Financial planning

QUESTION: My daughter graduated from college nearly a year ago. She has a car we bought her in college and she is still on our insurance. It’s time for her to get her own coverage, but she doesn’t have any experience with this and I don’t think I would be much help either. She lives out of state, so our agent can’t help her. What advice should I give her on how to find coverage?

ANSWER: The purpose of auto insurance is to protect the insured financially against damage done to her car or by her car.

QUESTION:  All my life I thought I would retire at age 65. But it now seems like I’ll have to work longer. I still owe money on my house and my 401K needs to grow more. How much of a difference can working a few more years really make?

ANSWER:  Small steps can make a big difference in retirement planning.

Dee Lay and his wife (Fee Lay, of course!) arrive at age 65, trying to figure out if they can retire. It will be five more years before their house is completely paid off. Dee has about $500,000 in his 401K. After paying taxes, the mortgage and his 401K contribution each year, Dee and Fee spend about $5000 a month to live.

Answer: I have no doubt you are busy.

However, imagine for a moment the nightmare of every parent: in the middle of the night, your young child stumbles, bleary-eyed into your room, struggling to breathe.

QUESTION: I am putting the max I can in my 401k. But I’m wondering if I should re-direct some of that towards a 529 plan for my seventh grader’s college. We also have some credit card debt we are trying to get paid down. But that’s tough ever since we signed up for one of those bi-weekly mortgages to save interest on our house payment. Sometimes I just want to ask myself, “How much is enough?” So I thought I would ask you. How much is enough?

ANSWER: You sound product rich and plan poor.

Do you remember who taught you how to play tic-tac-toe? Probably not – for most of us it was a while ago. Usually it’s an older sibling or a neighbor kid down the street. They “graciously” offer to teach us how to play. They might even let us go first.

QUESTION: I’ve done a basic calculation of what I have now and what I save each month. I know what we spend and it looks like we’re going to be OK if I keep this up for another 20 years. I am in my forties. Am I leaving anything major out of my thought process?

ANSWER: Have you ever asked someone for directions and have them replay, “Oh, that’s about a mile away…as the crow flies.”

Question: I have used debt judiciously to buy investment properties and other income producing assets. Now I am very focused on paying the debt off with the income from the assets so we can be debt free. My wife sees that we have an extra source of income that she would like to use for things like vacations. Our kids will soon be grown and we’ll have a nice income and be financially free if we can just stay the course. Is there something I’m missing here?

Answer: Maybe so. Maybe things like your wife and your children.