How to Change the Executor of a Will

A last will and testamentDrafting a last will and testament can help to ensure that your assets are distributed according to your wishes after you pass away. You can also use your will to name a legal guardian for minor children or choose an executor for your estate. It’s possible to make changes to your will after it’s written, including removing or adding an executor if necessary. If you’re wondering how to change the executor of a will after the fact, the process is easier than you might think. As you go about the process, it may behoove you to find a trusted financial advisor in your area for hands-on guidance.

Executor of a Will, Explained

The executor of a will is the person responsible for carrying out the terms of a will. When you name someone as executor, you’re giving him or her authority to handle certain tasks related to the distribution of your estate.

Generally, an executor can be any person you name. For example, that might include siblings, your spouse, adult children or your estate planning attorney. Minor children can’t serve as executors and some states prohibit convicted felons from doing so as well.

There’s no rule preventing a beneficiary of a will from also serving as executor. While beneficiaries can’t witness a will in which they have a direct interest, they can be charged with executing the terms of the will once you pass away.

What Does the Executor of a Will Do?

Being executor to a will means there are certain duties you’re obligated to carry out. Those include:

  • Obtaining death certificates after the will-maker passes away
  • Initiating the probate process
  • Creating an inventory of the will-maker’s assets
  • Notifying the will-maker’s creditors of the death
  • Paying off any outstanding debts owed by the will-maker
  • Closing bank accounts if necessary
  • Reading the will to the deceased person’s heirs
  • Distributing assets to the persons named in the will

Executors can’t change the terms of the will; they can only see that its terms are carried out. An executor can collect a fee for their services, which is typically a percentage of the value of the estate they’re finalizing.

Reasons to Change the Executor of a Will

While you may draft a will assuming that your choice of executor won’t change, there are different reasons why making a switch may be necessary. For example, you may need to choose a new executor if:

  • Your original executor passes away or becomes seriously ill and can’t fulfill his or her duties
  • You named your spouse as executor but you’ve since gotten a divorce
  • The person you originally named decides he or she no longer wants the responsibility
  • You’ve had a personal falling out with your executor
  • You believe that a different person is better equipped to execute your will

You don’t need to provide a specific reason to change the executor of a will. Once you’re ready to do so there are two options to choose from: add a codicil to an existing will or draft a brand-new will.

Using a Codicil 
to Change the Executor of a Will

Woman changes her will

A codicil is a written amendment that you can use to change the terms of your will without having to write a new one. Codicils can be used to change the executor of a will or revise any other terms as needed. If you want to change your will’s executor using a codicil, the first step is choosing a new executor. Remember, this can be almost anyone who’s an adult of sound mind, excluding felons.

Next, you’d write the codicil. In it, you’d specify the changes you’re making to your will (i.e. naming a new executor), the name of the person who should serve as executor going forward and the date the change should take effect. You’d also need to validate the codicil the same way you did your original will.

This means signing and dating the codicil in the presence of at least two witnesses. Witnesses must be legal adults of sound mind and they can’t have an interest in the will. So, a beneficiary to the will couldn’t witness your codicil but a neighbor or coworker could if they don’t stand to benefit from the will directly or indirectly.

Once the codicil is completed and signed by yourself and the witnesses, you can attach it to your existing will. It’s helpful to keep a copy of your will and the codicil in a safe place, such as a safe deposit box. You may also want to give a copy to your estate planning attorney if you have one.

Writing a New Will to 
Change the Executor of a Will

If you need to change more than just the executor of your will, you might consider drafting a new will document. The process for drafting a new will is similar to the one you followed for making your original one.

You’d need to specify who your beneficiaries will be, how you want your assets to be distributed and who should serve as executor. The new will would also need to be signed and properly witnessed.

But you’d have to take the added step of destroying all copies of the original will. This is necessary to avoid confusion and potential challenges to the terms of the will after you pass away. If you’re not sure how to draft a new will to replace an existing one, you may want to talk to an estate planning attorney to make sure you’re doing so legally.

What Happens If You Don’t Name an Executor?

Probate court hearing form

If, for any reason, you choose not to name an executor in your will the probate court can assign one. After you pass away, eligible persons can apply to become the executor of your estate. The person the court chooses would then be able to carry out the terms of your will. If you don’t have a will at all, then your assets would be distributed according to your state’s inheritance laws.

That’s why it’s important to take the time to at least write a simple will. This way, there’s no question of your estate being divided among your heirs the way that you want it to be.

The Bottom Line

Making a will can be a good starting point for shaping your estate plan. Naming an executor means you don’t have to rely on the probate court to do it. But if you need to change the executor of your will later, it’s possible to do so with minimal headaches.

Tips for Estate Planning

  • Consider talking to a financial advisor about creating an estate plan and what you might need. If you don’t have a financial advisor yet, finding one doesn’t have to be complicated. SmartAsset’s financial advisor matching tool can help you connect with an advisor in your local area. It takes just a few minutes to get your personalized recommendations online. If you’re ready, get started now.
  • A will is just one document you may need as part of your estate plan. You may also consider setting up a trust, for example, if you have extensive assets or own a business. Life insurance is something you may also need to have, along with an advance health care directive and/or power of attorney.

