In preparing your financial and estate plans you need to make sure
critical areas are in good shape. If you are unsure which areas are
critical, just look at all of the areas of a typical financial plan and
ask yourself if you need that segment. If it is not there, how much
harm will occur? As an example, let's say you have a five year old
child and are planning to help with their college expenses. As of
today, you have only $1,000 saved for those future expenses. Is this a
critical area of your financial plan? No. Since your child is only
five, there is still time to catch up or get started and build the
investments you need. I am not saying it is not important to save for
your child's college expenses. It is, and the more quickly you
the more likely you will be able to meet your goal. In this case, it is not critical. However, fail to start saving and at some
point in the future this area will become critical, as there will not be enough time to reach even the smallest of goals.
To illustrate a more critical area, let's look at both life insurance and wills. Imagine a young couple both working and making about the same salaries. They have two young children, own their home, that is with the bank and owe more in credit card debt than they have in savings. In the event one of the parents dies, will this cause harm? Of course, death is tragic and the emotional loss is tremendous, but the job of a financial advisor is to look past the emotions and provide solutions for situations that some may not be able to see or acknowledge it may happen to them. If this couple does not have any life insurance and a death occurs, it is too late to fix the problem. The surviving spouse may have to alter their lifestyle. If there are not sufficient savings to replace the income that would be lost or to pay off the debts that exist, this would cause the addition of life insurance to be critical.
Under the same circumstance, if neither parent has a will, this can also create a situation that once the death occurs, the ability to fix the problem cannot occur. While the state of Tennessee has a backup plan in the event you do not have a will, rarely does the state's plan distribute your belongings in the same fashion as you would. Additionally, there is added cost and frustration at the time of death for the family when there is no will for the decedent. Once the death has occurred, fixing this issue is no longer available and you have to take the course that lies ahead.
While we all know there are certain tools that should be in place like life insurance and wills, we do not always see the urgency of having them until it is too late. We often believe there is always time to take care of those items. What is your excuse for not having a will or having life insurance on yourself and your spouse? In the event of an unexpected death, how will that excuse stack up against the failure of having proper planning in place? While you may believe that is an unfair question, it often requires direct and sometimes blunt questions for some individuals to take the appropriate steps.
In businesses, the owners or management rarely have an issue of spending money on inventory or sales people provided they have products that are selling and a sales force that is making it happen. But ask the owner or management to increase the budget for the accounting department and the response is usually, "Do we have too?" No one wants to spend money on an area they have difficulty seeing the value. In this case, proper accounting can alert you to issues to address as well as perhaps save on taxes. Financial and estate planning is very similar to the individual. Many do not see the value of these expenditures, at least not until they are needed.
Fix now the critical gaps in your financial and estate plans. Contact us at Quality Financial Concepts to assist you or one of the other qualified planners in our area.
HOW TO REACH THE WRITER
Would you like a response to a financial question? Send your question to Doug Horn, 115 W. Broadway, Maryville TN 37801. Be sure to mark your envelope Money Matters.
Doug Horn, CFP, is an area financial planner with more than 24 years financial experience and founder of Quality Financial Concepts, located in downtown Maryville on Broadway.
Doug Horn, CFP, Registered Investment Advisor in Tennessee and Texas and Registered Principal, Branch Office of and Securities offered through CUE Financial, Member NASD, SIPC.