New Year Financial Resolutions for 2021. Let’s kick off 2021 with a bang. It’s time to hit the refresh button. 2020 was very challenging. The covid pandemic brought enormous shifts to our daily lives. Social distancing. Working from home. Digital transformation. 5G. Many of these changes will stay with us permanently. It’s time to open a new chapter. Take control of your finances. Become financially independent
Here are yourNew Year Financial Resolutions for 2021
1. Set your financial goals
Your first New Year Financial Resolutions for 2021 is to set your financial goals. Know where you are going. Build milestones of success. Be in control of your journey. Setting and tracking your financial goals will help you make smart financial decisions in the future. It will help you define what is best for you in the long run.
2. Pay off debt
Americans owe $14.3 trillion in debt. The average household owes $145,000 in total debt, $6,270 in credit cards, and $17,553 in auto loans. These figures are insane. If you are struggling to pay off your debts, 2021 is your year to change your life. Check out my article How to Pay off your debt before retirement. With interest rates are record low today, you can look into consolidating debt or refinancing your mortgage. Take advantage of these low-interest options. Even a small percentage cut of your interest can lead to massive savings and reductions of your monthly debt payments.
3. Automate bill payments
Are you frequently late on your bills? Are you getting hefty late penalty fees? It’s time to switch on automatic bill payments. It will save you time, frustration, and money. You should still review your bills for unexpected extra charges. But no need to worry about making your payments manually. Let technology do the heavy lifting for you.
4. Build an emergency fund
2020 taught us an important lesson. Life can be unpredictable. Economic conditions can change overnight. For that reason, you need to keep money on a rainy day. Your emergency fund should have enough cash to cover 6 to 12 months of essential expenses. Start with setting up a certain percentage of your wage that will automatically go to your savings account. Your rainy-day cash will hold you up if you lose your job or your ability to earn income. By maintaining an emergency fund, you could avoid taking debt and cover temporary gaps in your budget.
5. Monitor your credit score
In today’s world, everything is about data. Your credit score measures your financial health. It tells banks and other financial institutions your creditworthiness and ability to repay your debt. Often. The credit score methodology is not always perfect. That said, every lender and even some employers will check your credit score before extending a new line of credit or a job offer.
Do you find yourself spending more than you earn? Would you like to save more for your financial goals? If you are struggling to meet your milestones, 2021 will give you a chance to reshape your future. Budgeting should be your top New Year Financial Resolutions for 2021. There are many mobile apps and online tools alongside old fashion pen-and -aper to track and monitor your expenses. Effective budgeting will help you understand your spending habits and control impulse purchases.
7. Save more for retirement
One of your most important New Year Financial Resolutions for 2021 should be maximizing your retirement savings. I recommend that you save at least 10% of your earnings every year. If you want to be more aggressive, you can set aside 20% or 25%. A lot depends on your overall income and spending lifestyle.
In 2021, you can contribute up to $19,500 in your 401k. If you are 50 and older, you can set an additional $6,500. Furthermore, you can add another $6,000 to your Roth IRA or Traditional IRA.
8. Plan your taxes
You probably heard the old phrase. It’s not about how much you earn but how much you keep. Taxes are the single highest expense that you pay every year. Whether you are a high-income earner or not, proper tax planning is always necessary to ensure that you keep your taxes in check and take advantage of tax savings opportunities. But remember, tax planning is not a daily race; it’s a multi-year marathon.
9. Review your investments
When was the last time you reviewed your investments? Have you recently checked your 401k plan? You will be shocked to know how many people keep their retirement savings in cash and low-interest earning mutual funds. Sadly, sitting in cash is a losing strategy as inflation reduces your purchasing power. A dollar today is not equal to a dollar 10 years from now. While investing is risky, it will help you grow your wealth and protect you from inflation. Remember that time and time again; long-term investors get rewarded for their patience and persistence.
