Family Finances Articles
Julie Murphy Casserly, CFP® , CLU, ChFC
We’re in the thick of things in the holiday shopping season, and we’ve all gifts on our brains. Macy’s has had holiday displays up for a while, and pretty soon we’ll start hearing Christmas music. All this leads up to the “most wonderful time of the year.” Yet for many of us, this season of giving is spoiled by the stress of overspending.
It’s easy to the stresses of this time of year turn us into Scrooges, but so many of us allow those low moments take a turn for the less positive for a longer time. Maybe, the overwhelming list of gifts to give and parties to end has turned you into a crab in your own bucket.
Though the economy is still pretty fragile, many of us will still fall prey to spend, spend and spend some more over the next few weeks. In the face of financial insecurity and job instability, we continue to allow both external pressures – Gifts! Parties! Kids! – as well as our own internal crabs to guide how we spend our money.
Many finance journalists and experts say to save a little bit each month so that the holiday season doesn’t present such a problem money-wise. Putting away a little bit each month or pay period is a good way to avoid a lot of stress. But, with us already approaching mid-December, saving money now if you haven’t already may be a challenge.
So in this season of giving, give what you can…but not too much. And that means not allowing the crabs in your own bucket to make your financial decisions for you.
What does giving too much look like?
It’s charging every single credit card to the max. How many winter holidays have you spent more time stressing than feeling the seasonal happiness? We want to give the best to our kids, siblings and spouses. We need to be in the spirit for the Secret Santa or grab bag at work. And we can’t forget about our friends.
Take a load off by not racking up too much debt. Lay off the credit cards by not charging things you can’t afford. Yes, it’s the holidays, but that does not mean you need to go broke to be everyone else’s personal Santa Claus. The need to please everyone, especially during this time of year, is hard to resist; it’s the biggest crab in your bucket.
So this holiday season, try to use cash as much as possible – within reason, of course. Studies have shown that when people spend cash, they are more likely to think twice about purchasing something major.
I’m not expecting you to go cold turkey on the credit cards. Maybe you could start out with a 50/50 split; 50 percent of your holiday spending is available cash with the rest going on the credit cards. Or a different percentage – whatever works best for you.
The goal here is to lessen the load on you financially and emotionally. During this season of giving, give to others what you can. But give to yourself the gift of less stress and more holiday love.
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The school year is well underway for millions of children around the country who are grappling with the difficulties of being kids – issues we adults can forget at times. Our problems – office politics, the mortgage, caring for aging loved ones – seem so much bigger than the things our children have to face in their lives.
What many of us don’t realize, though, is what happens in childhood affects us our entire lives. Our subconscious is completely formed by the time we are six years old. So the majority of our actions and reactions got their roots before we even hit the first grade.
Your childhood
No one has total control of their emotions 100 percent of the time. When we face conflict, we won’t always be able to handle the situation without going a little bit off the deep end. During those moments when restraint goes out ofthe window, we tap into our subconscious and our deepest feelings – the ones that shape us – come to light.
For example, pretty much all of us are taught from a young age that setting personal boundaries is selfish. And as adults, even when something makes us uncomfortable, we sometimes feel like we have to go along with things because that’s what we are supposed to do.
When was the last time your coworkers went for post-work cocktails and pressured you into going, even though you knew it was over your budget? These types of scenarios have been happening to you your entire life. Like when you were peer-pressured into drinking after your junior prom, or when the other kids teased you at summer camp because your clothes were too different from everyone else’s. We’ve essentially recreated familiar situations we faced in childhood and replicated them in our adulthood. The only difference between what happened to us in childhood and what’s happening now is that our finances are greatly affected by our decisions.
Reflect
So this week, while your kids are doing homework, spend some time reflecting on your own childhood experiences. What did you do with your allowance – spend it all or save it? Did your parents encourage you to use your money a certain way?
Think about the different situations you were in during your childhood and teenage years. Journal about the things that come to mind.
What were some of the things you wrote down? Did you quickly spend your allowance or did you tightly hold on to it? Were you the leader of your pack or a shy type that went along with what your friends did?
Look over the things you wrote. What do you feel when you remember those childhood experiences? And how does that feeling shift when you think about how those experiences affect you today?
