Fearless Financial FAQs II
By Amy A. Brandts, CLU, ChFC
It’s true; there
are no foolish questions, particularly when it comes to your
finances. So be brave, don’t hesitate. Just ask!
Q. I am an
acknowledged spend-a-holic and not saving or investing as I know I
should. How can I break this habit?
A. As they say…
knowing is half the battle. Taking back control of spending habits,
while tough to do, will make you feel terrific!
Create a spending
plan
List your monthly
expenses in three categories:
-
Fixed and
Essential: Mortgage, utilities, loan payments, retirement
investment and savings.
-
Important but
Variable: Clothing, food, etc.
-
Totally
Optional: Electronics, entertainment, or another pair of red
shoes...
Total up your
essential monthly expenses and deposit this amount into your bill
paying account from your paychecks, so you know these items are
always covered. Take the rest of your funds in cash and split it
between two envelopes, one marked “food & clothing” and the other
marked “fun.” Remove all credit and debit cards from your wallet,
except for one card for emergencies. Stick that card in your purse
or wallet (place a sticker on it that says “emergencies only”).
Pay cash for
everything and when the cash runs out, you stop spending. This
forces you to think twice before every purchase and eliminates
credit card spending.
Treat saving as a
fixed and essential expense.
Make it a
priority! Make the investments/savings deposits through payroll
deduction. If you don’t see it, you can’t spend it.
Before you spend,
ask yourself the following:
-
Why am I
here? (Is it boredom or habit?)
-
How do I
feel? (Do you shop to feel better, fill a void or impress an
acquaintance?)
-
Do I need
this? (Is there a less expensive alternative?)
-
What if I
wait? (Would waiting 24 hours have any real impact on your
life?)
-
Where will I
put it? (Are your closets overflowing?)
-
Lastly, if you
shop with friends, ask them for their support and to help you
avoid temptation.
Q. My
father lives alone and seems to be struggling with routine chores
around the house. He’s also getting more forgetful and I’m
concerned about his safety. However, he insists that he is happy
living in his own home and refuses to move. He is agreeable to
hiring someone to help him, but lives on a fixed income and is too
proud to accept financial help from me. What can I do to help him?
A. This is
a common problem that many face as their family members age. There
are two key issues to deal with: getting him the right kind of
assistance and paying for it.
Assess his health
situation and needs
A complete
physical is vital. Identify any acute health problems that could be
impacting him. A friend or family member should accompany him to
the doctor to ask questions and take notes. If no one is available,
consider hiring a Geriatric Care Manager (GCM). They can be your
eyes and ears and provide an independent opinion on your father’s
situation, unclouded by emotion. A GCM is typically a social worker
or nurse with experience in geriatric care, they will visit him,
perform an assessment, establish a care plan and oversee his care.
For helpful information, contact The National Association of
Professional Geriatric Care at:
www.caremanager.org
Get the proper
legal documents
Make certain he
has executed a Durable Power of Attorney, Advanced Medical Directive
and has a current will or trusts. Consult a lawyer if these
essential documents are not yet in place.
Maximize
investment income
If your father has
investments, his portfolio should be evaluated to make certain it is
invested appropriately for his age and situation, and is invested to
produce a good income stream without taking unreasonable risks.
Seek out an independent planner to provide a second opinion if you
are uncertain if his money is properly invested.
Consider a reverse
mortgage for extra income
These are special
loans for seniors and backed by HUD (Dept of Housing & Urban
Development). A reverse mortgage allows seniors to tap into the
equity of their home and receive a monthly income, a lump sum
payment or a line of credit. There are no income or credit
requirements and no repayment during the lifetime of the senior, as
long as they continue to live in their home. The loan is
not repaid until one of three things occurs; the death of the
homeowner, sale of the property or the owner permanently moves out
of the property. There are no restrictions on how this money can be
used.
To be eligible, he
must:
-
Be over age 62
and live in the home
-
Have little to
no mortgage or property liens
-
Maintain
reasonable care of the home
-
Pay the real
estate taxes
A reverse mortgage
may be your best bet, provided you believe he is likely to remain in
the home for at least the next 5 years. For more information, go to
the HUD website at:
www.hud.gov.
Amy is president
of Symphony Financial in Herndon, VA and an Investment Advisor
Representative with Cambridge Investment Research, Inc. She can be
reached at (703) 481-9876 or
abrandts@symphonyfinancial.net. Securities and investment
advisory services are offered through Cambridge Investment Research,
Inc., member NASD/SIPC. Symphony Financial and Cambridge Investment
Research, Inc. are unrelated entities.
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