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Personal Finance from the Broke Perspective

How to Financially Prepare for Your Death

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No one likes to think about the day when you leave this Earth. It’s depressing and scary. Most of us would rather spend our time living our life. However, if you have parents or older relatives who died, you may have had the challenging task of cleaning out their homes and trying to arrange their finances. For most people, this is no easy task because the individuals never took steps to make the process easier for loved ones. If you don’t want your family to go through the same difficulty when you pass on, take these steps to financially prepare for your death.

How to Financially Prepare for Your Death

Below, you can find an end-of-life planning guide to help you emotionally and financially prepare for your death while removing any future burden from your loved ones.

Make Funeral Arrangements

Having been through the death of loved ones, I can tell you that the last thing you want to do when you’ve lost someone is to go to the funeral home and make arrangements. If you do this yourself so your family doesn’t have to, you will be giving them an incredible gift.

Create a List of People to Tell

Make a list of people you would like notified in the event of your death. Of course, that includes family and friends. But also include companies that you contracted with.

I’m currently making my list for my husband because I handle all of our finances. I have several accounts with food delivery services like Imperfect Foods, Misfits Market, ButcherBox, and Good Chop. He’d have no idea about these services until the food showed up at our doorstep. He’ll need to know how to contact the companies and stop the deliveries.

When working with my mom, I need to know how to contact some of her friends that I know of but don’t know how to reach in the event of her death. The same goes for companies like her home security system.

Names on Bills

If you have one partner who handles the money, or if you are single, carefully consider the names on your bills.

When Both Spouses Are Alive

If both spouses are alive, have both partners’ names on each bill, if you can. Then, if one partner passes away, the other partner has access to the accounts because his name is on them.

Some companies will only let one person’s name be on the account. If that is the case, make sure the spouse knows the web address to log into the account and how to pay the bill. Then the account can be kept current until you get the death certificate and can close the account and open a new one in the surviving spouse’s name.

Add an Adult Child’s Name on Bills

If you are single and have adult children, add the child’s name to your account. Then, the child can access the account if you suddenly pass away. However, only take this step if both the child and the parent have trust in one another and are both financially responsible.

Access to Important Documents

The person closest to you and most likely to handle your affairs when you pass away—your spouse or children or close family friend—should know how to access your important documents.

Keep Paperwork in One Place

How to Financially Prepare for Your Death
Open safe deposit box with money, jewels and golden ingot. 3d illustration

Keep all of your important paperwork such as will, trust, and life insurance policy in one safe, secure spot that the person who handles your affairs knows about. Some people choose to keep these documents in a bank safety deposit box. Others keep them in a safe in their home. Either way, make sure your trusted contact has the key.

List of Accounts and Passwords

Create a list of all of the accounts that you have and the user ID and passwords so that whoever manages your affairs after you pass can close accounts and pay the remaining bills. You’ll want to list the accounts for all of the services and bills that you have as well as social media accounts.

People often forget the most important passwords—those to your cell phone and computer.

Clean Out Your House

We’ve all heard horror stories of parents who pass away, leaving their children to clean up their homes. If you pass away at 80 and you’ve lived in your house for 50 years, you’ve likely accumulated a lot of stuff. Your basement, garage, and closets may be full. Your adult children do not want to spend weeks sifting through all of your belongings trying to decide what to keep, what to throw, and what to sell.

When you move into a new house, routinely go through it every year or two to throw or give away items you no longer need or that no longer work. Continue doing this throughout your life, and your children won’t face 50 years of accumulated stuff when you pass away.

Don’t Keep Secrets about Power of Attorney & Will

If you don’t want your death to cause hard feelings, be honest before you die about who you have given power of attorney to and why. You should also share what your will contains so no one is surprised after your death.

When my paternal great uncle died, his will was a surprise. He did not split his assets evenly among his children, and the members of his large family had hard feelings toward one another. Even though my great uncle died more than three years ago, the children are fractured and don’t talk to one another due to the contents of the will.

Final Thoughts

None of us likes to think about dying, but all of us will die one day. If you’re able to face your mortality, you can give your spouse and children a great gift by taking these steps to financially prepare for your death. Those you leave behind will be forever grateful for the actions you took while you were alive to make their job of closing your estate easier after you’re gone.

Read More

What to Do with a Sudden Large Sum of Money,

Reasons Why You Need a Will Even If You’re Broke,

How to Handle Financially Toxic Parents

How Much Life Insurance Do I Need?

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Life insurance seems like a second thought to so many people.  You’ll notice that the title of this article isn’t “Do I Need Life Insurance?”.  That’s because there really isn’t much question about whether you need life insurance or not.  I suppose there might be a few exceptions, but pretty much everyone needs and should have life insurance.  It’s just a matter of how much you need.  There’s a couple of ways to figure out how much you really need.

How much life insurance can I afford?

This is probably the most popular method of choosing life insurance.  And it’s completely wrong.  If you ask most people how much life insurance they can afford the answer is almost always “little” or “none”.  Again, wrong answer.  Most of us carry car insurance because it’s something that covers us against a loss.  If our car is damaged in an accident, we have the insurance to help with the cost of repairing or replacing the car.  To the people who depend on us for income, we need to have life insurance in place to help with the costs of continuing on when our income is lost.

How much income do I need to replace?