Here’s an example. When you would go shopping with your group of friends in high school, you felt pressured to buy something when everyone else in the group had a shopping bag. You didn’t want to feel left out, and you eased your anxiety by doing what the others did. As you grew older, you never kicked that feeling of needing to purchase something – anything – when someone close to you got something new for themselves. You never grew out of that anxiety; it grew right along with you.
So why is this anxiety so hard to kick? Most unhealthy behaviors are the result of two types of internal emotional conflict: having needs that aren’t met or having trouble setting personal boundaries. When you look over the things you wrote down, I’m willing to be that all of them fall within these two categories. And if those experiences still give you feelings of shame, anger or resentment, now is as good of a time as any to reroute those feelings.
When was the last time you focused on financial healing as a way to fix your money troubles? We’re always looking for an easy way out when we’re in too deep financially. But instead of a get-rich-quick scheme, I want to help you build long-term wealth slowly and deliberately. And to do that, we need to start your financial healing process.
Step 1: Detach
Distractions are around us daily. Cell phones buzz with messages and calls all day. Emails are a never-ending task. And, at the end of the day when all we want to do is rest, the television winds us down until bedtime.
You’ll never be able to financially heal if you don’t eliminate the commotions taking up your attention. So this week, take a few nights to totally detach. Unplug from the outside world and focus on your authentic self: core values, beliefs, unique abilities and sense of purpose.
Step 2: Define
Congratulations! You’ve disconnected the internet, turned off the smart phone and found a quiet place to explore. Let your mind wander to places you’d usually deem off limits. No boundaries here; the idea is to unearth everything that’s hidden.
It’s easy to pass off a particular idea as crazy or impossible, but let those negative feelings float out of your consciousness. Don’t judge what you come up with; embrace it. Define your own personal dreams and desires to determine what you’re passionate about; this is necessary to get what you really want out of life.
Step 3: Devise
Now it’s time to get a plan together. You’ve figured out your big dream. How are you going to make it happen? What will you do today? Tomorrow? Next week? Next year? Design your ideal life. What does a typical day look like when you’re living your dream?
What you just devised is a Personal Navigation Route. This is the life plan that will get you from where you are right now to where you want to be. Once you’ve defined this path, write it down and post it everywhere. Remind yourself that each day is another opportunity to live your dreams. Don’t waste one moment living anything other than your ideal life.
When you’ve initially set a big personal goal, you feel a lot of excitement. We make huge strides towards achieving what we set out for; and we justifiably feel a ton of pride for what we accomplish. Sometimes, though, when we’re on our path towards our ideal lives, we lose sight of the ultimate goal and get lost in the everyday hurdles.
So in this article, I wanted to provide some tips on remembering the big picture when going after your big goals. Stop sabotaging your progress when it gets hard, and don’t allow falling off track to be an option.
Document your progress
When people are losing weight, they do a lot of things to keep track of their progress; weighing themselves every week, measuring themselves, or taking weekly pictures are all popular options. So why not do the same thing with your money goals?
When money is automatically transferred into your dream savings account (you have automated your savings, right?), have a spreadsheet set up. Update it with the day and amount you deposited into your dream account, and then keep a tally of the total. Seeing not only your total amount in savings, but also how many times you’ve invested funds into it is a rejuvenating thing.
Set up reminders
In the beginning, you may not know what will trigger the weaker moments. But once you figure it out, have a reminder system in place. If the clothing store right next to your favorite lunch spot makes you want to spend, spend and spend some more, set up a push notification on your phone for every day at lunchtime that just says “Dream Loft” or “Full-time Freelancer.” Seeing your ultimate goal is motivating, and you’ll be less inclined to spend excessively.
Have an accountability crew
Nobody can set you straight like your peers; and I’m not talking about the people you do drinks and go shopping with. We’ve talked before about surrounding yourself with people who doing the things that you want to be doing. Be sure to tell them your goal of being debt free (or paying for a new car in cash) by the end of the year. And then have them check in on you every so often to make sure you’re making progress. If they have a big goal they’re working on (such as amassing a seven-figure retirement portfolio), you can bounce ideas off of each other and keep each other accountable.
Next time you feel the urge to abandon your big dreams, take a moment to consider the big picture. Whether it is through post-it notes on your desk at work or setting up an account at a different bank, remember your goals and be ready to counter the weakness with strength. Continue to encourage yourself and be proud of what you’ve already accomplished.
