Part 1 - Education Pays
It should come as no surprise to a parent that the cost of sending a child to college is an expense which continues to rise year over year. The average annual total tuition and fees at four-year public colleges and universities in 2009-10 are $6,585. Throw in room and board and the total cost climbs to $14,333. This is 6.4% higher than they were in 2007-08. As staggering as this annual increase seems, it is significantly smaller than in preceding years. This 6.4% increase follows increases of 13% in 2003-04, 10% in 2004-05, and 7.1% in 2005-06.
How does the cost at a four-year private college compare? Average total charges, including tuition, room and board, and fees are $34,132 for 2008-09. This is 5.6% higher than last year, and has been the average over the preceding three years.
Come graduation day, the typical parent will have spent almost $58,000 for public universities and $137,000 for private or out-of-state universities.
However, to most Americans the skyrocketing cost of sending a child to college seems to overshadow the long-term benefits of a college education. Numerous studies have been done indicating a direct relationship between the level of education an individual receives and that individual’s earnings potential. These studies show that, monetarily, a college education is an investment that pays off over a lifetime. In 2008, the typical full-time worker with a four-year college degree earned $50,856. This is 65% more than the $30,732 earned by a full-time worker with only a high school diploma. A worker with a master’s degree earned over twice as much, $63,856, as the high school graduate. In fact, the earnings gap for college graduates versus high school graduates is estimated to exceed $1 million over an individual’s lifetime.
The information contained in this report attempts to summarize the various savings vehicles and college funding options available to most Americans today. While the costs to attend college may be imposing for many families, the costs associated with not going to college are likely to be much greater.
How Are Parents Saving Today?
A recent Gallup survey commissioned by Sallie Mae revealed that three-quarters (75%) of the 1,200 parents surveyed thought it was "highly likely" their children would be attending some form of higher education after high school. Of this group of parents, 62% (but only 32% among those with household income below $35,000) of them have saved or invested for college.
The survey found that only 33% of parents are investing in 529 savings plans, and only 20% of households earning $150,000 or more are taking advantage of them. A majority (59%) used savings, money market accounts, or CDs while 41% saved with stocks or bonds. 35% of those not saving for college anticipate scholarships or financial aid to cover the cost.
Estimated 2009-10 College Costs for Selected Colleges
Below are total costs for some of the top universities in the United States, as ranked by U.S. News & World Report. These figures represent the total cost of sending a Texas-resident student to each school for the 2009-10 school year, including tuition, room and board, fees, books, and miscellaneous expenses.
For colleges in Texas:
Public Universities:
University of Texas - $25,284
Texas A&M University - $20,531
Texas Tech University - $18,464
University of Houston - $16,418
Stephen F. Austin University - $11,360
Private Universities:
Rice University - $45,685
Southern Methodist Univ. - $43,295
Baylor University - $42,898
University of St. Thomas - $30,906
St. Mary’s University - $30,266
Other colleges in the United States:
Exclusive Universities:
Stanford University - $53,652
Harvard University - $52,000
Brown University - $50,560
Dartmouth College - $49,974
Princeton University - $49,190
Private Universities:
Georgetown University - $55,130
Vanderbilt University - $54,718
Northwestern University - $53,608
Tulane University - $52,240
Notre Dame University - $51,300
Public Universities (Non-TX):
UCLA - $46,420
University of Michigan - $44,797
Miami (OH) University - $41,864
University of Colorado - $38,365
Louisiana State University - $22,195
With college costs increasing at alarming rates, advanced planning is required to make these costs affordable for your children and/or grandchildren. Time and the power of compounding are your most valuable assets.
In the coming weeks, I will be posting more information on the various savings vehicles parents should be aware of, including 529 Plans, Coverdell Savings, Education Savings Bonds, and UTMA/UGMA accounts. Other topics will follow, including the basics of financial aid, tax incentives available for educational expenses, and programs designed specifically for members of the military. Please check back regularly for more updates. Better yet, click on 'Follow' on the home page to be notified when items are posted to this blog.
