single parenting with Amber Jones

After reviewing my quarterly balance on my 401K, I have to admit I am beginning to freak out!!  In the beginning I didn’t get to concerned — after all I am more than 20 years away from even thinking about retirement so for me a downturn in the Dow is a good thing.  But, after listening and reading to all of the economists as well as the financial advisers I was beginning to get a little bit concerned. 

Then I received my statement….and suddenly I was VERY concerned.  But is this a realistic concern?  As I said before I have a long time period to be able to recover — so should I still be thanking my lucky stars for a yard sale or should I be praying that I don’t lose everything?  My gut tells me to “buy, buy, buy” — but my head says “proceed with caution”. 

What do you think — full speed ahead or slow down?

The Economy…..it’s on everyone’s mind, and if it isn’t just turn on your television because that is what everyone is talking about, writing about, and thinking about.  Everyone seems to be preparing for the worst…assuming that the worst has not already hit us. 

One can only hope at this point that the stimulus package(s) make enough of an improvement so that the economy doesn’t hit the record books like the “dirty 30’s”.  I had previously blogged that my State had still been somewhat secluded from the effects of the economy….not so much anymore as we are starting to see the effects as well.  Not to the extent that California has — how awful that would be! 

However, I still consider us to be the lucky ones.  We have had a few more months than most to fully know that this was coming and be prepared.  Everyone (unless you are living under a rock) should have been changing their spending habits to pay off debt and save money for an emergency fund.  Being a single parent, however, I can tell you that there wasn’t much waste in the budget to begin with so even given that time period there wasn’t a lot of additional funds to be saved.  But, I have and will continue to attempt to save a little bit more out of the budget each month (just in case). 

On that note, what are some of your saving tricks?  What have you learned over the past few months that can help everyone out? 

 Continuing the discussion of our financial prep for 2009 I wanted to talk about your 401K.  So long as you are able to make your mortgage and pay your bills you should be contributing funds to your retirement.  After all, you don’t want to work for the rest of your life do you?  I certainly don’t.  And as much as I would like to hope for social security ……..I am not willing to bet my future on it. 

Should you be working for a company that offers a 401K with a matching contribution consider yourself lucky as this seems to be a popular cutback item for many corporations in these economic times.  So if you are one of the lucky ones, at minimum you should be contributing as much as what your company is willing to match.  Why when the stock market appears to be going down, down, down?  Because for those of us with more than 10 years to go to retirement - it’s a yard sale baby!  Not only are stocks at rock bottom prices right now, with your company matching your money you have already gotten dollar for dollar value for your money. 

Having said all of this, I want to tell you that I did not do a very good job of diversifying my investments in the past which is why I chose to hire a financial advisor this year.  I would recommend that to you as well if it is within your budget to obtain one.  If not, as I stated previously I am also a huge fan of Suze Orman whose book is only $9.99 at Barnes & Noble or you can watch her for free on TV every Saturday night.  There is also a lot of really good information on the internet as well. 

Being a single parent myself, I know how tight money can be but you owe it to yourself to be sure you are taken care of.  Be careful with your money and invest wisely ……..after all it is the lifeline of your future.

I know I have mentioned the fact that Suze Orman is one of my favorite financial advisors. Now, you can download a copy of her most recent book Suze Orman’s 2009 Action Plan for FREE by going to the Oprah Winfrey website oprahwinfrey.com before January 15th!!

If you haven’t been reading my site daily and you missed the deadline you can also purchase the book at Barnes and Noble for $9.99 — in today’s economy it would be well worth the money in my opinion!

Make it a family affair and bring along your tots for storybook time — they will have fun and you will get your financial life on track all at the same time!

 Health insurance, an absolute must have, especially with a child but even for you.  Should you be one of the millions of Americans out there without health insurance let me tell you how you are playing Russian roulette with everything you have earned and paid for in your lifetime.    

My youngest daughter was born a normal, healthy, baby girl.  Less than eighteen months later she was hospitalized for dehydration and rotavirus.  Rotavirus is a virus that you can get anywhere.  She happened to pick it up at daycare.  After a few days of diarrhea and vomiting she needed to be hospitalized for two days to replenish her fluids.  Total cost:  $3800

One month later she developed a UTI (believed to be caused from the diarrhea she had from the rotavirus) that went into her kidneys called pyelonephritis for which she had to be hospitalized for five days.  Total cost for the acute illness:  $8000

With all of the follow up care from her two episodes as well as other normal illnesses throughout the year the total cost of her healthcare without insurance would have been $30,932.  With our health insurance it cost us $3767.93.  (This is for my youngest daughter only; it does not include the other family members.)

This past year my normally healthy family ended up having three separate hospitalizations and surgeries.  I began the cycle with a gallbladder attack, my older daughter then developed a cyst on her foot which needed to be removed, and my youngest rounded it out with having to have her tonsils and adenoids taken out.  Out of pocket cost for the year between health insurance premiums, hospitalizations, surgeries, routine physician visits and medications: over $10,000.  Had I not had health insurance we would have had to have sold our house because I would not have been able to afford to keep it along with paying our medical bills.

