Your son has picked his college. Your daughter has chosen her major. Your children have even picked out their mini-fridges and microwave ovens for their dorm rooms. However, what about the biggest challenge? Do you know how you and your children are going to finance their college education? It is no secret that college tuition, even at in-state public universities, continues to rise at a rate far outpacing inflation. Paying for college, then, has become an ever more challenging task. Fortunately, students and their families can ease the pain of paying for college by applying for a wide range of student loans. Like all loans, student loans will have to be paid back. However, these loans come with favorable terms, most notably low interest rates. Typically, students do not have to start paying back their student loans until several months after they’ve graduated. Many times, those students who have not found a solid job after graduation or are otherwise financially struggling can often put off repaying these loans. Before your sons or daughters head off to college, make sure that you understand the basics of student loans. The odds are high, after all that your children will need to take on at least some student-loan debt to make it through college. Types of Student Loans There are two main types of student loans: federal and private. Federal student loans — including the common Stafford loan — are a better option. That is because they tend to come with lower interest rates. Students do not have to repay these loans until after they graduate. In fact, federal student loans account for nearly 70 percent of all the student aid received by graduate and undergraduate students. Federal student loans are handed out on a needs basis. In other words, students are more likely to receive federal student loans if they can demonstrate that they need financial assistance to afford the costs of college tuition and fees. The main challenge with federal student loans is that they are limited. There is only so much assistance that students will get in the form of these loans. Again, this limit is based on students’ financial needs. A popular type of federal student loan, the Stafford loan, comes in two main types, subsidized and non-subsidized. With subsidized Stafford loans, the federal government pays the interest for students who attend classes at least on a half-time basis. This loan is given out on a needs basis. With non-subsidized Stafford loans, students have to repay the interest. This loan is not given out according to financial need. Private loans are as the name suggests, provided by private institutions such as banks. These loans are not as attractive as federal ones because they tend to come with higher interest rates. Some private loans also require that students begin repaying them before they graduate, something that can prove challenging. There are some benefits to private student loans, however. For one thing, they can fill in the gaps left by federal student loans. They also often come with higher lending limits, meaning that students and their parents can borrow a larger amount of money to cover the costs of their college years. Parent Loans Parents can also take out federal student loans to help cover the costs of their children’s college education. One popular vehicle for parents is the Federal Direct Parent PLUS Loan. With these loans, parents can cover up to the total cost of their dependent children’s college education minus whatever additional financial aid they or their children have already received. As an example, if the annual cost of attendance is $25,000, and the student receives $5,000 in student financial aid, the Parent PLUS Loan program can provide parents up to $20,000 in loans. Parents, of course, can also take out private student loans to cover their children’s education costs. Again, these loans might come with higher lending limits, but they also usually come with higher interest rates, too. Paying it Back Students often think little about the debt that they are acquiring during their college years. However, parents should remind their children that this debt requires repayment and that doing so could be a financial burden. That is why it is important for students to do whatever they can to rack up as little student loan debt as possible. If this means seeking out obscure scholarships, attending community college for two years or choosing an in-state school versus a private institution, then strong consideration should be given to those options. The best plan? Students and their parents need to research financial aid opportunities carefully. That is the best way to minimize student-loan debt.