Friday, October 30, 2009
Friday, October 16, 2009
Key Planning Opportunity For 2010
As with the start of every New Year, some key financial planning opportunities will be available to all investors beginning in 2010. One opportunity that has not received nearly as much press as others is the upcoming changes in the Roth IRA rules.
Roth IRA Background
Roth IRAs were created with the Tax Payer Relief Act of 1997. The attractiveness of a Roth IRA is very apparent. Not only do funds placed in a Roth IRA, whether through annual contributions or conversions from traditional IRAs, appreciate tax-free, all distributions from a Roth IRA are tax-free as well. Additionally, unlike traditional IRAs where you are required to withdraw a certain amount each year starting at age 70 ½, there are no required minimum distributions (RMDs) with Roth IRAs.
For the most part, though, the benefits mentioned above were only available to those families who’s modified adjusted gross income (AGI) was less than $100,000 each tax year. This restriction kept the Roth benefits out of reach for higher income earners – the ones who would gain the most from the benefits.
However, a provision in the Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA) removes the income limitation on Roth IRA conversion eligibility beginning in 2010 – and this is a key planning opportunity for everyone, regardless of annual income.
New Roth Conversion Rules
Beginning January 1, 2010, anyone can convert a traditional IRA to a Roth IRA, regardless of income. This new tax window opens the door to a tremendous tax-planning opportunity for millions of people, who hold more than $1 trillion in traditional IRAs.
It is important to understand that the conversion process is a taxable event. The amount you decide to convert is deemed income, and you will owe taxes on that amount at ordinary income tax rates. However, the provision within TIPRA states that taxes recognized due to conversions made in 2010, and 2010 only, can be spread over two years. Therefore, half of the taxes due can be paid in 2011 and the other half paid in 2012.
Ironically, the market downturn over the past 24 months actually benefits those who are looking to convert into Roth IRAs. Undoubtedly, your traditional IRA balance today is considerably less than it was when the market began its decline in September of 2007. As a result, you are converting a lesser balance thus generating lesser taxes – taxes that can be spread over two years. Given the long-term historical returns of the market, your new Roth IRA will eventually recoup, and surpass, your traditional IRA balance from 2007 and you will not have to worry about another income tax issue as long as you have your Roth. Combine that with the anticipation of higher tax brackets in the future, and this becomes a great opportunity.
So, if you have ever considered converting your retirement accounts to Roth IRAs, 2010 is the year you definitely want to consider doing so. Please contact MTR Financial Services, LLC should you have any questions or would like to discuss your situation in greater detail.
Roth IRA Background
Roth IRAs were created with the Tax Payer Relief Act of 1997. The attractiveness of a Roth IRA is very apparent. Not only do funds placed in a Roth IRA, whether through annual contributions or conversions from traditional IRAs, appreciate tax-free, all distributions from a Roth IRA are tax-free as well. Additionally, unlike traditional IRAs where you are required to withdraw a certain amount each year starting at age 70 ½, there are no required minimum distributions (RMDs) with Roth IRAs.
For the most part, though, the benefits mentioned above were only available to those families who’s modified adjusted gross income (AGI) was less than $100,000 each tax year. This restriction kept the Roth benefits out of reach for higher income earners – the ones who would gain the most from the benefits.
However, a provision in the Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA) removes the income limitation on Roth IRA conversion eligibility beginning in 2010 – and this is a key planning opportunity for everyone, regardless of annual income.
New Roth Conversion Rules
Beginning January 1, 2010, anyone can convert a traditional IRA to a Roth IRA, regardless of income. This new tax window opens the door to a tremendous tax-planning opportunity for millions of people, who hold more than $1 trillion in traditional IRAs.
It is important to understand that the conversion process is a taxable event. The amount you decide to convert is deemed income, and you will owe taxes on that amount at ordinary income tax rates. However, the provision within TIPRA states that taxes recognized due to conversions made in 2010, and 2010 only, can be spread over two years. Therefore, half of the taxes due can be paid in 2011 and the other half paid in 2012.