Photo credit: ©iStock.com/eric1513, ©iStock.com/kate_sept2004, ©iStock.com/courtneyk

The post How to Change the Executor of a Will appeared first on SmartAsset Blog.

Source: smartasset.com

How I Paid Off $40,000 In Student Loans in 7 Months

Want to learn how to pay off student loans? With my student loan repayment plan, I was able to pay off $40,000 in student loan debt in 7 months!Want to learn how to pay off student loans? With my student loan repayment plan, I was able to pay off $40,000 in student loan debt in 7 months! One of the best ways to save money is to finally get rid of those pesky loans that are hurting your financial situation.

Learning how to pay off student loans can lead to many positives, such as:

  • You may finally feel less financial stress.
  • You may be able to use that money towards something more important, such as saving for retirement.
  • Getting rid of your student loans may allow you to pursue other goals in life, such as traveling more or looking for a better job.

I know these things are true because learning how to pay off my student loans is one of the best decisions that I’ve ever made.

No, it wasn’t easy to pay off my student loans that quickly, but it was definitely worth it. No longer having those monthly payments hanging over my head is a HUGE relief, and it allowed me to eventually leave my day job and travel full-time.

Related posts on how to pay off student loans:

  • 6 Ways I Saved Money On College Costs
  • How Blogging Paid Off My Student Loans
  • The Benefits Of Paying Off Student Loan Debt Early
  • 30+ Ways To Save Money Each Month
  • 12 Work From Home Jobs That Can Earn You $1,000+ Each Month
  • How Do Student Loans Work?

How to pay off student loans and create a great student loan repayment plan:

 

Total how much student loan debt you have.

The very first thing that I recommend you do if you want to learn how to pay off student loans is to add up the total amount of student loans that you have.

When you total your student loans, do not just estimate how much student loan debt you have.

You should actually pull up each student loan and tally everything, down to the penny. By doing so, you will have a much more realistic view of exactly how much you’re dealing with.

Plus, the average person has no idea how much student loan debt they have! Usually, they have far more than they originally thought.

 

Understand your student loans better.

There are many people who simply do not understand their student loans. There are many things to research so that you can create the best student loan repayment plan, and this will also help you understand your loans and interest rates.

You should understand:

  • Your interest rate. Some student loans have fixed interest rates, whereas others might have variable rates. You’ll want to figure out what the interest rate on your loans are because that may impact the student loan repayment plan you decide on. For example, you might choose to pay off your student loans that have the highest interest rates first so that you can pay less money over time.
  • What a monthly payment means. Many people believe that a monthly payment is all that you have to pay, are allowed to pay, or that by paying just the minimum monthly payment you won’t owe any interest. These three things are so incorrect! Even if you pay the minimum monthly payment, you will most likely still owe interest charges (unless your interest rate is 0% – but that is very unlikely with student loans).
  • Student loan reimbursements. Some employers will give you money to put towards your student loans, but you should always do your research when it comes to this area. Some employers require that you work for them for a certain amount of time, you have great grades, good attendance, and they might have other requirements as well. There are many employers out there who will pay your student loans back (fully or partially), so definitely look into this option.
  • Auto-payment plans. For most student loans, you can probably auto-pay them and receive a discount. Always look into this as you may be able to lower your interest rate by 0.25% on each of your student loans.

I recommend that you check out Personal Capital (a free service) if you are interested in gaining control of your financial situation. Personal Capital allows you to aggregate your financial accounts so that you can easily see your financial situation, your cash flow, detailed graphs, and more. You can also connect accounts, such as your mortgage, bank accounts, credit card accounts, investment accounts, retirement accounts, and more. Plus, it’s FREE.

 

Determine if refinancing your student loans is right for you.

Student loan refinancing is when you apply for a new loan that is then used to pay off your other student loans. This may be a good option if your credit history or credit score is better than when you originally took out your student loans.

By refinancing your student loans, you may qualify for better repayment terms, a lower interest rate, and more. This is great because it may help you pay off your student loans quicker.

The positives of refinancing student loans include:

  • One monthly payment to simplify your finances.
  • Lower monthly payments.
  • Lower interest rates, and more.

Some companies, like Credible, allow you to refinance your federal student loans as well as your private student loans into one. On average, refinancing can save you thousands of dollars on your loan, which is amazing!

However, before refinancing a federal student loan, you will want to think about different federal benefits that you may be giving up. You may give up income-based repayment plans and loan forgiveness for those who have certain public service jobs (such as jobs at public schools, the military, Peace Corps, and more). By refinancing federal student loans, you are giving up any future option to these.

Read further at: Consolidating And Refinancing Student Loans – What You Should Know.

Related tip on how to pay off student loans: I highly recommend Credible for student loan refinancing. They are the top student loan refinancing company and have great customer service! You can significantly lower the interest rate on your student loans which may help you shave thousands off your student loan bill over time. Through Credible, you may be able to refinance your student loans at a rate as low as 2.14%! Plus, it’s free to apply and Credible is giving Making Sense of Cents readers a $100 bonus when they refinance.

 

Reduce your interest rate for your student loan repayment plan.

As I stated earlier, if you automatically pay your student loans each month or consolidate them, then sometimes you can get an interest rate reduction.