Understanding Student Loans

View Resource Understanding Student Loans
You’ve graduated from college. For many graduates, now becomes the time you’ll have to pay for that high-level education. All those student loans you took out while studying economics, philosophy, and engineering, are soon to come due. Those payments will not wait. Moreover, you have to repay your loans regardless of whether you’ve nabbed a high-paying job after graduation or can only find a position filling coffee cups at the nearest coffee shop. You, of course, can help ease the sting of loan payments by learning about your repayment options. A bit of research can help keep your budget healthy as you begin paying back your student loan debt. The burden The first step? You need to understand how much money you’ll owe once you graduate. You’ll need to do this before you graduate. Fortunately, you can find out by logging onto the National Student Loan Data System. This database lists all the federal student loans you’ve taken out. It also lists how much debt you owe, including interest. These figures might come as a shock to you, but it is better to know the debt burden you are facing. This way, your student loan debt will not be as much of a surprise when those first bills start arriving. Who to pay? Next, you need to determine whom you’ll pay when your student loans are due. For federal student loans, this will be a loan servicer. The U.S. Department of Education assigns a loan servicer to graduating students after their entire loan amount has been paid out. You can find information — including contact numbers and mailing addresses — for your loan servicers at the National Student Loan Data System online database. You will need your Federal Student Aid PIN to gain access to this important loan information. Don’t forget that you are responsible for making your loan payments on time, even if you do not receive a bill. If you do not make your payments on time, you’ll face late fees and a hit to your credit scores. Repayment options Once you know how much you owe and whom you’ll pay, you’ll need to choose a repayment plan. This is a big decision, and you might want to spend some time researching it. Your decision should hinge on your current employment and income. Most graduates choose a standard 10-year repayment plan, meaning that they pay off their student loans by making ten years’ worth of monthly payments. However, this is far from the only option. Some graduates might instead sign up for the Income-Based Repayment or Income-Contingent Repayment plans. These plans are better suited for those students who have not yet found a steady, well-paying job. Instead of requiring the same payment each month, their minimum monthly payment rises or falls depending on the graduates’ ability to make their payments. Such programs provide flexibility for graduates still trying to find that right job. Budgeting Once you graduate from college, it is time to learn the important skill of budgeting. This is especially important for students who are repaying student loan debt. You need to learn that you do not have unlimited financial resources. Moreover, you have to learn how to allocate your money properly. If you are earning barely more than minimum wage, you’ll struggle to pay your student loan bills on time if you are spending all your extra cash on Thai food and movie rentals. Sit down after you graduate and spend the time to create a realistic budget. Make sure that you set aside money for fixed expenses such as monthly rent, car loan payments and, of course, your student loan bills. Make sure you also craft realistic line items for costs that can change from month to month, such as entertainment, groceries and transportation. Budgeting is a crucial skill, especially for recent graduates who have not yet had the time to build up a financial cushion. If you can master this skill, you’ll be developing the tools you need to forget a sound financial future. Facing those student loan bills after four years of college life is never an easy task. However, you can ease more smoothly into the real world of bills and financial responsibilities if you do the research on how these loans work. The key is to spend the time to educate yourself on your new responsibilities.

Now That You’ve Graduated: Repaying Your Student Loans

View Resource Now That You’ve Graduated: Repaying Your Student Loans
You’ve graduated from college with a new degree and lots — a whole lot — of student-loan debt. The good news is that depending on the type of loans you have outstanding, you’ll have several ways to repay them. You might choose to set up a standard repayment plan, paying off your student loans over a set period. Alternatively, maybe you’ll set up a plan that allows you to vary your payments — hiking them or shrinking them — depending on your gross monthly income levels. Before you enter the real world of jobs, rents and household budgets, you’ll need to determine exactly how you’ll repay your student loans. It is one of the most important decisions you can make for your financial health. Loan types Before you start to repay their loans, you need to know exactly what kind of loans you have. Federal loans come with the most flexible repayment options. Private loans, made by private companies, come with the fewest. In fact, private student loans are like any other kind of loans, such as a car loan or mortgage. Students will have to pay them back by making a specific payment each month for a set number of years. These loans usually don’t offer any payment flexibility for students who are struggling with their finances or who have not found stable, well-paying jobs. Loans provided by the federal government, though, do take into account outside factors. There are two main types of federal loans. Federal Direct loans are made directly by the federal government. Federal Family Education Loans are made by private lenders on behalf of the federal government. If you default on these loans, the federal government will cover any losses that private lenders would suffer. You might also have taken out federal loans issued directly by the college that you attended. These loans, too, often come with flexible repayment plans. Students, though, will have to check with their individual schools to determine their repayment options. Plans So, what repayment plan ranks as the best choice for you? This depends on your financial and job situation. The payment plan that makes the most financial sense is the standard repayment plan. Under such a plan, graduates make payments for as many as ten years, paying off their student loan debt gradually. Under such a plan, graduates might face higher monthly payments. However, in the long run, you’ll be paying less. That is because graduates who pay their loans back under standard repayment plans pay far less interest. This, then, is the cheapest way to pay off student loan debt. However, what if you do not have much money now? This is not unusual. Many students graduate college with a solid degree but can only find entry level work, even in their chosen field. During these early years after graduation, their gross monthly income is low. However, as these graduates rise through the ranks in their field, their income steadily grows. What was once a pittance becomes solid and, sometimes even great pay. Suddenly, these graduates are no longer struggling financially. The best loan repayment option for such students might be the graduated repayment plan. Under this plan, monthly payments start out low. They then rise after a certain period, often every two years. Again, this is a good option for graduates who are certain that their incomes will steadily rise. However, because payments start out lower, graduates will be paying more interest over the life of the loan. You might also consider an extended repayment plan. This plan gives students a longer time to repay their loans, often for as long as 25 years. It is an option for those graduates whose income is simply too low for a larger payment. There is a limit on this type of plan, though: Graduates are only eligible for it if they owe more than $30,000 on their student loans. Graduates who are financially struggling might qualify for one of the several available hardship repayment plans. The Income Contingent Repayment Plan, for instance, allows graduates to make lower payments — maybe even no payment — if their incomes are especially low. After 25 years, the government will cancel the amount the graduate still owes. There are some downsides, however. First, the IRS will consider any canceled student loan debt as taxable income. Secondly, graduates who make payments that are lower than their monthly accrued interest will see their loan’s principal balance grow over time. The Income Sensitive Repayment Plan allows graduates to make payments based on their annual income, the size of their families and their total loan amounts. The main difference from Income Contingent Repayment Plans? Graduates must send in a payment large enough to at least cover their loans’ accruing interest. Graduates must also pay off their loans in 10 years. Loan Consolidation Those graduates who are in default on their student loans might find relief through the federal government’s Direct Consolidation Loans program. This program allows graduates to consolidate their federal student loans into one larger loan. The new loan will come with several repayment options, including those based on a graduates’ income, family size and ability to pay. A loan consolidation, though, does come with some drawbacks. First, the interest rate on graduates’ student loan debt might rise. Secondly, you might end up paying off your student loan debt over a longer period. This might cause you to pay more interest during the life of the loan than you would have paid if you had not gone through loan consolidation. Before you make any decision on loan consolidation, you should talk with a financial planner or counselor. This professional will help you make the right decision and make sure that you do not fall for any consolidation scams. Paying back student loans is not the easiest of tasks, especially not as college tuition continues to rise, and the country’s unemployment rate remains stubbornly high. Those graduates, though, who know all their options are the ones who are most likely to make the right choice when it comes to repayment plans.

