Financial Planning for Growing Families
Many Millennials today have entered the workforce, gotten married, become home owners, and are raising a family. Too often they have seen their parents and grandparents experience a poor quality of life and become dependent on their children and grandchildren because of financial stress, living a long life and not having enough money. Whether you are a Millennial or in your middle years with a home and family, most likely you’re asking these questions: “What do I need to do now to protect my family and home, have money for my children’s college, weddings and braces, create wealth, and prepare for a secure and comfortable retirement?”
At this stage of your life, your responsibilities are high for dependent children, a mortgage, car payments, future major expenses, and accumulating wealth. This is a time when life insurance, investments, long-term care, trusts, and other legal protections become increasingly important. But do you know what you need to do to properly plan for and secure your financial future?
A strong financial foundation for families...
Whether you’re just starting a family or have older children and teens, you’re at a great time in your life to achieve financial security and accumulate wealth. Imagine being able to send your kids to college without debt, pay for weddings, pay off car loans, meet all your financial needs, and plan for a happy, comfortable retirement. With the right financial plan, you and your family can live your dreams without financial stress and worry.
Provided your health needs are met, you have an adequate income, do not have excessive debt, and you’re willing to make a few changes to reduce unnecessary spending, you can benefit from financial strategies that will protect your assets, cover expenses, and when the time comes, enjoy your retirement without any financial worries.
A financial plan always begins with a detailed analysis of your financial situation and needs. This includes any special needs for you and your family, income and expenses, mortgage info, projected future expenses, existing insurance for life and long-term care, savings, existing retirement accounts, spending habits, knowledge and beliefs about money, and your tolerance for risk. Based on your analysis and input, we prepare a customized plan designed to meet your needs for financial security, covering existing and future expenses, and accumulating wealth.
Customary considerations for family financial planning...
Most people go through their life spending money erratically without a budget. They may go for coffee everyday, eat out regularly, or use unnecessary gas by making several trips to the store. Some make regular purchases in expensive convenience stores instead of clipping coupons or shopping where grocery and personal care products are much less costly.
A big part of helping you to generate enough income for life is to reduce unnecessary spending. You will learn how small changes can produce big money growth. Your commitment to using a budget that eliminates impulsive unnecessary costly purchases will change your life. In the process, you will be empowered to take control of your money so that you can get what you most need and want in your life.
Are you taking advantage of opportunities for a tax-deferred retirement account through your employer? Your contributions will be deducted from your paycheck before taxes and invested by a fund manager according to your risk tolerance. Sometimes your employer will match your contributions up to a certain percentage of your annual salary. This is money that can grow substantially over a period of years and produce a comfortable retirement. All the money earned through your retirement account belongs to you with options to do a tax-free rollover investment when you leave your job.
Your employer may also provide you with life insurance. This might be one to two times your annual salary. You might have the opportunity to purchase additional life insurance or long-term care insurance through your employment. These extra policies belong to you as long as you continue to pay the premiums. And if you are young, healthy and a non-smoker, the cost of these policies is a real bargain – one that you will not want to miss out on.
Policies for short term disability and long term disability can be purchased to safeguard your salary when you are unable to work for an extended period of time. Disability insurance pays you a portion of your salary after you have been disabled due to injury or illness. This is different from workers compensation (paid by employers when required) that pays you when you are injured on the job.
When you have a family with children and a home, your responsibilities will be higher than any other time in your life. Whether you live or die, you and your partner/spouse are responsible for obligations you incur. And when you are young and healthy, life insurance is extremely affordable as a way of protecting your family in the event that you should die younger than expected.
There are a number of different types of life insurance. No one product is right for everyone. Whether you choose a term or permanent life insurance, your choice should be based on your calculated insurance needs, your age and health status, budget, financial obligations, and other options you have to build up cash that fits with your savings and investment goals.
Long-term care is a type of insurance that provides you with limited assistance in your home or in an assisted living facility when and if you meet certain criteria. Most people do not think about long-term care insurance until later in life when it is very expensive. The best time to buy long-term care insurance is when you are young and healthy and the costs are very low.
When you have many years ahead for investing, this is a time where you can generally afford more risk. There are numerous investment opportunities that can accumulate large amounts of cash over a period of years. These can be managed funds within an IRA or a 401k through employment. Even if there is a retirement account through your job, you are not limited to a single account. If you are in a relatively low tax situation and can afford it, you might consider investing within a Roth IRA in which after tax dollars are used to fund the account. This provides an opportunity to grow cash in an account that is completely tax free after 5 years.
U.S 529 Savings Plans are an investment strategy that allows contributions to accumulate in value and be used to pay for college expenses tax-free. The account is funded with after tax dollars. Parents can participate in any state program, regardless of residency in that state. If their child decides not to go to college, the funds can be transferred and used for another child in the family. if the money is not used for college, it is subject to regular income taxes upon withdrawal plus a 10% penalty on gains. Because these plans are considered to be assets, they can affect eligibility for financial aid for college expenses
If you and your partner have good paying jobs or are self-employed, it is quite possible that you have a substantial income with a high tax obligation. Fortunately there are a number of opportunities to offset your taxes, lower your taxable income and accumulate cash – strategies that can make you wealthy over time. Tax-deferred investment strategies allow you to invest, deduct your investment amount from your taxable income, and defer the tax until you take distributions later in life. Another method of reducing your taxable income is by having your own business where business expenses offset your taxable income.
When we are young and healthy, we tend to believe that we will remain healthy for a very long time. Although most people will have a long, healthy life, a life threatening illness or injury can happen at any age. Part of financial security are legal protections that safeguard you and your family should serious illness or death occur. Trusts or wills, Durable Power of Attorney, and Living Wills are important protections for you, your family, and your assets. Our team includes estate and asset protection attorneys who can help you by creating these essential legal documents.