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Feature/General
Family Finance: Getting Your Financial House in Order
By Laurel S. Alberty
January/February 2006

 The baby is on the way. Everyone is asking if the nursery is ready. Has anyone asked if you have your financial house in order? Here is where to start.

First, take a look at your legal documents. If you have a will and the suggested powers of attorney, you are ahead of most who are beginning the adventure of parenthood. Still, you should review the documents to be sure they are current. You'll also want to make sure they still reflect your wishes. Lastly, assure they are complete with provisions for your new bundle of joy.

If you are part of the majority who don't have these documents, call a lawyer and start the process. It is often a long and difficult road to decide who will take care of your children, your business affairs and your health care decisions in the event of a tragedy. However, it is important to spare your grieving loved ones the grueling process of having these decisions made in the public court system.
The basic legal documents that everyone should have (not just new parents) are a will, durable and health care powers of attorney, and a living will. When drafting these types of legal documents you should seek the advice of an estate attorney. Resist the urge to use your old roommate, the real estate attorney. While you are meeting with the estate attorney, don't forget to discuss planned gifts to your favorite charities.

Income replacement is a dreaded topic for most because it usually means discussing life and disability insurance. Unfortunately, most of us are not wealthy enough to be self insured. That means we need to find an efficient way to provide income for our surviving loved ones. It is important to seek out enough coverage so that your family can live as comfortably as if you were still working. Most employers offer disability and life insurance coverage as a benefit. Usually, these benefits will not be portable if you move to another job. Consider taking out a personal policy while you are young and healthy and the expense is less. If you already have or plan to buy life insurance, be sure to mention it to your estate attorney.

Flexible spending accounts for day care and medical expenses are now available through most employers. These accounts take pre-tax dollars from your paycheck and put them in an account for the designated expense. The day care spending account is limited to $5,000 per year. If you don't use the amount you have saved by the end of the year, you lose it. The flexible spending account for medical expenses is similar but does not have the $5,000 limit per year.

Don't forget to add your child to your health insurance. Before you renew your existing coverage, be sure that the pediatrician and any other doctors you might need are available on your plan.
Last but not least, education planning is on the mind of every new parent. There are many choices available for education savings these days. Seek professional assistance when making this choice. A professional can help you with options regarding the child's access to funds, how the funds are used (educational vs. general) and types of accounts that are available to you based on adjusted gross income limits. Educational savings is very specific to the family situation

Now you can say that your nursery is ready and so is your financial plan!

Laurel Alberty, CFP, is president of Alberty Financial Planning Services, Inc.


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