Student Loan Repayment Options

View Resource Student Loan Repayment Options
It makes financial sense to wait to collect your Social Security benefits until you hit full retirement age: 66 if you were born between 1943 and 1954 and as old as 67 if you were born after 1959. Your Social Security benefits will shrink if you begin collecting them before you hit full retirement age. According to the Social Security Administration, if you are the main wage earner and begin taking payments at 62 — the earliest age that you can begin collecting — you will receive just 75 percent of the benefit that you’ll receive if you wait until full retirement age. This can add up. However, there are times when retiring early — and collecting those monthly Social Security checks before you hit full retirement age — is actually the right decision. I cannot work: Maybe you’d like to continue working until full retirement age. Unfortunately, events have conspired against you. Maybe your health is bad, and you can no longer handle the strain of working. Maybe you lost your job, and you have not been able to find replacement work. In such cases, it might make sense to begin drawing your Social Security benefits before you reach your full retirement age. Taking a smaller Social Security benefit each month is a better alternative than is running up credit card debt or facing the possibility of losing your home to foreclosure. My health is bad: This a rough estimate, but if you expect to live past 78, it makes more sense to wait until you hit Social Security full retirement age. If you do not think you’ll live to 78, it makes sense to take your Social Security payments as early as possible. Of course, you cannot predict how long you’ll live. However, if you are in poor health already, or are suffering from a potentially life-threatening disease, your odds of living past 78 are lower. It might be time to consider taking your Social Security benefits earlier. I am married and my spouse is ready to start collecting: Even if you have not reached full retirement age, it is considered smart for married couples to begin taking their Social Security benefits at the same time. If your spouse passes away before you, you can choose either to receive your Social Security benefits or your spouse’s, whichever is higher. Your spouse has passed away: If you are a surviving spouse, you can either claim your own Social Security benefits or those awarded to your deceased partner. You’ll obviously take the payment that is higher. If you take your spouse’s benefits, though, before you reach full retirement age, these benefits will be reduced permanently. It might not make financial sense, though, to wait until you reach retirement age. For instance, if you’ll struggle to pay your household bills without the benefits of your deceased spouse, you should begin taking your benefits as soon as possible.

