I’ve been learning something different lately. Through some seminars and online courses, I learn to look at money in a different perspective. If you have a family, you might want to examine your financial planning in the following 5 categories,
(1) Emergency funds—after the 2008 financial crisis in US, everyone probably appreciates the importance of having some cash at hand for rainy days. How much should you have and where should you put it? Should you store that money underneath your mattress or in a bank with meager interest earnings?
(2) Insurance—Many people have auto, home or health insurance, but what about insurance against the financial loss should the primary breadwinner be sick or pass away? If you decide to have life insurance, should you have a term life or a whole life? Is term life really cheaper than whole life?
(3) Retirement—It’s probably early for some of you to be thinking about retirement, but if you are like me, in mid-40s, retirement may not be that far off. What is your source of income after you retire? What could you do when your income can no longer support your current standard of living? How much would you (or our generation) get from social security? Would your 401k or IRA be enough to cover your living expenses for as long as you live?
(4) Education—If you have children, how to pay for college tuition probably cross your minds a few times. My parents and my in-laws paid for all my and my husband’s education through graduate schools. We would like to do the same for our girls. We have opened 529 accounts for our girls but there are talks that these accounts might not be as good as they are advertised. Is that true?
(5) Investment—Well, some of you might think, “Hey, I can barely scrape by with our income, who has extra money for investment?” Yet, this is closely related to the first category, emergency funds. It is certainly easy to save your money in the bank because you can get it out whenever you need it. With the current interest rate falling below 1%, however, your savings will depreciate every year due to inflation. What do you do then?
I’ll answer some of these questions later. In the meantime, please share your thoughts down below.