I’ve come to believe that most unhealthy financial behaviors result from emotional conflict or unrest within the individual. In a few short weeks we’ll be in February, the month of love. It’s the perfect time to understand how you might be sabotaging your relationship with money. Knowing why you’re spending will help you get in touch with your heart’s desires. And it’ll create a vibration of harmony and abundance in your life.
First, let’s look at a few reasons we sabotage one of our most important relationships in life.
• We put other’s needs before our own
How many times have we bought something our husband or kids didn’t need, “just because”?
• We spend on what we think we need
It’s easy to get caught up in the “keeping up with the Jones’” mentality, so we rationalize those expensive briefcases or luxury cars as fitting in with our circles.
• We’ve convinced ourselves it’s a treat
We work hard, so we deserve that high-end handbag. But when it comes at the expense of what what’s really in our hearts, how much of a ‘treat’ is it really?
• We listen to what the “crabs” say
We want the ones closest to us to accept what we want, and we’re devastated when they don’t.
• And one of the biggest ways we sabotage our money situation is to ignore our dreams and desires for the sake of taking care of the “necessities.”
So many of us are just going through the motions in our lives, pushing down our true passions in lieu of what we think life should be. But there’s no better time than now to take the leap.
Here’s an exercise: Sit quietly and listen to your own heartbeat. Ask yourself, “What do I need? What do I want?” Maybe you want more time alone or need a creative outlet or more physical activity. Maybe you need to end a relationship that’s making you miserable or move overseas.
Remember, there are no right or wrong answers. So don’t judge your needs and desires; they have merit and deserve to be taken seriously. Let them flow out onto a piece of paper, and look over what you wrote.
Now choose one of the items on your list and describe some specific, practical ways you might begin to meet it. Do you need fifteen minutes alone each day when you get home from work? Do you need to open a “Europe” savings account and put ten dollars into it each month? What’s the first step, and when can you get it done?
Acknowledge how powerful it feels to funnel your energy toward your own needs and desires. Make a pledge to take at least a few minutes each day to accept who you really are and think of concrete ways to honor the authentic you. Feel the harmonious vibration from one simple act hum through every aspect of your life!
Review your retirement strategies
As you approach retirement, many important decisions await you. If you have a qualified employer-sponsored retirement plan, whether it is a traditional pension or a defined contribution plan, such as a 401(k), you will have to decide how to manage the proceeds from the plan once you retire. Your choice may depend on the following considerations: your current financial situation and your projected income requirements; the health and life expectancy of you and your spouse; the anticipated inflation rate; and Federal and state taxes.
Pension Payout Options
If you have a company pension plan, you will need to make some decisions about how you wish to receive your pension proceeds when you retire. Generally, you’ll be given the choice between receiving an income for the rest of your life (single life option), receiving an income for the life of you and your spouse (joint and survivorship option), or receiving a lump-sum distribution.
Each option has potential advantages and disadvantages. For instance, a single life option may pay a higher income than a joint and survivorship option. However, if you take the single payout option, income will cease upon your death, whereas if you take the joint and survivorship option, payments continue for the life of both you and your spouse. With both payout options, you exchange your pension balance for periodic payments.
If you prefer to maintain control over your pension assets during retirement, you might consider taking a lump-sum distribution. You can choose to receive the pension proceeds net of income taxes or roll them over into a traditional Individual Retirement Account (IRA), where they will continue to grow through tax deferral. (Required minimum distributions (RMDs) must commence at age 70½.) Either choice with the lump-sum distribution allows you to actively manage your own retirement assets.
Defined Contribution Plan Proceeds
If you’re a participant in an employer-sponsored defined contribution plan (such as a 401(k)), you must begin taking RMDs by age 70½. Depending on the rules of your company plan, you may also have the option of taking a lump-sum withdrawal net of income taxes or rolling over the proceeds into an IRA. Either of these options requires you to actively manage your retirement assets, and there may be tax consequences. Therefore, it is important to consult with your qualified financial and tax professionals to ensure that your savings decisions are consistent with your objectives.
