Insurance for your college age son is something you should obtain. First look at the university. Some provide group student plans that are major medical type of coverage. Look at traditional insurers such as BCBS in his area. If you or he belongs to a group, professional or otherwise, look at any group plans they might have. At his age, it should no be expensive.
Bobbie, here's a question for you from wreckon95.
Alright Trice, that sounds pretty unanimous! Here's one more question for everyone, from Sam.
I'm going to open it up and ask the advisors to tell us their favorite budgeting tools, regardless of whether Sam mentioned them. I know David touched on this earlier.
I actually have to run, but thank you Kiplinger for hosting and to everyone for their questions!!
No worries, Rich! Thanks very much for your help.
Bobbie is correct. If your goal is to deal with estate taxes, then you want to have a policy that is going to be there your whole life. As Rich stated insurance is expensive. So it's important to understand the need and to also find the right product. There are "low load" permanent life policies that are quite cost effective compared to full load products most insurance agents promote. The low load route can save $1,000's in unnecessary premiums.
Good point Bill. Even if you do want whole life insurance, low load policies will prevent higher costs because of higher sales commissions.
We use Quicken, but have clients using Mint and the old-fashioned envelope method. The "advantage" of the envelope method is that the negative feedback of counting out money and handing it to someone overcomes the brain's tendancy to spend with a credit card without thinking. If you are having money troubles, the envelope method ensures you can't overspend.
Envelope method! That's interesting, David, thank you. Any other thoughts?
Budgeting is an interesting topic. The key here is to always "PAY YOURSELF FIRST" - this is a no exceptions rule. This may sound like heresy, but whether or not you keep track of things, which is a GOOD thing to do, it's really secondary. If you're saving enough, and not going into debt, buying the right size house, using a 30 year fixed rate mortgage, diversifying your investments, keeping investment cost low, etc. - you're going to be FINE.
We use Quicken as well, but many of our clients find it too complicated for budgeting. One of our clients has a simple spreadsheet where she inputs all of her banking transactions each month. She finds that easy. Budgeting is like dieting, you can't change if you don't know what you are spending (eating), so a journal is a must. Even just for a few months.
Great, thanks all. Bobbie, I'm going to send you this question from Chuck.
For those that simply cannot control their spending, the ENVELOPE method is the best. It gets us back in touch with our money AND it automatically tells us when were done for the month! The problem with all the use of plastic these days, is there really is no feedback loop!
Budgeting can be very complicated. Drawing up the initial numbers on paper really isn't the hard part....sticking with it is. Now I love numbers and have used Quicken since it was DOS based in the early 90s (boy do I have a wealth of information on hand to include every expense on the car which I've had for over 12 years). But not everyone is suited to Quicken or mint.com. One advisor that I know created a workbook that you can see at www.financialkarma.com. It will help you translate your long term goals into daily behaviors. Finally, what has happened in the past can help you identify problems areas but what is important is the future. If you do draw up a budget based on your income, be sure to include saving for you future. Then decide how you will divide what is left for discretionary items. I have clients take that in cash and when it is gone it is gone. You won't overspend with that method.
Some great ideas here. Maybe Mint and company aren't always the best way to go!
Debbie, here's a question for you from LadeyDi.
Bill, clients who use the cash method often use envelopes so that they will sure to have money for the expenses that don't come up all the time. There is a great site on this: www.mvelopes.com
And Bill, I have a question from "Rainwater_et_al" for you.
Yep: mvelopes is a great digital variation of the original physical envelopes practice.
Congratulations on the low mortgage balance, but it sounds like it came with some expense. I would ratchet down the mortgage, just paying the monthly amount necessary and begin saving for college for your child. Be realistic with your child about how much college you can reasonably afford. I know it is a tough conversaton, but there are terrific state schools in most states that will educate even the smartest child.
Oops, think we got mixed up there. No worries. Bobbie, would you mind fielding LadeyDi's credit question?
David, I have a question for you from "gee."
Chuck, I certainly love for people to have a paid off home in retirement but you are a long way from that. So I might back off on the accelerated payments for now. Now the next thing on your list is saving for YOU and your retirement. This comes before your child's college as you can borrow for that but not for retirement. (BTW, I do suggest that parents do have some student loans in the child's name as it makes the value of the education more meaningful...if they do well you can help pay it off when they are finished).
Chuck, I believe it would serve you well to spend a couple of hours modeling your financial future with an advisor. You can take a look at how delaying retirement savings might impact your retirement.
Great discussion! Thanks everyone. Debbie, I have a question for you from "momonbeach."
David, your next question's from Nate ...
Take a look at these 6 ways to retire without a mortgage -- www.kiplinger.com/features/archives/retire-without-a-mortgage.html
Rainwater: First off, I recommend you immediately implement a savings program targeted at 15% of your gross income - you can maximize your employer sponsored plans to do this. Next, I recommend you set up a savings process to create an emergency fund equal to 6 mos expenses. Do not run up credit card debt. How much can you pay on the student loans under these circumstances? Pay as much as you can. When you get to the point where you have the emergency fund, start saving for the down payment on a home. As your income goes up, DO NOT increase your standard of living with all the raise. Split the raise between your loans and savings programs. YES you want to retire the debt, but you also want to be improving your financial circumstances, and building your savings and investing muscles as you go.
LadeyDi, have you pulled a copy of your credit report? You need to know what is on it so you don't get blindsided. You might be making all of your payments on time but your score has declined because you are using most of your available credit. Then, if the employer does a credit check (you will have to sign something to allow this) be up front about it. Tell them your issues before they see for themselves. I think they will appreciate your honesty and understand that many people who would make terrific employees have similar circumstance because of recent, universal financial problems. You are not the only one. You might add that you need the job because it is important for you to pay your obligations.
It is always a good idea to add to principle periodically. It is best to make regular principle payments when you have the extra money. If you would prefer to build up money in a savings account, that is fine also.
Really great advice, Bill, thank you. We have another question from a young person for you -- here's Eliza.
Bobbie, I have a question for you from Bob B. And Debbie, here's one from DeboraDee. (Very popular name in today's chat!)
Gee: David is right on. Also, depending on where you live another reason for a trust is to avoid probate costs. Here in California they can be quite high. So depending on where you live this could be another aspect of the analysis.