10. Protect your family finances from unexpected events
2020 taught us a big lesson. Life is unpredictable. Bad things can happen suddenly and unexpectedly. In 2021, take action to protect your family, your wealth, and yourself from abrupt events. Start with your estate plan. Make sure that you write your will and assign your beneficiaries, trustees, and health directives.
Laslly, you need to review your insurance coverage. Ensure that your life, disability, and other insurance will protect your family in times of emergency.
Pay off debt before retirement is a top priority for many of you who are planning to retire in the near future. In my article Retirement Checklist, I discussed a 12-step roadmap to planning a successful and carefree retirement. One of the most important steps was paying off your debt. According to the Federal Reserve, US households owe $4 trillion in non-housing loans and $10 trillion in mortgage debt. In today’s world, it is easy and effortless to get credit. Loan and credit card offers are lurking on every corner.
Why is it essential to pay off debt before retirement?
Being debt-free is a significant milestone in becoming financially independent. Retirement opens a new chapter in new life. You can no longer rely on your working wage. Your retirement income will come from a combination of steady income sources such as social security, pension, retirement savings, and possibly annuities. Your income will drop, your healthcare cost will rise, and your debt payments will remain the same. Having a large amount of debt during retirement will reduce your disposable income and strain your financial strength.
For those of you who are committed to paying debt before retirement, I have created a multi-step guide that can help you navigate through the challenges of becoming debt-free
1. Set your goals
Setting your financial and retirement goals is an essential pathway in your life journey. Pay off debt before retirement starts with establishing up your goals. Having goals give you structure and will prepare you for the future. If you do not know where you are going, you can end up anywhere. Following your objectives will provide you with essential life milestones. Achieving your goals will give you a sense of accomplishment and boost your confidence.
2. Take control of your spending habits
If you are approaching retirement with considerable debt, you need to rein in spending habits. You can not be a big spender. Therefore, as long as you spend more than you earn, you will need to cut back. I know it is a painful task. It is not easy to make changes to your lifestyle. Still, think of it as a small and responsible sacrifice today so you can live a better tomorrow.
3. Create a budget
If you find yourself spending more than you make, you will need to set up a budget. Numerous websites and mobile apps can help you track your income and expenses by groups, categories, and periods. Regular budgeting can help you steer away from outsized spending and frivolous purchases.
4. Build an emergency fund
An emergency fund is the amount of cash you need to cover 6 to 12 months of essential expenses. Financially successful people maintain an emergency fund to cover high, unexpected costs. Your rainy-day stash can serve as a buffer if you lose your job or lose your ability to earn income. By maintaining an emergency fund, you could avoid taking debt and cover temporary gaps in your budget. Suppose you don’t have an emergency fund. Start with setting up a certain percentage of your wage that will automatically go to your savings account. Don’t get discouraged if it takes a long time to build your rainy-day fund. It is okay. Look forward and keep saving.
5. Track your loans
Did you notice that the first four steps of becoming debt-free did not involve debt at all? I hope you will agree that building long-lasting financial habits is the key to financial independence.
So, if you have reviewed my first four recommendations, it is time to look at your debt.
Make a list of all your loans – credit cards, auto, mortgage, student, home equity, personal loans. Sort them by amount and interest rate. Pay attention to due dates and monthly interest charges. Do not miss payments. Late or missed payments can trigger enormous late fees and penalty charges. Stay on top of your loans. Track them daily and monthly.
6. Pay off higher interest loans first
I strongly recommend that you pay off your highest interest loans first. Credit cards tend to have the highest interest rates and the most punishing late fees. If you have credit card debt, there is a high chance that you need to tackle it first. Remember, there are always exceptions to the rules, and every one case is different.
Another popular theory suggests that you pay off your smaller loans first and repay the bigger loans next. The reasoning behind this recommendation is that paying off even smaller loans awards you with the feeling of accomplishment. You can also focus on the big picture once you eliminate the smaller loans.
Mathematically, paying off your highest interest loans makes more sense. Emotionally, paying off the smaller debt first could be more effective. In the end, you can find a happy medium. Use the approach that works best for you and your specific situation.