Shortfall Planning
As you approach retirement, regularly reevaluate your financial strategies to help ensure that you will meet your retirement funding goals. For many individuals, retirement plan assets and Social Security alone will not meet retirement income needs. Therefore, personal savings are important to long-term success. Before you begin your personal retirement savings program, be sure you are maximizing contributions to your tax-advantaged, employer-sponsored plan.
As you can see, there are a number of choices available and decisions to be made regarding the distribution of proceeds from your employer-sponsored retirement plan. If you are not sure which strategies are best for meeting your particular goals, seek the advice of your professional advisors. It’s never too early to start!
How much can you earn and still receive Social Security?
Retirees are often ready, willing, and able to start new careers that may earn them significant incomes. However, some individuals may feel that it is not worthwhile to work for wages, only to have to “give up” some of those earnings in the form of higher income taxes. As frustrating as that may sound, it is important to understand the fundamentals of Social Security income and taxation so you can make your retirement years more “golden” and less “taxing.”
Income Limits: Paying to Work?
The first factor you must consider is your age and the so-called Social Security “giveback.” If you are age 62 or older, under the full retirement age (65–67 depending on your birth year), and receiving reduced Social Security benefits, you must “give back” $1 for every $2 earned above $14,160 in 2010. If you attain full retirement age in 2010, your benefits will be reduced by $1 for each $3 earned over $37,680 in months prior to full retirement age. Upon attainment of full retirement age, there is no limit on your earnings, and Social Security benefits are not reduced.
How Much Is Taxable?
A second factor affecting your Social Security benefits is the potential income taxation of those benefits. Let’s assume you are working and you also receive a check from the Social Security Administration (SSA) each month. You must first determine how much, if any, of your benefit is included in your gross taxable income. The first step in estimating this is to add up the following items: your wages, taxable pensions, interest, dividends, and other taxable income; all tax-exempt interest; any exclusions from income; your net earnings (net income less net losses) from self-employment; and half of your Social Security benefits.
This total is then compared to a first-tier threshold of $25,000 for a single taxpayer or a married taxpayer who is filing separately and lived apart from his or her spouse for the entire year, or $32,000 for a married taxpayer filing jointly. For a married taxpayer filing separately, who lived with his or her spouse for any period during the year, the first-tier threshold is $0.
For illustrative purposes, suppose your total applicable earnings are $27,000, and you are married and filing jointly. Since the total does not exceed the applicable threshold amount of $32,000, then no portion of your Social Security benefit is taxable. However, if the total exceeds the applicable threshold amount, further calculation is needed to determine the amount of your benefits that are taxable. You can refer to IRS Publication 915, Social Security and Equivalent Railroad Retirement Benefits, for more information, or consult your financial or tax professional.
As you can see, performing these calculations is no simple task. Thus, it is important for anyone who is thinking about receiving Social Security benefits while still working to understand the potential tax consequences and plan accordingly. As with all tax planning matters, it is important to consult a tax professional to help ensure your planning decisions are consistent with your overall goals.
During this season of giving, be mindful of the lessons you’ve learned these past three years in the recession.
I’ve already talked about saving for right now and the future and investing wisely. On the job front, I stressed to be prepared to look for a new job at a moment’s notice. Still, there are Americans that just didn’t get that chance.
Nationally, there are 14.8 million unemployed workers with over 400,000 of them right here in Chicago. Many of them have turned to temp agencies to find work, and a recent Chicago Tribune article highlighted their plight. Many companies are moving towards temp and part-time workers. And, financially, it makes sense.
“There is no incentive to make permanent jobs, with good job security and good benefits and good pay and good working conditions, (when) you have another 15 people waiting out the door that would take lower than that,” said Heidi Shierholz, an economist with the Economic Policy Institute.
To make matters worse, unemployment benefits run out next month for over two million people. In the first week of December, 800,000 Americans will lose their benefits with the other 1.2 million getting their last checks at the end of the month. And another 3 million may become victim to the cuts in January and February.
This unsettling news really put things into perspective for me. And during this holiday season, the most valuable lesson I’ve taken away from this rough economic time is to be thankful. The past three years have taught us nothing if not to be humble.
As you know, I’m a firm believer in the connection between our emotions/thoughts and our biology. When we’re stressed out about something, especially finances, we feel the negative pull emotionally. Our thoughts then go to a bad place, and it affects us physically many ways. We eat too much or not at all. Our hair falls out. Or we lash out at those we love.
