After ten or 12 years, your marriage is as comfortable as Saturday’s flannel shirt. Now the real work begins. Developing a sound plan to secure the financial future of your marriage has probably been lost in the crush of kids and career.
Many couples live paycheck to paycheck and don’t take a long view of their finances. This is the beginning of future money problems that will strain the marriage and could be catastrophic if one spouse dies or is incapacitated.
There’s a message in your burgeoning gut and the quickly evaporating balance in your checking account: You’re not a kid anymore and you’ve got to think about things like the mortgage, insurance, saving for college, retirement and even the unthinkable such as naming a legal guardian for your children should both you and your spouse die.
The type and amount of insurance you need is a good starting point for making a detailed financial plan. If the family depends on two incomes to cover daily expenses, think about insurance to cover medical costs and to replace at least a portion of the lost income if you or your spouse can no longer work.
529 College Savings Plan
At some point, you’ve got to think about getting the kids through college. Loans, scholarships and part-time work probably won’t cover all expenses, even at a state university, so take a look at a 529 College Savings Plan.
In general, funds set aside for college should be money available after meeting routine household expenses and other savings, including retirement.
The college savings plans, named for the section of the tax code that created them, now total about $43 billion in assets. In 2001, withdrawals from 529 College Savings Plans became tax free at the federal level for tuition, books and other qualified expenses. About half of the states offer tax breaks for contributing to their plans.
When selecting a 529 Plan, be sure to shop around for the best deal and remember that:
- Contribution limits may vary by state.
- Tax advantages may vary from state to state and may depend on whether the investor is a resident of the state that sponsors the plan.
- Fees and expenses vary by state and often among various plans offered by the same state.
- Investment options range from higher-risk stock funds to blended funds including stocks and bonds to conservative, short-term funds.
Why a "Family CFO" is important, even for young families
Getting the details right in your long-term financial plan takes time and extensive research. Time is often in short supply for young parents.
So, consider lining up a financial adviser as part of your plan to secure your future. About 75% of Americans don’t have a financial advisor despite the obvious benefits. An AG Edwards study showed that those who hire a pro have portfolios that, on average, represent 362% of their annual income while those who don’t have a financial adviser have portfolios representing about 105% of their annual income.
Instead, most couples take a worm’s eye view of their finances and fret about how they’ll cover expenses after an unexpected job loss, major illness or major home repair.