7. Pay off or refinance your mortgage
I recommend that you pay off your mortgage by the time you retire. Owning your house without the burden of debt is the ultimate American dream and the secret to a happy retirement. In today’s world, there is nothing more liberating than owning your home. Your home is your fortress. It’s the place where you can be yourself. You can host your family and friends and enjoy your favorite hobby.
Now, if you are still making mortgage payments, you may want to look into refinancing options. With record-low interest rates, today offers an excellent opportunity to lower your monthly mortgage bill. It’s certainly will be easier to refinance your mortgage while still working and having regular income and paystubs. I highly recommend that you shop around for the best offer. Banks and mortgage brokers will offer you a wide range of interest rates, closing costs, and refinancing rules. Generally, stay away from bids with high closing costs. Evaluate your savings for each offer and choose the option that best suits your need.
8. Downsize and relocate
Another popular way to control your cost and pay off debt before retirement is downsizing and relocating. Sometimes you can do them both at the same time. Owning a big house requires high maintenance, bills, and possibly higher property taxes. Moving to a smaller home in a more affordable location can save you a lot of money in the long run. The USA offers a wide range of affordable locations in smaller states and communities. Choose a location that fits your budget, health insurance needs, and lifestyle.
9. Work longer
if you are approaching retirement age and holding debt, you may want to consider working longer. Working after retirement is no longer a stigma. Many retirees choose to work part-time, remain active, and earn an extra income. The additional money can help your pay off your remaining loans. You can use the extra cash to maintain your emergency fund or support your current lifestyle.
10. Do not touch your retirement savings
Your retirement savings are sacred. They are your ticket to financial freedom. It can be tempting to pay your debt before retirement by tapping into your 401k or IRA. However, this strategy rarely ends very well. Do not withdraw your 401k or IRA savings unless you are in dire need. Hold on to your retirement savings until you exhaust your other options. One, when drawing from your retirement plan, you will need to pay taxes. Furthermore, you may have to pay a penalty charge if you are younger than 59 ½. Second, paying off debt without controlling your expense will only have a short-term impact. You will be back where you started in just a couple of months or years. And lastly, tapping your retirement savings now will reduce your future income. How confident are you that you can replace your lost revenue in the future?
Early retirement for physicians….As someone married to a physician and surrounded by many friends in the medical field, I know that early retirement is on the minds of many physicians. If you are reading this article, you have probably put some serious thoughts about it as well.
Retiring early is a very personal decision. And it is not an easy decision to make. It would be best if you considered many financial and personal factors before you make the final call. Retirement will change your lifestyle dramatically. Your salary and healthcare benefits will be different. You might experience an unexpected change of pace. You may lose touch with colleagues and friends. On the bright side, you can travel and do things that matter most to you. Your stress level will go down, and you will spend more time with your family and loved ones.
Many physicians decide to leave the profession due to physical and emotional stress. A 2019 study by the AMA, the Mayo Clinic and Stanford University School of Medicine found that 44% of U.S. physicians presented at least one symptom of burnout. For comparison, the overall burnout among US workers is 28%.
Among the specialties with the highest burnout rate are Urology (54%), Neurology (53%), Physical Medicine and Rehabilitation (52%), Internal Medicine (49%), and Emergency Medicine (48%).
The peer pressure for early retirement
Be prepared to encounter some resistance from colleagues and patients when you announce your early retirement. There is this unspoken public “belief” that doctors owe the society their skills and knowledge. Many patients don’t want to look for another doctor. And some of your colleagues may feel that you are abandoning the profession. You need to ignore the noise and focus on your personal goals.
I compiled a list of suggestions that will help you prepare on your journey to early retirement. Don’t wait until the last moment. Get ahead of the curve so that you can take the financial stress out of your retirement plans.
Study your benefits
The first step to early retirement for physicians is to know your employee benefits in full detail. Most public and private healthcare systems offer competitive benefits packages with a wide range of perks including pension, 401k match, profit sharing, healthcare coverage, life insurance, disability insurance, and loan repayment. Many employers even offer an early retirement option at 55.