Instead of letting this rough economic time take over the happiness of this season, focus on what’s good in life. I have a wonderful family with a great husband. I have beautiful child with one on the way very soon. And I wake up every day knowing that I get to do something that I love.
What are you thankful for during this time?
The recent downturn in the economy, and the current upswing, has taught us many important lessons. One of the more important lessons? We cannot put off saving for retirement because we never know what the future will bring.
We are currently in a long-term cycle called a “secular bear market” which could potentially last for another 10 years. This means the market is anticipated to remain relatively flat so people must actively contribute to and manage a retirement plan now in order to build up assets for the future.
The amount of money a person needs for retirement varies from person to person depending on their desired lifestyle, location, retirement age and anticipated social security payments. The average person a may need anywhere between $850,000 – $1.5 million to retire comfortably, but this amount is different for everyone.
In order to determine exactly how much you need for retirement, there are several retirement calculator tools online like the one on MSN.com (MoneyCentral.msn.com/go) This tool allows you to enter specific information about your specific situation, while also accounting for inflation.
After filling out a personalized retirement calculator, you should analyze your risk tolerance levels and create a personalized retirement strategy. Here are some of my top tips to help you take action:
*The tips above may not be suitable for all people, and JMC Wealth Management advises clients on their investment strategies on an individual basis.
Julie Murphy Casserly, CLU, ChFC, CFP® is a 15-year veteran of the financial services industry, founder of JMC Wealth Management in Chicago and author of the award-winning book, “The Emotion Behind Money.” Julie helps people understand how their emotional attitudes and behaviors affect how they earn, spend and save. For more information, please visit www.JulieMurphyCasserly.com.
We all know that money does not grow on trees, nor does it fall from the sky. However, many parents are subconsciously teaching their children the exact opposite through their money behaviors. The sooner you erase this idea from your kids’ minds, the more wisely they’ll be able to handle their own money throughout their life.
Introducing concepts of money management and instilling a good sense of fiscal responsibility should start at an early age, and be continued throughout a child’s life. Below are some of the top money rules parents can teach their children during different life stages.
Yes, money patterns start during the pre-school years. You can start talking to your child about money when they are two or three by explaining that everything costs money – from the food they eat, the clothes they wear, to the house they live in. These talks need to go beyond the necessities too. Explain that new toys, accessories or video games are things your family can live without. Introduce new toys to them a few at a time, rather than showering them with an over-abundance. This will help them get used to the fact that they don’t need a ton of toys to be happy.
By the time your child is six or seven, you can start teaching them about prioritizing their money. For example, when you are at the toy store, instead of letting them pick anything off the shelf, try giving your child five dollars and letting them choose something that fits within this price tag. For parents who buy their children anything and everything, the child will expect this later on in life too, giving them a sense of entitlement. Ask yourself, is this the reality I want for my child 15 years from now?
This is also the point to show your child that money is the result of hard work. Work out a plan with a family friend or neighbor where your child will do housework or yard work for $5-$10 cash. Then give them the power to choose how they want to spend or save their hard-earned money.
At this point in life, it is critical to create a financial collaboration with your child. Encourage them to get a part-time job to help pay for their car insurance, their gas or portions of the monthly car payment. Children should be held accountable for sharing some of these costs with their parents. Once they get that paycheck, show them how it should be dispersed — 1/3 goes towards that car payment, 1/3 goes towards their future college fund and 1/3 can be spent on whatever they choose.
During this age, it’s also important to highlight the importance of living a quality of life, rather than the quality of things that you own. Help your children understand that material things like a brand new car when they turn 16, are often a source of immediate happiness, but sooner or later, this happiness fades and they will be left searching for deeper self-fulfillment.
Your child is an adult now. Have an adult conversation with them about their finances and make sure they understand how credit works. Tell them about your experiences with credit card use – the good, bad and the ugly. Once children are on their own, temptations will always arise and children in this age bracket will more than likely try to open a credit card to fund some of these temptations. Explain how credit cards can bring a false sense of financial reality. They make us less conscious of where our money is flowing. Talk about how the constant struggle to earn cash to pay off debt can take a physical and emotional toll.
