Life is full of surprises and events that sometimes shatter our daily routines and our finances.
Conventional wisdom says that the money in an emergency fund would be earmarked for “unexpected expenses.” That is true. However, let’s think about what expenses actually are (and are not) unexpected.
Expenses that are not unexpected: monthly and annual bills
- Regular annual or semi-annual expenses are not unexpected: these include property taxes, car insurance premiums, annual life insurance premium, eye exams and other once-a year expenses. You can plan and prepare for these expenses by setting aside a fixed amount each month. Since you know these expenses are coming, they cannot truly be considered emergencies.
- Occasional maintenance or repairs, such as a leaky roof or a dishwasher breakdown are not fully unexpected. either. The same is true for other ordinary home repair, care repair, and moderate medical bills. You may not know exactly what expenses will come up, but if you have a body, a car or a home, you need to expect to spend money on maintaining them. Setting aside money each month will build a fund for home repair and maintenance, car repairs, and ordinary medical bills.
What expenses are truly unexpected?
An emergency fund is intended for expenses that fall outside the categories of “annual bills” or ordinary maintenance of home, car, and health. Unexpected expenses are events like losing your job or being struck by a massive, out-of-the-norm health-related bill beyond what insurance will cover. Emergency funds are designed for expenses that are highly unusual, not for common occurrences.
Bottom Line: It is possible that the savings account you were labeling as an “Emergency Fund” is actually your “Yearly Expense and Maintenance Fund.” That’s a good fund to have. But perhaps you also need an emergency fund.
Have you reviewed your beneficiary list recently? Why should you do this? Some of the biggest headaches experienced by tax, legal and financial advisers occur when their clients are not current with their beneficiaries.
During a meeting of older adults, I had a woman admit that her mother was her beneficiary. In the same breath, she mentioned that her mother had been dead for 14 years. I highly encouraged her to change her beneficiary as soon as possible.
If you have not left clear and up-to-date instructions, your heirs will face real legal obstacles; sometimes long and expensive legal and family disputes result, often not ending well. Many of these mistakes are so easy to avoid: simply check your beneficiary forms while you are still breathing! Encourage your family members to do the same.
Any big life event – such as a birth, a death, a marriage, a divorce, a remarriage, a new grandchild, or a change in the tax law – is a reason to revisit your beneficiary forms. My brother-in-law had three brothers and all three had been through divorce; there were children and remarriages. In those situations, updating beneficiary forms is critical.
Avoid the headaches. To avoid beneficiary form problems, it is important to name a contingent beneficiary in case the primary beneficiary precedes you in death or chooses to disclaim the benefit.
Take an inventory of all retirement accounts and investment accounts — locate beneficiary forms for each one. After reviewing and updating them now, and adding contingent beneficiaries to each, mark your calendar to review them annually. Keep on file a copy of the most current beneficiary form for all your accounts, and make sure your family members know where to locate them.
Since we are on holiday break – and have already spent our money on holiday gifts and entertaining — what are some ideas that can entertain the family at little or no cost?
Whether it is checking out a DVD at your local library or from the Red Box or playing card or board games in the evening, there are ways to find entertainment without putting a hole in your pocket.
If you have young children, you may have a chalk mural on your driveway if the weather is warm. Even baking cookies together can be a fun family event. I remember as a child, my mom would sometimes make a batch of yeast bread dough and my sister and I would shape the dinner rolls. In addition to being an enjoyable family activity, working together in the kitchen is also a chance to start teaching your child cooking skills that they will use in their later years.
To be healthier, how about a hike in the woods or taking the children to play in the park? With help from seed catalogs, why not plan your own garden? You will reap the produce next summer. As a family, go for a bike ride. Have a family pick-up game of one-on-one basketball or invite the neighbors over for a game of volleyball. Invite the neighbors in for a potluck barbeque and have activities for the kids and adults.
