Ensuring that your family has a safe financial future can be a major motivation for organizing your finances. The tips below may not apply in every family, but they can help you start thinking about what you will need to provide financial security.
If you don’t have an emergency savings built up to this point, you can be financially destabilized by small things. An unexpected car repair, dental emergency or sick pet can mean a significant credit card charge with the accompanying high interest or using money earmarked for something else, such as rent, and then scrambling to replace it. If you have three to six months of expenses saved up, you can easily absorb these financial surprises. However, even a cushion of $500 will give you a good start.
Life insurance can help protect any dependents in case something happens to you. If you are concerned about minor children, you may want to calculate how much your family would need to live on until they are adults. You might also want to think about whether you should include money to pay for their education. When your children grow up and you no longer need the policy, it still has value. For example, if you become chronically or terminally ill, you might be able to get a viatical settlement. You can review a guide about viatical settlements and start finding out what the value of your policy may be.
An Estate Plan
Life insurance is often part of a larger estate plan. Although one function of an estate plan is to identify what assets will pass to which beneficiaries, it can do much more than that. Your will can appoint guardians for your children if they are minors, sparing your family a long and potentially costly and contentious court process. You can set up a trust to designate when loved ones receive certain assets or that even put conditions on those assets, such as requiring them to reach a certain age or another milestone. An estate plan can help protect assets from creditors, divorce and other threats.
Other Types of Insurance
You might want to make sure that you have other types of insurance as well. If you rent instead of owning your home, renter’s insurance can help protect your belongings just as a homeowner’s policy would. Your family should have health insurance. Preparing for retirement is another important step because it helps ensure that your children will not have to help you out financially when they are adults. You might want to look into long-term care insurance and possibly consult a financial professional to talk about how spend-down requirements work in your state and how you might plan around them.
An Education Plan
If you want your children to go to college, you may want to make financial plans for this as well. Find out whether a 529 savings plan is right for you or if there is a better way for you to put away money for their education. This could also mean meeting with a financial professional.