But what about investments, don’t you handle those also? Sure, but investments need to be appropriate for individuals and well managed to help them achieve their financial goals and keep their financial house in order. The key word in achieving financial order is planning. Here are some examples of financial concerns that I have helped people with.
Planning for financial emergencies generally requires accumulating an emergency fund so that cash will be available when that furnace or roof needs replacement. The fund must be liquid since the need is immediate. Planning requires estimating the size of the emergency fund. Perhaps $5,000 or $10,000 will be enough to cover the cost of a new roof and/or a furnace, but may not be enough for other types of emergencies. What if the wage earner is laid off from his or her job? The emergency fund will need to cover monthly living expenses not covered by unemployment insurance for some period of time (say 3 to 6 months or possibly longer).
Managing risk includes planning for the breadwinner’s premature death or disability. This can be accomplished by reviewing life and disability insurance coverage, and if necessary recommending and assisting in securing additional coverage.
Identifying and prioritizing financial goals are important
parts of the planning process. Often
there are conflicting goals (e.g., saving for their children’s college
education and saving for their own retirement).
Paying for college can sometimes be accomplished in part through the use
of a tax-advantaged Sec. 529 Plan, named after a section in the Internal Revenue
Code, and financial aid packages offered through government programs and the
colleges or universities. Student and
parent loans are additional options.
Parents need to be educated about their options and reminded that they
can borrow for their children’s education but not for their retirement.
Saving for retirement can be accomplished in part through
tax-deferred retirement plans offered by employers, tax-deferred retirement
plans available to the self-employed, individual retirement accounts (IRAs) and
deferred annuities. These plans work
best through continuous savings (e.g., payroll deductions, checking account
drafts, etc.) over long periods of time.
I have set up qualified retirement plans for small businesses and
individuals tailored to their budgets.
Managing debt is often a critical factor in getting one’s
financial house in order. Refinancing a
mortgage or home equity line of credit can reduce borrowing costs and often be
a source of additional cash. Reducing or
eliminating credit card debt can result in substantial savings that can be
directed to achieving other financial goals.
I sometimes find that people are paying too much in
taxes. Most of us work hard for our
money and should not be sending more of it to the IRS than what is legally
required. By reviewing recent tax returns
it is often possible to find opportunities for savings. Sometimes the review will result in filing an
amended return (or returns) and claiming a refund for taxes paid in prior
years.
Finally, having a will and reviewing it periodically is an
important part of having your financial house in order. A living will along with a durable power of
attorney should be part of your documents.
Be sure to name a guardian for minor children. It is also a good idea to review your
beneficiary designations on life insurance policies, annuity contracts, and
retirement plans to insure that they are current. Having an ex-spouse or a deceased relative
listed as a beneficiary can cause major problems.
Remember, it is never too late to get your financial house
in order and now is a great time to start.