Julie Murphy Casserly, CLU, ChFC, CFP® is a 15-year veteran of the financial services industry, founder of JMC Wealth Management in Chicago and author of the award-winning book, “The Emotion Behind Money.” Julie helps people understand how their emotional attitudes and behaviors affect how they earn, spend and save. For more information, please visit www.JulieMurphyCasserly.com.
*The tips above may not be suitable for all people, and JMC Wealth Management advises clients on their investment strategies on an individual basis.
Aging parents often have a difficult time managing their finances. As parents, they were used to taking care of you. But at some point, your parents are going to need your help with financial issues. If your parents are in their 60s or older, it may be time to speak with them about their financial affairs and be sure they are utilizing all of the resources available to them.
If your parents have assets under $3M, it is likely that they will need additional financial help in their later years. Below are a few options to discuss with them. Regardless of health or medical issues, everybody qualifies for at least one of these options so be sure to research one that is best for your family members.
Self-insure. With self-insured plans, your parents would put their own money into special investment accounts specifically for their long-term care. This option is best for those who have over $3M in assets, excluding their home.
Straight long-term care policy. These are purchased from an insurance company. Your parents would pay into them until they need the financial help down the road. I tell my clients to think of these policies like car insurance. You either use it or lose it. For example, your parents would only get a financial benefit if they need long-term care in their retirement years. If they don’t need it, they will not get any of their money back. Long-term care includes home health care, nursing homes, assisted living and/or adult care.
Life insurance policy with a long-term care rider. These policies are built so someone receives a financial benefit at some point. If your parents don’t ever need or use their long-term care insurance, their beneficiaries would receive a death benefit. These policies are more expensive, but are usually more than what is put into the policy so at least someone gets paid.
Annuity product with a long-term care rider. This option is specifically for people who may not qualify for other policies due to health and medical conditions. Most of these contracts allow three percent of the premium put into the contract after s certain period of time. Be careful with these as some of them require a five to seven year commitment before payout. This is also the most expensive of the options currently in the marketplace.
Julie Murphy Casserly, CLU, ChFC, CFP® is a 14-year veteran of the financial services industry and founder of JMC Wealth Management in Chicago. Julie helps people understand how their emotional attitudes and behaviors affect how they earn, spend and save. To purchase her award winning the book, “The Emotion Behind Money,” and to sign up for her weekly wisdom for wealth e-newsletter, please visit EmotionBehindMoney.com.
As children, we probably learned that it was impolite to ask how much someone paid for something. These learning’s generally follow us into adulthood and make it difficult for us to talk about our money situations….with our financial planners, our friends and even our spouses and children.
Unfortunately, there can be severe consequences when money is not talked about. Many couples cite money problems as a factor in divorce. And the failure to instill good spending and saving habits in children could result in them living an unhealthy, money-centric life.
There are several important topics to include in your discussions about money with your children.
First, help your children understand the families’ current financial reality. Explain how much of your earnings go towards the house, bills, the car, food and past debt. This will help them understand the value of a dollar and allow them to think about their everyday spending, wants and needs.
Secondly, it’s important that parents highlight the importance of living a quality of life, rather than the quality of things that you own. Help your children understand that material things are often a source of immediate happiness, but sooner or later, this happiness fades and they will be left searching for deeper self-fulfillment.
Explain the process of credit to your children and how credit cards can bring a false sense of financial reality. They make us less conscious of where our money is flowing. Talk about how the constant struggle to earn cash to pay off debt can take a physical and emotional toll.
And finally, talk to your child about where they want to be and what they want to become when they are adults. Encourage them to identify their true self and their life’s passions. When their financial life is guided by their true self, they have less of a chance to surrender their personal power to money.
Julie Murphy Casserly, CLU, ChFC, CFP®, is a contributor to On The Money. As a 14-year veteran of the financial services industry and founder of JMC Wealth Management in Chicago, Julie helps people understand how their emotional attitudes and behaviors affect how they earn, spend and save. She is author of The Emotion Behind Money: Building Wealth from the Inside Out.
Many parents may find it uncomfortable, or may believe it is unnecessary, to inform their children about their personal matters. Yet, communicating openly with your family can help everyone feel reassured about your financial and health care wishes. It can also ease the decision-making process in many important areas.
