I was driving last week looking for my destination and when a terrible feeling came over me. Was I lost?
And if you know me, I rarely get lost driving.
I had printed out directions (no, I don’t have a GPS) but at least I had a general idea of where the destination was.
A thought – is this how most people feel when it comes to their finances?
At least with directions, I have a goal in mind – my destination. But I still have choices. Mapquest offers options such as avoid highways. Or utilize highways more and such. So there might be 100 different ways to get there and I can choose which way I want to go (or have Mapquest show me).
When it comes to finances, think the choices we have today. 100’s of banks to choose from – either locally or online. 1000’s of mutual funds to invest in. 100’s of mortgage companies to borrow from. Several (and increasing in number) auto and home insurance companies to deal with. And so on.
And the worst part – most people have no idea what their destination is! Most would say to have a comfortable retirement, but what does that really mean in dollars and cents?
Too bad Mapquest can’t help here.
Take a simple thing like life insurance. There’s term. Or permanent. But which kind of permanent? What about a hybrid term/permanent? Cash value? Length of coverage? Cost?
And most important of all, how much insurance do I really need?
The answer can be found in any number of online calculators, but the real answer lies in how much you love your heirs (family or otherwise).
As a starting point, I always encourage clients to add up everything they want to pay off in case they are roadkill.
Start with the mortgage, credit card balances, auto loans, consumer loans, etc.
Add funeral expenses (could be $20,000 or more – less if you just have your body dumped in the river).
Add any ‘reimbursement’ of emergency funds. For example, you get run over by a bus but don’t die. Your spouse can’t work because they are visiting you in the hospital everyday. That lack of income eats up your emergency funds since your spouse still has expenses until you finally pass.
Add any college expenses or related items for children.
And any other one-time expenses – such as probate costs or taxes.
All together, that gives you an excellent starting point.
From there, working with a professional is a must. The other choices in this seemingly simple thing can be very complex. Having the wrong kind of coverage can be almost as bad as having no coverage at all.
Answer to last week’s trivia question: C - $367,000. Yikes! Probably more if your kids try out and make traveling baseball as my sons are doing. And $200 composite metal bats don’t help either…
This week’s trivia question – In a finding that will surprise no one, Massachusetts has yet again been deemed as a high tax state according to the Tax Foundation. Based on business, personal, and other taxes, where does MA rank out of the 50 states (#1 and best is South Dakota. #50 and worst is New Jersey). Is it?
A. 20th
B. 36th
C. 40th
D. 49th
