take stock of other assets that may be available to you:
- Investment accounts that can be accessed to meet the family’s changed circumstances
- Retirement accounts that can be earmarked for the surviving spouse’s retirement years
- College savings accounts
- Social Security Survivors Insurance (based on your spouse’s work history)
- Family resources (wealthy relatives who would be willing to release part of an inheritance early)
Understand Your Finances
Ideally, both partners should know where their money comes from, where it goes, how to pay the bills, and have an understanding of investment accounts. You should also understand your spouse’s employer-provided benefits. If you or your spouse has taken a backseat in the management of the family finances, it’s time to take a more active role. It’s better to learn your cash-flow picture now, instead of when you’re forced to understand at a time when it will be much more difficult.
Preparation is Best
A surviving spouse will have a lot of financial issues to address. It’s best to address them well in advance. A financial professional can guide you through the difficult questions you should ask to prepare for an event that, hopefully, will never occur.
As the parent of a special needs child, you work hard to give your child the most fulfilling life possible, and to meet their medical, educational, and therapeutic requirements. But don’t neglect their financial health. Your child will likely outlive you, and there are particular legal and regulatory issues to consider. However, good planning can help ensure that your child has financial resources later on. [Read more...]
If you’re a parent with less-than-deep pockets, you’ve probably wondered which savings goal is more important—your children’s education or your own retirement. After all, good parents put their kids’ needs above their own, right?
Every divorce is different, but they all end the same way—after a divorce you need to plan for your financial future. Though it may be hard to think about during an emotional time, taking some important steps could save you frustration later and help you get started on the right financial path.
You’ve seen momentous changes in the life of your son or daughter. You helped them take their first steps and learn to ride a bike. Now they’ve graduated from college and “officially” entered adulthood. What makes a good graduation or house-warming gift? You can’t go wrong with solid financial advice, particularly this summer, when jobs are scarce.
Give Them a Guiding Philosophy
One sure way to build net worth over time is to live below your means. Of course, spending less than you make is easier said than done for young adults. Excess cash in savings and checking accounts can easily disappear.
A budget can help your grad control his or her spending. The best way to track this information is to compile three lists: debt, expenses and earnings. A budget should also allow for some savings, no matter how small. Saving is an important habit to develop at a young age.
Saving money for the sake of saving money is not appealing, but establishing a few short- and long-term goals can lead to success. They make the process of saving money real, giving your son or daughter a way to measure progress, and make the sacrifices of saving easier to accept.
Make the Most of Total Compensation
Salary is not the only form of pay. Equally important are benefits like health, life and disability insurance, retirement plans and paid vacation time. Some companies offer subsidies for education and health clubs and discounts on services or products, including company stock. Encourage your adult child not to leave money on the table!
New workers tend to do one of two things when it comes to taxes—they withhold too much or too little. Teach your grad that withholding too much means the government keeps his or her money interest free—money that could go to a retirement or emergency fund.
Get a Head Start on Retirement
People in their 20s should sign up for their company’s 401(k) or 403(b) plan the minute they’re eligible. Putting money aside for retirement is always a good idea, but an employer’s retirement plan accomplishes far more than simple savings. In addition to the employer’s matching contribution, such a plan teaches new workers the value of “out of sight, out of mind” savings—when money goes into savings before they have a chance to spend it.
Tame the Debt Monster
The two biggest sources of debt among young adults are credit cards and student loans. Generally, student loan payments should not exceed 8-10% of the borrower’s gross monthly income. Help your son or daughter explore student loan consolidation and establish automatic monthly payments from a checking account.
It can be hard to get along without credit cards in this increasingly paperless society, but even a relatively low credit card balance can grow into an unmanageable burden. Encourage your grad to manage credit cards wisely by doubling the minimum monthly payment and making payments on time.
Keep a Lid on Housing
A good rule of thumb for new college grads is to spend about 25% of their income on housing. This includes rent, parking, and utilities. Decisions about where to live can be emotionally charged. Before signing the lease, help your child consider his or her priorities. The more they spend on a place to live, the less they’ll have for their social life, travel, hobbies, and savings. By holding the line at 25% or less, they’ll be better able to fund a down payment on a house someday.
Insurance Is Not an Afterthought
Young adults must find another insurance resource if their employer has a waiting period, if they are unemployed, or if they can’t piggyback on your health plan. Encourage them to research temporary health insurance plans or join a local HMO. If your grad is single he or she may not need life insurance, but auto, renter’s and disability insurance are necessities.
“If Only I Had Done This Earlier!”
As a financial planner, I’ve heard this many times. Here’s your chance for a do-over with your grown children. Help them establish good financial habits from the outset and you’ll help them lay the groundwork for a flourishing financial future.