With all the financial products and salesman in the world these days, it can be overwhelming and difficult to know what you really need versus what someone is just trying to sell you. Below is a checklist for married couples (with or without children) of what you actually need.
1. Credit cards – Even if you pay cash for everything, it is still a good idea to have at least one credit card in the name of each spouse. An alternative to this is to have both spouses’ names on the same account. The purpose of this is to build a credit score for both spouses. While it is common for one spouse to have the bills under his/her name, the other spouse needs to be protected in the event of death or divorce.
2. Disability Insurance – Unfortunately, this is one area where a lot of people are underinsured, and it can be devastating to a family. Each income-earning spouse needs to have disability insurance in the event they become disabled and aren’t able to earn a paycheck. The insurance will cover most or all of your lost wages if you become disabled. Some employers will offer this insurance to their employees, so you will want to check to see if it is an option for you. If not, you’ll need to buy an individual policy through an insurance agent.
3. Health Insurance – Don’t leave home without it! You may be the healthiest person in the world, but all it takes is one bad car accident and you can become financially-crippled. Again, this is something that is commonly offered through employers. If both spouses have coverage with their employers, make sure to do a complete analysis of which plan is best for your family. Depending on your benefits, it’s possible that it makes the most sense for each of you to be covered under your own employer’s plan instead of being under one plan.
4. Life Insurance – This is an area where a lot of people are either under-insured because they don’t understand the importance of having life insurance, or they are over-insured because an insurance agent got a hold of them and didn’t have the client’s best interest in mind. Whichever the case, it is important to perform an analysis to determine how much life insurance you should have (it is possible for some couples and families to not need any life insurance). Buying life insurance on your children’s lives is a scam and waste of money. You will want to review your life insurance coverage every few years, or as life-changing events occur, in the event your need increases or decreases. Click here for a life insurance calculator to get started.
5. Will/Power of Attorney/Living Will and Health-Care Power of Attorney – The detail and magnitude of each estate plan greatly varies depending on the individual, but every couple should have one. While there are cheaper alternatives than a lawyer (i.e., Do-It-Yourself software, online lawyers, etc.), I highly recommend paying the money to meet with a good estate planning attorney to have your estate plan documents drafted. The will directs where your belongings will go, and who the guardians for your children will be (if applicable). The power of attorney names a person to control your finances in the event you are unable. The living will declares your wishes should you be unable to speak (i.e., coma), and whether or not you want to live on life support. The health-care power of attorney names the person responsible for any decisions related to your health.
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John P. Chladek, MBA, CFP® is the President of Chladek Wealth Management, LLC, a fee-only financial planning and investment management firm specializing in helping families and couples who are not yet retired realize their financial goals. For more information, visit http://www.chladekwealth.com.