Although most people have one, few can actually define their Financial Plan. Is your plan stuck in a junk drawer someplace, with insurance policies, retirement account statements, and other financial information tossed in?
Are you adept at managing all of the accounts in your “junk drawer?” Does your insurance agent manage the insurance policies; your various brokers manage the stock and retirement accounts which are held by them, etc. If you have an accountant, does he or she merely do your taxes, or does he or she also advise on tax savings through various investments? Has your attorney ever communicated with any of your other advisors? Who coordinates the junk drawer?
Ideally, it’s nice to think that we are in the driver’s seat with our financial plan. After all, you are at the nucleus of your financial plan. Realistically, most of us are not well enough versed in all the parts of our plans, and rely fairly heavily on the insurance agent or stock broker for their advice.
As an insurance agent, I work off of the information that I am given. When a new client comes in for a consultation and doesn’t share all of his or her information, it’s difficult to get an accurate picture of what the client’s true needs are. Are the liability limits appropriate? What’s the purpose of the life insurance policy? The only way to determine this is to have an idea of the client’s total financial picture.
When your financial plan encompasses a variety of different advisors, do you share with
each of them the actions you are taking with the others? As an example, it is certainly beneficial for you to include your insurance agent in any discussion with your attorney
regarding the transfer of your estate. Is life insurance needed to pay off the potential estate tax? Or, have you set up a trust and the beneficiary on your current policy needs to be changed to the trust? How is it best to handle the policy? Should the
owner of the policy be a trust? Coordinating with one’s attorney and insurance agent can keep everyone on the same page with an agreed upon course of action.
For someone who is just starting out, things like life insurance and wills may not seem to
be a priority. Even if the cost of having a professional will done seems to be beyond your budget, a hand written will or one done through an on line legal source will direct probate to handle your estate the way you want it to be handled. Assets which include a vehicle and a thousand or two in a 401K might make a world of difference to one sibling, but not to the rest of the family. Put yourself in the driver’s seat by determining your wishes ahead of time.
For a young family, it can be imperative that they appoint a guardian through a will. Verbalizing to Grandma that you would like her to take care of the baby if something happens to you is fine, but, will not direct the courts to make the same choice.
How difficult it could be for both sides of the family if legal action were required to determine who will be the guardian of minor children. The smoothness of the transition for any child should be the first thing a parent considers. This is also an appropriate time to discuss life insurance. Benefits could be used to help offset the cost of raising your children.
A junk drawer can certainly be the first step. After all, you do have the start of a plan in there. Not only do you need to inform your advisors if your status changes, (a new job, raise, baby, etc.) but, also, keep advancing and changing your plan as needed with proper coordination of information amongst your various advisors. When the time comes to take the next step, don’t be afraid to obtain a financial planner to round out your plan.
