I help women, families and businesses gain financial strength. Here I’m sharing below 4 Financial Moves Every Parent Needs and my personal story of sitting down with my own Financial Planner.
I am going to start this post off with a question to ask yourself. It’s a hard one. Brace yourself.
How do you feel about your financial health?
Yep, I went there. Gulp. Are you the type that checks your bank account with your eyes closed or are you the one who is watching your investment portfolio grow?
In the past 2 years we moved to a new city, had a new baby and I started a new job. Life is never short of changes and as we carve out some big goals, like buying a home, it was time to take a strategic look at our finances. I not only want to build the best life possible for my daughters but also feel a sense of security that is much-needed as a parent. As a busy mom, it was time to pause and do the things I have been meaning to do before another year got away from me. Overhauling your finances means finding a deliberate honesty with yourself and changing behaviors.
Even though I am in the finance industry myself, we sat down with a Financial Planning Advisor over coffee when I was first getting started and what I can tell you is that it was one of the best conversations I have ever had. That’s right, I still needed my own planner. I learned things, I simply never knew and most likely would never have learned like how to choose the best beneficiary for your accounts to how to strategically save for retirement. The most important part of the conversation? Getting to know an expert. You wouldn’t change your hair without consulting your trusted stylist, why should you treat your finances any different? With all that said, I was surprised how easy and non-overwhelming the conversation was. While you may be thinking this is going to be a serious gut check, or I’m not in a position to plan (“I have no money!”), what I have learned is that everyone deserves this conversation, While it may be intimidating, the best thing you can do is to start.
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I sat down and got to know Paul. Paul shared with me, that like us, he has a family of four, raising kids in Center City Philadelphia. Wow did he understand the anxieties of being a parent and the hopes and dreams we wish to achieve. He understood that as much as we want to allocate money to every priority, there is only so much to go around. One of the most valuable parts of meeting with him is that he was able to help us prioritize the urgent needs first while keeping in mind our goals to build on. Do you know how much this conversation cost? Simply my time.
After learning so much I felt compelled to share with you some of my biggest take aways as a parent and the same ways I help others today. The things I wish I knew YEARS ago! It’s time to get real and hard-core ADULT!
- Protect Your Family
You know that Life Insurance policy you have through your employer? Well turns out it’s probably barely enough to cover your funeral expenses if the unthinkable happens. Let’s talk about Life Insurance for a minute. While it’s odd to think about your death…what would things look like for your loved ones if you were to die much sooner than expected? Most parents want to be able to financially take care of their children through the age of 18 and most would even like to assist them in paying for college. I certainly want to do those two things for my daughters. If by chance I’m not here anymore to earn and do that for them, then what? That’s where a Life Insurance policy comes in.
If it’s important to you to have it, then it’s important to you to have the correct amount. The amount you need will differ on your circumstances but you can get to the right amount by asking the right questions. Do you want the policy to pay off the mortgage and any other debt your significant other may inherit? Do you want to pay for your kids’ education? If so, what kind of education, public or private? Do you want to provide replacement income for your spouse? This one is tricky, but providing additional benefit will allow your spouse the OPTION to make decisions based on what they want, and not what they HAVE to do.
My advisor helped me by asking me the questions I have never thought of. Then together, we carved out what the ideal plan would look like for my life insurance. I was also surprised that the cost of private life insurance is much much less than I expected. Is let’s say, $50 a month worth the security for your family? For me it is when one policy can take care of so much.
2. Pay Yourself
Raise your hand if you have an emergency fund? Now raise your hand if it has 6 months of your living expenses in it? For an individual this may mean $12,000 while for a family it may mean $60,000+. It may mean less or more for you. First determine what you spend on average a month to cover your cost of living: rent/mortgage costs, car/gas, healthcare needs, food and entertainment to name a few.
Experts will tell you to have 3-6 months on hand to protect yourself in unforeseen circumstances. Circumstances that may include job layoff or medical issue. I can tell you that I don’t have 6 months stocked away and this is one of my first priorities to keep my family living comfortably should an emergency arise. Before you pay anyone else each paycheck, pay yourself first.
3. Planning For College
The girls are six and 18 months. Setting up a 529 College Savings Plan for my older daughter has always been on my to-do list. Yet 5 years had past and I still hadn’t. She had a savings account but how was that money growing?
For most parents with young kids college can seem so far away. Will your kids go to private or state school? I went to state school and I want to provide the choice for my kids. It is estimated that the cost of a private college will be $93k per a year in the year 2030. Are you doing the math in your head? Yep, that means if you put 2 kids through a private college it will run you a smooth million dollars.
I needed a Financial Planner to make my brain stop hurting. HONEST! Wrapping your head around these large numbers can be overwhelming, but it’s the insight and expertise from a Financial Planner that makes all the difference when planning for big ticket items like a college education. My advisor was able to guide me to the best state plans and point out that my state allowed me to claim my contributions on my state taxes. Not to mention that you can now use those dollars to pay for K-12 education, tax free.
I wouldn’t trade my current hustle for the world but eventually there will come a time I will want to retire. At 35 now, do I know what that will look like in 30 years? Will I be 65? 68? 70? My advisor worked with me to determine what my ideal vision of retirement looked like and I can tell you it involves a lot of travel and gardening. He understood my risk tolerance and guided me to make the best decisions.
We talked about how much I could allocate now to my company sponsored plan while I tackle bigger priorities and how much I needed to commit next year and so fourth. Retirement, while important, is lower on the list because you have the gift of time. However keep in mind that the best time to plant a tree was 20 years ago and the second best time is now.
At the end of the day, having one of my life’s most important conversations came down to getting it done and finding the right trusted person to guide me. I left with key action items and most importantly security for myself and my family that I had a plan. You don’t know what you don’t know and as a parent we have a responsibility to educate ourselves. My way of doing that, is to take a partner. WHEW! Anxiety levels way down.
I’d love to hear your experiences and questions around your financial planning. Let’s bring those anxieties way down, sip on a warm cup of joe and get to living.