
Feature/General
Family Finance: Getting Your Financial House
in Order
By Laurel S. Alberty
January/February 2006
The baby is on the way. Everyone is asking if the nursery is ready.
Has anyone asked if you have your financial house in order? Here
is where to start.
First, take a look at your legal documents. If you
have a will and the suggested powers of attorney, you are ahead
of most who are beginning the adventure of parenthood. Still, you
should review the documents to be sure they are current. You'll
also want to make sure they still reflect your wishes. Lastly,
assure they are complete with provisions for your new bundle of
joy.
If you are part of the majority who don't have these documents,
call a lawyer and start the process. It is often a long and difficult
road to decide who will take care of your children, your business
affairs and your health care decisions in the event of a tragedy.
However, it is important to spare your grieving loved ones the
grueling process of having these decisions made in the public court
system.
The basic legal documents that everyone should have (not just new
parents) are a will, durable and health care powers of attorney,
and a living will. When drafting these types of legal documents
you should seek the advice of an estate attorney. Resist the urge
to use your old roommate, the real estate attorney. While you are
meeting with the estate attorney, don't forget to discuss planned
gifts to your favorite charities.
Income replacement is a dreaded topic for most because it usually
means discussing life and disability insurance. Unfortunately,
most of us are not wealthy enough to be self insured. That means
we need to find an efficient way to provide income for our surviving
loved ones. It is important to seek out enough coverage so that
your family can live as comfortably as if you were still working.
Most employers offer disability and life insurance coverage as
a benefit. Usually, these benefits will not be portable if you
move to another job. Consider taking out a personal policy while
you are young and healthy and the expense is less. If you already
have or plan to buy life insurance, be sure to mention it to your
estate attorney.
Flexible spending accounts for day care and medical expenses
are now available through most employers. These accounts take pre-tax
dollars from your paycheck and put them in an account for the designated
expense. The day care spending account is limited to $5,000 per
year. If you don't use the amount you have saved by the end of
the year, you lose it. The flexible spending account for medical
expenses is similar but does not have the $5,000 limit per year.
Don't forget to add your child to your health insurance. Before
you renew your existing coverage, be sure that the pediatrician
and any other doctors you might need are available on your plan.
Last but not least, education planning is on the mind of every
new parent. There are many choices available for education savings
these days. Seek professional assistance when making this choice.
A professional can help you with options regarding the child's
access to funds, how the funds are used (educational vs. general)
and types of accounts that are available to you based on adjusted
gross income limits. Educational savings is very specific to the
family situation
Now you can say that your nursery is ready and so is your financial
plan!
Laurel Alberty, CFP, is president of Alberty Financial Planning
Services, Inc.
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