As you age, informing your children of financial, estate, and medical arrangements that could affect the entire family helps everyone prepare and plan for the future. This information need not include exact facts and figures; however, the following should be made available to, and be understood by, your grown children:
Life Insurance. Life insurance is typically purchased to provide cash to help cover mortgages, liabilities, expenses, estate taxes, and lost income. Knowledge of the existence and location of life insurance policies can be of critical importance to children when settling their parents’ financial affairs. A policy locked in a safe-deposit box may not be found in a timely manner, if ever.
Other Insurance. Adult children should be aware of any other insurance policies that you may have—including health, disability income, and long-term care insurance. If you are age 65 or older, they should also have a basic understanding of Medicare coverage and be aware of any health insurance policies that go beyond coverage provided by Medicare. Older adults can greatly benefit when their children understand and follow appropriate procedures, as well as submit any necessary forms in a timely manner.
Wills. It is important to prepare a will in order to avoid leaving the disposition of your estate up to your particular state and its laws. To help ensure assets are distributed according to your wishes, both you and your spouse should prepare wills, review them regularly, and make necessary updates as circumstances warrant.
Although the exact contents may be kept private, the existence and location of wills should be disclosed to all family members. Wills should not be kept in bank safe deposit boxes, which may be sealed at death. The original will may be left with your attorney for safekeeping.
Trusts. Although wills accomplish many estate-related tasks, trusts may help protect your estate from unnecessary taxation or mismanagement by individuals who may lack the ability to handle matters appropriately. Trust documents should be kept with wills for ease of access. Be sure to discuss pertinent terms with those who will be involved. As children reach adulthood, it is common for parents to select a responsible son or daughter to act as a trustee upon the parents’ deaths.
Living Will. This document specifies your preferences regarding the administering or withholding of life-sustaining medical treatment. Under many state statutes, a patient must be considered “terminal,” “permanently unconscious,” or in a “persistent vegetative state” before life support can be withdrawn. Copies of living wills should be made available to anyone who may be involved with the care of you or your spouse, and the originals should be kept in a safe, readily accessible storage place.
Health Care Proxy. This legal document allows you to appoint a person to act as an agent on your behalf to make medical decisions, should you become incapacitated. A copy of the health care proxy should be filed with your primary doctor and your hospital, if possible. The individual appointed as your agent should also retain a copy.
Durable Power of Attorney. With a durable power of attorney, an individual or financial institution may act as an agent to oversee your legal and financial affairs in the event of incapacity. Grown children need to be informed of the steps that have been taken to ensure the competent direction of your affairs, should the need arise. However, their actual involvement in your affairs may be limited, according to your wishes. A power of attorney automatically terminates upon the death of the principal.
Assets and Debts. It can be beneficial for your children to know that a list of your assets and debts exists, without necessarily seeing the list itself. An asset list, developed and updated regularly, may include information on your bank accounts, real estate holdings, pension holdings, annuities, business agreements, brokerage accounts, boats, cars, works of art, collectibles, other valuables, and insurance policies. A debt list should include information on your current mortgages, consumer indebtedness, personal loans, and business obligations. Both lists should identify where paperwork and associated files for each item can be found.
Planning for a worst-case scenario may help your loved ones through an unforeseen tragedy. At first glance, preparing these lists and the associated documentation may seem burdensome. However, once completed, both parents and children can rest assured that the thoughtful planning that has been implemented and discussed will ultimately be handled properly.
According to recently released reports from the College Board, most students and their families can expect to pay, on average, from $108 to $1,398 more than what they paid in 2008 for this year’s tuition and fees, depending on the type of college. And with inflation rates continuing to increase, these costs will likely double and even triple in the years to come.
Although these costs are quite daunting, there are ways that parents and kids can prepare themselves for the sticker shock of attending college.
First and foremost, you want to make sure you are basing your college saving decisions on your families’ personal strategy rather than the stock market, which has been like a gambling roller coaster this past year. A few other savings tips for parents include: things to consider:
• Next pay raise, take 1/2 or 1/3 of it and put it in a 529 plan to get tax deferred and tax free gains.
• Sign up for www.upromise.com where corporations will share in their profits and provide money to your children’s college fund on products that you already buy.
• Look for credit cards such as American Express linked with Fidelity where 1.5 percent of anything you charge will go into your kids’ college fund. Citibank has similar card.
