Prepare the Future for You and Your Children

As I suspect, if you have children, you recognize the world is a much brighter place. I wrote yesterday about preparing yourself and your parents (and grandparents) for the inevitable. From the many responses I received, I can see these issues are on all our minds. I thought I would take the time to add to what I wrote.

If you haven't already, please read yesterday's blog article. The tips I recommended for your parents also apply to you. You should also have a will (or living trust), advanced healthcare directives and powers of attorney in place. There are no guarantees in life, when your time will come. As I said yesterday, preparing yourself now buys peace of mind and the ability to focus on other things in life!

Here are some other points you need to consider:

• Have a plan for your children should you become unable to care for them. Again, no one likes to talk about it, but if you plan now, you won't have to think about it again. Think about who could raise your children in the best possible way. Start with your relatives first. Be sure to talk with your chosen relative and get their thoughts and opinions. No surprises! Please read, "Who will take care of my children".
  

• Do plan for college. I realize not all children will go to college. But let's be positive and plan for it! Read up on 529 college plans, by far the best way to save. The money grows tax free. Obviously, there are some disadvantages but I think the advantages far outweigh them and any other options out there right now.
  

• If your employer offers a savings plan, use it. I see too many people who bypass this step. It would be crazy, especially if your employer matches your contributions. This is free money! If you find you don't have the money, then you are spending beyond your means. "Pay yourself first". I like David Bach's series of books, a real eye-opener in seeing what money we throw away on a daily basis, to the point of costing us hundreds of thousands of dollars for retirement and our savings.
  

• Do invest a portion of your monthly income for your retirement. Social Security and your husband's military pension won't be enough. Inflation will cut into everything, and believe it or not, by the time we retire, a million dollars will barely be enough, even if you live modestly. There are many financial advisors out there, so let's take a look at what's available.
  

• Commission based. I have had good luck myself with Edward Jones. Even though they are commission based, as long as our holdings return a certain interest rate level, we are happy with that arrangement.
  

• Fee/percentage based. I know a few folks who go with the maverick Edelman Financial. Ric Edelman does have some great advice, read some of his books to get some insight and to get smart. Ric is a fee based financial planner, charging 1-2% of your holdings to be with him (on a sliding scale). He even has a retirement fund for your children. Invest $5,000 and it will grow tax free to $1 million, by the time your child retires. I think he is the only one who has this type of savings plan. If you totally want to be completely "hands off", he would be a good choice.
  

• Fee based/hourly. You can also visit a certified and licensed independent financial planner who charges by the hour. If you are already familiar with mutual funds, investing and the stock market, maybe all you need is a plan that you will update every few years, depending on your investment goals.
  

• On your own. Perhaps you are pretty well read on investing and retirement funding. You can either use the plan from the fee based planner above, or use one of the tools online to come up with your own plan. You will need to divide up your plan into stocks, bonds, cash, etc (and further into large cap, small cap and such), depending on your age, investments and goals. Try this Portfolio Asset Allocator or this Portfolio Allocation Spreadsheet. If you have trouble understanding these concepts, please see this easy diversification explanation from Ric Edelman on Oprah. I am personably familiar with T Rowe Price and their funds, as we have done business with them for many years, even before we were married. Their funds have had consistently high returns and high ratings, and they even have a few funds geared specifically towards your retirement years. Their site also has so many planning tools and calculators, as well as free CDs and videos to help you in your planning. If you are hesitant to spend money on financial planning (even though it could be money well spent), T Rowe Price is your best "low cost" but "high value" bet.

Would you like to share some of your ideas?