Financial planning is crucial at any stage of life, but it is particularly important for parents who have children to support. It’s essential to plan for the future, a rainy day, or the event of a death or emergency. Financial planning isn’t something you should regret not doing in the past or put off for the future — it’s for the here and now. If you’re not sure where to start, this article will discuss some financial planning essentials that can get you going in the right direction.
Financial planning is indeed about your present and future, but it’s also about providing for your loved ones after you pass. Spend some time researching term life insurance, determine the length of the term you need (for instance, 10, 20, or 30 years), get quotes based on your current life situation, and research premiums (most policies offer guaranteed level premiums). With term life insurance, you can be sure your beneficiaries are taken care of with a guaranteed payout. If you’re a single parent, this will be especially crucial knowing your child has financial stability for health, education, and general well-being. You will rest easier knowing you have a plan in place.
The daily hustle and bustle keeps most parents focused on the present or the immediate future. Oftentimes, this means retirement is overlooked. It’s crucial for parents to look beyond school-aged children, extracurricular activities, college tuitions, and the current needs and plan for the day when an income is no longer coming in. For parents on a tight budget — especially single parents — retirement planning may seem like a feat, but it’s possible.
Look into 401Ks, IRAs, and investments. This should come before you save for college funds or new cars for 16th birthdays. As parents, we want to give the world to our children, but loans and scholarships are available for colleges and your child can work for a new car, but not planning for your financial future can put you and your children in a tough spot.
Disability insurance can mean the difference between getting into debt or financial freedom, living in a subpar assisted living facility or getting the care you need and deserve, losing all your assets or having a financial cushion. We can’t prepare for every injury or malady, but we can prepare for their financial effects. The catch is that you must have proper coverage before the incident giving rise to the disability occurs.
If you’re dependent on your salary, don’t wait. Do your research, and then find the best quotes that provide the most coverage. Short-term disability insurance will cover three to six months of lost wages at a rate of about 60 to 70 percent. Long-term disability insurance will provide coverage from two years to retirement age at a rate of about 40 to 70 percent of your salary.
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The general rule of thumb is to put about three to six months worth of expenses in an emergency/rainy day fund. Its purpose is to give you a safety net when the unexpected happens (Murphy’s law says it will happen). Any money above that emergency fund should be used to pay down all debt. Once the debt is paid off, you can then invest away — making passive income and have a little fun while doing it.
A solid financial plan will take the holistic approach, considering all of your needs, your family’s needs and your goals. It will include things we didn’t discuss like health insurance, home insurance, car insurance, umbrella insurance, health savings accounts, stocks, bonds, real estate, college accounts, and mutual funds. It will also include the basics we did discuss, such as life insurance, retirement plans, disability insurance, and savings. It’s never too late or too early to make your plan and start achieving your goals.
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