With Sallie Mae, I believe the reduction is 0.25%.

That may not seem significant, but it is something! Remember, every little bit counts when it comes to having a good student loan repayment plan.

 

Create the best budget.

If you don’t have one already, then you should create a budget immediately. This will help you learn how to pay off student loans as you’ll learn how to manage your money better.

Budgets are great, because they keep you mindful of your income and expenses. With a budget, you will know exactly how much you can spend in a category each month, how much you have to work with, what spending areas need to be evaluated, among other things.

Learn more at How To Create a Budget That Works.

 

Look for more ways to earn money.

Making extra money can allow you to pay off your students loans quickly because there is no limit to how much money you can make.

Finding ways to make extra money is how I was able to pay off my student loans so quickly!

And trust me, you probably do have time in your day to make extra money.

Just think about it: The average person watches 35 hours of TV a week and spends around 15 hours a week on social media. If you could use that time better and make more money with those extra hours, you’ll be able to pay off your student loans in no time!

Here are some ways to make more money so that you can learn how to pay off student loans:

  • Start a blog. Blogging is how I make a living and just a few years ago I never thought it would be possible. I earn around $100,000 a month through blogging. You can create your own blog here with my easy-to-use tutorial. You can start your blog for as low as $2.95 per month, plus you get a free domain if you sign-up through my tutorial.
  • Start a business. There are many business ideas that you could start in order to make extra money.
  • Sell your stuff. There are many things you can do to make money by selling items. We all have extra things laying around that can be sold, or you can even search for items that can be bought and resold for a profit.
  • Rent an extra room in your home. If you have extra space in your house, then you may want to rent it out. Read A Complete Guide To Renting A Room For Extra Money.
  • Answer surveys. Survey companies I recommend include Swagbucks, Survey Junkie, Pinecone Research, Opinion Outpost, Prize Rebel, and Harris Poll Online. They’re free to join and free to use! You get paid to answer surveys and to test products. It’s best to sign up for as many as you can as that way you can receive the most surveys and make the most money.
  • Become an Uber or Lyft driver. Driving others around in your spare time can be a great money maker. Read more about this in my post – How To Become An Uber Or Lyft Driver. Click here to join Uber and start making money ASAP.
  • Find a part-time job. There are many part-time jobs that you may be able to find. You can find a job on sites such as Snagajob, Craigslist (yes, I’ve found a legitimate job through there before), Monster, and so on.

Related articles that will help you learn how to pay off student loans:

  • 75+ Ways To Make Extra Money
  • 8 Things To Sell To Make Money
  • 10 Ways To Make Money Online From The Comfort of Your Home
  • 10 Things I’ve Done To Make Extra Money
  • Ways To Make An Extra $1,000 A Month

 

How to pay off your student loans – Find ways to reduce your expenses.

The next step is to cut your budget so that you can have a faster student loan repayment plan. Even though you may have a budget, you should go through it line by line and see what you really do not need to be spending money on.

There’s probably something that you’re wasting your money on.

Until you write it down in your budget, you may not realize how much money you are wasting on things you don’t need. And, remember, it’s never too late to start trimming your budget and to put your money towards important things like paying off student loans!

Even if all you can cut is $100 each month, that is better than nothing. That’s $1,200 a year right there!

Some expenses you may be able to cut include:

  • Lower your cell phone bill. Instead of paying the $150 or more that you currently spend on your cell phone bill, there are companies out there like Republic Wireless that offer cell phone service starting at $15. YES, I SAID $15! If you use my Republic Wireless affiliate link, you can change your life and start saving thousands of dollars a year on your cell phone service. If you are interested in hearing more, I created a full review on Republic Wireless. I’ve been using them for over a year and they are great.
  • ATM fees. You don’t need to pay ATM fees, but for some reason so many people do!
  • Sign up for a website like Ebates where you can earn CASH BACK for spending how you normally would online. The service is free too! Plus, when you sign up through my link, you also receive a free $10 cash back!
  • Pay bills on time. This way you can avoid late fees.
  • Shop around for insurance. This includes health insurance, car insurance, life insurance, home insurance, and so on. Insurance pricing can vary significantly from one company to the next. The last time we were shopping for car insurance, we found that our old company wanted something like $205 to insure one car for one month, whereas the company we have now charges $50 a month for the same exact coverage. INSANE!
  • Save money on food. I recently joined $5 Meal Plan in order to help me eat at home more and cut my food spending. It’s only $5 a month (the first four weeks are free) and they send meal plans straight to you along with the exact shopping list you need in order to create the meals. Each meal costs around $2 or less per person. This allows you to save time because you won’t have to meal plan anymore, and it will save you money as well!
  • Fuel savings. Combine your car trips, drive more efficiently, get a fuel efficient car, etc.
  • Trade in your car for a cheaper one. For us, we are car people. Cars are one of our splurges. However, if you only have a nice car to keep up with the Joneses, then you might want to get rid of it and get something that makes more sense.
  • Live in a cheaper home. I’m not saying that you need to live in a box, but if you live in a McMansion, then you may want to think about a smaller home. This way you can save money on utility bills and your mortgage payment.
  • Learn to have more frugal fun. We don’t spend anywhere near the same amount of money on entertainment as we used to. There are plenty of ways to have frugal fun.
  • Look for coupon codes. I search for coupon codes for everything. Today, I have two for you. I have a $20 Airbnb coupon code and a free taxi ride with Uber. Both are great services that I have personally used.