Special Situations to Consider Before Starting Social Security

View Resource Special Situations to Consider Before Starting Social Security
You are attached to your home. That is natural: Your children grew up in this home. You spent long hours with your spouse in this home. You’ve celebrated holidays, anniversaries and birthdays in this residence. Giving it up is no easy task. Also, then there’s the physical challenge of moving. Moving from one residence to another can be a grueling job, both mentally and physically. However, there are times when downsizing to a smaller home makes economic sense. A smaller home can mean less maintenance and lower costs. Moreover, during your retirement years, both are important if you want to live a comfortable, stress-free life. Moving to a smaller home When does it make sense to move to a smaller home? When maintaining your current home is both too physically and financially demanding. Consider the physical side first. You once needed a lot of living space in your home. You had children living with you, and they ate up a great deal of your home’s square footage. However, now it is just you and your spouse. You have too much space, space that you now rarely if ever use. Unfortunately, that space still needs upkeep. You still need to mow that large backyard that you rarely use and stain that oversize outdoor deck that mostly sits empty. You and your spouse may rarely travel to the second floor of your home, but that does not mean that the carpets up there don’t need vacuuming or that the furniture does not need to be dusted. The simple truth: It is easier to care for a smaller home. You might even consider moving into a seniors community, condominium unit or apartment. Such options allow you to forget about yard work, so that you’ll no longer have to worry about how tall the grass has grown or how deep the afternoon snowfall was. The financial advantages of moving to a smaller home are important, too. Smaller residences often come with lower property taxes or insurance costs. This can be important as you move into your retirement years. Remember, your monthly income will fall once you leave your job. You can better protect the monthly income you do receive by reducing the amount of money you spend on taxes and homeowners insurance each year. Reducing expenses As you debate whether it is time to move into a smaller home, you can also take steps to downsize other of your regular expenses. Again, every dollar that you do not spend leading up to or during your retirement is an important one. For instance, once you hit retirement age, it is time to take a closer look at your insurance coverage. While you may need to add supplemental health insurance as a boost to Medicare coverage, you might be able to cut out other insurance costs. The odds are you’ll no longer need as much life insurance as you grow older. If you no longer need a second car because you do not commute to work, you’ll also be able to lower the amount of money you pay each month for auto insurance. Then there’s phone service. Many of us hold onto cell phone service plans that simply cost too much. Consider searching for a cheaper service. You might not need all of the monthly minutes for which you are now paying. Consider, too, whether you still need a land phone line. Many people have dropped their land lines entirely, opting instead to rely on less expensive cellular plans for their phone service. Reverse mortgages If you choose not to move to a new home, you might consider a reverse mortgage as another potential income stream. A reverse mortgage allows homeowners of retirement age to access a portion of their residence’s equity that they can use to pay for bills and living expenses. Retirees can do this in a number of ways. They can choose to receive their equity payment in a lump sum, in the form of monthly payments, or they can take the funds as a revolving line of credit. Retirees do not have to make payments to the lender that provides them with a reverse mortgage. Instead, they typically repay the home when they die or sell their residence. Homeowners, though, need to be careful with a reverse mortgage. If they die without having first repaid the loan — typically through a house sale — their heirs will be responsible for selling their home and repaying the loan, something that can add stress to their lives.

