Recently, my husband’s mother passed away. It was a difficult time for him and his brothers, made even tougher because his mother had competing wills. Thankfully, that situation worked itself out relatively easily, as no one came forward to contest her latest will. But going through the probate process really opened my eyes. At the time, my husband and I each had a will, but that was the extent of our estate planning. As I started doing some digging, I realized we were way off the mark in our planning, and that’s when I began to create a life plan for my family.
Constructing a life plan involves figuring out your wants and desires in life and mapping out the pathways to achieving those goals. Most life plans will start with savings and investments and move toward retirement. These sorts of financial life plans are vital, but there could be things you miss if you only focus on saving enough money for retirement. Life throws plenty of curveballs, and you need to plan for roadblocks if you want your map to be complete. Here are some factors that you won’t want to leave out of your life plan.
A Sudden Career Change
Most life plans start with the premise of gainful employment, and you can use the income derived from that to map out savings and investment strategies. However, what happens if you, for whatever reason, have a sudden change in your career? What if you’re fired unexpectedly from a seemingly secure job? Or, what if you decide on your own that you want to quit your job and explore another career? What happens then?
The keys to planning for this unexpected circumstance are to be flexible and to have some sort of backup savings. A large emergency fund that will support you several months of job hunting is crucial. If you’re prepared, you will have savings tucked away separate from your normal emergency fund that’s primarily used for home and car repairs and medical expenses.
While having a will is a great starting point, there are other particulars worth having in place, namely life insurance. A life insurance policy ensures that your family is taken care of should something happen to you, your spouse or the both of you. Rates can be fairly reasonable if you’re younger than 40, but if you’re older than that it’s still a worthwhile investment. You can also choose a permanent life insurance policy that you can sell later in life to free up cash for expenses. Alternatively, many people opt for final expense insurance, which can help cover the cost of your funeral and burial. Considering that the average cost of a funeral in the United States is around $8,508, this can help financially protect your finally after you pass.
Do You Want to Age in Place?
Everyone thinks about retirement in terms of how they will have enough money to support themselves as they age, but few begin to make plans for where and how they will live until the time comes. It’s never too early to think about where you’ll live in your golden years. Would you prefer to age in place and deed your home over to one of your descendants? Do you want to sell your house and downsize? What about an assisted living community? Setting aside money for your care later in life might seem hard at an early age, but it’s crucial if you don’t want to create a hardship for your family. Another option is to purchase a long-term care policy. These policies are a great safety net that can shoulder the burden of long-term care costs, which can be astronomical if you have a degenerative disease like Alzheimer’s or Parkinson’s.
How Will I pay for My Kids’ College?
Oftentimes, parents forget that their kids are going to need a lot of monetary help even after they leave the nest. The biggest expense is college as not every kid can acquire scholarships and grants. If you have the money and want to prevent your child from racking up a ton of student loan debt, you may want to consider planning to help pay for their college tuition (at least in part). And don’t forget to consider how you’ll cover ancillary costs, such as room and board, textbooks, laptops, and other necessities. There are many advantages to savings plans designed to be used specifically for college, like a 529 plan. Most of the time these are preferable to general savings or custodial accounts.
I feel a lot better now that my husband and I have created a life plan to account for these and other potential situations. I can rest a little easier at night knowing that my kids will be well taken care of should something happen to us and that if we’re lucky enough to live a long and happy life, my husband and I will have a good roof over our heads. If you haven’t created your own life plan, take some time to do so. It is definitely time well spent.