Money Matters: Getting the basics prepared

In recent conversations with numerous prospective clients, it appears some of the financial planning basics are being placed on the backburner far too long. I have listed five basic elements of financial planning. If you have these five items, are you done? No! But, you will have the basics covered and you will avoid most of the major problems.

They are:

• Basic Will

• Related Estate Planning Documents

• Life Insurance

• Home and Automobile Coverage

• Retirement Plan

While I have listed five items, there are additional areas and in some cases more advanced planning is appropriate for one or more of these items. So remember, this is only a place to begin, not stop.

You might be asking why these five. Let’s go over the reasons why. Most of these pertain to an unexpected event. Should you have an accident or die prematurely, the first four items most likely will come into play. They are there to make things easier for your family or to provide financial security. And since we cannot predict the date and time we will need this protection, it is best to have these documents and plans in place at all times.

The last item is something we can predict. So, why is it important to have a retirement plan? Without the benefit of time-value-of-money, most of us would not be able to set aside enough cash to ever retire. Therefore, the earlier you create, and start a plan, the easier it will be to meet your goal. In all cases though, once the accident, death, or retirement has occurred, it is too late to have the same benefits had the planning been completed earlier.

Now that we know the why these are needed, is it enough to just have them in place and say, ‘I’m done’? Sadly, in today’s environment doing these without professional help may cause more trouble than it prevents. While I am not an attorney and thus do not draft the documents referred to in the first two points, I do assist in enough estate planning cases to know these are necessary items. If you do not have a Will, you are permitting the state write your Will for you. And, they have decided who is to receive your probate belongings at your death. Most often their choice may not match your own. If you have a Will, then the question becomes, does your Will meet the requirements of the law? If it is typed and does not have the signature of two or more witnesses, it may not be accepted by the courts. While I do not recommend handwritten Wills, it is my opinion they are better than nothing, but the entire document needs to be handwritten. Just your signature is not sufficient. You should also review the documents for those items passing outside of probate, such as retirement accounts and life insurance policies. The beneficiary statements should be kept current.

The related estate planning documents are the Financial and Healthcare Powers-of-Attorney, Living Will, and now the HIPPA Medical Information Release. By having these documents prior to their need will make things easier for your family.

Today, term life insurance is so inexpensive everyone in reasonably good health should have sufficient benefit for their family. Purchasing coverage when you get married, buy your first home, or certainly when you have your first child will prevent a major financial disaster in your family’s future should an unforeseen death occur. But, do not forget to keep the coverage up-to-date.

Most of us have seen enough car accidents or homes damaged to know you cannot afford to be without coverage in these areas.

And lastly, the retirement plan. Time value of money will help you reach your goal or will become your greatest enemy. A 25 year-old by the time they reach 65 will almost have $350,000 by saving $100 per month that averages 8%. But a 55 year-old must save $1,908 per month to reach the same goal. Time will work for you or against you. It is your choice. If you have not started, it is better to start today than to wait.

Have a financial question you would like a response to? Send your question to Doug Horn, 115 W. Broadway, Maryville TN 37801; be sure to mark your envelope Money Matters. We will answer as many as possible in this weekly column.


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 FINRA, SIPC.

© 2008 All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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