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Estate Planning: Get Help with Designating Beneficiaries outlines “7 Common Mistakes to Avoid When Naming Your Beneficiaries” to give readers some ideas about just how even the most well-intentioned estate planning can go awry.

You may already know that if you leave no will or estate documents, the courts will decide who gets your assets, but did you know that if you name your estate as the beneficiary your money will still go through probate?

And those parents who decide to name the child they consider to be the most responsible as a sole beneficiary have no way to guarantee that this child will distribute the wealth among all heirs. In the same vein, a parent who puts a different child’s name on different accounts may not realize that value of these accounts could vary significantly when it is time to inherit.

People who don’t periodically check and update beneficiaries may leave money to someone they didn’t intend to inherit (such as an ex-spouse). Or they may unintentionally leave someone, such as the youngest child who was a surprise, with no inheritance.

Even if you create a trust with your will, making a minor child the sole beneficiary on some accounts or life insurance policies will mean that the child gets a lot of money at 18 or 21. This may not be a good thing, depending on the child. On the other hand, there could be a very capable minor who won’t be able to access needed funds. You can make a trust the beneficiary for things like a life insurance policy with stipulations for how the money will be distributed.

Perhaps you’ve seen TV shows or movies where someone write their own will and then goes to a notary. Often it is not as simple as that. As states:

“Designating beneficiaries incorrectly, among other mistakes, can have far reaching negative consequences.  Beneficiary designations are an important part of your overall estate plan and should be reviewed and updated as part of a well-coordinated estate plan with the help of an estate planning specialist. “

Financial Habits to Avoid and Adopt

In “Bad habits, or lack of habits, can make finances worse than necessary, “ Daily Journal discusses the things we do that cost us more money than they should.

Years ago there was a lot of talk about the ‘latte factor,’ small items people buy that they really don’t need that cost them more than they should in the  long run. The habit of buying little luxuries isn’t the only thing that keeps people from saving, investing, and paying down debt. Here are a few habits that drain your bank account:

Impulse Purchases/Shopping without a List: Of course you are open to temptation just by being in a store or shopping online but when you shop without a list, you leave yourself wide open. When you keep a list going (whether on paper or by using an app) you can make it a little more difficult stray. And list aren’t just for food either. You can make lists for when you go shopping for clothes, gifts, and household items.

While you may buy something that is not on your list, having the list as a guide can instill discipline. You can compete with yourself to see how close you can stick to the list. And if you buy things that are not on the list, you can tighten your budget elsewhere.

As the article points out, “It’s unlikely a pack of gum bought in a moment of weakness will sink your entire future; however, when you get into the practice of buying items without considering their overall impact, you head down the wrong road.”

Piling on Late Fees: Forgetting to pay a bill now and then happens but if you regularly pay late fees you are really hurting your financial future. There are a number of ways to tackle this including setting up automated bill payments or setting reminders so you can remember to pay the bills on time. Reminders also work if your late fees are not connected to bills but to borrowing and rentals, such as library books or sports equipment.

It is so Important to Update Your Beneficiaries

We’ve mentioned how not updating your beneficiaries may haunt your heirs and told of how the case of a widow versus an ex-wife went all the way to the Supreme Court because a man died and had not changed is designated beneficiary.

MarketWatch’s Moneyist column has another tale of why it is so important to update your beneficiaries but this one is a little different. In “My father’s ex-wife stole his life insurance, breaking the terms of their divorce decree,” an advice seeker wonders how he can recoup the loss of a life insurance policy that his father’s ex-wife cashed when she wasn’t supposed to do so.

Unlike the previously mentioned stories in which the beneficiary just wasn’t changed, the letter writer has his father’s divorce decree on his side: according to the decree, his ex-wife was not entitled to that money. However, since the father did not actually change the name of the beneficiary on the policy, the insurance company paid it out to her. 

The columnist advised that while the man can stake a claim because “..the divorce decree trumps a private contract in the eyes of the law. If your former stepmother agreed to forego the proceeds from this policy, she has a responsibility to uphold that — even if your father failed to take her name off it,” it will cost him to pursue the case in court.

This story and similar cases, such as the one where a widow realized that her husband had not actually signed his will are, as Moneyist observes, “cautionary tale[s] to always complete important paperwork.” While many people do not have wills, those that do take the time to create wills and do other elements of estate planning need to complete the process by signing documents once they are in order and updating beneficiaries after a life event.


Congratulate Yourself on Financial Planning Progress

This time of year, social media pages are flooded with pictures of kids either going back to school or going to school for the first time. In many of these pictures, the kids are holding up signs or chalkboards indicating their name, grade, age, and maybe even some fun facts.  One woman got her husband who is a teacher to get in on the fun by posing with the same kind of sign that his students do.

It is easy to question the need to mark the beginning of each school year or the need for students to get gold stars or other prizes for their work but there is good reason for these practices. It helps to spur students to continue what they are doing and work towards even bigger goals.