 

See if your employer will reimburse your student loan debt.

Some companies will pay your student loans quickly if you work for them. I even know of someone who receives a $2 bonus for each hour that she works to put towards her student loans.

$2 may not seem like a lot, but if you work full-time, then that’s over $300 a month. $300 a month for student loans is a good amount! And, because it’s free money, it can all be put towards paying off your student loans quickly.

 

Create a plan to pay off your student loans.

After you have completed the steps above, you’ll want to put it all together and create a plan.

Without a plan, you would just be all over the place, making it difficult to reach your goal of learning how to pay off student loans.

You should create a plan that details the steps you need in order to pay off your student loans, what will happen as you reach each step, when and how you will track your progress, and more.

Being detailed with your plan will help you reach your goal and become successful.

 

Stay motivated with your student loan repayment plan.

Finding motivation can be a hard task for anyone. Motivation is important because it can help you keep your eye on the goal even when you want to quit. Motivation will help you continue to work hard towards your goal, even when it seems impossible. Motivation is what keeps you going so that you do not quit.

Yes, student loan repayment can seem very stressful when you think about it. Many people owe thousands and thousands in student loans.

And, no matter how young or old you are, learning how to pay off student loans can seem difficult or even near impossible. However, think about your goal and how good life will be once all of your student loan debt is gone.

Please try to not let your student loans get you down. Think positively and attack that debt so that you can pay off your student loans fast!

Trust me, once you finally pay off those pesky student loans, you’ll be happier than ever!

Related post on how to pay off student loans: 8 Ways To Get Motivated And Reach Your Goals

 

Pay more than the minimum if you want to learn how to pay off student loans!

The point of what I’ve written above is to help you pay off your student loans. However, you can always go a little bit further and pay off your student loans more quickly.

The key to speeding up your student loan repayment process is that you will need to pay more than the minimum each month.

It may sound hard, but it really doesn’t have to be. Whatever extra you can afford, you should think about putting it towards your student loans. You may be able to shave years off your student loans!

What other ways can a person learn how to pay off student loans? What’s your student loan repayment plan?

The post How I Paid Off $40,000 In Student Loans in 7 Months appeared first on Making Sense Of Cents.

Source: makingsenseofcents.com

Money Moves to Make in Your 20s, 30s, and 40s

Reaching your twenties is an exciting milestone for most as it means you’ve officially entered adulthood. Along with that milestone comes new responsibilities and worries that we didn’t picture when our teenage selves dreamed of turning 21. We imagined our college graduation, moving into our first apartment, and launching our new career. That vision didn’t include dealing with student loan debt, taking on a low paying entry-level job, or having to confront that despite spending 4 years in college, you’re still unsure how the world of personal finance actually works.

It’s easy to dismiss it all because well you’re a 20 something, and you’ll have plenty of time to play catch up. The reality is that each decade plays an important role in our future financial health. Take the time now to learn about your money and follow the money moves outlined below to put yourself on a path of lifelong financial success and eventual freedom.

Money Moves to Make in Your 20’s:

Learn How To Budget

Building a budget doesn’t have to be overly complicated or time-consuming. It’s actually the first step in putting yourself in control of your finances because it means you know where your money goes each month. The good news is that there are lots of apps and online tools that can make the process a breeze. Consider a system like Mint that will connect to your accounts and automatically categorize your spending for you. The right budgeting tool is simply the one you’ll stick with long term.

Pay Off Debt

Debt isn’t all bad. It may be the reason you were able to earn your degree, and a mortgage may help you one day buy a home. It can also quickly overrun your life if you aren’t careful. Now’s the perfect time before life gets more hectic with family commitments to buckle down and tackle any loans or credit card balances so you can be debt-free going into your 30’s.

Build a Cash Cushion

The financial downturn caused by the pandemic has reminded the whole world of the importance of having an emergency fund. We don’t know what life is going to throw at us and having a cushion can help you navigate the uncertain times. Though it’s not all about having a secret stash of cash to deal with the bad news of life (medical bills, car repair, layoff), it can also be about having the cash to seize an exciting opportunity. Having savings gives you the freedom and security to deal with whatever life brings your way – good or bad.

Understand Credit

Your credit score can dictate so much of your life. That little number can play a big role in the home you buy, the car you drive, and even the job you hold as some employers (especially in the finance world) will pull your credit. It’s important that you check your credit report and score (also available through Mint), learn how it’s calculated, and work to improve it.

Money Moves to Make in Your 30’s:

Invest For Retirement

Now that you’ve spent your 20’s building the foundation for your financial life, it’s time to make sure you’re also tackling the big picture goals like saving and investing for retirement. I typically recommend that clients save 10% to 15% of their annual income towards retirement. That may seem like an insurmountable goal, but starting small by saving even 1 to 3% of your salary can make a big difference in the future. Also, make sure to take advantage of any matching contributions that your employer may provide in your retirement plan. If, for example, they offer to match contributions up to 6%, I would try hard to work towards contributing at least 6%.