Ironically, the market downturn over the past 24 months actually benefits those who are looking to convert into Roth IRAs. Undoubtedly, your traditional IRA balance today is considerably less than it was when the market began its decline in September of 2007. As a result, you are converting a lesser balance thus generating lesser taxes – taxes that can be spread over two years. Given the long-term historical returns of the market, your new Roth IRA will eventually recoup, and surpass, your traditional IRA balance from 2007 and you will not have to worry about another income tax issue as long as you have your Roth. Combine that with the anticipation of higher tax brackets in the future, and this becomes a great opportunity.
So, if you have ever considered converting your retirement accounts to Roth IRAs, 2010 is the year you definitely want to consider doing so. Please contact MTR Financial Services, LLC should you have any questions or would like to discuss your situation in greater detail.
Thursday, July 16, 2009
Tips On Finding A Financial Planner
The time and research you should put in to finding a financial planner is no different than the time and research you should put into finding a good family doctor. You are looking for someone you can trust and guide your financial health, after all. But how should you start your search? According to the National Association of Securities Dealers (NASD) there are no fewer than 69 different financial credentials that you may run into. This article will attempt to help you narrow down your search before you even pick up the phone and start calling prospective planners.
As with a family doctor, the best place to start your search is referrals from friends and family and ask who they work with. The best planners out there will tell they get the majority of their new clients from referrals. You can also use the internet to look for planners in your area. A few websites out there provide good starting points: www.fpanet.org and www.napfa.com. The FPA website includes planners who are fee-only, fee-based, or commission-based. The National Association of Personal Financial Advisors (NAPFA) website only includes those planners who adhere to a fee-only compensation model. All three compensation models will be explained below.
When deciding what type of planner best fits you and your family’s finances there are four areas to consider: credentials, experience, how they are compensated, and to what regulatory standards must they adhere to.
Credentials
Of all the credentials in the financial world, the four most common are CFP, CPA-PFS, ChFC, and CFA.
1. Certified Financial Planner (CFP) – Awarded by the Certified Financial Planner Board of Standards, or CFP Board, to individuals who meet the CFP Board’s education, examination, experience and ethics requirements. A professional with a CFP designation should have a broad knowledge of all aspects of financial planning including investments, estate planning, retirement planning, insurance and taxes. The designation means the person has passed rigorous examinations and met certain requirements.
2. Certified Public Accountant – Personal Financial Specialist (CPA-PFS) – CPAs, by trade, have a more extensive background in tax issues. A PFS designation is awarded by the American Institute of Certified Public Accountants to CPAs who have taken additional training or already hold a CFP or ChFC designation.
3. Chartered Financial Consultant (ChFC) – Earned through The American College in Bryn Mawr, PA, and designees tend to work in the insurance industry. A professional with the ChFC designation should have a broad knowledge of all aspects of financial planning, including investments, estate planning, insurance and taxes. The designation means the person has passed rigorous examinations and met certain requirements.
4. Chartered Financial Analyst (CFA) – Awarded by the CFA Institute to experienced financial analysts who successfully pass three examinations covering economics, financial accounting, portfolio management, securities analysis, and ethics. CFAs are more likely to work for mutual fund companies, institutional asset management firms, or pension funds. CFA charter holders are annually required to affirm their commitment to high ethical standards.
Experience
With the impending onslaught of baby boomers nearing and entering retirement, the financial planning profession has become a second-career choice for many new planners out there today. You will want to keep this in mind when you interview potential planners. Ideally, the planner has been in the profession for more than five to ten years and has an educational background in the profession. The number of colleges actually offering degrees in Personal Financial Planning and Counseling has exploded over the past decade. One of the most well-known programs today is right up the road in Lubbock, TX at Texas Tech. Although having a college degree in financial planning is preferable, it shouldn't be a reason to disqualify a prospective planner.
Compensation
Understanding how – and how much – a planner is paid is an important part of establishing the relationship. Always consider whether a planner’s compensation requirements will interfere with their objectivity when it comes to your financial plan.