In the summer, visit a drive-in movie theatre or tour a dairy farm or a police or fire station. Enjoy a free concert in the park or community festival. Visit the public library, check out movies, books, games, music, and take advantage of the programs that the library offers. Read a good book for enjoyment.
Best to you and your family as we start a new year!
Last November, my brother-in-law’s vehicle was broken into at the nearby grocery store parking lot. He had done some banking prior to pulling into the grocery store to pick up a pizza for the night’s meal. While he was in the store, his money and cell phone were stolen. There was also damage done to both driver and passenger doors, his console, and the car’s paint. There were surveillance cameras in grocery store’s lot, but it was hard to identify the perpetrator.
When my sister and brother-in-law returned from the holidays, they picked up their held mail at the post office; while they were there, a man had money stolen from his vehicle parked outside the post office, also after a visit to the bank. Note: Both of these incidents occurred in daylight in a large U.S. city.
Based on his recent experience, my brother-in-law was able to encourage the man to call the police and file a complaint; this would help him to file a claim with his insurance company. Depending what was taken, he might also want to contact his bank, and/or place a fraud alert on his credit reports. In addition, he would need to make arrangements to have his vehicle fixed. These were all steps my brother-in-law had needed to take a few weeks earlier, plus he had to deal with the theft of his phone; fortunately, since my brother-in-law’s information on his phone was backed up in the “cloud,” he was able to be back in business soon after the phone was replaced.
We do not always think about who is watching us, but in both of these cases, someone was watching while they visited their banks. These incidents remind us: don’t let your guard down, and watch your surroundings. That guidance is especially important during the upcoming holiday season when many of us make more purchases than usual and may leave things in our cars.
How many times do we go somewhere feeling we are safe, and therefore do not pay attention to the environment around us?
With the upcoming time change (from Daylight Savings back to Standard Time), take a few minutes this week to make your home healthier for your family. Here are six tips:
- Test your smoke alarm and replace the battery. Using smoke alarms in your home cuts your risk of dying in a fire in half.
- Wash your hands with warm, soapy water for at least 20 seconds – enough time to sing “Happy Birthday” twice. Each year about 48 million Americans get sick from eating contaminated or improperly prepared foods.
- Make your home smoke free. Never let anyone smoke anywhere in or near your home. Parents are responsible for 90% of their children’s exposure to smoke.
- Program the number for poison control into your cell phone: 1-800-222-1222. If you use a land line, post the number near the phone. Each day in the United States over 300 children (ages 0-19) are in emergency rooms for poisonings.
- Do a 3-minute “clean sweep” Pick one small area of your home- like your junk drawer or stairs and take 3 minutes to sort the items. Get rid of what you do not need. Clutter can collect dust, mold, and other allergens and gives pests a place to hide. If clutter is on the floor or stairs, it can cause you to trip and fall.
- Check your locks. Make sure locks function correctly and that a child can operate them in an emergency.
October is always a fun time of year. I grew up near the Spoon River Scenic Drive in western Illinois, where every fall included two fun weekends of visitors checking out the crafts, antiques, and food.
You can experience leaf peeping, apple orchard visits and cider donuts, fall art shows and festivals. Living now near Wisconsin, I now also enjoy cheese festivals with music!
Bike rides as well as walks can benefit from the good fall weather. Don’t forget the pumpkin patch and corn maze fun. Capitalize on the farmer’s market – local produce, jellies and jams.
Many of these opportunities are near where you live. Take advantage of your local resources and opportunities. You don’t have to travel hours away to visit theatre, museums, art exhibits and great food. These opportunites are in your backyard – experience the offerings and make family memories.
First, what is a Digital Asset? It is personal information that is stored electronically on either a computer or an online “cloud” server account. If you use a computer, a password protected cell phone, social media, OR if you make online purchases, pay bills or do banking online – you have digital assets to consider.
