This blog is a follow-up to the article “SAFEGUARDING YOUR FINANCIAL FUTURE PART ONE”, and will hopefully provide additional information about preventive measures which can be taken to prevent, or at least minimize, financial distress. While PART ONE was primarily geared towards those at the beginning of their careers, PART TWO will make recommendations for those who are more established. In PART TWO, our firm would advocate these precautions, and/or suggestions:
1) Married couples need to communicate about earnings and expenses. A monthly review of bank statements may answer the common marital question, “Where is the money going ?” This is especially important when couples rely on debit cards and automatic bill pay for the majority of their deposit account transactions.
2) While there are definite advantages to home ownership, don’t rush into it. Purchasing a home is probably the biggest investment you will make, so make sure that you are financially prepared. Don’t buy more home than you can afford, and don’t borrow based upon what you expect to make in the future.
3) When buying a home, always strive for at least a 10% down payment. It will reduce the amount that you have to borrow, and will reduce the risk to the lender, which should translate into a lower interest rate or better repayment terms.
4) Don’t forget to consider the ancillary costs of home ownership, such as insurance, property taxes, HOA/regime fees, and interior/exterior maintenance. Have an idea of what these costs will be before you commit to the purchase.
5) Hire your own home inspector, and your own appraiser! You want to make sure that your interests are protected, and you are fully-informed before you make your purchase.
6) Consider the educational needs of your children, and the surrounding public schools, in researching your purchase. Even if you don’t have children, the potential buyer of your house in the future will have children, and quality of education will be a strong consideration.
7) Buy term life insurance in an amount sufficient to pay off the home mortgage and any other debt accumulated during the marriage. Credit life insurance – which is for the protection of the lender – is usually overpriced.
8) Consider long-term care insurance while you are young, and the rates are affordable. A catastrophic illness has been the cause of too many bankruptcies.
9) Draft a will, and a health care directive. Too often the lack of a will and the failure of a spouse to have a health care directive has unnecessarily burdened the surviving family members, both financially and mentally.
10) Consider raising the coverage on your home and automobile liability policies, so that it will be sufficient to protect your assets and income as they increase over time.
PART THREE will continue to address family-oriented safeguards, and provide additional suggestions for middle-aged earners.