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Featured Content -
Personal Finance for Educators
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Written by Scott Dauenhauer
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Monday, 26 January 2009 07:10 |
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It’s easy to be scared about financial matters right now. While you cannot control the markets or the timing of the eventual recovery, there are steps that all teachers — indeed, all individuals — should take to protect themselves from financial calamity. What follows are four major areas of concern that all individuals should plan for.
DisabilityWhat is your greatest financial asset? Not long ago, we all might have had a laundry list of riches: House, 403(b), IRA, stock investments, etc., etc., etc. Still, even when times were good, these weren’t our great assets. No, our greatest financial asset is our ability to work, or more specifically, to earn income. It’s easy to think that disability is something that happens to someone else. Statistics say otherwise. It is estimated that three in five Americans will miss work for a period of time due to a disability. What should an educator do? Find out if you currently have protection through some combination of your employer, your state pension plan, and your union. These are your best sources for attaining affordable coverage. Seeking it on your own could be cost-prohibitive. Remember: These plans are not lottery tickets for people who become disabled; they are designed to get you through a tough period until you are able to return to work.
Job LossBeing laid off from a teaching job was once unthinkable. It may be time to start rethinking this assumption. There is no insurance you can buy to protect yourself from a lay-off, but you can do the following to lessen the blow:
- Build a cash reserve equal to three-to-six months of living expenses (a challenge, we realize).
- Live below your means (the definition of need is clearly being re-examined).
- Draw up a budget. Mint.com, Quickenonline.com, and Justthrive.com are easy to use web-based money management sites.
- If you are a homeowner, you may want to look into arranging a home equity line of credit. This would allow you to draw money as needed. Obviously, the utmost caution is urged here. Tap this money only in an emergency. Note that lenders are making it much more difficult to arrange these types of lines of credit.
AccidentsAccidents happen, especially when glue and glitter is involved. In all seriousness, there is never a good time to get in an auto accident or to be sued. In fact, this may be the worst time. Be sure you have adequate auto insurance and look into getting an umbrella insurance policy. An umbrella insurance policy protects you above and beyond the often limited liability coverage provided by regular policies, even when rain isn’t involved. This type of protection can be particularly helpful if lawsuits ensue. While it varies by provider, Umbrella insurance can add 1-5 million in liability protection at pretty affordable rates. This kind of coverage can protect against a lot of glue and glitter accidents.
DeathDeath. Never a fun topic. It’s even less fun when it happens to an uninsured wage earner with dependents. Death can actually be insured at a reasonable cost. Let’s be clear: We are not saying you can insure against death; only that if you die, an insurance policy will provide dependents with a measure of financial security. While something called whole life insurance (a hybrid insurance/investment policy) is often pushed on consumers by sales agents, look into getting term life insurance. This relatively affordable insurance ($15 to $50 a month approximately) can provide loved ones with lump sum payments ranging from $100,000 to $1 million, and more, if - and only if - one dies. A real general rule of thumb is to have a policy that would provide six to ten times your gross income. Term insurance covers a period of time. The longer the period of time, the more it costs. A good place to begin searching policies is www.quickquote.com. Additionally, you should have a Living Will (which basically governs end of life care) and Power of Attorney documents. If you have young children, you need to figure out who will take care of them (assuming you are single or that your spouse or loved dies at the same time). Lastly, make sure you have beneficiary designations elected and that they are correct. Saving for retirement is very important and it’s a habit you should start if you haven’t already, but the ideas I’ve detailed above are important immediately. Give the gift of peace of mind to start off the New Year: Protect yourself and your loved ones.
Scott Dauenhauer, CFP, MSFP, AIF, Owner of Meridian Wealth Management is a Fee-Only Fiduciary Planner who specializes in working with educators. He is the co-author of The 403(b) Wise Guide and runs two blogs located at http://themeridian.blogspot.com and http://teachersadvocate.blogspot.com.
Dan Otter is a teacher and writer who operates the financial websites www.403bwise.com and www.yourplan.info. His most recent book is Teach and Retire Rich. Both Scott and Dan speak nationally on retirement, financial planning and investment issues Disability Stats from www.protectyourincome.com
POSTED ON HOTCHALK
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Last Updated ( Tuesday, 16 June 2009 16:57 )
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