There are three general compensation categories that a planner will fall into: commission-based, fee-based, or fee-only.
1. Commission Based – Planners in this category earn their paycheck through commissions on sales of products, such as stocks, bonds, mutual funds, and insurance. Some commission-based advisors associated with banks or brokerage firms may have sales quotas they need to fill in order to keep their jobs, and the products they are recommending may not be the best option for you. If the planner is paid a commission it does not necessarily mean they are not looking out for your best interests. But the potential for conflict of interest is greater.
2. Fee-Based – Planners in this category usually have their compensation based on a flat fee or percentage of money under management as well as commissions on sales of products such as stocks, bonds, mutual funds, and insurance.
3. Fee-Only – Planners in this category do not sell any commission-based product, instead charging an agreed-upon flat fee or a percent of assets under management. It is argued that removing any incentive to buy or sell a particular investment for a client also removes any conflict of interest and the planner is making their recommendations based on what is best for the client, not the planner.
Which compensation model is the best? I’m willing to guess that planners in each category will make their argument as to why theirs is more advantageous to their clients. In the end, you must be not only comfortable with how your planner is compensated, but you should have an understanding as to how much they are being paid for each recommendation they make. If they do not volunteer that information to you, simply ask! If they value you as a client they will have no issues in providing that information.
Regulatory Standards
Financial planners will fall under one of two standards with their clients. These two standards are “suitability” and “fiduciary”.
Brokers, also known as ‘registered representatives’ may call themselves financial planners but they are basically employees of a stock exchange member firm who act as account executives for their clients. These brokers fall under the jurisdiction of the self-regulatory Financial Industry Regulatory Authority (or FINRA) and are held to a less stringent “suitability” standard. This means their recommendations must be “suitable” to their clients (e.g. be in line with the client’s risk tolerance and long-term goals). Therefore, a broker is legally free to recommend an investment that pays his firm (and himself) a higher commission over a similar lower-cost fund as long as the investment is suitable to the client’s situation.
In stark contrast, planners held to a “fiduciary” standard could not do that. If held to a fiduciary standard the planner, by law, must place the client’s interests first. CFPs and Registered Investment Advisors (RIA) are held to the strict fiduciary standard. (Registered Investment Advisors are simply planners who are not employed by, nor have any affiliation with, brokerage firms or other financial institutions, and must register with the U.S. Securities and Exchange Commission and/or state regulators)
If you are comfortable with your planner not being held to a fiduciary standard, at least ask them to explain precisely the reasons for their recommendations, including what’s in if for them.
In Summary
Finding a financial planner for your family ultimately comes down to trust. Regardless of the planner’s association to a certain firm, their compensation structure, or experience you must feel a strong connection between the two parties. Your relationship with a financial professional is, above all things, a partnership. It is worth taking the added time to find the right planner upfront because you want this relationship to last a lifetime.
As with a family doctor, the best place to start your search is referrals from friends and family and ask who they work with. The best planners out there will tell they get the majority of their new clients from referrals. You can also use the internet to look for planners in your area. A few websites out there provide good starting points: www.fpanet.org and www.napfa.com. The FPA website includes planners who are fee-only, fee-based, or commission-based. The National Association of Personal Financial Advisors (NAPFA) website only includes those planners who adhere to a fee-only compensation model. All three compensation models will be explained below.
When deciding what type of planner best fits you and your family’s finances there are four areas to consider: credentials, experience, how they are compensated, and to what regulatory standards must they adhere to.
Credentials
Of all the credentials in the financial world, the four most common are CFP, CPA-PFS, ChFC, and CFA.
1. Certified Financial Planner (CFP) – Awarded by the Certified Financial Planner Board of Standards, or CFP Board, to individuals who meet the CFP Board’s education, examination, experience and ethics requirements. A professional with a CFP designation should have a broad knowledge of all aspects of financial planning including investments, estate planning, retirement planning, insurance and taxes. The designation means the person has passed rigorous examinations and met certain requirements.