Down-Size Your Home, Right-Size Your Life

View Resource Down-Size Your Home, Right-Size Your Life
The secret to a happy retirement? There are probably many. However, not having to worry if you’ll run out of money is certainly near the top of the list. The problem is, people are living longer today. It is not unusual for people to live well into their late 80s. That is a good thing, except when it comes to retirement savings. Living longer means you’ll need far more dollars for your retirement years. The secret to stretching those dollars is proper management of the money you’ve saved for retirement. The wiser the financial choices you make, the more likely it is that you will not run out of money during your retirement years. The good news? Managing your retirement funds does not have to be complicated. You can either hire a financial advisor to take on this role or you can do it yourself. Going with a pro There are plenty of financial planners who can help you manage your retirement funds. These financial pros can provide you with suggestions on how much money you should withdraw from your savings each year. They can also provide guidance on which investments you should first make your withdrawals from. A financial planner can also spot signs of trouble with your investment portfolio. For instance, you might have a portfolio that’s weighted too heavily toward risky stocks. Alternatively, you might have one that doesn’t have enough risk. Both can cost you a significant amount of dollars during your retirement years. A portfolio weighted too much towards stocks could eat away your savings should those stocks falter. A portfolio that relies too heavily on safer bonds could shut you out of the potentially bigger gains that stocks can generate. The key to having someone else manage your retirement funds is to find the right professional for the job. This means that you’ll have to interview several financial planners or advisors before selecting one to watch over your funds. First, make sure to work with a Certified Financial Planner. Such planners must take regular continuing education courses to maintain their certifications. This means that they are more informed about the latest investment trends, strategies and vehicles. Secondly, only work with a financial planner who is willing to provide you with references of current customers. You want to consult with these references to make sure that they have been satisfied with a particular planner’s advice, service and responsiveness. Finally, make sure that you only work with a financial planner with whom you are comfortable. You will be sharing personal financial information with this professional. You want to be able to trust them. Ideally, you should like them, too. Work with a planner who listens to you, takes your individual needs into account and gives you a say in investment decisions. There should be no “one-size-fits-all” advice. Going it alone You also have the choice of going it alone when it comes to managing your retirement funds. If you choose this route, you’ll need to commit to staying up-to-date on the latest financial news and be willing to conduct regular reviews of your investment portfolio. That latter point is important: Too many retirees who manage their retirement funds review their investment portfolio on a frequent basis. This is a mistake. As you age, your investment needs change. It may make sense to have more risk in your portfolio in the early years of your retirement, especially if you expect to live many years after leaving the workforce. However, as age, you might need to reduce some of that risk. If you do not review your investment portfolio and make the necessary changes, on a regular basis, you could end up costing yourself financially in the latter years of your retirement. Many retirees who manage their retirement portfolio rely on the bucket approach. Under this method, you divvy your investments into several buckets. Those buckets with the least amount of risk, investments that typically include certificates of deposit, money market accounts and short-term annuities, are the ones designed to fund the first five years of your retirement. The bucket of investments that funds your sixth through 10th years of retirement includes investments with a bit more risk, such as longer-term certificates of deposits and short-term treasury notes. The risk gradually increases with the buckets designed for years 11 through 15, 15 through 20 and 21 and beyond. The key, though, is to move your savings from those riskier buckets to the safer buckets as you move through retirement. For instance, in year six of your retirement, the money you previously had in bucket two, with a bit more risk, goes down to bucket 1. You then start withdrawing from this bucket until you move into your 11th year of retirement. At this point, you move your investments down another level of buckets.

Managing Your Retirement Funds

View Resource Managing Your Retirement Funds
You’ve worked hard all your life. You do not want to enter retirement worrying about how you are going to pay for medical costs, insurance, groceries and your other bills. The key to living a comfortable and stress-free retirement is to draft a realistic budget and to cut out unnecessary expenses. If you do this, you’ll greatly increase the odds that your retirement years will truly be your “golden” years. Reduce your spending Financial experts say that you’ll need 70 percent to 80 percent of your pre-retirement income to live happily during your retirement years. However, that is just a general statement. Only you can determine exactly how much money you’ll need during retirement. That is why you have to set your budget. For instance, you’ll need more money if you plan to spend your retirement years traveling the globe or booking cruises. You’ll need less if your retirement plans involve spending time with your grandchildren, playing golf with your friends or fishing on a nearby river. Your health plays a role in your retirement budget, too. If you are already suffering serious health conditions, the odds are high that your medical costs will be significant during your retirement years. No matter what kind of retirement you’d like to live, though, you’ll have an easier time reaching your goals if you reduce some of your expenses. Remember, the lower your expenses, the more dollars you’ll have to do what you want during your retirement years. First, consider your home. You might no longer need all that indoor and outdoor space. Maintaining a large home takes much work. Larger homes also often come with higher property taxes and homeowners insurance bills. Consider downsizing to a smaller home, one that comes with lower property taxes, as a way to cut your monthly living expenses. You might also consider moving to a less expensive community in which to live. With your children grown and out of the house, top-notch schools and busy parks might no longer be a consideration. This frees you up to consider moving to a part of town in which consumer goods and property taxes are both lower. It is not always easy to leave the community in which you’ve spent decades, but sometimes moving to a cheaper town makes good economic sense. Look at your existing insurance policies, too, as a potential source for savings. Now that you’ve hit retirement age, you might no longer need to invest in life or disability insurance. You might not have children that depend on you financially, and your spouse might be able to survive on his or her own financially without life insurance payments. Ditching those insurance payments can add up to significant savings. Speaking of children, be wary of providing them too much financial assistance as you age. Yes, you want your children to be happy. You do not want them to struggle to pay their bills or provide for their families. However, if you spend too much money supporting your adult children, you could accidentally eat away at your savings, leaving you and your spouse in a financial bind. As you hit retirement age, your priority is to make sure that you and your spouse are financially secure. Working longer can pay off You can stretch your retirement savings, too, by working longer, either on a part- or full-time basis. This extra income that you earn during your retirement years can help you cover your basic living expenses, allowing you to leave more of your savings untouched. It is important, too, to understand the possible drawbacks of collecting Social Security benefits too early. You can begin collecting your monthly Social Security payments at the age of 62. When you do this, though, your payments will be reduced. In fact, your payments will be lower if you begin taking them before your full retirement age. Your full retirement age depends on your year of birth but will fall somewhere between the ages of 66 or 67. There are times when it makes sense to begin collecting your benefits as early as possible. However, most financial experts agree that it is better if you are relatively healthy and expect to live past 78 to wait until at least 66 or 67 to begin collecting your monthly Social Security payments.