? One of the keys is finding the right card, is to find one where the money transfers from your credit card or upromise.com account directly into the 529 plan. That way, you don’t have to manage the transfers yourself.
• Re-prioritize your monthly savings goals to fit the need, if one kid is in college and one is approaching grad school, determine which one to tackle first.
• Strategize with your kids to spend 2 years at a community college to save funds which will make your dollar stretch farther
But don’t put it all on yourself! There are things that your child can be doing to contribute to their college savings. Different banks and credit unions have special accounts for teens saving for college. Be sure to ask at your financial institution and have your child contribute some of his or her part-time wages to the account. Since today’s teens are so tech-savvy, have them research various scholarships, grants and federal aid available to them and help them fill out applications.
In my book, “The Emotion Behind Money: Building Wealth from the Inside Out,” I include 22 specific exercises to help families understand their current financial reality, learn how to transform their lives and build a new relationship with money.
Julie Murphy Casserly, CLU, ChFC, CFP® is a 14-year veteran of the financial services industry and founder of JMC Wealth Management in Chicago. Julie helps people understand how their emotional attitudes and behaviors affect how they earn, spend and save. To purchase her award winning the book, “The Emotion Behind Money,” please visit http://www.emotionbehindmoney.com.
Position yourself to be lucky to spend the amount of money you actually have for vacation, instead of going into debt and later on having to pay for past choices. No one likes having what I like to call a “spending hangover”…it takes all the fun out of going on vacation in the 1st place.
It’s all about what is your free cash flow to be able to afford a vacation. It’s all about what is right for you and your family, there is no right or wrong, it’s about what you have chosen as your financial priorities and making sure that you create a positive energy flow from your spending (spending on a cash basis) and not a negative energy flow (spending with debt).
We live in a world where there are so many things to do and many, many options. Many of the travel websites will have last minute trips at a deep discount, particularly today with this economic environment. Decide, OK, we have $2000 to spend on vacation and then search online for an all inclusive trip for the long weekend that falls into that number. The exciting part is that you are leaving yourself open to trying out a new adventure, to a new place.
Steven Covey says, “Begin with the end in mind”. I couldn’t agree more. Decide what are your priorities for your vacation, what amount your will choose to spend, then build your plan out from there.
Cost saving tips:
You can choose to travel on cheaper air fair days, say Tuesday – Saturday
Rent your car, hotel, or your airfare through www.priceline.com where you can name your own price…I have put down 30% lower price than the market price and most times I am successful
If you’re taking a road trip, pack a cooler!!!
Buy in bulk, get airfare, hotel, and car from one vendor
Talk to the locals once you get somewhere, go to the restaurants where the locals are at, they’re not tourist traps with higher costs, and many times better.
If you don’t have a vacation planned, set those financial intentions by opening up a separate savings account that is ONLY to be used for your vacations. If you’ve decided you want to spend $3000 per year on a vacation, then make sure you put $125 per check (if paid twice per month) into that savings account straight from your paycheck. I’ve met so many people who want to go on vacation, but they don’t because they don’t plan on it….this is a really easy thing to do to go have some fun in life!
Financial problems have long been a trouble area in many marriages and the current economic crisis is stretching even more people to the emotional breaking point. The resulting frustration can certainly take a toll on marriages which is why it’s important to have financial discussions before walking down the aisle.
Below are some of the top conversations you should have with your soon-to-be spouse to be sure you are on the same page financially.
1 – Past – Review and discuss all of your past choices and work to pay them down now.
2 – Present – Review your current monthly bills and purchases and set a budget that fits into your allotted incomes. Try to live the quality of life you want today on a cash basis, not a credit basis.
3 – Future – Plan for your short-term, mid-term and long-term financial goals and make them a priority. Enlist the help of a financial planner who can help you set up savings and investment accounts that will help you reach all of your life goals.
Julie Murphy Casserly, CLU, ChFC, CFP® is a 15-year veteran of the financial services industry and founder of JMC Wealth Management in Chicago. Julie is the leading authority on how emotional attitudes and behaviors affect how people earn, spend and save. To purchase her award winning the book, “The Emotion Behind Money,” also now available in an e-book format, please visitwww.EmotionBehindMoney.com.
*The tips above many not be suitable for all people, and JMC Wealth Management advises clients on their investment strategies on an individual basis.