The Kansas City Star says in its recent article, “Financial skeletons to clean out of your closet,” that regardless of your income, the paycheck to paycheck pendulum can hover over anyone, posed to knock you off track at any time. Even one financial skeleton in your closet, could affect your financial security.
First, you may want to track your spending for a few months to get an idea of what you spend. See if there are luxuries posing as necessities, and then look at each item as a need vs. a want. Next, create a budget that works with your income. Include savings and build an emergency fund of at least three months of living expenses.
The U.S. Census Bureau data shows that the average American household owes more than $16,000 in credit card debt. If you add student debt and mortgages, that debt may really be suffocating some families. Determine your net worth, check your credit report, don’t take on more debt and create a repayment plan.
Most Americans will have to fund their own retirement, or at least contribute significantly to it. However, many aren’t saving enough to cover their future needs. See if you can get an employer match and save at least that much in your 401(k) account. You can consider an IRA or other savings/investment vehicle.
Estate planning lets you consider the legacy you’d like to leave to your family and addresses who gets your property when you die. It also covers the best legal transfer methods for leaving your property, designating a guardian for your minor children and naming who should make medical and financial decisions for you, if you’re incapacitated. Partner with an estate planning attorney to create a sound estate plan.
As baby boomers get older, more of our nation’s seniors will need home care or care at a long-term care facility. The cost of long-term care can range from $30,000-$70,000 a year or more, depending on the needs. Long term care insurance may be an option, so talk to your attorney about this.
Many of these skeletons would be addressed, if you had a proper financial plan in place. A financial plan isn’t just about money, but should also address insurance and estate planning.
Reference: Kansas City Star (October 27, 2017) “Financial skeletons to clean out of your closet”