Your 4 Week Financial Check-Up Challenge: Week 4

June 15, 2015

This week is the last in the Financial Check-Up series and the final opportunity to enter your name in a random drawing for a personal financial planning consultation. Multiple entries are acceptable so be sure to like Financial Finesse on Facebook (or like this blog), tweet us on Twitter, or enter your comments below to enter your name for a professionally guided financial check-up. All entries received by Friday, June 19 at 11:59 PM will be entered into the drawing and the winner of the financial planning consultation will be announced next week. (If the winner prefers to “pay it forward” the consultation is transferable and may be gifted to a friend or family member.)

For the purpose of this 4 Week Financial Check-Up Challenge, we have covered some important topics. Week 1 focused on setting financial life goals and assessing financial health. Week 2 attempted to eliminate any negative thoughts associated with “budgeting” and focused on creating and following a more proactive and personal spending plan. Week 3 shifted the attention to reaching important financial life goals. Our final step during the Financial Check-Up Challenge is to look at ways to protect wealth through insurance and estate planning:

Maintain an emergency savings fund. This is not the “if” life happens account, it’s the “when” life happens account. An emergency savings fund should be at the core of every financial plan. A general rule is to have at least three to six months of living expenses in a separate account from your day-to-day checking account. Since this account is designated for emergencies, the money set aside for your Griswold style family vacation, Caribbean cruise, or that special trip to Disney or somewhere as far away from a theme park as possible doesn’t belong in the same emergency fund account.

Action Steps: Review your personal spending plan and consider it a core wealth protection (and debt avoidance) item. Use this emergency savings tool to estimate your needs and the Saving for Goals calculator to track your progress.

Protect against the potential loss of income. One of the biggest assets in our lives is the ability to work and generate income. Unfortunately, about half of all Americans surveyed would experience significant financial difficulties in less than a month without a paycheck. The thought of not being able to provide for my own family should I become injured or develop a severe illness is not a pleasant one. Disability insurance is an important way to protect your paycheck and your wealth in the event of an unexpected illness or injury.

Action Steps: Check with your employer to see what type of disability insurance benefits you have or are eligible for. Learn more about disability at LifeHappens.org to find out more about who needs it and how much coverage is recommended.

Protect your property. When is the last time you reviewed your auto, homeowners, or renters policies? It can be easy to put those bill payments on cruise control. But if it’s been a few years since your last review or if you’ve had any major life changes, (marriage, divorce, property additions, started a home business, etc.) you should review your coverage amounts or schedule a meeting with an insurance professional.

Action Steps: Review your automobile and homeowners (or renters) insurance policies to see if there are any gaps in coverage. You can also learn more about insuring other personal property such as watercraft, personal valuables, and small businesses here.

Maintain sufficient life insurance coverage. Life insurance is an important part of the financial planning process, yet not too many of us feel comfortable talking about it. Should the unexpected occur, you want to make sure your family will have their income replacement needs covered and final expenses will be funded. Life insurance proceeds can help cover these expenses and make sure that other important goals can be met such as paying off debt, sending children to college, funding a spouse’s retirement, or continuing a family business despite a tragic family loss.

Action Steps: Use this life insurance needs worksheet or visit LifeHappens.org to estimate how much coverage is sufficient for you and your family. Just remember that determining your actual life insurance needs often requires more than a basic calculator as you must look at all important factors involved. Compare the costs of supplemental life insurance through your employer with low cost term life insurance available for individuals (see Term4Sale.com to comparison shop).

Create (or review) your formal estate plan. It’s not just about death. It’s about living. What does that mean you may ask? Well, an estate plan provides peace of mind during our lifetime that our most important wishes will be met.

Charitable legacies, family stories, and passing on important values are part of this discussion that transcends the simple transfer of wealth. Too often people neglect to write a will or create other crucial estate planning documents because the topic of death and dying isn’t all that glamorous and exciting or we are too young, too poor, or too distracted to care. The reality is that everyone has an estate plan already but you don’t want your loved ones to be at the mercy of your state’s laws should you pass away without a more formal plan that can save loved ones time, money, and additional stress. Take steps to create a basic estate plan now so you have peace of mind that your loved ones are protected just in case the unexpected happens.

Action Steps: See if your employer offers an employee assistance program (EAP) with free legal consultations (many large corporations now offer free online estate planning document preparation). If you do not know where to turn to get these crucial documents, check out sites like LegalZoom, US Legal Forms, Rocket Lawyer, or Nolo. If your situation is not simple or you need more than basic guidance, paying extra for the services of a professional is suggested. You can use this Choosing an Estate Planner guide to find an estate planning attorney in your area.

Financial Check-Up Summary: This week’s blog post is the final in the four week series. No matter where you are in the financial planning process, it is important to take time out of your busy schedule to complete a basic financial check-up. Hopefully this blog series has helped you identify some areas of your financial plan in need of a little extra attention. Just keep in mind that it’s not a plan unless you put it in writing and the plan is only as effective as our habits and behaviors so go ahead and put your financial action plan items on your calendar and make the financial check-up process an annual routine.