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Whether
you're single because you've never married, or
are suddenly single due to divorce or death of
a spouse, money management and financial
planning are critical. You have only yourself
to depend on for income, goal-setting,
decision-making, and retirement planning. Here
are the issues that most need your attention:
Debt:
Know exactly who you owe, how much you owe
each creditor, and the interest rate on each
account. Develop a plan to pay down your debt.
Budget:
You've heard the expression: "You can't
get there from here," right? Well,
whoever coined the phrase might very well have
been talking about budgets. When it comes to
meeting your financial goals, without a budget
"you can't get there from here." A
budget doesn't have to be financial handcuffs
or a money diet.
Health
insurance:
It's common to feel invincible when you're
young. Many young singles take a huge
financial risk by going without health
insurance because they believe their youth and
good health makes insurance unnecessary. This
is one of the biggest mistakes you can make as
a single. You CAN become ill, regardless of
your age. You could be in a car accident, hurt
yourself skiing, tear a muscle lifting
weights, fall on the ice, get mono or
pneumonia, or incur any number of illnesses or
injuries that would land you in the hospital
and rack up large medical bills that may take
you decades to pay off.
Don't
be short-sighted. If you can't afford a good
plan with a low deductible, at least protect
yourself from catastrophic financial losses by
purchasing a less expensive plan with a high
deductible. You'll pay the small expenses
yourself, but the large ones that could ruin
your financial future will be covered by
insurance.
COBRA:
If you're covered under your employer's group
health insurance plan and you're about to
change jobs, check into COBRA coverage, which
allows you to continue your coverage under the
plan until you're covered under your new
employer's plan, for up to 18 months after
termination of employment. The cost to you is
whatever your employer pays, plus a small
administrative fee.
Disability
insurance:
Because you don't have a second family income,
it's very important that you protect your
income-generating power by buying long-term
disability insurance, and if possible,
short-term disability insurance. Disability
insurance will pay a percentage of your income
(usually 60%) if you're unable to work due to
illness or accident. Again, don't let your
feelings of invincibility prevent you from
protecting yourself. These coverages are much
more important to you than life insurance
unless you have dependents. Many employers
offer short- and long-term disability
insurance free or at a substantial savings.
Check with your Human Resources department.
Retirement
Planning:
If you're young, don't let your age fool you
into thinking it's too early to save for
retirement. The sooner you start saving, the
less you'll need to save overall, due to the
power of compounding, deferred taxes, and your
employer's 401(k) match if you're lucky enough
to have such a plan. Don't walk away from the
free gift your employer offers via the 401(k)
match. If you're not eligible for an
employer's plan, set up an IRA. Avoid a big
mistake many singles make: don't cash out your
401(k) account when you change jobs. Roll it
over into an IRA or another employer plan
instead. The cash is tempting, but spending
your retirement money is short-sighted.
Medi-gap
and Long-term Care Insurance:
Singles over 65 should purchase a Medi-gap
policy to cover medical expenses not covered
by Medicare. Singles over 50 may want to
consider a long-term care insurance policy,
which covers the expenses of a nursing home or
home health care if needed.
Your
Home:
If you're suddenly single due to divorce or
death of a spouse, it may be necessary or
prudent for you to move to a smaller home so
you have a smaller mortgage. This will make it
easier to make ends meet and may be the only
way you'll be able to save towards retirement.
Wills:
Wills are another item that many singles think
are unnecessary. They're wrong. If you own
anything of value (car, jewelry, house or
condo, computer, savings account, etc.), you
should have a will specifying who will get
your belongings if you die. If you have
children, a will is an absolute must, because
it's the method for designating a guardian for
them.
Living
Will and Health Care Power of Attorney:
If you become unable to make medical decisions
for yourself, a living will and power of
attorney will designate someone you trust to
make those decisions for you or carry out the
wishes you've indicated. See a lawyer or
financial planner to draft these documents.
One
should consult with a qualified financial
planning professional prior to implementing
financial planning strategies.
The
purpose of this newsletter is to stimulate
thought for my clients and those professionals
with whom I network. If you are a real
estate, estate planning, taxation, financial
planning or insurance professional receiving
this newsletter, please call my office and
introduce yourself to me. I'm always
seeking to grow my referral network, and to
expose more service professionals to my client
base. I specialize in helping those
individuals looking to buy, sell or refinance
real property in the Pacific Northwest Area.
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