By Patrick Amey
“Honey, we are having a baby!!!” The emotions that follow these words range from elation to terror. Elation from the joy that staring and raising a family will bring to your life. Terror from the prospect of what starting and raising a family will do to your life. Needless to say, it is a life-changing and perspective-altering moment in life. There will be a lot to do as you prepare to add another to your family. Below are my top 3:
- Get appropriate insurance – At this point in our lives, our human capital, or ability to earn income, is by far our largest asset. It makes sense to protect it in some way. This can be accomplished through basic life and disability insurance. When it comes to life insurance, there are two major questions to ask – what type and how much? In regards to type, I am partial to Term insurance because it is most cost effective. A new child brings lots of expenses, so keeping costs low can be important. In terms of amount, there are as many different ways to calculate this as there are agents that sell insurance. There are rules of thumb like ten times your annual salary and calculators like www.life-line.org. In either case, do not be shocked the calculator spits out a number with 7-digits. The value of your human capital is well into the million dollar range and that is what you are protecting. In terms of disability insurance, research if your company offers a long-term disability policy in which you can enroll. It may be cheaper and cover basic needs. The key to disability insurance is making sure you have enough to replace your take home income. Disability insurance is taxed differently depending on whether your employer pays or you pay. Consult an independent resource when obtaining life and disability insurance who can help you calculate your needs and shop the insurance market.
- Complete basic estate planning documents – Having estate planning documents are key when little ones come around. A Last Will and Testament, Powers of Attorney, and Health Directives are the basic documents that an attorney will compile for you. Each is important to have as you grow your family. The last will and testament names who will be guardians of your children, and who will inherit your property (money), and when they will inherit it. The guardian conversation is never an easy one. The conversations that need to be had to establish the right people for these documents are never easy. You have to imagine unlikely scenarios of something tragic happening to both of you so that you have to appoint someone to take care of your minor children. We recommend you name a succession of individuals or couples to make the document last longer. Same goes for who will inherit the money. We recommend you appoint a different person than the guardians to handle the money for the benefit of your children. The powers of attorney give your spouse and a succession of other people you name authority to act on your behalf if you become incapacitated.
- Celebrate – Growing your family is the most difficult and rewarding experience to go through. It is a blessing and deserves to be celebrated. There will be plenty of time for consideration and concern, but now is a time of celebration.
For help starting a financial plan for your growing family, schedule a meeting by clicking below, contact Patrick Amey –firstname.lastname@example.org, or call (913) 345-1881.