Although premiums are high it is a wise investment.  If you can not afford the premiums for a regular plan, at the very minimum you should purchase a catastrophic policy.  Those types of policies are not going to pay for the everyday doctors visit but if you are in a car accident and need care that will cost into the tens of thousands of dollars they will pay the at least a portion of the tab.  Take it from me, even if your family is healthy you can never predict when a healthcare event costing thousands of dollars will happen — be prepared.   

 In watching financial guru Suze Orman (if you do not watch her I highly recommend it) the following is one of her top five things that she recommends NOT to do - but yours truly has done it and continues to do so. 

So, what am I talking about?  Quite simply I purchased a whole life insurance policy several years ago when I was young and dumb.  I would never make that mistake today.  However, the policy is for approximately $100,000 and because I was so young when I took it out the premiums are very low. 

For those of you who do not know, a whole life insurance policy is a policy which is good for your entire life.  It is never renewed, and as long as you continue to pay your premium, your beneficiaries will receive the face value of the policy upon your death.  Whole life insurance is typically much more expensive than a term life insurance policy because they know that at some point in time (your death) they will be paying the dollar value of the policy.  In addition, they also have an “investment” component that builds cash value for which you can borrow against.  Because of that investment component you also pay commission and fees for the policy which can really eat into any investment gains, therefore, most financial advisors will tell you there are much better investment opportunities for your money than a whole life insurance policy.      

A term life insurance policy will pay out only upon your death.  In addition, term policies are for a set number of years.  Therefore, you may pay premiums for 20 years but never need the policy (meaning you didn’t die) and have nothing to show for it after that time.  However, because the rates are so much cheaper (assuming you are in good health), this is generally the way that most financial advisors will instruct you to go. 

In addition to my whole life policy I also have a large thirty-year term life insurance policy.  So, why do I keep my whole life policy?  Simply speaking, once my thirty-year term policy expires, it will most likely be pretty expensive for me to get another term policy due to my age (assuming my health is still good).  My whole life policy rates will still be very low because they will not change from the rate they were when I took out the policy (24).  My whole life policy should be enough to pay for my funeral and I will hopefully have enough assets built up for my adult children that they won’t need additional funds from a term policy. 

Again, these are the choices that I have made for my family and their needs.  This may not be the best options for your family but I encourage you to review what you’ve done, why you’ve done it and obtain recommendations from professionals who can work through your unique situation.   

 Death is typically not a subject that most of us like to think about.  But I can tell you that the reality is many people die everyday from things other than a long term illness.  Although I hope you live to be 100, or at the very least have time to prepare your children and your estate, you need to plan for the worst.  This is especially true if you are the sole provider for your children. 

Should something happen to you do you really want them to have to suffer anymore than necessary? At the very best it would be that more than one person wants to care for them, but at the very worst it might be that no one steps up to the plate.  Don’t you want to have a say in what happens to your children should you not be able to be there? 

In my circumstance I have two sets of individuals listed for each of my children.  Given their vast age difference and the fact that they have two different fathers it was necessary to do so.  Having said that, I truly believe that everyone should list more than one individual as the party who would take parental responsibility for your child/children; regardless of the circumstance.  The reason why I feel so strongly is because most individuals do not review their will often enough to be sure that the person that they had listed is still able to take on that responsibility.  Therefore, the chances that both sets of individuals whom you had listed at one point in time not being at a juncture in their life where they are unable to take on your child/children is less likely to happen. 

In addition, I also created a financial executor of my children’s estate.  Therefore, the parties who would take my children in the event of my death would be provided a monthly child support rather than the entire lump sum.  Everyone has a different level of money management skill so I feel that this is the best protection for all parties involved. 

Finally, I have also placed some money in a trust for each child that they would obtain once they hit a certain age; again based upon the fact that my children are so different in age it is the best way to assure the dollars would be divided equally.

As a reminder:  I sought the advice of my attorney regarding the above to be sure that all of my unique needs were met.  I would recommend that you do as well.  Please provide me some feedback on what you have done.  Is your will set up similarly?  Do you have any of the same circumstances that I do?  If so, what are your recommendations?  I certainly don’t have all of the answers but I am willing to tell you some of the decisions, right or wrong that I have made regarding my family.

 Given the current economic condition of our country, I think it is fairly safe to say that everyone is taking a closer look at their financial status.  As a single parent, this becomes even more important.  After all, it isn’t just yourself that you are responsible for anymore. 

Therefore, over the next few weeks I would like to take each of the following items one at a time:

• Creating/Maintaining a Will
• Life Insurance
• Health/Disability Insurance
• 401K
• Roth IRA
• Emergency Fund/Savings
• Budget

I’m not a lawyer or even an accountant so please check with one or both of them to verify the choices you should make when finalizing your decisions but I will tell you what I did and why.  Please feel free to tell me if you think I’ve done the right thing or if you feel I have erred in my ways.

I’ve recently decided that rather than attempting to manage my finances on my own, I’ve hired a financial advisor.  The good news for you is that I am willing to share his in-site with you.  Do you have an advisor for your financial future?  In looking at the above items, how many do you have done?  How many have you reviewed for 2009?

Amber