These benefit packages vary significantly from one employer to the next. Take some time to learn and understand your options. If your goal is to retire early, consider an employer that will give you the highest chance to achieve this goal.
The US student debt has skyrocketed to $1.6 trillion. Seventy-five percent of medical students graduated in their class of 2018 with student debt. The average loan per student is $196,520. Furthermore, many medical students graduate with more than $300,000 in debt. It’s not uncommon that some physician couples owe over half a million dollars in student debt.
A crucial step in your journey to early retirement for physicians is paying off ALLYOUR DEBT including student loans, credit cards, and mortgage. It might seem like an uphill battle, but it’s not impossible.
There are several options you can consider when tackling your student loans – loan forgiveness, refinancing with low-interest rates and income-driven repayment.
Maximize your retirement savings
When you retire early, assuming before the age of 66, you will not have full access to your social security benefits, pension, and Medicare benefits. In many cases, you may want to delay taking your pension and social security to maximize the amount you will receive annually.
One way to cover the gap while you are waiting is through your personal retirement savings. Most employers nowadays offer either a 401k, a 403b, or a 457-retirement plan. When you join your employer retirement plan, you can save up to $19,000 per year as of 2019. If you are 50 or older, you can save an additional $6,000 for a total of $25,000 per year. An additional benefit to you is that these contributions are tax-deductible and will lower your tax bill. Many employers also offer a match that can further boost your retirement savings. For more information about how to increase your 401k savings, read my article about “The Secret to becoming a 401k millionaire.”
Save outside your retirement plan
if you plan to retire early, you need to make additional savings outside of your retirement plan.
First, you need an emergency fund. It would help if you had at least six months’ worth of living expenses in cash or a savings account. This emergency fund will serve you as a buffer in case of sudden and unexpected expenses.
Second, save in a taxable investment account. The main benefit of using an investment account is liquidity. You can access these funds at any point in time without any restrictions.
If you retire in your 40s or 50s, you may not be able to access your retirement accounts before reaching 59 ½. There are some legal exemptions, including poor health, disability and economic hardship that allow withdrawing your retirement savings without a penalty. However, these exceptions may not apply to you. And ideally, you should let your tax-deferred retirement savings grow for as long as possible.
Investing outside of your retirement accounts does not provide immediate tax benefits. All investments will be after-taxes. You may also incur taxes on dividends and capital gains. To make the most out of your investment account, make sure to use low cost, tax-efficient ETFs, and index funds.
Have an exit strategy if you own a medical practice
If you own a medical practice and want to retire early, you will need a sound exit and succession plan. You will have to find a suitable buyer or someone who will manage the day-to-operations on your behalf. Many business owners have a significant portion of their wealth, locked-in their business. If selling your practice is the primary source of your retirement income, then you will need to consider tax implications from any potential realized capital gains.
Consider moving to a low-cost location
If you currently work and live in an expensive area like San Francisco or New York City, you may want to consider retiring in a different state or even another country. The cost of living differential between Mississippi or Arkansas versus New York and California could make a big difference in your retirement lifestyle, especially if you are working on a tight budget.
Look for healthcare coverage
One of the main challenges, when you plan for early retirement for physicians, will be healthcare coverage. Depending on your employer, some doctors have excellent medical and dental benefits. In some cases, these benefits are completely free or heavily subsidized by your employer. Some hospitals that offer an early retirement option could have healthcare benefits included. In other cases, when you retire early, you could lose these perks. Since you won’t have access to Medicare until you reach 65, you will need to find a reasonably priced healthcare insurance policy.
Do not underestimate healthcare costs. According to Fidelity, a 65-year old couple retiring in 2019 can expect to spend $285,000 in health care and medical expenses throughout retirement. For single retirees, the health care cost could reach $150,000 for women and $135,000 for men.
