Working with individuals and families for over 20 years, we've answered countless questions, seen multiple family scenarios, and set up various customized plans. Here are some questions we've been asked.
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Q: I’m not accustomed to saving money, but know it’s the smart thing to do. What is a good amount I can start with now?
A: It is important to get into the habit of saving money at an early age no matter how small the amount. Even if you’re in your twenties, thirties, or forties, start with a dollar amount that you can live with – even $50 per month. When you begin to make more money, gradually increase the amount you are saving.
Ideally, it’s wise to put your money into an interest bearing account. A valuable tip would be to have a predetermined amount of money taken directly from your paycheck and deposited in your savings/money market account automatically. If you do not have direct deposit, you can set up with your bank to have your money transferred once a month from your checking to your savings.
Q: I want to buy a house. What is my first step?
A: If you’re in your twenties, thirties, or forties and thinking of buying your first house, review this 4-step check list:
- Determination Budget: How much can you afford to pay each month? How much can you afford for a down payment? Determining your budget is a critical first step to making one of the largest purchases of your lifetime. And it’s important remember that this purchase is not just a one-time investment. Yearly taxes, up-keep and maintenance, and insurance are among the expenses you’ll have after becoming a homeowner. You do not want to set yourself up to be “house poor” where all of your income goes to supporting your house. So evaluate your income and budget before you begin applying for mortgages.
- Boost Credit: Your credit score plays a huge role in qualifying for a mortgage. A solid credit score allows you to compete for a lower interest rate, which can save you thousands of dollars over the course of your mortgage payments. Paying off debt and having available credit are among the factors. Find out your current credit score for free at the federal government authorized website Annual Credit Report.
- Start Saving: Even if you have great credit, it’s important to save enough money to put down 20% of your new home’s value to get the best terms. If 20% down seems too far from your reach, consider a government-backed FHA loan. This type of loan allows you to purchase a home with significantly lower down payments, however you would have to pay additional money each month to insure your payments.
- Consider Location: Have you thought about what city or town you want to live in? It’s important to consider not only where you want to live now, but where you want to live years down the road. Especially if you plan to have kids, it’s important to look at school districts, access to transportation, and other factors while making your decision.
Q: I have a new family and know I need some kind of insurance protection. What kind and how much do I need?
A: Life insurance is a great way to protect the people you love. Having the right amount of life insurance ensures that if something catastrophic should happen to you, your loved ones would be taken care of financially.
While insurance can be a scary topic, but it’s important to remember that this type of protection is no for the person that dies – it’s for the people who live on.
There are many formulas to figure out how much insurance you and your family might need. Factors include your age, current salary and lifestyles, children and potential college loans, and other factors.
There are also multiple types of insurance policies – and some can even be used as a savings vehicle in some instances. It’s recommended to seek the advice of a professional when making this important decision.
Q: I’m having a hard time juggling a mortgage, school loans, and regular family and household expenses, all while still having enough money to save for a rainy day. Is there a better way to accomplish these savings goals that is less stressful?
A: These situations are very common. The first thing we ask clients to do, especially those in their thirties, forties, and fifties, is create a budget. You may know that lots of money is leaving your bank account for various causes – but do you know exactly how much? And where everything is going?
It’s critical to create and maintain a budget for yourself or family. This will force you to track your spending and bills. Many times, it’s difficult even for people who have budgets to stay up to date if they pay bills online or with a credit/debit card. It can be easy to lose track of where your money is going.
Developing a budget may also show you that you are living beyond your means. You may need to reevaluate your expenses and determine what you can cut back on: TV, phone, eating out, luxuries, etc.
Understanding your finances better can ultimately help you develop a better plan – and relieve yourself of some of the pressure and stress you’re currently feeling.
Q: Is there a way I can protect my paycheck in the event I can no longer work?
A: There is a useful vehicle available that allows you to still collect a paycheck in the event you are unable to work to do an injury or an illness. This vehicle is commonly known as “disability” insurance, but we prefer to refer to it as “income insurance.”
If you ask people in their forties, fifties, and sixties, they may say that their most important assets are the well-being of their family, their house, their savings accounts, and the list goes on. But if you think about it: Which of these assets is not dependent on your ability to bring home income?
Income insurance, while not thought of frequently, is an important tool to access to just in case the unthinkable happens to you.
Q: I haven’t started saving for retirement yet. Am I too late?
A: Reaching your fifties, sixties, or even seventies with little money set aside for retirement is not unusual. You are actually a part of the majority.
But know that it is never too late to start saving for retirement. No matter your age, reaching the point of inertia when you start to save is the most critical element of retirement planning. Even if you are later in life, there are vehicles available to help you catch up.
Q: I have aging parents who are depleting their savings to pay for long term care. At what age should I protect myself with long term care insurance so the same thing does not happen to me?
A: Your middle to late fifties is the typical time to begin shopping around for long term care insurance.
Unfortunately, as you might have seen, the cost of long term care for people in their sixties and seventies is astounding. According to Genworth’s 2016 cost of care survey, the average nursing home cost for a private room in Pennsylvania, for instance, is $116,800. This is enough to completely erase your savings in just a few years.
We all have a natural tendency to avoid thinking about becoming dependent on others for our care. But that shouldn’t stop you from being proactive and exploring your options.