Buying Your First Home

Buying your first home is a top goal for many, but it also seems to be getting increasingly more difficult especially if you live in a major city. The most important steps you can take is to improve your credit score, pay down high-interest debt, and be aggressive about saving for a down payment. Saving 20% down will help you qualify for the best loan terms and interest rate, but there are still home loans available even if you aren’t able to save that much. Just be realistic with your budget and what you can afford. Don’t let a lender or real estate agent determine what payment will fit into your budget.

Be Covered Under These Must-Have Insurances

You’ve spent the last several years building your savings and growing your family. It’s now crucial that you have the proper insurance coverage in place to protect your assets and your loved ones. Life and disability insurance are top of the list. Life insurance doesn’t have to be expensive or complex. Get a quote for term-life that will last a set number of years and protect your partner and children during those crucial years that they depend on you. Disability insurance protects your income if you become sick or injured and are unable to work. Your earning ability is one of your biggest assets during this time, and you should protect it. This coverage may be offered through your employer, or you can request a quote for an individual policy.

Invest in Self-Care and Well Being

Mental health is part of self-care and wealth. Most people don’t talk about how financial stress and worry affect their overall health. When you can take care of yourself on all levels, you will feel healthier and wealthier, and happier. But it is not easy. It takes work, effort, awareness, and consciousness to learn how to detach the value in your bank account or financial account from your self-worth and value as a human being. When you feel emotional about your money, investments, or the stock market, learn ways to process them and take care of yourself by hiring licensed professionals and experts to help you.

Money Moves to Make in Your 40’s:

Revisit Your College Savings Goal

As your kids get older and prepare to enter their own journey into adulthood, paying for college is likely a major goal on your list. Consider opening a 529 plan (if you haven’t already) to save for their education. 529 plans offer tax advantages when it comes to saving for college. There are lots of online resources that can help you understand and pick the right plan for you. Visit https://www.savingforcollege.com. This is also a great time to make sure you’re talking to your kids about money. Give them the benefit of a financial education that you may not have had.

Get Aggressive with Retirement Planning

Your 40’s likely mark peak earning years. You’ll want to take advantage of your higher earnings to maximize your retirement savings especially if you weren’t able to save as much in your 20’s and 30’s. Revisit your retirement plan to crunch the numbers so you’ll be clear on what you need to save to reach your goal.

Build More Wealth

You’ve arrived at mid-life probably feeling younger than you are and wondering how the heck that big 4-0 got on your birthday cake. We typically associate being 20 with being free, but I think we’ve got it wrong. There is something incredibly freeing about the wisdom and self-assurance that comes with getting older. You’ve proved yourself. People see you as an adult. Your kids are getting older and your finances are more settled. Now’s the time to kick it up to the next level. Look for ways to build additional wealth. This may mean tapping into your entrepreneurial side to launch the business you’ve dreamed of or buying real estate to increase passive income. Now’s also a great time to find a trusted financial advisor who can help guide your next steps and help you plan the best ways to build your wealth.

Revisit Your Insurance Coverage

Insurance was crucial before, but it’s time to revisit your coverage and make sure you’re protected especially if you decide to launch a business or buy additional real estate. This is also where a financial advisor can help you analyze your coverage needs and find the policies that will work for you.

Consider Estate Planning

Estate planning (think wills, trusts, power of attorney) isn’t the most fun / exciting topic. It involves imagining your gone and creating a plan for the loved ones you leave behind. It is also often overlooked by adults in their younger years. It’s easy to assume estate planning is something the wealthy need to do. It really comes down to whether you want to decide how your life savings will be managed or if you want a court to decide. It’s also crucial for parents with children who are minors to select a guardian and have those uncomfortable conversations with their family members about who would care for the children if the worst were to happen. It’s also a good time to visit this topic with your own aging parents and make sure they have the proper documents and plans in place.

 

Whether you’re in your 20’s, 30’s or 40’s, it can be easy to put off planning your finances especially in the middle of a pandemic. Most of us are busy, and it’s easy to tell yourself that you’ll have time to work on a goal in the future. Commit to setting aside one hour each week or even each month to have a money date and review your finances. Don’t let yourself reach a milestone birthday (30, 40) and regret not being farther ahead. Follow these money moves now to seize control of your financial future.

The post Money Moves to Make in Your 20s, 30s, and 40s appeared first on MintLife Blog.

Source: mint.intuit.com

10 Financial Steps to Take Before Having Kids

According to the U.S. Department of Agriculture (USDA), raising a child to the age of 18 sets families back an average of $233,610, and that’s for each child. This figure doesn’t even include the cost of college, which is growing faster than inflation. 

CollegeBoard data found that for the 2019-2020 school year, the average in-state, four-year school costs $21,950 per year including tuition, fees, and room and board. 

Kids can add meaning to your life, and most parents would say they’re well worth the cost. But having your financial ducks in a row — before having kids — can help you spend more time with your new family instead of worrying about paying the bills.

10 Financial Moves to Make Before Having Kids

If you want to have kids and reach your long-term financial goals, you’ll need to make some strategic moves early on. There are plenty of ways to set yourself up for success, but here are the most important ones. 

