Financial planning often gets a bad rap. Part of
problem is self-inflicted, since some industry participants would rather sell you a product than address your financial concerns. The process of planning is important, though, whether done with a professional or on your own. After all, you wouldn’t leave on a long trip without looking at a map – a poor analogy for some of us men, but you get idea.So where should you start? That really depends on you and your situation. Since everyone has different goals, needs, risk tolerances, and concerns, everyone needs a unique plan. But in general, planning needs to take into account at least three major areas – insurance, investments, and estate planning. While you can fill a library with all necessary information to properly address these issues, below are a few single-specific tips to help you get started.
Insurance
Insurance is confusing. It comes in all shapes and sizes and covers everything from your car to your health. You can even buy insurance that covers you against alien abductions. And like many areas of planning, insurance can be especially complicated for singles, depending on your situation.
·Life Insurance. For some singles, this may not seem like a pressing issue. But for singles with dependents, it’s crucial. Stick with a term-life policy – more expensive whole-life and universal-life policies are rarely worth extra cost. You should generally buy enough insurance to equal eight to ten times your annual salary, though you may need more if you have several dependents or unique expenses, such as for a special needs child. And since you may not have a second income to rely on if you can’t work, disability insurance is also a good idea.
·Health Insurance. Most of us count health insurance as one of our primary employee benefits. For married employees, benefit is even greater, since this insurance is usually also available to employee’s spouse. For unmarried couples, though, it’s a whole different story. While some companies provide medical and dental benefits to domestic partners, it’s far from norm. And even when these benefits are provided, they are usually taxed as income at their fair market value. While an exception exists, it requires partner to qualify as employee’s dependent and have an annual income of less than $3,100 – which makes it useless for many partners.
Investments
Successful investing is a difficult and time-consuming process. I’ll touch on specifics in later issues, but if you’re trying to put together an investment plan on your own, keep these issues in mind.
·Be patient. There aren’t any magic systems that will help you consistently beat markets. And if there were, could you really buy them for $299 on Internet? Investing is not a get-rich-quick scheme, it’s a long-term process that takes patience, discipline and experience.
·Diversify, but in moderation. Most people own several hundred stocks and bonds, either directly or through mutual funds. There just aren’t hundreds of great investments out there. You’re much better off keeping your portfolio at a manageable level of a two dozen high-quality stocks and a few exchange traded funds or mutual funds with strong track records and low expenses.