This question is usually a pretty good place to start when determining how much life insurance you need.  If you’re a regular budget-maker, you probably have a pretty good idea of how much income you and your family need to pay the bills and keep food in the fridge.  It’s probably not your entire salary, but it might be close.  Take into account any investments you have, as well as assets that might become unneeded if you die.  You’re family probably won’t need that second car anymore, for instance.  Also, any payments on those assets that can be disposed of can be discounted as well.

How long do I need to replace the income?

Once you know how much income you need to replace, the next question you need to ask is how long you need to replace it for.  In an ideal world, you’d be able to buy enough life insurance to set your family up for life.  Your spouse would be able to quit work and take care of the kids full-time.  You’d be able to pay for the children’s college education.  But, the world we live in is far from ideal.  Most of us won’t be able to afford the premium payments on a life insurance policy that will pay out enough to do those things.  In a romanticist world, your spouse would grieve for your loss for the rest of his or her life.  That isn’t all that likely either.  It’s far more likely that your spouse will remarry at some point.

All of that still leaves us without a real answer to the time question though, doesn’t it?  You’ll have to make some assumptions in order to really answer the question.  Assume that your spouse will get remarried.  Assume that you’re not going to be able to pay for your kids’ college education with the pay-out.  I think a good starting point is somewhere around 3-7 years.  Some will say that’s too long.  Others will say that it’s too short.  I don’t think there is a perfect answer.  And, when you’re faced with a question that has no perfect answer, you’ve got to find an answer that is as close as possible.

Calculate, then purchase.

You’ve answered how much income you need to replace, and you’ve got a pretty good idea of how long you need to replace it for.  Now, you’ve just got to put the two together and come up with how much life insurance you need.  Multiply the income number by the length and you’re in the ballpark. Let’s say that you determine that you need to replace about $30,000 a year in income.  You’re married to a real hottie, who shouldn’t have any issues with finding suitable future spouses, but you don’t want him or her to rush into it, so you use the 5 year length.  $30,000 a year X 5 years = $150,000.

You might want to add a bit extra for sudden expenses at the time of death, like funeral, casket, and burial.  But, that’s a pretty good ballpark number for how much life insurance you should buy.  Now comes the big step…  You’ve got to purchase it.  Find a good place to compare life insurance policies and costs and get all the information compiled.  Then pull the trigger and purchase the policy.

That will be the hardest part of the whole thing.  If anything does happen to you, your family will be thankful that you did.

3 Ways Young Homeowners Can Save $3745 (at least) Each Year

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If you recently bought your first home let me congratulate you. This is possibly the very best time to buy real estate that you’ll ever see in your lifetime. You made a smart move. And because you are a smart real estate investor, I know you’ll be interested in taking advantage of the following 3 ways young homeowners can save even more “moolah”.

1. Home Warranty

I owned a home warranty program for years and it was a waste of money. Of course it felt great not to have to worry about running into major unexpected expenses, but the cost just didn’t justify it. First of all, you are stuck with any repair person the home protection company sends out. Next, the deductible you have to pay is often pretty close to the amount you’d have to pay to a contractor of your own choosing. Last, when you do have a major repair, you are stuck (again) with whoever the company sends out unless you are willing to go through a great deal of red tape.

You’re always responsible for upgrades, code changes and any problems associated with misuse or poor maintenance. I cancelled my home protection plan several years ago and it turned out to be a fantastic decision. If you follow my lead on this, you’ll save at least $600 a year.

2. Life Insurance

If you are a young homeowner you might have a young family or plan on having one. As a result, you definitely need life insurance. But when it comes to term life vs. whole life – play it smart. Term life is your best friend. It’s cheap and it does the job. It’s true that at some point (20 or 30 years down the road) your term insurance will expire. But by that time, you may not need life insurance anyway. Term life is so much cheaper than whole life that you can take that savings and invest it. This way probably you’ll have much more than the whole life promises.

One of the biggest problems with whole life (and I feel it’s criminal) is that agents sell you the whole life you can afford because it pays them a whole lot more commission. (Maybe that’s why they call it “whole” life.) And because it buys a great deal less insurance than term, people end up dangerously under-insured. You could save several thousands of dollars each year and have better coverage just by having term instead of whole life insurance. Look into this ASAP.

3. Good Credit Score

Because you are a young homeowner, you’ll be using your credit for a very long time. And you might have to lean on that plastic a lot right now to pay for all that new furniture and appliances. If you able to get even a slightly better credit score, you might end up savings a bundle every month. That’s because a higher credit score will help you get lower interest rates on credit cards and mortgages.

Find out what your score is and make sure there are no errors. If there are mistakes, fix them. You can easily do most of this without paying a cent. You can even get your credit score for free and sign up for services that provide updates whenever there is a change to your rating. This has helped me a great deal.

As a young homeowner you might be facing some pretty hefty expenses and that can be daunting. Take these 3 steps. Dump the home protection plan. Get rid of your whole life insurance and buy term instead. Finally make sure your credit score is as high as possible.

Will you save $3745? I don’t know. You could save a lot more. You’ll never know until you start taking action.

What are the biggest expenses you face as a young homeowner? What have you done to reduce those costs?

This was a guest post written by Neal Frankle. He is a Certified Financial Planner ® and owns Wealth Pilgrim – a great personal finance blog. He writes extensively about ways to help people make smart financial decisions. One of his most in-depth posts was his review of CIT Bank.