Providing insight, ideas, tips and tidbits. 

Securing Your Financial Future

In a recent survey, 74.5% of individuals with at least $1 million in net worth felt that the world is a dangerous place (Source:  Financial Planning, June 2007).  While there might not be much we can do on an individual level to reduce crime, war, or even stock market corrections, we can take all appropriate steps to mitigate the risks under our control.  If you’re looking for ways to increase your financial security, consider the following tips:

•  Get your estate in order.  While dealing with your own mortality is often difficult, it is one of the most important things you can do to ensure your family can survive financially in the event of your death.  Make sure your will reflects your current desires for the disposition of your assets and names a guardian for your minor children.  You should also consider a durable power of attorney, which designates someone to control your financial affairs if you become incapacitated, and a health care proxy, which delegates health-care decisions when you are unable to make those decisions. 
• Review your portfolio.  Recent stock market fluctuations may have made you a little nervous about holding stocks.  But if you’re saving for goals that are decades away, stocks probably should continue to hold a major position in your portfolio.  The lesson we should learn from recent stock market fluctuations is that our portfolios should be diversified.  A properly diversified portfolio will help protect its value during market declines, while still offering higher return potential. 
• Take another look at your life insurance.  You need to purchase an appropriate amount of insurance to protect your family in the event of your death.  The amount needed will depend on your current net worth, the lifestyle you want to provide for your family, and your personal circumstances and desires.  Since your insurance needs will change over time, assess your insurance coverage periodically, especially after major events in your life.
• Obtain sufficient disability income insurance.  You should consider disability income insurance if your current assets won’t support you until age 65.  Many companies provide short-term disability insurance that covers 100% of your salary for three to six months.  Long-term disability insurance is typically less common and less generous.  Thus, even if you have long-term disability insurance at work, you may want to obtain additional coverage.  Your available resources and disability benefits should equal at least 60% of your pretax salary.
• Make sure you have an emergency cash reserve.  Consider setting aside at last three to six months of living expenses, although the exact amount will depend on your age, health, job outlook, and borrowing capacity.  This can help tide you over in case of a job layoff, short-term disability, or large, unexpected expenditure.
• Consider long-term-care insurance.  This coverage may be especially important for women, who tend to outlive their husbands.  You should probably purchase the insurance while you are in your 50s or 60s.  After that, the premiums get much more expensive.  Also, if you develop a serious health condition, you may not be able to purchase the insurance.
• Protect your financial identity.  While you typically won’t have to pay for anything charged by an identity thief, you will have to work to restore your credit and to ensure all fraudulent accounts are closed.  That can be time-consuming as well as expensive.  To help protect your financial identity, only give out your Social Security number when it is required, shred financial documents, cut up old credit cards, and review your credit reports periodically.
•  Keep your homeowners insurance up to date.  Review your homeowners policy carefully so you understand what would happen if your home was totally destroyed.  It is your responsibility to make sure you have adequate policy limits, so inform your insurance company when you make major improvements, get an inflation rider for your policy, and make sure your policy covers the total cost of rebuilding your home.
• Protect your home.  Obtain a good security system for your home.  Make sure all doors are metal or solid wood with deadbolt locks, use bars or locks to secure sliding glass doors, and keep all entrances well lit.
• Properly store important documents.  Documents that you might need when the bank is closed, such as passports, birth certificates, wills, or insurance policies, can be kept in a fireproof home safe.  Other documents, such as deeds, stock certificates, and titles, should be kept in a safe deposit box at a bank.

 Please call if you’d like to review these tips in more detail.