2. Certified Public Accountant – Personal Financial Specialist (CPA-PFS) – CPAs, by trade, have a more extensive background in tax issues. A PFS designation is awarded by the American Institute of Certified Public Accountants to CPAs who have taken additional training or already hold a CFP or ChFC designation.
3. Chartered Financial Consultant (ChFC) – Earned through The American College in Bryn Mawr, PA, and designees tend to work in the insurance industry. A professional with the ChFC designation should have a broad knowledge of all aspects of financial planning, including investments, estate planning, insurance and taxes. The designation means the person has passed rigorous examinations and met certain requirements.
4. Chartered Financial Analyst (CFA) – Awarded by the CFA Institute to experienced financial analysts who successfully pass three examinations covering economics, financial accounting, portfolio management, securities analysis, and ethics. CFAs are more likely to work for mutual fund companies, institutional asset management firms, or pension funds. CFA charter holders are annually required to affirm their commitment to high ethical standards.
Experience
With the impending onslaught of baby boomers nearing and entering retirement, the financial planning profession has become a second-career choice for many new planners out there today. You will want to keep this in mind when you interview potential planners. Ideally, the planner has been in the profession for more than five to ten years and has an educational background in the profession. The number of colleges actually offering degrees in Personal Financial Planning and Counseling has exploded over the past decade. One of the most well-known programs today is right up the road in Lubbock, TX at Texas Tech. Although having a college degree in financial planning is preferable, it shouldn't be a reason to disqualify a prospective planner.
Compensation
Understanding how – and how much – a planner is paid is an important part of establishing the relationship. Always consider whether a planner’s compensation requirements will interfere with their objectivity when it comes to your financial plan.
There are three general compensation categories that a planner will fall into: commission-based, fee-based, or fee-only.
1. Commission Based – Planners in this category earn their paycheck through commissions on sales of products, such as stocks, bonds, mutual funds, and insurance. Some commission-based advisors associated with banks or brokerage firms may have sales quotas they need to fill in order to keep their jobs, and the products they are recommending may not be the best option for you. If the planner is paid a commission it does not necessarily mean they are not looking out for your best interests. But the potential for conflict of interest is greater.
2. Fee-Based – Planners in this category usually have their compensation based on a flat fee or percentage of money under management as well as commissions on sales of products such as stocks, bonds, mutual funds, and insurance.
3. Fee-Only – Planners in this category do not sell any commission-based product, instead charging an agreed-upon flat fee or a percent of assets under management. It is argued that removing any incentive to buy or sell a particular investment for a client also removes any conflict of interest and the planner is making their recommendations based on what is best for the client, not the planner.
Which compensation model is the best? I’m willing to guess that planners in each category will make their argument as to why theirs is more advantageous to their clients. In the end, you must be not only comfortable with how your planner is compensated, but you should have an understanding as to how much they are being paid for each recommendation they make. If they do not volunteer that information to you, simply ask! If they value you as a client they will have no issues in providing that information.
Regulatory Standards
Financial planners will fall under one of two standards with their clients. These two standards are “suitability” and “fiduciary”.
Brokers, also known as ‘registered representatives’ may call themselves financial planners but they are basically employees of a stock exchange member firm who act as account executives for their clients. These brokers fall under the jurisdiction of the self-regulatory Financial Industry Regulatory Authority (or FINRA) and are held to a less stringent “suitability” standard. This means their recommendations must be “suitable” to their clients (e.g. be in line with the client’s risk tolerance and long-term goals). Therefore, a broker is legally free to recommend an investment that pays his firm (and himself) a higher commission over a similar lower-cost fund as long as the investment is suitable to the client’s situation.
In stark contrast, planners held to a “fiduciary” standard could not do that. If held to a fiduciary standard the planner, by law, must place the client’s interests first. CFPs and Registered Investment Advisors (RIA) are held to the strict fiduciary standard. (Registered Investment Advisors are simply planners who are not employed by, nor have any affiliation with, brokerage firms or other financial institutions, and must register with the U.S. Securities and Exchange Commission and/or state regulators)
If you are comfortable with your planner not being held to a fiduciary standard, at least ask them to explain precisely the reasons for their recommendations, including what’s in if for them.