Consider working per diem
If you are short of retirement savings or bored of staying at home, you may consider working per diem or locum tenens. You can work on an hourly basis at your own pace. The extra work will boost your early retirement income and will keep your knowledge up to date.
Stick to a budget
You must adhere to a budget before and after your retirement. Before retirement, you need to pay off your debt and save for retirement aggressively. Depending on your income, these payments can cut through your family budget. You may have to make some tough choices to avoid or delay large purchases and curb discretionary spending.
Once you retire, your income may go down. True, you don’t have to drive to work, but some of your expenses might still be the same.
Here are some ideas about how to save money. Cook instead of going to a restaurant. Make your own coffee. Drive your old car instead of buying a new one. Travel off-season.
Have a plan
A happy retirement comes with a good plan. It may require some self-discovery but ultimately will lead to finding a purpose and fulfilling your life dreams. You can travel and volunteer. Write a book. Teach. Learn a new hobby or language. Find out what makes you happy outside of your daily routine and make the most out of your free time.
The bottom line on early retirement
Early retirement for physicians is not an illusion. It’s an achievable mission that requires a great deal of planning and some personal sacrifice. If you want to retire early, you need to start planning now. Some hospital systems offer early retirement packages. Unfortunately, your guaranteed retirement income or pension will be a lot less than what you would get if you retire ten years later.
Your family can be a big influencer for or against your decision to retire early. You might have a partner who wants to stay active. Perhaps, you have children who are going to college soon. Every family is different, and every situation is unique. Do the number crunching and see what makes the most sense to you.
A financial checklist for young families…..Many of my clients are young families looking for help to build their wealth and improve their finances. We typically discuss a broad range of topics from buying a house, saving for retirement, savings for their kids’ college, budgeting and building legacy. As a financial advisor in the early 40s, I have personally gone through many of these questions and was happy to share my experience.
Some of my clients already had young children. Others are expecting a new family member. Being a dad of a nine-month-old boy, I could relate to many of their concerns. My experience helped me guide them through the web of financial and investment questions.
While each family is unique, there are many common themes amongst all couples. While each topic of them deserves a separate post, I will try to summarize them for you.
Successful couples always find a way to communicate effectively. I always advise my clients to discuss their financial priorities and concerns. When partners talk to each other, they often discover that they have entirely different objectives. Having differences is normal as long as you have common goals. By building a strong partnership you will pursue your common goals while finding a common ground for your differences
Talking to each other will help you address any of the topics in this article.
If it helps, talk to an independent fiduciary financial advisor. We can help you get a more comprehensive and objective view of your finances. We often see blind spots that you haven’t recognized before.
Set your financial goals
Most life coaches will tell you that setting up specific goals is crucial in achieving success in life. It’s the same when it comes to your finances. Set specific short-term and long-term financial goals and stick to them. These milestones will guide you and help you make better financial decisions in the future.
There is nothing more important to any family wellbeing than budgeting. Many apps can help you budget your income and spending. You can also use an excel spreadsheet or an old fashion piece of paper. You can break down your expenses in various categories and groups similar to what I have below. Balance your budget and live within your means.
Utilities (Phone, Cable, Gas, Electric)
Non-Discretionary Flexible Expenses
Automotive (Fuel, Parking, Tolls)
Dues & Subscriptions
Consolidate your assets
One common issue I see amongst young couples is the dispersion of their assets. It’s very common for spouses to have multiple 401k, IRAs and savings accounts in various financial institutions and former employers. Consolidating your assets will help you get a more comprehensive view of your finances and manage them more efficiently.
Manage your debt
The US consumer debt has grown to record high levels. The relatively low-interest rates, rising real estate prices and the ever-growing college cost have pushed the total value of US household debt to $13.25 trillion. According to the New York Fed, here is how much Americans owe by age group.
Under 35: $67,400
75 and up: $34,500
For many young families who are combining their finances, managing their debt becomes a key priority in achieving financial independence.