Stretch Your Retirement Budget

View Resource Stretch Your Retirement Budget
When you are moving out on your own, the first place you live will probably end up being an apartment. They are generally inexpensive, readily available, small, and are often densely concentrated in the places where young people most like to live. Starting the process may seem nerve-wracking at first, especially if you do not know what to expect. A little bit of planning and preparation can go a long way in helping you get into the best apartment for your needs. Setting a budget The rule of thumb is that your rent should be no more than 30 percent of your income, ideally more like 20 to 25 percent. Perhaps more important than the percentage is whether you will have enough money leftover after paying your rent to cover your other obligations. Consider your costs for transportation, food, insurance, debt payments, and other necessities and calculate how much you can afford to spend on an apartment. If your budget is not enough for an apartment in your area, consider finding one or more roommates to divide the cost. However, keep in mind the complications they bring, especially as you figure out how to divide chore responsibilities, handle joint costs, and share the space with each of your guests. Additional costs of renting As you are looking for apartments within your budget, remember some additional costs that may or may not be included in the rent. The big one is utilities, including electricity, heat, water, and cable. If your rent does not cover these, you may be able to call the utility company with the apartment address to get an estimate of what the recent bill amounts have been for that unit. Consider other added costs like a garage or parking space and fees for having a pet in your apartment. On the flip side though, make sure also to factor in perks, like a fitness center and pool, which may allow you to skip paying for a separate gym membership. Signing a lease You’ll need to go through several steps before you sign a lease. The application will include an employment check, calling your personal references, and checking your credit history. If you do not have good credit history or solid employment, the landlord may require you to have a guarantor or co-signer on the lease with you. Your parents are the best candidates for this role. When you sign a lease, be ready to put down some money. This will include a security deposit, the first month’s rent, and sometimes the last month’s rent as well. Find out what you need to do to get your security deposit back in full when you move out. The last major thing to consider is the length of the lease. You are committing to live there for the entire lease term, and it is worth finding out what the penalties are for breaking the lease if you need to move. Some apartments will let you sublet to another tenant to finish out your lease, which can be helpful if you are not confident you’ll stay at your current job.