In Summary
Finding a financial planner for your family ultimately comes down to trust. Regardless of the planner’s association to a certain firm, their compensation structure, or experience you must feel a strong connection between the two parties. Your relationship with a financial professional is, above all things, a partnership. It is worth taking the added time to find the right planner upfront because you want this relationship to last a lifetime.
Tuesday, July 7, 2009
The New Credit Card Law & How It Affects You
On May 22nd of this year, President Obama signed into law the Credit Card Accountability, Responsibility and Disclosure Act. Known simply as the Credit CARD Act (why do they do this??), the provisions attempt to provide more protection for the consumer and rein in some of the more flagrant practices in the credit card industry. Most, but not all, of the provisions favor the consumer.
Below are areas in which major changes will take place as a result of the law.
1. Restriction on Interest Rate Increases
2. Restriction on Fees
Here's The Secret!
After reading through the numerous articles and analysis done on this new Act to post this entry, I think I may have stumbled on the secret to avoiding all of this, and I'm willing to share it with everyone reading this......Want a way to totally become immune from all of this? The solution is quite simple: don't use credit cards!! If you discipline yourself (and your spouse, if married) to adhere to a cash-only mentality, Congress can pass whatever legislation they want in regards to consumer credit card protection and your pocketbook won't feel a thing.
Contrary to popular belief, credit cards are not a necessity in life. Somehow our grandparents found a way to survive in the pre-credit card era. If they could do it, so can you.....nothing has changed except the mentality that credit cards are necessary to survive these days. This is a warped mentality that can easily be changed by actually living within your means and paying cash for everything. Try it out sometime.....it's pretty cool!
Below are areas in which major changes will take place as a result of the law.
1. Restriction on Interest Rate Increases
- Prior to this Act, credit card companies could increase your interest rate if you were even one day late on your payments. With the passage of this Act, credit card issuers may not raise rates on your existing balance unless you are more than 60 days late.
- If the cardholder does go beyond the 60-day time frame and has his interest rate increased, the credit card issuer MUST restore the lower rate if the cardholder makes on-time payments for six consecutive billing cycles. However, this provision does not take effect until August, 2010.
- Unless the card is issued under a promotional rate, rates cannot be raised in the first year of issuance (unless you go beyond the 60-day period mentioned above). Promotional, or teaser, rates must now last at least six months. Currently, there are no time limits for these rates to last.
- Under the current Truth In Lending Act, card issuers can give cardholders as little as a 15-day notice of rate increases and key contract changes. With the new Act, cardholders must now be given a minimum of 45 days notice of those changes. This provision takes effect August 20th, 2009.
2. Restriction on Fees
- As a way of avoiding over-the-limit fees, cardholders can instruct their credit card company to decline any charge that would put them over their limit. If the cardholder does not do this and goes over their stated credit line, the credit card company may not charge more than one over-the-limit fee per billing cycle.
- Fees for taking payments over the phone or internet are eliminated with the passage of this Act. However, fees may be imposed for expediting a payment.
- Late fees will not be imposed on payments received by the due date, or the next business day if the bank does not accept mailed payments on the due date. If you make a payment at your local bank branch, your payment must be posted and credited on that same day.
- For those who only qualify to receive sub-prime cards (i.e. those who are considered high-risk to credit card issuers), non-penalty fees cannot account for more than 25% of the credit limit. Currently a card can be issued, say by Capital One, with a $500 credit limit to a high-risk individual. Before the card is even used, it is not uncommon to have the annual fee and even a 'card processing' fee charged to the account. Before the cardholder even signs the back of the new card, that $500 limit is only $375. This new provision limits this practice.
- Consumers who fall into the ages of 18 to 21 who do not have adequate income or a co-signer, or who do not complete a certified financial literacy course, will not get approved for a credit card. Last year the average college student carried a balance of over $3,000 on their credit card(s), according to a recent Sallie Mae study. This is a record high since the first study was done in 1998. This new provision attempts to protect young adults from becoming a statistic in this study.