1. Start Using a Monthly Budget

When you’re young and child-free, it’s easy to spend more than you planned on fun activities and nonessentials. But having kids has a way of ruining your carefree spending habits, and that’s especially true if you’ve spent most of your adult life buying whatever catches your eye.

That’s why it’s smart to start using a monthly budget before having kids. It helps you prioritize each dollar you earn every month so you’re tracking your family’s short- and long-term goals.

You can create a simple budget with a pen and paper. Each month, list your income and recurring monthly expenses in separate columns, and then log your purchases throughout the month. This gives you a high-level perspective about money going in and out of your budget. You can also use a digital budgeting tool, like Mint, Qube Money, or You Need a Budget (YNAB) to get a handle on your finances. 

Regardless of which budgeting tool you choose, create categories for savings (e.g. an emergency fund, vacation fund, etc.) and investments. Treat these expense categories just like regular bills as a way to commit to your family’s money goals. Your budget should provide a rough guide that helps you cover household expenses and save for the future while leaving some money for fun.

2. Build an Emergency Fund

Most experts suggest keeping three- to six-months of expenses in an emergency fund. Having an emergency fund is even more crucial when you have kids. You never know when you’ll face a broken arm, requiring you to cover your entire health care deductible in one fell swoop. 

It’s also possible your child could be born with a critical medical condition that requires you to take time away from work. And don’t forget about the other emergencies you can face, from a roof that needs replacing to a job loss or income reduction. 

Your best bet is opening a high-yield savings account and saving up at least three months of expenses before becoming a parent. You’ll never regret having this money set aside, but you’ll easily regret not having savings in an emergency.

3. Boost Your Retirement Savings Percentage

Your retirement might be decades away, but making retirement savings a priority is a lot easier when you don’t have kids. And with the magic of compound interest that lets your money grow exponentially over time, you’ll want to get started ASAP. 

By boosting your retirement savings percentage before having kids, you’ll also learn how to live on a lower amount of take-home pay. Try boosting your retirement savings percentage a little each year until you have kids. 

Go from 6% to 7%, then from 8% to 9%, for example. Ideally, you’ll get to the point where you’re saving 15% of your income or more before becoming a parent. If you’re already enrolled in an employer-sponsored retirement plan, this change can be done with a simple form. Ask your employer or your HR department for more information.

If you’re self-employed, you can still open a retirement account like a SEP IRA or Solo 401(k) and begin saving on your own. You can also consider a traditional IRA or a Roth IRA, both of which let you contribute up to $6,000 per year, or $7,000 if you’re ages 50 or older. 

4. Start a Parental Leave Fund

Since the U.S. doesn’t mandate paid leave for new parents, check with your employer to find out how much paid time off you might receive. The average amount of paid leave in the U.S. is 4.1 weeks, according to a study by WorldatWork, which means you might face partial pay or no pay for some weeks of your parental leave period. It all depends on your employer’s policy and how flexible it is.

Your best bet is figuring out how much time you can take off with pay, and then creating a plan to save up the income you’ll need to cover the rest of your leave. Let’s say you have four weeks of paid time off, but plan on taking 10 weeks of parental leave, for example. Open a new savings account and save weekly or monthly until you have six weeks of pay saved up. 

If you have six months to wait for the baby to arrive and you need $6,000 saved for parental leave, you could strive to set aside $1,000 per month for those ten weeks off. If you’re able to plan earlier, up to 12 months before the baby arrives, then you can cut your monthly savings amount and set aside just $500 per month.

5. Open a Health Savings Account (HSA)

A health savings account (HSA) is a tax-advantaged way to save up for health care expenses, including the cost of a hospital stay. This type of account is available to Americans who have a designated high-deductible health insurance plan (HDHP), meaning a deductible of at least $1,400 for individuals and at least $2,800 for families. HDHPs must also have maximum out-of-pocket limits below $6,900 for individuals and $13,800 for families. 

In 2020, individuals can contribute up to $3,550 to an HSA while families can save up to $7,100. This money is tax-advantaged in that it grows tax-free until you’re ready to use it. Moreover, you’ll never pay taxes or a penalty on your HSA funds if you use your distributions for qualified health care expenses. At the age of 65, you can even deduct money from your HSA and use it however you want without a penalty. 

6. Start Saving for College

The price of college will only get worse over time. To get a handle on it early and plan for your future child’s college tuition, start saving for their education in a separate account.  Once your child is born, you can open a 529 college savings account and list your child as its beneficiary. 

Some states offer tax benefits for those who contribute to a 529 account. For example, Indiana offers a 20% tax credit on up to $5,000 in 529 contributions each year, which gets you up to $1,000 back from the state at tax time. Many plans also let you invest in underlying investments to help your money grow faster than a traditional savings account. 

7. Pay Off Unsecured Debt

If you have credit card debt, pay it off before having kids. You’re not helping yourself by spending years lugging high-interest debt around. Paying off debt can free-up cash and save you thousands of dollars in interest every year. 

