As we approach the autumn months, naturally we begin to think about packing away our shorts and summer clothes in exchange for sweaters and parkas. We stop worrying about our air conditioning bill and begin to think about how to pay our heating bill. However, we may overlook the opportunity that these seasonal changes bring to assess other aspects of our livesparticularly the financial aspects.
According to many accountants, financial planning is especially pertinent now. Late summer and early fall are the best times to analyze your finances. The idea is to get everything in order today because you wont be able to change the bottom line when Dec. 31 rolls around. A good place to start is by taking a long, hard look at your net worth, or where you stand financially. Make a two-columned list that has your assets on one side and your liabilities on the other:
Total value of your home and/or other real estate
Balances in savings and money market accounts
Value of all your investments combined (stocks, bonds, mutual funds, etc.)
Amounts of all 401(k) and IRA accounts not included above
Value of an Ownership interest in a business
Your outstanding mortgage
Total due on credit cards and loans
Total amount due for property settlements or other judgments/debts
Amount you owe in alimony or child support
Subtract your liabilities from your assets. What remains are the resources you have to begin building a strong financial foundation! Dont stress if you arent satisfied with this number right off the bat. Most people arent. If you come up with a negative number, your first step is to implement a budget to pay off all non-mortgage debt: stop using your credit cards, begin saving monthly, and establish an emergency fund.
This brings you to the next step in the process: Come up with a plan to turn this foundation into a wealth-building opportunity through a combination of savings, investment and insurance vehicles. Consider these saving options:
Certificates of Deposit (CDs)generally offer a higher rate of return, but may require you to tie up your money for months or years at a time.
Money Market Accountsdeliver a rate of return thats similar to, but usually less than a CD, combined with the ability to withdraw funds when needed.
529 Educational Savings Plansflexible savings plan that allows you to save amounts (in excess of $250,000 per student) tax-deferred to cover educational expenses.
Also consider saving through retirement options:
Individual Retirement Accounts (IRAs)there are two types available. With Traditional IRAs you can contribute as much as $4,000 a year in 2007 ($5,000 if 50 or older) and deduct your contribution from your tax return. These amounts increase in 2008 to $5,000 for those younger than 50 and $6,000 if you are 50 and older.
401 (k) Retirement plansoffered by many employers as a way to encourage employees to save for retirement. Many companies match a certain percentage of employee contributions.
While investing in the future through savings and retirement plans is a given, a financial area many people forget to consider is life insurance. According to the Insurance Information Institute, millions of Americans dont carry any life insurance at all; millions more dont have enough to provide sufficient financial security for their families.
This is changing, however. The Insurance Institute reports that, on average, premiums for individual life insurance have been falling about 5 percent a year since 2000, and are expected to drop an additional 4 percent in 2007. Premiums have gone down because people are living longer. Interested consumers should take advantage of the downward trend and tendencies of competitive markets. According to Mike Akker, Chief Investment Officer of SBLI USA Mutual Life Insurance Company, Theres never been a better time to purchase life insurance to protect your family than right now.
Here are some of the options to consider:
Whole life insurancealso called permanent life insurance. It features coverage that lasts an entire lifetime and typically offers cash value that may accumulate tax-deferred. This kind of insurance eliminates concern about qualifying for insurance later in life.
Term life insurancecoverage that lasts a specific period of time. It provides affordable security and is an attractive option for families purchasing life insurance for the first time.
Annuitiesa contract with the insurance company to provide guaranteed payments at a specific time, drawn from funds you have entrusted to that company. Your funds may earn interest at a fixed or variable rate, depending on the option you choose.
With change in the air, now is the time to start thinking about your financial future. Do you want to know more about the products listed here as well as others? As you longingly stow away your swimsuits and start to think about curling up by the fire, you should also consider visiting www.sbliusa.com where youll benefit from free access to financial planning resources, including interactive calculators, real life stories, informative articles, product guides and more.
from the Oct. 17-23, 2007, issue