Thursday, August 26, 2010

Financial Planning for Life's Milestones

Last month I posted a feature on financial planning with a guest expert. Robert Cooper is a Certified Financial Planner™ with over 15 years of experience in banking, finance, and financial planning. He shared information about some of the basics of financial planning: why you might need a planner, what a planner does, what type of planner to look for, and how to choose one.

I’m really excited that Robert has agreed to come back to answer more of my questions. Many of the people I work with are preparing for some of life’s big events, like getting married or having babies. Since Robert’s clients are often planning for transitions, too, he has some great financial advice this week for those of you who are approaching these milestones.

There are so many things to think about when planning a wedding, and the financial focus is usually on how to pay for the event. Are there other financial issues to deal with before you get married?

Before the big day it is critical that you sit down with your prospective spouse and discuss finances. You would not hide an important medical issue from your fiancĂ©; don’t hide anything about money! Be upfront about debt, savings, and investments. Talk about how you manage money and the expectations of how you will share expenses in your life going forward.

You hear so many opinions about whether couples should keep their separate accounts. And what if one spouse already has debt? How do you handle these things?

Decisions like joint or separate checking accounts or managing shared debt are specific to each couple; there is no right answer. Sometimes it is helpful to talk with a planner to help understand what debt each person has and how the debt will be paid off. However, hiring a planner is not necessary for this first step. The most important action is to make sure each spouse is fully aware of the financial situation of the couple. This can be done by simply sitting down together and reviewing all your financial documents.

Will the couple have to make changes to their accounts because of their changed marital status? What kind of financial steps might be necessary?

One thing I recommend is to review beneficiaries on retirement policies. Generally the spouse is the default beneficiary on an IRA account, but I never like to rely on this “default” being correct. Make sure you specifically designate your spouse (or another beneficiary) by contacting your retirement plan coordinator and specifically listing your beneficiary on the account.

Also, talk with your fiancé about life insurance. If your household budget is now dependent on both incomes, what would you do if one of you died? This is a difficult discussion, but the discussion with the bank is much more difficult if something unfortunate happens later on and debts cannot get paid.

For those couples out there who are expecting, what new financial decisions should they be making when they’re planning for the big arrival?

Get a will. Get a will. Get a will. Apart from a lack of emergency savings, this is the next most important thing I see many families neglect. Once you have children, a will is critical. Remember, the most important aspect of the will is not who will inherit your money; it is what will happen with the guardianship of your children. Do not allow state law to decide who would raise your children should something happen to both parents. Talk with your partner about the choice of guardian, but also talk to the prospective guardian. If the unfortunate should happen, you don’t want the guardian of your children to be surprised, or even worse, decline the assignment of guardianship!

Everyone knows that kids are expensive! What should new parents do to make sure they have it covered?
Make sure your emergency savings account is adequate. You are adding another person to the household, and consequently more expenses. Make sure your ready cash is at a comfortable level.

What about the dreaded college expenses?
The sooner you begin planning, the better your situation will be in 18 years. However, college savings should come after your emergency fund and your own retirement. Remember, your child can get a loan for college, but no one is going to loan you money for retirement.
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Thanks again, Robert, for sharing advice on financial planning for life’s big milestones!

About Robert Cooper: After 9 years at MBNA American in Camden and Belfast, Maine, Robert moved to Minnesota to join with his mother-in-law in the financial planning business. His family was looking to improve their quality of life by having a small business that better fit with the family activity and school schedule. Living in Faribault, MN with his wife, Amy Gragg and their daughter Amanda, Robert finds time to run, golf, and help manage Amanda’s busy summer schedule!

Robert now has over 15 years of experience in banking, finance, and financial planning. He enjoys working with entire families on their financial goals and has been especially successful working with small business owners and women in financial transitions. His education includes a Bachelor of Arts degree from Amherst College and a Master of Science degree from the University of Michigan as well as several programs specific to financial planning. Robert is licensed for securities in multiple states and specializes in full family Financial Planning.

Capital Management Associates
1803 Legacy Drive
Faribault, MN 55021
Phone (507) 334-7433
Fax (507) 334-7433
rcooper@cap-mgt.com

SECURITIES OFFERED THROUGH CAPITAL MANAGEMENT SECURITIES, INC.
A Registered Broker/Dealer, Member FINRA and SIPC

ADVISORY SERVICES OFFERED THROUGH CAPITAL MANAGEMENT ASSOCIATES, INC.
An SEC Registered Investment Advisor

Certified Financial Planner Board of Standards, Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™ and federally registered CFP (with flame design) in the U.S., which it awards to individuals who successfully complete initial and ongoing certification requirements.

2 comments:

  1. Great post! Thank you Robert and Emily for sharing this valuable information.

    I remember at my first baby shower, my friend gave me a check for $100. "Wow! For the college fund!" I exclaimed.

    She replied, "No, honey. Sorry. More like the pre-school fund."

    Little did I know ...

    ReplyDelete
  2. Donna Maria, it's so true. Kids are like almost everything else in life: always more expensive than you planned on! It's good to be prepared. I'm glad you liked the post!

    ReplyDelete

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