Generally required is a user name and a password and/or PIN to access. If a family member or friend becomes incapacitated or passes away, it is almost impossible to retrieve information without the user name and log in information.
Take time to record all of your digital assets in a safe place. Share the information with the person to whom you have granted power of attorney, with your executor, and with other trusted people who would need to have it.
Need help identifying the potential digital assets? Consider the following:
Electronic Devices; Benefit Accounts; E-mail accounts; Financial accounts; online merchant accounts – Amazon or Zappos.; Organization Accounts; Photography and Music Accounts; Publication Accounts; Social Media Accounts; Video Account; Virtual Currency Accounts with Cash Value; and Web Site Accounts.
So how do you plan for your digital assets?
Use specific language in estate planning documents (will, trusts, and power of attorney) that authorizes your representative to handle digital assets as well as tangible assets. Make a list of your digital assets in your will as you would for untitled personal property. Don’t include private information (e.g. passwords) in your will, however, as it becomes a public document after someone dies.
I just completed a pilot series online for a financial class called Small Change. How many of you pick up coins off the ground or from pockets in the laundry? With each dime or quarter, money starts to add up! Starting with small change can pay off a small debt or help you save for one of your goals like a vacation, a down payment for a vehicle or your child’s higher education.
These small coins can make a big difference. Twelve years ago my friends found out their daughter-in-law was expecting twins and during the six months, they saved their coins from purchases and emptied out their pockets: they were able to buy a piece of furniture – a dresser -for the grandsons.
I have participated in a group where part of our fund raising for scholarships is to save the coins. We each have a nifty little box with a lid to transport our coins. During a month’s time, the treasurer collects between $50-$60 dollars. When an I-Pass, (prepaid electronic toll collection system) was needed because of daily travel on the tollway, my coin collection started to flourish. When I moved to Iowa, I am in a community that has parking meters where I now use many a quarter.
What are you doing with your small change?
Some messages are very direct. For example, many parents have a rule against cellphones at the dinner table. The message is clear, and everyone follows the rule. On the other hand, if your parents say they do not want cellphones at the dinner table but they break the rule themselves, this sends a confusing message.
When it comes to money management, children learn through direct teaching from their parents and teachers. They also learn by watching. They see how their parents and guardians manage money. They see how their friends and friends’ families spend money. They receive messages from TV, movies, advertisements and many other sources.
Hidden or mixed messages about money in childhood can turn into adult habits.
- If your parents encouraged you to save money, but your actual experiences in childhood convinced you that saving money was impossible because you are just “not a saver,” then the saving message from your parents didn’t hit its mark. When parents want to teach children to save, it is wise to go beyond verbal encouragement; ideally, they create situations in which children are successful in saving to reach short or longer-term goals.
- As an adult, if you look at your actions and wonder why you are unable to reach your goals, it may be worthwhile to think back to your childhood and teen years. Perhaps you’ll find that when you were a teen, spending money was a way for you to rebel, or a way to find comfort. Those long-ago subconscious motives may have created habits that still haunt you as an adult, causing you to sabotage your own financial goals.
Understand your habits and values and their hidden meanings.
Many students recently marked a big milestone by graduating from school. Looking back, what words of wisdom regarding personal finance would you like to have received when you left high school?
Personal finance does not have to be boring! The National Endowment Financial Education – www.nefe.org has a couple resources to help your graduate be an independent young adult.
On Your Own –is a blog with a range from credit score calculated, making better money decisions, and the pros and cons of college? This is a trustworthy site.
Another option is Smart About Money (SAM) is an in-depth, guided learning experience. There are five sections with valuable tools, worksheets, calculators and quizzes. Each course is about 45 minutes.
Cash Course targets college students. Some colleges and universities offer it especially for their students, but any student can enroll independently. It’s free, with no strings attached, but you do need to create a user account.
Forty Money Management Tips Every College Student Should Know – this Cash Course resource helps young people learn how to take control of their money instead of letting their money control them.