Financial Preparation Checklist for Life’s Milestone Moments
2015 is going to be a big year, you can just feel it! Maybe you don’t know exactly what the year holds in store for you, or maybe you have a very clear picture of the milestone events coming your way.
Either way, with each new life event there are new financial considerations that need to be addressed. We’ve prepared a financial preparation checklist to guide you through some milestones you may encounter this year.
In 2015, are you:
1. Getting Married or Expanding your Family?
Combining Financial Accounts
Combining finances can be a touchy subject, but it does make things much simpler. Make the decision about which accounts you want to maintain by considering interest rates, account fees and account benefits. Then you’ll need to visit your local branch to add your spouse onto your account or open a new joint account.
But don’t close the other accounts right away! Take a few months to get direct deposits and automatic bill payments moved to the new account. Once you’re sure everything is operating properly, you can close the unnecessary accounts.
Emergency Savings
An emergency savings should be a priority to deal with unplanned circumstances like temporary unemployment, medical emergencies, or even unplanned home or car repair. When building your emergency funds, you should plan on enough to cover 3-6 month of household expenses. Your long-term goal should be putting away 10% of your monthly income into savings.
Life Insurance
One of the first questions that’s always asked in the life insurance planning process is how much insurance do I need? Standard advice suggests having enough insurance to cover 5-10x your annual income. But there are other needs that have to be considered now and in the future.
- What expenses are associated with funeral planning?
- What outstanding debt, your mortgage or credit card debt, will need to be repaid?
- How much will your children need to have a future in higher education?
- Does the loss of one parent necessitate an increased cost in child care?
Life insurance will need to remain on your financial preparation checklist for life changes going forward. With each new family member, new job, or new home, you’ll want to assess that your life insurance coverage is enough.
2. Looking for a New Job?
Take Full Advantage of your 401K
If this is your first job, you might have the opportunity to start retirement planning through your employers’ 401K program. You’ll invest a portion of each paycheck into an account that will grow throughout the remainder of your working years!
You can choose what percentage of your salary you’d like to invest. You should, however, be aware of your company’s match program and make sure you are taking full advantage of it. For example, if your company matches contributions up to 3%, be sure you are contributing at least 3%. This is essentially doubling your investment.
If you are changing jobs and you already have a 401K started, you’ll want to look into options of rolling-over the dollars from your existing 401K into the program offered by your new employer.
Open an IRA
If you’re farther along in your career then you’re ready to take retirement planning to the next level. Go above and beyond your employer-supplied 401K and start investing in an Individual Retirement Account (IRA).
Both the Traditional IRA and Roth IRA offer you a wider variety of investment opportunities. With a Traditional IRA your contributions may be tax-deductible and your earning will grow tax-deferred. Your withdrawals, however, will be taxed as income. With a Roth IRA, on the other hand, your contributions are not tax-deductible, but your earnings and withdrawals are tax-free.
3. Buying a New Home?
Mortgage
Whether you’re buying your first home or upgrading for more space or a better location, getting pre-approved for a mortgage should be your first step in the house-hunting process. This will give you the best idea of how much you can afford to spend.
You should also know your credit score, and if your current score is on the lower end, start taking the steps necessary to bring it up.
In this Diamond Credit Union video, Mortgage Originator Ben, offers additional tips on how you should approach obtaining a mortgage.
Homeowners Insurance
A lot of people misunderstand exactly what homeowners insurance provides for them. It does more than just cover any losses due to a robbery or fire. Homeowners insurance provides coverage if someone is injured inside or outside of your home, if your child or pet does damage to a neighbor’s property, and even covers the loss of items like clothing, luggage and electronics while you’re traveling.
4. Saving for Your Child’s College Education?
529 Savings
While the Class of 2013 graduated college with an average of $35,000 in debt, the total amount of student debt in the US totals $1 trillion. Sobering facts.
You can lessen your children’s dependency on student loans by saving for their college education as early as possible. 529 College Savings Plans are one of the most popular ways to save for future education. These educational savings plans allow you to save and invest (tax-free!) as long as your earnings go towards qualified educational purposes.
Savings plans are offered by each of the 50 states. You can enroll in a plan from any state, you are not limited to your home state plans only. Additionally the plan you enroll in plays no part in determining where your child goes to college or university.