This is Part 2 of the article that I started writing a week ago. Click here to read Part 1. I will highlight few easy Financial decisions that are often delayed or neglected in this part.
1) Having a Will and/or Trusts
A Will/Trust is a legalized document that addresses who/how your assets are dealt with after you die. The risk of not having one is that your assets could end up with the government/courts and not with the ones who really deserve/need them (family). All your assets (bank accounts, real estate, safe deposit boxes, automobiles, ornaments, etc.) can be included in your document. Remember that Trusts or Wills made in US will not cover assets back home. You should have a separate Will made in your home country. Recommended way is to have a Trust to cover assets in US and a Will to cover assets back home (India mainly). There are many CPAs and lawyers in the market who can do this in US & back home. The following link has additional details, pros/cons of each approach - Regular Will Vs Living Trust
A Will/Trust is a legalized document that addresses who/how your assets are dealt with after you die. The risk of not having one is that your assets could end up with the government/courts and not with the ones who really deserve/need them (family). All your assets (bank accounts, real estate, safe deposit boxes, automobiles, ornaments, etc.) can be included in your document. Remember that Trusts or Wills made in US will not cover assets back home. You should have a separate Will made in your home country. Recommended way is to have a Trust to cover assets in US and a Will to cover assets back home (India mainly). There are many CPAs and lawyers in the market who can do this in US & back home. The following link has additional details, pros/cons of each approach - Regular Will Vs Living Trust
2) Whole life Insurance Vs Term-life Insurance
Life insurance isn’t a topic most people want to discuss. You don’t have an option of staying back when death knocks on your door. Death in a family is both a physical and a mental drain; make sure your family is financially taken care of at that time. The basic concept of an Insurance policy is that you’d be paying an annual premium and in case something happens to you, your family would be paid a lump sum amount, in most cases Tax-free. The two common types of Insurance policies are: Life, Term-life. Life is more expensive than Term-Life; however, Life returns a portion of your money at the end of the term, while Term does not. Some criteria to decide on which one to choose should be Finances, health, life style, age, duration of policy, etc. Do your own research and seriously consider getting either one that best fits you and your family. The following link has additional details of each type - Life Vs Term-life
Life insurance isn’t a topic most people want to discuss. You don’t have an option of staying back when death knocks on your door. Death in a family is both a physical and a mental drain; make sure your family is financially taken care of at that time. The basic concept of an Insurance policy is that you’d be paying an annual premium and in case something happens to you, your family would be paid a lump sum amount, in most cases Tax-free. The two common types of Insurance policies are: Life, Term-life. Life is more expensive than Term-Life; however, Life returns a portion of your money at the end of the term, while Term does not. Some criteria to decide on which one to choose should be Finances, health, life style, age, duration of policy, etc. Do your own research and seriously consider getting either one that best fits you and your family. The following link has additional details of each type - Life Vs Term-life
3) Keeping spouse/family informed about personal assets and liabilities
The most common mistake most people do is sparing their spouses/family of financial dealings, mostly with an intention of shielding them from tedious unnecessary detail. That is the most terrible act of violence you will inflict on your dependents; in case something were to happen to you. If your family doesn’t know what you own/owe, they will not be able to claim them in the absence of a will/trust.
4) Distribution of Net worth
Knowing the different categories of assets you hold is very important to laying out both a short-term and a long-term fiscal strategy. Depending on current distribution, consider diversifying into other categories. Recently, Gold is becoming an important asset class, with one analyst suggesting a current allocation of up to 20% of the portfolio link. Use following link to get an idea of your current asset distribution - Asset Allocation Calculator
The most common mistake most people do is sparing their spouses/family of financial dealings, mostly with an intention of shielding them from tedious unnecessary detail. That is the most terrible act of violence you will inflict on your dependents; in case something were to happen to you. If your family doesn’t know what you own/owe, they will not be able to claim them in the absence of a will/trust.
4) Distribution of Net worth
Knowing the different categories of assets you hold is very important to laying out both a short-term and a long-term fiscal strategy. Depending on current distribution, consider diversifying into other categories. Recently, Gold is becoming an important asset class, with one analyst suggesting a current allocation of up to 20% of the portfolio link. Use following link to get an idea of your current asset distribution - Asset Allocation Calculator
5) Watching credit reports and safeguarding identity
Identity theft occurs when someone uses your personally identifying information, like your name, Social Security number, or credit card number, without your permission, to commit fraud or other crimes. While some identity theft victims can resolve their problems quickly, others spend hundreds of dollars and many days repairing damage to their good name and credit record. Some consumers victimized by identity theft may lose out on job opportunities, or be denied loans for education, housing or cars because of negative information on their credit reports. In rare cases, they may even be arrested for crimes they did not commit link. The different types of fraud that can be committed are: Credit card, phone/utilities, bank/finance, Government documents, etc. There are many credit monitoring services available in the market. I strongly recommend signing up for one to keep a close eye on your credit history. Also, The Fair Credit Reporting Act (FCRA) requires all 3 credit reporting agencies — Equifax, Experian, and TransUnion — to provide you with a free copy of your credit report once every year. Don't forget to utilize this free service provided to you.
Stay tuned for Part 3 of this article. Credit for this post goes to my friend Hemanth Potluri and I thank him for his contribution. Please feel free to send me an email or use the comments section below for any inconsistencies or additional information you might want to share.
If you find this interesting, please consider social sharing. Thanks!
If you find this interesting, please consider social sharing. Thanks!
Very True. Life insurance isn’t a topic most people want to discuss. But it’s an important instrument that can help protect a family as well as possible provide an investment as well.
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