Answers to 10 Financial Planning Questions You’re Afraid to Ask
By Ryan Sheppard, ChFC®
May 23, 2014
At some point in your life, you may have to ask some financial planning questions that you would rather avoid. Here are answers to 10 financial planning questions that many people are too afraid to ask. Drumroll please…
1. How do I plan for an unexpected job loss?
To lessen this financial burden, there are a few steps you can begin now. Keep track of your spending habits to determine where cuts can be made. Pay off 401K loans quickly, to prevent being bumped into a higher tax bracket. Also, consider refinancing your home to decrease your mortgage payments.
2. How much life insurance should I have?
This amount is based upon how many dependents you have, the debt you owe and your burial plans. With no debt or dependents, you could settle for as little as $15k. However, if you have dependents, debt, or planning for inflation then a 1 million policy may be more suitable.
3. Should I sign up for long-term care insurance?
It is said that 1 in 5 people over the age of 65 require long-term care, which can cost as much as $80k a year. However, this hardship can be avoided with the proper insurance, and your dependents will thank you for planning ahead.
4. Does my spouse have to be my primary beneficiary?
You are not required to name your spouse as your primary beneficiary. However, your spouse will have to sign a waiver stating that they are aware that someone else has been named in their place.
5. If I have more than one child, do I have to leave each of them the same amount?
No. You can specify different amounts for each child. In fact, some parents do this based upon their children’s responsibility level, life choices, etc. Keep in mind however, that your choices will likely effect the relationship between your children once you are gone.
6. Do I need a will?
Yes. With this legal document, you can specify who your property and possessions will go to. Most importantly, you can stipulate who will take over legal guardianship of any minor children you have.
7. How much money should I have in my emergency fund?
At the minimum, you should have $1000 set aside. While living on a budget, this should cover your expenses for a month. To build this fund easily, you can reach this amount within a year, with as little as $20 a week.
8. I’m retired. Do I still have to save money?
Yes. Emergencies can still happen. Therefore, it is a good idea to continue adding to your savings account. How do you do this without a job? Be frugal. You can save while shopping by using coupons, enroll in a discounted prescription plan, cut cable, and dine out less.
9. Should I put money into savings or pay off my debt?
Let’s consider the long term. Odds are, your debt contains a high rate of interest, which is what your minimum payment goes to. As a result, you end up paying more than necessary. By making higher payments, you’ll save money in the long run and pay off your debt faster. Then you can save.
10. Should my fiance and I sign a prenuptial agreement?
Unfortunately, divorce happens to the best of people. By signing a prenuptial agreement, you can both be saved from a great deal of stress and resentment if this worst case scenario happens.
By asking the right financial planning questions, you can be prepared when difficult times come. Are there any financial planning that you are afraid to ask?