We can apply this idea to investing, saving, and financial planning. One way to take away the dread that some people feel with regards to financial planning is to mark important dates in your financial life such as:

  • Buying a home
  • Paying off a credit card
  • Making progress in reaching a goal for your emergency fund
  • Getting long-term care insurance
  • Staring an investment portfolio
  • Selling an underperforming stock

Now we don’t recommend that you mark these kinds of occasions by spending money (going out to dinner, etc.) but it is important to congratulate yourself on the progress you have made. If financial planning were easy, then everyone would do it with great enthusiasm. However, it is not easy and if you are taking the time to look out for yourself and take care of your finances, you do need to pat yourself on the back. Your accomplishments matter and noting them will motivate you to continue. And if you want expert assistance, a Fee-Only financial planner can help.

Put Your Money to Work for You

According to Yahoo! Finance, 1 in Every 4 Americans is Working this Labor Day and Their Hard Work is Going Unappreciated. The article made mention of a contest in which U.S. laborers can win a paid day off.

There are always people working at something in order to keep things going. You might not want emergency service workers to all take the day off. People in the armed services cannot all take the day off. And if you went to enjoy some recreation outside of your home, you probably expected restaurants and beaches to be staffed. And since people like to shop, retail workers have to be available.

But there is a larger point to be made in the idea that there are people laboring on Labor Day and that is the fact that a lot of people are working very hard and not getting ahead. Parents find it hard to save to leave a legacy for their children. And young adults are finding that they may not be able to live as comfortably as their parent did.

This is where investments come in: if you can work with a Fee-Only Financial Planner, you can find ways to make your money work for you. You may have to work a lot more than you would like but you don’t want your money to disappear. Instead, you want to invest it so it grows and is there for you when you no longer can or no longer want to work.

And as you’ve probably heard, the sooner you start, the more time there is for your investments to grow as they weather the ups and downs of the market. But you may have also heard that starting later in life is better than not starting at all. So if you have yet to begin an investment portfolio, the time to start one is  now. You work and you can put your money to work for you.


Women: Strategic Investments and Financial Planning are Important

In”Women can take control to protect and grow their wealth,” the Nashville Business Journal offers a summary of a more detailed report on gender differences and investing from UBS. Some of the challenges women may face when attempting to build wealth include:

  • The pay gap between women and men
  • Seeking work with flexible hours
  • Taking time away from work (often for caretaking duties)
  • Living longer than men

If it is true that many women seem reluctant to take risks with their investments, “here is also evidence to suggest that women may invest in a more disciplined way.” And anyone who has discipline can use that to their advantage.

Women also want to invest in companies they believe in. You can work with a Fee-Only financial advisor to find companies you believe in that will offer good returns. You don’t have to invest in the sure-bet money makers if you don’t want to give them your financial support. And you do not have to lose money when investing in companies that align with your values.

And while the Nashville Business Journal noted that women tend to want to leave more for the next generation, the USB report compares a fictional Jane and Joe who are both 25 and both have the same financial goals:

“preserve and grow their inheritance of USD 1 million for the next generation

buy a house at the age of 35

enjoy a decent lifestyle during retirement.”

There are young women and young men that want to leave generational wealth. While women are traditionally seen as nurturers, this doesn’t mean that men are not concerned with leaving a financial legacy. The issue is that women’s earning capacity is often hampered in ways that makes it more difficult for them to finance their own retirements and leave something for their heirs. Despite these challenges, women can create wealth for themselves and their loved ones. This is why strategic investments and financial planning are so important.

Retirement Planning Gives the Confidence Needed to Retire, part 2

Last week we looked at the importance of planning for retirement financially and mentally. A Washington Post article, ‘Dying at your desk is not a retirement plan,’ noted that some people who save enough may keep working because they can’t imagine being fulfilled any other way. This is in contrast to those who absolutely must keep working because they don’t have enough retirement savings. People in both groups could (literally or figuratively) end up doing what the article says—dying at their desks.

So how does one avoid working until the very end? There are no guarantees but the article offers some clues as to how one can prepare well for retirement. 

Start to save early

The writer interviewed a man who started saving for retirement in his 20s. Everyone cannot do that but giving yourself time for your money to grow is ideal.  The man interviewed estimates that he saved 20-25% of what he earned.

“Gilbert is a case study on how to mentally and financially ready yourself to retire. He saved like mad, maximized tax-deferred retirement accounts and created a diversified portfolio of low-cost mutual funds. He lived well but prudently.”

This man also took the perspective that your spending decisions are also retirement decisions. Spending more means you will need to work longer.

Reduce work

The article’s final quote is from a man who cannot imagine with he would do as a retiree. This differs from the interviewee immediately before: a man who works a reduced schedule. This man lost money during the Great Recession and sold a property at a significant loss but is still not doing badly. Rather than working full-time or stopping work completely, this man still works but also finds time for recreation. He told the Post that his work fulfills him and he also works because he wants to save more so he has more to leave his family.

These balanced approaches to saving more (living well but prudently and working less while finding time for recreation) are possible. If you don’t start to save for retirement in your 20s, start as soon as you can. And if you find that you need or want to work well into your 70s, you can still find ways to relax.

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