Manage your credit score
One way to lower your debt is having a high credit score. I always advise my clients to find out how much their credit score is. The credit score, also known as the FICO score, is a measure between 300 and 850 points. Higher scores indicate lower credit risk and often help you get a lower interest rate on your mortgage or personal loan. Each of the three national credit bureaus, Equifax, Experian, and TransUnion, provides an individual FICO score. All three companies have a proprietary database, methodology, and scoring system. You can sometimes see substantial differences in your credit score issued by those agencies.
Your FICO score is a sum of 64 different measurements. And each agency calculates it slightly differently. As a rule, your credit score depends mainly on the actual dollar amount of your debt, the debt to credit ratio and your payment history. Being late on or missing your credit card payments, maximizing your credit limits and applying for too many cards at once will hurt your credit score.
Own a house or rent
Owning your first home is a common theme among my clients. However, the price of real estate in the Bay area, where I live, has skyrocketed in the past 10 years. The average home price in San Francisco according to Zillow is $1.3 million. The average home price in Palo Alto is $3.1 million. (Source: https://www.zillow.com/san-francisco-ca/home-values/ ). While not at this magnitude, home prices have risen in all major metropolitan areas around the country. Buying a home has become an impossible dream for many young families. Not surprisingly a recent survey by the Bank of the West has revealed that 46% of millennials have chosen to rent over buying a home, while another 11% are staying with their parents.
Buying a home in today’s market conditions is a big commitment and a highly personal decision. It depends on a range of factors including how long you are planning to live in the new home, available cash for a downpayment, job prospects, willingness to maintain your property, size of your family and so on.
Maximize your retirement contributions
Did you know that in 2019 you can contribute up to $19,000 in your 401k? If you are in your 50s or older, you can add another $6,000 as a catch-up contribution. Maximizing your retirement savings will help you grow your wealth and build a cushion of solid retirement savings. Not to mention the fact that 401k contributions are tax-deferred and lower your current tax bill.
Unfortunately, many Americans are not saving aggressively for retirement. According to Fidelity, the average person in their 30’s have $42.7k in their 401k plan. people in their 40s own on average 103k.
If your 401k balance is higher than your age group you are already better off than the average American.
Here is how much Americans own in their 401 plan by age group
20 to 29 age: $11,500
30 to 39 age: $42,700
40 to 49 age: $103,500
50 to 59 age: $174,200
60 to 69 age: $192,800
For those serious about their retirement goals, Fidelity recommends having ten times your final salary in savings if you want to retire by age 67. They are also suggesting how to achieve this goal by age group.
By the age of 30: Have the equivalent of your starting salary saved
35 years old: Have two times your salary saved
40 years old: Have three times your salary saved
45 years old: Have four times your salary saved
50 years old: Have six times your salary saved
55 years old: Have seven times your salary saved
60 years old: Have eight times your salary saved
By age 67: Have 10 times your salary saved
Keep in mind that these are general guidelines. Everybody is different. Your family retirement goal is highly dependent on your individual circumstances, your lifestyle, spending habits, family size and alternative sources of income.
Know your risk tolerance level
One common issue I see with young families is the substantial gap between their risk tolerance and the actual risk they take in their retirement and investment accounts. Risk tolerance is your emotional ability to accept risk as an investor.
I have seen clients who are conservative by nature but have a very aggressive portfolio. Or the opposite, there are aggressive investors with a large amount of cash or a large bond portfolio. Talking to a fiduciary financial advisor can help you understand your risk tolerance. You will be able to narrow that gap between your emotions and real-life needs and then connect them to your financial goals and milestones.
Diversify your investments
Diversification is the only free lunch you will get in investing. Diversifying your investments can reduce the overall risk of your portfolio. Without going into detail, owning a mix of uncorrelated assets will lower the long-term risk of your portfolio. I always recommend that you have a portion of your portfolio in US Large Cap Blue Chip Stocks and add some exposure to Small Cap, International, and Emerging Market Stocks, Bonds and Alternative Assets such as Gold and Real Estate.