- Currently, credit card companies have full control over how they apply any excess payment received on an account. If you have an account with split rates (for example, you took advantage of a special balance transfer rate and you have a separate rate for normal purchases) more times than not they will apply the excess to the balance that is subject to the lowest interest rate first. The Act will require that all excess, or above-the-minimum, payments to be applied to the highest interest rate balance first.
- Card companies must mail statements 21 days before a payment is due. Currently the law requires 14 days. This new provision is set to go into effect August 20th, 2009.
Here's The Secret!
After reading through the numerous articles and analysis done on this new Act to post this entry, I think I may have stumbled on the secret to avoiding all of this, and I'm willing to share it with everyone reading this......Want a way to totally become immune from all of this? The solution is quite simple: don't use credit cards!! If you discipline yourself (and your spouse, if married) to adhere to a cash-only mentality, Congress can pass whatever legislation they want in regards to consumer credit card protection and your pocketbook won't feel a thing.
Contrary to popular belief, credit cards are not a necessity in life. Somehow our grandparents found a way to survive in the pre-credit card era. If they could do it, so can you.....nothing has changed except the mentality that credit cards are necessary to survive these days. This is a warped mentality that can easily be changed by actually living within your means and paying cash for everything. Try it out sometime.....it's pretty cool!
Monday, July 6, 2009
What Topics Would You Like To See Blogged?
Blogging....I can easily see this becoming a new addiction for me! After publishing my first entry last week I have started drafting numerous articles for future postings.
I plan on posting something out here on a weekly basis at least. Most of my blogging will be on topics that attempt to educate the reader and spark interest in learning more on those topics. They may be as simple as 'How Do I Find A Financial Planner' to more advanced areas such as 'How To Utilize Trusts In Your Estate Plan'.
If there are certain areas of personal financial planning you would like to see discussed, please reply here or contact me via email. My contact information can be found on my website at www.mtrfinancial.com. I will be more than willing to post a blog on those topics as soon as possible.
Thank you, in advance, for your ongoing support to this site, and I look forward to hearing from you!
I hope everyone had a safe and enjoyable 4th of July holiday! Now if we could just get some rain......
I plan on posting something out here on a weekly basis at least. Most of my blogging will be on topics that attempt to educate the reader and spark interest in learning more on those topics. They may be as simple as 'How Do I Find A Financial Planner' to more advanced areas such as 'How To Utilize Trusts In Your Estate Plan'.
If there are certain areas of personal financial planning you would like to see discussed, please reply here or contact me via email. My contact information can be found on my website at www.mtrfinancial.com. I will be more than willing to post a blog on those topics as soon as possible.
Thank you, in advance, for your ongoing support to this site, and I look forward to hearing from you!
I hope everyone had a safe and enjoyable 4th of July holiday! Now if we could just get some rain......
Thursday, July 2, 2009
Family Finances – A Role For Both Spouses
Dad mows the yard, cooks all the meals, and handles all repair jobs. Mom does all the grocery shopping, is in charge of taxiing the kids to their ‘practice du jour’, and takes care of the laundry.
Division of household duties such as these sounds all too common these days. In most cases, the handling of family finances falls to a particular spouse as well. However, when it comes to the family finances, it is imperative that both spouses play a role. If not, the result could be a devastating blow when a spouse is left to pick up the pieces.
The primary risk faced by a household which has one spouse managing the family financial affairs alone is that the other spouse is left completely in the dark. Being the financial decision maker in the family, if something were to happen to you would your spouse be able to step in and manage the family wealth?
More times than not, the death of a spouse is the immediate situation people think of. But the same can be said about being a spouse of a soldier being sent half way around the world for the next year, or someone who is too ill to continue handling the family finances. Even if you expect your spouse will turn to a financial planner or advisor for help when you’re not available, will your spouse even know where to look for such help much less what questions to ask?