If you’re struggling to pay off your unsecured debt, there are several strategies to consider. Here are a few approaches:

Debt Snowball

This debt repayment approach requires you to make a large payment on your smallest account balance and only the minimum amount that’s due on other debt. As the months tick by, you’ll focus on paying off your smallest debt first, only to “snowball” the payments from fully paid accounts toward the next smallest debt. Eventually, the debt snowball should leave you with only your largest debts, then one debt, and then none.

Debt Avalanche

The debt avalanche is the opposite of the debt snowball, asking you to pay off the debt with the highest interest rate first, while paying the minimum payment on other debt. Once that account is fully paid, you’ll “avalanche” those payments to the next highest-rate debt. Eventually, you’ll only be left with your lowest-interest account until you’ve paid off all of your debt. 

Balance Transfer Credit Card

Another popular strategy involves transferring high-interest balances to a balance transfer credit card that offers 0% APR for a limited time. You might have to pay a balance transfer fee (often 3% to 5%), but the interest savings can make this strategy worth it.

If you try this strategy, make sure you have a plan to pay off your debt before your introductory offer ends. If you have 15 months at 0% APR, for example, calculate how much you need to pay each month for 15 months to repay your entire balance during that time. Any debt remaining after your introductory APR period ends will start accruing interest at the regular, variable interest rate. 

8. Consider Refinancing Other Debt

Ditching credit card debt is a no-brainer, but debt like student loans or your home mortgage can also weigh on your future family’s budget.

If you have student loan debt, look into refinancing your student loans with a private lender. A student loan refinance can help you lower the interest rate on your loans, find a manageable monthly payment, and simplify your repayment into one loan.

Private student loan rates are often considerably lower than rates you can get with federal loans — sometimes by half. The caveat with refinancing federal loans is that you’ll lose out on government protections, like deferment and forbearance, and loan forgiveness programs. Before refinancing your student loans, make sure you won’t need these benefits in the future. 

Also look into the prospect of refinancing your mortgage to secure a shorter repayment timeline, a lower monthly payment, or both. Today’s low interest rates have made mortgage refinancing a good deal for anyone who took out a mortgage several years ago. Compare today’s mortgage refinancing rates to see how much you can save. 

9. Buy Life Insurance

You should also buy life insurance before having kids. Don’t worry about picking up an expensive whole life policy. All you need is a term life insurance policy that covers at least 10 years of your salary, and hopefully more.

Term life insurance is extremely affordable and easy to buy. Many providers don’t even require a medical exam if you’re young and healthy. 

Once you start comparing life insurance quotes, you’ll be shocked at how affordable term coverage can be. With Bestow, for example, a thirty-year-old woman in good health can buy a 20-year term policy for $500,000 for as little as $20.41 per month. 

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10. Create a Will

A last will and testament lets you write down what should happen to your major assets upon your death. You can also state personal requests in writing, like whether you want to be kept on life support, and how you want your final arrangements handled.

A will can also formally define who you’d like to take over custody of your kids, if both parents die. If you don’t formally make this decision ahead of time, these deeply personal decisions might be left to the courts.

Fortunately, it’s not overly expensive to create a last will and testament. You can meet with a lawyer who can draw one up, or you can create your own using a platform like LegalZoom.

The Bottom Line

Having kids can be the most rewarding part of your life, but parenthood is far from cheap. You’ll need money for expenses you might’ve never considered before — and the cost of raising a family only goes up over time.

That’s why getting your money straightened out is essential before kids enter the picture. With a financial plan and savings built up, you can experience the joys of parenthood without financial stress.

The post 10 Financial Steps to Take Before Having Kids appeared first on Good Financial Cents®.

Source: goodfinancialcents.com

How to Find Affordable Life Insurance

Life insurance can be expensive and if it’s essential those high costs can leave a nasty taste in your mouth. You may wonder if it’s worth purchasing a policy at all, which could place your family in jeopardy as they won’t have the cover they need when you pass. 

However, there are a few ways you can bring those costs down and get affordable life insurance. So, don’t despair, and take a look at these top tips for cheap life insurance.

How are Life Insurance Payouts and Premiums Judged?

Insurance underwriters set your premiums and your payout based on the likelihood that you will die during the term. It sounds pretty morbid, but these are for-profit companies we’re talking about and when death is your only liability, there’s no time for gentility. 

It’s something that frustrates everyone who has ever been quoted high premiums, but it’s important to see things from the perspective of the underwriter. If you’re 100 pounds over your ideal weight, your risk of heart disease, cancer, and countless other diseases increases, and you become more of a liability. 

It doesn’t matter how much you convince them that you’re on a diet and will lose all of that weight eventually—as things stand right now, you’re more of a liability than someone who weighs 100 pounds less.

Of course, it’s possible to be 140 pounds and unhealthy, just as it’s possible to be 240 pounds and healthy, and this is an argument that many applicants make. But those are the exceptions. The oldest woman ever smoked until the day she died and made it halfway through her 122nd year, and everyone knows of at least one smoker that continued the habit well into their 70th and 80th year, seemingly unaffected. 

However, the average smoker will die 10 years before their non-smoking counterpart and their risk of contracting a host of diseases increases exponentially for every decade that they stick with the habit. Should a life insurance company dismiss your habit just because of a 122-year-old French woman? Of course not. 