Renting Your First Apartment

View Resource Renting Your First Apartment
When you get married, you tie the knot in more ways than one. In addition to committing to one another, you are also committing to a life of managing your money together. Regardless of whether you plan to manage your finances separately or jointly, you need to create a game plan before your wedding day. Reviewing accounts and debts It is not uncommon for couples to come together and realize that one has a lot more debt than the other. Whether it is credit card debt, student loans or a mortgage, you’ll need to talk about it. Start by sitting down together and taking a comprehensive look at what each of you owes. If you feel tension because one of you has more debt than the other, discuss what you want to do about it. For example, some couples decide to manage their money separately, so each one continues paying pre-marriage debts out of his or her paychecks. You’ll also want to take a look at each of your credit reports because your credit history will affect your ability to qualify for joint accounts, especially a mortgage. If your spouse has a lower score, lenders will use that on a joint application. The sooner you know about credit problems, the sooner you can start working together to improve your credit and build a strong financial future. Setting financial goals Once you know where you stand, talk about where you want to go. Do you want to focus on paying off debt? Saving money for a down payment on a home? Catching up on retirement savings? Going on lots of vacations while you are still young? In the areas where your goals differ, talk through your reasoning with each other until you are on the same page and in agreement on your priorities as a couple. Deciding between joint or separate accounts It is just as common for couples to maintain some separate accounts as it is to join their finances completely, so you should feel free to decide what makes the most sense for your situation and relationship. Maintaining separate accounts can be wise if one of you has child support or alimony responsibilities or if one of you has gotten a large inheritance. However, joint accounts are helpful for managing shared expenses. If you both have both joint and separate accounts, decide where each other’s money initially gets deposited. Some couples deposit their paychecks into a joint account and then transfer allowances into separate accounts for their discretionary spending needs. Others choose to deposit their pay into separate accounts, with each transferring a specific amount each month into a joint account to cover shared expenses. Agreeing on money management rules The last step is to agree on your rules going forward. Talk about who will be in charge of paying the bills, how you’ll manage conflicts over money, and what types of financial decisions you need to discuss together. For example, some couples set a specific price point above which they have to agree on a purchase before making it. Studies show that a great deal of marital discord occurs because of disagreements over money. In that regard, it is not as important the specific choices that you make, rather that you are in agreement on those decisions.

Getting Married

View Resource Getting Married
After they spent at least 18 years taking care of you at the beginning of your life, there’s a good chance you’ll end up helping take care of your parents at the end of their lives. They may need a little bit of help keeping track of when bills are due, or in planning how to tap into their retirement accounts. Towards the end of their life, they might need you to take full control over the management of their personal finances. Even if your parents have not yet reached the point when they need help, it is never too early to start having conversations about their financial fitness as they head into retirement. That way, you have plenty of time to plan how you will take care of your parents as they get older. Costs of elder care If your parents were on an especially tight budget during their working lives and in the early years of their retirement, they might not have the funds available to handle their long-term care needs financially. That might be left to you to fund, and it can be expensive. For example, receiving long-term care in a nursing home or assisted-living facility usually costs between $3,000 and $5,000 per month. Those costs will vary depending on the type of facility and where you live. If the cost of paying someone to care for your parents seems too high, the alternative is for you to take on the task yourself. If you have space in your home, invite your parents to move in with you so you can keep a closer eye on them and care for them as they age. Another option is for you to move in with them or near them so you can provide care while minimizing expenses. The other major expense to consider is health care. Although Medicare provides for their basic health expenses, they will need to be ready to pay for additional costs. Supplemental insurance is one option, or if they have substantial savings, they can self-insure and be ready to pay for costs Medicare does not cover out of their savings. Financial resources for elder care Ideally, your parents will have saved enough money to pay for their eldercare. Between Social Security checks, their pensions, and withdrawals from other types of retirement accounts, some elderly parents have plenty of money to cover their expenses. If your parents do not have enough income from typical sources of retirement savings, another option is for them to sell their home when they need to transition into an assisted living or nursing home. The income from the sale can play a large part in taking care of their financial needs. If they are not ready to move yet, a reverse mortgage is another alternative. It is similar to a home equity line of credit, but they will not need to make payments on it until they move out of the home. Medicaid provides another way to pay for basic nursing home costs. Your parents will need to qualify based on their means, and they will have to spend down nearly all of their assets before they can qualify. They cannot give away assets to you or others to qualify because the government looks back five years in financial records. If your parents are still working and healthy, you may want to consider long-term care insurance. This is difficult to obtain, but if they can qualify early and start making payments, it will cover the cost of long-term care when they are unable to care for themselves. Managing your parents finances Now is the time to start talking with your parents about where they stand financially and how they want their money managed. It is a sensitive topic, but your conversations now will allow you to understand what their needs may be in the future. In addition, in the event that you need to manage their finances for them, you will be more confident that you are following through with their wishes. As far as the legal side goes, have them create a power of attorney for you as soon as you know you will be in charge of managing their finances. This is a simple document that needs to be signed and notarized, and it allows you to stand in for them in a legal sense when they are no longer able. Getting this done now helps you avoid lengthy court proceedings if something happens to them before they designate a power of attorney.

Taking Care of Elderly Parents

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