Taking a proactive approach to bringing your spouse up to speed on your family’s finances will pay huge dividends in case the time comes when you are not around to assist. Most financial advisors will agree that there are six questions your spouse needs to be able to answer regarding your family’s financial picture.
1. Who Do I Need To Contact?
o This first step is the most critical. Your spouse needs to have a well prepared list drawn up for him or her listing your important contacts.
2. Where Is Everything Located?
o Your next step is to outline what assets are held and where they are held. In addition to your investments, there are other important documents which must be located.
3. How Are We Doing Financially?
o Your spouse doesn’t need to know about every trade you make and every stock you may own; however, you should sit down as a couple from time to time and review your current financial picture.
4. In What Order Should I Access Our Assets?
o While some of your assets can be accessed at any time, drawing on other assets may result in unnecessary fees, penalties and taxes. Your spouse needs to know which accounts and assets to tap into first should the need arise.
5. Who Do I Turn To For Help?
o It can’t hurt to assume the possibility that your spouse will be in need of a financial planner or advisor.
6. Where Can I Learn More?
o Even with a financial planner or advisor in the wings, it is important for your spouse to know where to turn to build a basic foundation of financial literacy.
For more details on each question above please visit my website at www.mtrfinancial.com and click on the Free Reports link on the Home page. You will be directed to the full report which you can print and read at your leisure.
Nobody wants to think about life without their spouse. Not having your financial ducks in a row, along with a financially-educated spouse who will be able to pick up the baton and run, will only make the transition that much more difficult......both emotionally and financially. Take the time to sit down together and start this indispensable process.
Division of household duties such as these sounds all too common these days. In most cases, the handling of family finances falls to a particular spouse as well. However, when it comes to the family finances, it is imperative that both spouses play a role. If not, the result could be a devastating blow when a spouse is left to pick up the pieces.
The primary risk faced by a household which has one spouse managing the family financial affairs alone is that the other spouse is left completely in the dark. Being the financial decision maker in the family, if something were to happen to you would your spouse be able to step in and manage the family wealth?
More times than not, the death of a spouse is the immediate situation people think of. But the same can be said about being a spouse of a soldier being sent half way around the world for the next year, or someone who is too ill to continue handling the family finances. Even if you expect your spouse will turn to a financial planner or advisor for help when you’re not available, will your spouse even know where to look for such help much less what questions to ask?
Taking a proactive approach to bringing your spouse up to speed on your family’s finances will pay huge dividends in case the time comes when you are not around to assist. Most financial advisors will agree that there are six questions your spouse needs to be able to answer regarding your family’s financial picture.
1. Who Do I Need To Contact?
o This first step is the most critical. Your spouse needs to have a well prepared list drawn up for him or her listing your important contacts.
2. Where Is Everything Located?
o Your next step is to outline what assets are held and where they are held. In addition to your investments, there are other important documents which must be located.
3. How Are We Doing Financially?
o Your spouse doesn’t need to know about every trade you make and every stock you may own; however, you should sit down as a couple from time to time and review your current financial picture.
4. In What Order Should I Access Our Assets?
o While some of your assets can be accessed at any time, drawing on other assets may result in unnecessary fees, penalties and taxes. Your spouse needs to know which accounts and assets to tap into first should the need arise.
5. Who Do I Turn To For Help?
o It can’t hurt to assume the possibility that your spouse will be in need of a financial planner or advisor.
6. Where Can I Learn More?
o Even with a financial planner or advisor in the wings, it is important for your spouse to know where to turn to build a basic foundation of financial literacy.
For more details on each question above please visit my website at www.mtrfinancial.com and click on the Free Reports link on the Home page. You will be directed to the full report which you can print and read at your leisure.
Nobody wants to think about life without their spouse. Not having your financial ducks in a row, along with a financially-educated spouse who will be able to pick up the baton and run, will only make the transition that much more difficult......both emotionally and financially. Take the time to sit down together and start this indispensable process.
Subscribe to:
Posts (Atom)