These are statistics and probabilities; they focus on the most likely and the most common. By their very nature, there will always be exceptions and outliers. A life insurance company doesn’t care about any of these because as long as they focus on the events that are most likely (obese policyholders and smokers will die young; preexisting medical conditions are more likely to reoccur than if they didn’t exist at all) the premiums will exceed the payouts and they will turn a profit. 

Start Early

The sooner you apply for life insurance, the better your chances of getting a high payout and a low premium. Age is one of the biggest factors in determining your mortality risk. A 20-year-old has a high chance of surviving a 30-year-term, but for every additional year, those odds decline and by the time they hit 55, the odds are no longer in their favor.

Starting early doesn’t just protect your loved ones if you die before your time, it also gives you more options. This is when whole life insurance policies are at their most beneficial. These will payout regardless, even if you live to be 100. The life insurance company will still benefit, however, because many of these policies either lapse because of non-payment (a lot can happen in those 80 years) or the policyholder takes the cash value.

They’re like a life insurance policy and saving account bundled into one, but they become less viable as you age.

Make Big Changes

You probably knew this tip was going to be here, but it’s worth mentioning: If you smoke, stop; if you’re obese, lose weight. We can’t stress enough how much of a difference these things will make to your life insurance application.

If you’re a smoker and you’re obese, you’re a massive liability. Statistically speaking, you’ll be beating the odds if you make it to your 60th year, which means a 30-year term stops being a viable option when you’re just 31! If that’s not enough to scare you, then there’s nothing we can say that will.

By quitting cigarettes and dropping a few dozen pounds, you improve your chances of living a long and full life, which, in turn, means you’ll get cheaper life insurance premiums.

And these are not the only changes you should consider making. Many applicants fail to calculate just how much of a liability they become when they partake in extreme sports and activities such as base jumping, parkour, sky diving, and rock climbing. Some of these are riskier than others, but in all cases, the underwriter will compare them to the averages to determine your likelihood of dying young.

Roughly 10 skydivers will die for every 1 million that jump on a regular basis. However, more than 40 times as many will die from base jumping and you’re 30 times more likely to die from extreme mountaineering than you are from base jumping. 

Some of these are less risky than you might think. For instance, you’re twice as likely to die from walking than you are from horseback riding, as the former puts you at risk of major pedestrian accidents. 

You’re also more likely to die from getting out of bed aged 45 than you are from SCUBA diving. So, assess the risks, try to look at your situation from the underwriter’s perspective, and make changes where necessary without giving up all the things that you enjoy.

Wait

You can apply for life insurance as soon as you lose weight or give up risky and dangerous activities. You can reap the benefits straight away when you do this, but the same can’t be said for everything. 

Smoking is a great example of this. If you quit smoking today, you will need to wait at least 12 months before that has an impact on your life insurance policy. It only makes sense when you consider the majority of short-term cessations will result in relapse. 

The underwriter also wants to protect their bottom line, because you won’t start feeling the health benefits until several months have passed and before that time elapses, you’re still a high risk for many diseases and conditions.

Look for Group Life Insurance 

If you can’t get life insurance by applying directly, you may be offered it through an employer. Group life insurance is offered to large groups of people and is typically provided by employers.

You probably won’t get the same extensive cover, but you will get some cover, and this is a great alternative if you’re struggling to seal the deal yourself.

Only Buy What You Need

It’s tempting to get a big payout when you’re buying life insurance as that payout can then provide a good life for your loved ones. But life insurance shouldn’t be like winning the lottery. It’s not designed to allow them to quit work and spend the rest of their lives sipping champagne on Mediterranean cruises.

The payout should cover all of their needs for several years, while also repaying any debts that you (or your loved ones) have. If you have a mortgage, it can also go towards repaying this.

Many life insurance experts recommend that you stick with the absolute basics in situations where the remaining family members can still support themselves. For instance, let’s suppose that you’re a 50-year man in relatively good health. You earn roughly the same money as your wife, but she’s 10 years younger than you and you also have a son at college and a mortgage with $50,000 left to pay.

In this case, the payout should be at least $50,000, plus the size of remaining debts. However, you don’t need to include all debts in this. Some debts, including all federal student loans, will die with you, which means your son or your wife won’t be burdened with them. For example, if you cosigned on a $20,000 federal student loan and also have $10,000 in joint credit card debt, a death benefit of $60,000 will be enough.

That way, your wife can clear the mortgage and debt in full, thus reducing monthly liabilities and putting more money in her pocket at the end of the money. If she ever faces a financial crisis, such as the loss of a job, she’ll have a fully paid house to use as collateral and can take loans and equity loans as needed.

This is the best way to provide for your family after your death without crippling your finances in the present.

And Finally, Take Your Time

The sooner you apply, the better. But that applies to years and not weeks, so don’t feel like you need to rush. If you’re not sure about the process and need a little advice, spend some more time reading through articles and guides and speaking with current policyholders.

Providing yourself with a little extra shopping time will also make it easier to compare and to find the best life insurance rates and the best payouts based on your specific budget and situation.

How to Find Affordable Life Insurance is a post from Pocket Your Dollars.

Source: pocketyourdollars.com