During the month of September, our Real Simple Family financial expert, Farnoosh Torabi will be answering a few of your family financial questions. If you have questions for Farnoosh, share them in the comments of this post: Your Money Problems, Solved with Farnoosh Torabi. And you can read more of Farnoosh's advice for Real Simple readers in the article from our 2010 issue of Real Simple Family: What Does It Cost to Raise Your Family?
Here are the first two questions and Farnoosh's suggestions:
I am single, 52, have raised 4 children. Have recently been diagnosed with Stage IV breast cancer, which is currently in remission (!!) but will almost definitely return. (no sympathy please) My question: how to best plan now for my finances and my children after I'm gone. I don't have much, but I have a house, a 401K, and an IRA.
Posted by: Karen Monday, August 23, 2010 at 02:34 PM
I’m glad you’ve asked this question, since too often parents wait until the last minute to decide how to distribute their assets to their children and dependents and by then it can get pretty hairy.
First, if you have any young children I do hope that you have life insurance. If not, it may be extremely difficult to qualify at this point given your health. But life insurance can be a major financial life preserve for any dependent children you might still have, as it will be a source of income for them after you pass.
To pass on your 401k and IRA, establish beneficiaries if you haven’t already done so. With regards to your home, you should include specific directions in a will explaining how your want your home to be managed, sold and divided amongst the children. Also in the will, you can mention how you’d like your other assets handled, such as your savings accounts, your car, furniture and other personal belongings.
Estate planning experts also think it’s best to create a living will and health care proxy. In case you become disabled or unable to make medical-related decisions on your own, these documents will clearly state your wishes and who you’d like to make those decisions on your behalf.
To make sure all goes smoothly with your bills and finances in case you can no longer manage them on your own, you should also name a power of attorney to manage and protect your finances in case you become disabled, says Lawrence A. Caplan, an estate-planning attorney with The Sequoia Group. This person is usually an older child, family member or close friend that you highly trust.
Finally, make sure you talk to all of your children—or at least the ones who are mature enough to understand—about your plans, says Susan Cheng, an estate planning legal expert in New York. “The more involved the children are in knowing Mom's wishes, the less likely to have litigation after she passes,” she says.
I am 24, my husband is 31 and we feel ready to have kids. I would like to stay at home with our children (we would like to have 3 or 4) so we need to set up our plan for saving for having a baby next year and plan to live off of my husband's income alone. We have no debt – we rent a 1 1/2 bedroom so we don't have a mortgage (we plan to rent for a while due to lack of faith in the housing market), we have paid off student loans and have recently paid off our 2 cars. We currently save my entire take-home income each month, about $2,000, but that will most likely go away when a baby comes if I am able to stop working. Please share how we should start setting things up to prepare for starting our own little family.
Posted by: Tammy Hawkins Monday, August 23, 2010 at 03:03 PM
Congrats! It sounds like you’re taking all the right steps. You’re saving every month, you have paid down debt and you’re not jumping into a newer, bigger home when you don’t really need it (after all the baby sleeps mainly in a bassinet for the first five months, right?).
I think what could help you and your husband even more is to better understand how much money you will need that first year when the baby arrives. The good news is that since you won’t be hiring anyone to take care of your child you’ll save at least $5,000 a year in childcare costs, according to this nifty baby cost calculator at BabyCenter.com <http://www.babycenter.com/babyCostCalculator.htm> . I recommend using it to get a ballpark estimate of how much you’ll need in your savings account to cover all your child’s first year expenses. If you’ve been saving $2,000 a month you’re probably well on your way or have enough saved to cover the first couple of years.
Next, make sure you have sufficient health insurance. This is a biggie. If you’re not going to be working after you deliver find out if you and baby can piggyback on your husband’s health insurance plan from his company. Delivering a child, alone, including a last-minute epidural during delivery can be very expensive if your insurance company isn’t completely on-board. Definitely look into that by speaking with his company’s human resources department and health care provider.
Finally, since you and your husband hope to have your first child in the next year, I’d recommend seeing your doctor soon, getting on a health and fitness regiment and cutting the caffeine, all to prepare your body and reduce health risks.
If you have questions for Farnoosh, share them in the comments of this post: Your Money Problems, Solved with Farnoosh Torabi.
About Farnoosh Torabi
Farnoosh's financial advice has been featured in the pages of Real Simple, People, Money Magazine, The Wall Street Journal, The New York Times, Glamour, and The New York Post, as well as on The Today Show, CNN, MSNBC, and Thew View. Her second book Psych Yourself Rich comes out in September 2010. Find out more about Farnoosh on her website Farnoosh.tv.