Invest your idle cash
One common issue I have seen amongst some of my clients is holding a significant amount of cash in their investment and retirement accounts. The way I explain it is that most millennials are conservative investors. Many of them observed their parents’ negative experience during the financial crisis of 2008 and 2009. As a result, they became more risk-averse than their parents.
However, keeping ample cash in your retirement account in your 30s will not boost your wealth in the long run. You are probably losing money as inflation is deteriorating the purchasing power of your idle cash. Even if you are a very conservative investor, there are ways to invest in your retirement portfolio without taking on too much risk.
I talk about early retirement a lot often than one might imagine. The media and online bloggers have boosted the image of retiring early and made it sound a lot easier than it is. I am not saying that early retirement is an illusion, but it requires a great deal of personal and financial sacrifice. Unless you are born rich or rely on a huge payout, most people who retire early are very frugal and highly resourceful. If your goal is to retire early, you need to pay off your debt now, cut down spending and save, save and save.
Build-in tax diversification
While most of the time we talk about our 401k plans, there are other investment and retirement vehicles out there such as Roth IRA, Traditional IRA and even your brokerage account. They all have their own tax advantages and disadvantages. Even if you save a million bucks in your 401k plan, not all of it is yours. You must pay a cut to the IRS and your state treasury. Not to mention the fact that you can only withdraw your savings penalty-free after reaching 59 ½. Roth IRA and brokerage account do not lower your taxes when you make contributions, but they offer a lot more flexibility, liquidity, and some significant future tax advantages. In the case of Roth IRA, all your withdrawals can be tax-free when you retire. Your brokerage account provides you with immediate liquidity and lower long-term capital gains tax on realized gains.
Plan for child’s expenses
Most parents will do anything for their children. But having kids is expensive. Whether a parent will stay at home and not earn a salary, or you decide to hire a nanny or pay for daycare, children will add an extra burden to your budget. Not to mention the extra money for clothes, food, entertainment (Disneyland) and even another seat on the plane.
Plan for college with a 529 Plan
Many parents want to help their children pay for college or at least cover some of the expenses. 529 plan is a convenient, relatively inexpensive and tax-advantageous way to save for qualified college expenses. Sadly, only 29% of US families are familiar with the plan. Most states have their own state-run 529 plan. Some states even allow state tax deductions for 529 contributions. Most 529 plans have various active, passive and age-based investment options. You can link your checking account to your 529 plan and set-up regular monthly contributions. There are plentiful resources about 529 plans in your state. I am happy to answer questions if you contact me directly.
Protect your legacy
Many young families want to protect their children in case of sudden death or a medical emergency. However, many others don’t want to talk about it at all. I agree it’s not a pleasant conversation. Here in California, unless you have an established estate, in case of your death all your assets will go to probate and will have to be distributed by the court. The probate is a public, lengthy and expensive process. When my son was born my wife and I set up an estate, created our wills and assigned guardians, and trustees to our newly established trust.
The process of protecting your legacy is called estate planning. Like everything else, it’s highly personalized depending on the size of your family, the variety of assets you own, your income sources, your charitable aptitude, and so on. Talking to an experienced estate attorney can help you find the best decision for yourself and your family.
I never sell insurance to my clients. However, if you are in a situation where you are the sole bread earner in the household, it makes a lot of sense to consider term life and disability insurance, which can cover your loved ones if something were to happen to you.
I realize that this is a very general, kind of catch-all checkpoint but let me give it a try. No matter what happens in your life right now, I guarantee you a year or two from now things will be different. Life changes all the time – you get a new job, you have a baby, you need to buy a new car, or your company goes public, and your stock options make you a millionaire. Whatever that is, think ahead. Proper planning could save you a lot of money and frustration in the long run.
I realize that this checklist is not complete. Every family is unique. Each one of you has very different circumstances, financial priorities, and life goals. There is never a one-size-fits-all solution for any family out there. If you contact me directly, I will be happy to address your questions.