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Yours, Mine and Ours-part two
The second part of a two part practical guide to marriage and money
Yours, Mine and Ours-part two
The second part of a two part practical guide to marriage and money.
The theme of this article is to consolidate, combine and simplify your finances as you move forward as a couple. This is an opportunity for a fresh start, to correct prior â€œmistakesâ€ or bad habits and move forward with a new strategy for financial success.
Now you can start to set-up your new finances and accounts. You may need to refer to Yours, Mine and Ours part one from time to time.
The first step is your new budget tracking the inflow and outflow, the logical starting point. You may find Quicken or another software package can help or just a sheet of paper and pen work fine for many.
It may be helpful to review 3 months of your individual expenses and categorize them and then create a â€œjointâ€ budget or expense tracking. During this transition, a Yours, Mine, and Ours budget sheet may be helpful to track your expenses.
Should you set-up new â€˜jointâ€™ savings and checking accounts? What banking relationships do you want to continue? Start-up? You may find it easiest to establish a new joint account for bill payment, while maintaining an individual account during this transition. Do either, or both of you have to change direct deposits, etc.
You may want to have your CPA or tax preparer estimate your new tax liability and withholdings adjustments, they can also run a few tax projections based on your filing status. You may find the adjustments can free up some cash flow.
Are you contributing to your respective retirement plans? If so, will you continue? At what levels? How will you handle your employment fringe benefits and health insurance? Are you better off under one plan or continuing under individual plans? A side-by-side comparison of your benefit packages will help. Again, you may find a cash flow savings as you pick and choose your benefits.
How will you consolidate, coordinate, and manage your investments? Is there overlap when you combine both of your portfolios? How will your asset allocation be impacted? Will you continue your automatic savings plans, how much, and where will it be invested? What decision process will you use to evaluate your investments?
Property & Casualty Insurance
Now is a good time to review your Property and Casualty Insurance coverages, multiple autos, homeownerâ€™s, and an umbrella policy should be considered. Many insurers offer a multi-policy discount.
Have you changed your beneficiaries on your 401K, IRAâ€™s and Life Insurance policies? Have you changed names and addresses on your accounts; DMV, Social Security, credit cards, bills, and bank accounts?
Are there other areas you can consolidate your finances and accounts?
Have you reviewed your Life Insurance coverage? Is it adequate in light of your new circumstances? What type and how much you should have are key points to discuss.
Good news, most of the hard work is behind you, now you can concentrate on the fun aspects of your new financial life together.
Life Insurance-A Selfless Gift Of Love
All insurance is based on minimizing risk and protecting against economic loss. Unfortunately, bad things happen to good people. Insurance is designed to transfer risk from you to an insurance company in exchange for money commonly called premiums.
Often times, life insurance is one of your most misunderstood and underappreciated assets. As a general rule, you should have 5-10 times your income in life insurance protection. Dependant on your circumstances, family needs, income assets, etc. your need may be more or less than the rule.
On the surface, 5-10 times your income may seem like a lot of insurance/money, but let me show you this example. Assume you earn $30,000 per year; therefore you have $300,000 of death benefit. If your survivor invests the $300,000 and earns 5% per year and needs $24,000 per year to replace your income, he/she is broke in 20 years! Is that what you want?
Basically there are two types of life insurance: temporary/term, or permanent. Based on the length of your need, each may have a place in your protection portfolio.
is designed for short-term needs, up to 20 years, it is often referred to as rented insurance, just like renting an apartment, you build no equity with Term Insurance. It comes in a variety of flavors: 1 year renewable, 5, 10, 15, and 20 year level premiums. Term insurance â€“ is pure death benefit, if you die and policy is in force, it pays. Term insurance does not build any cash value or equity.
Term insurance is ideally suited where there is a large need for protection but few dollars to pay the premium, i.e. to provide for family support through age 20 for a spouse and family.
provides death benefit plus has cash value, or equity in the policy. Just like owning a house you build equity with every payment. There are three types of permanent insurance. Whole Life, Universal Life or Variable Universal Life. Each of these products, if properly funded, should provide cash value as a living benefit. Each of these policies applies a portion of your premium to the insurance and a portion to your equity. A detailed description of each of these types of permanent insurance is available but beyond the scope of this article.
Permanent Insurance is ideally suited for life long goals like spousal support, supplemental income, and estate planning.
Usually a combination of both types of insurance can provide a cost effective solution to meet your needs. Most couples and families will have a unique life insurance need based on their circumstances and philosophy.
Disability Insurance- Income Protection
This type of insurance is often ignored or taken lightly. Disability insurance protects you and your most important asset, your ability to work and earn an income.
Think about the negative impact of never working again! If you are targeting 70-80% of your current income for your retirement - what about for living? How long could you survive without one or both incomes? How? Who will replace the lost income?
Unfortunately disability can be a financial disaster for most couples and families. Medical expenses, inflation, and the every day costs of living continue with or without your income.
Most employer sponsored disability programs only provide 50% income replacement. Can you survive on a paycheck? If not, you need to address this area quickly.
The worksheets referenced; balance sheet, cash flow, goals & objectives are available at no charge. Simply call Michael A. Masiello and ask for them.
It is suggested to do these exercises individually and then together as a couple. You may find areas that need to be discussed further to reach agreement.
Masiello & Associates is a full service financial planning firm that has been helping people since 1990. They can be reached at 720-0590. Visit our website www.mmasiello.com.
MASIELLO & ASSOCIATES/Estate & Wealth Preservation Council, LLC 1777 English Road, Rochester, New York 14616
Securities Offered Through Multi-Financial Securities Corporation,
Member NASD, SIPC
Masiello & Associates/Estate & Wealth Preservation Council, LLC
& Multi-Financial Securities Corporation are not affiliated companies.
Written by Michael A. Masiello
Â© 585wedding.com 2011