May 20, 2019 | Money Professor
Financial Goals
I realized that in my blog and almost every other financial blog, everyone is telling us to make goals, stick to our goals, evaluate our goals, but how do we make goals?
In this post, I attempt to breakdown the process of thinking about financial goals.
Practical tips:
- Create a monthly even annual budget
- Live within your means
- Pay off any debt
- Set up an emergency fund
- Contribute to your retirement funds/ start a retirement plan (even if you are in Zimbabwe!)
- Visualize the life you want
- Do work that keeps you happy (when possible – sometimes we just have to do what have to do)
- Spend on what you like
- Cut out any expenses that waste your money and do not bring you joy
- Make charitable giving an integral part of your financial goals
I think about money as a vehicle for living the life that we want. A wholesome, happy life of giving, traveling, and doing the things that bring us (me) joy.
Before we get down to business, I would suggest doing a visualization exercise. Close your eyes and think about the life you want, where you want to be, and what makes you happy. Maybe when you close your eyes, you see a beautiful house, your parents with a car, a million dollars in your retirements account. It doesn’t matter as long as you are honest. I daydream a lot- my therapist says this is healthy. So there you go- I just saved you $150.
Step one:
Build your budget – we now write down our budget, so do this. This is worth repeating at every turn.
Step two:
Think about what you want – what are your five-year goals? Where do you see yourself in ten years? Thinking through these questions is how you come up with short and long term goals.
Your fixed goals should include living within your budget, paying off debt, setting up an emergency fund, contributing to retirement and saving at least 20-30% of your income. After that, the goals you make are entirely dependent on the kind of life you want to live.
- If you are a student, you need to regularly set aside a small nest for after graduation to cover trips to visit friends, to support the family and additional health expenses (we have to talk about the cost of dental care -yikes) that might come up.
- If you have just started working you may need to furnish your home, get a car and or you may be thinking about settling down, etc
Our financial goals change; this is perfectly normal. Do not stress when you find yourself needing to adjust some plans. Life changes, things happen, pause, assess the change, breath, and embrace the change.
Step three:
Do I need big purchases? What brings me the most joy? How well do you know yourself?
My husband and I are in our early 30s, so everyone we know is continually asking us if and when we are planning to buy a house. We also get asked a lot if we are planning on getting a new car. And about kids! I am not a minimalist or even planning to retire early, but I value financial independence.
- What is keeping you up at night? The things that keep us up at night should be at the top of our financial goals. For a while, debt was keeping me up at night – so I came up with a strategy to pay it off and exclusively focused on that. Then organizing things for my mom was stressing me for a while, so I researched what I needed to do and dealt with that. Owning a house and or a bigger car has never kept me up at night, so it is not part of our immediate goals. What do I need to be happy? What kind of living situation would make me happy?
We would love to buy a house in the future (Because Boston- seriously who can afford a house here?). We have learned that I hate commuting – I loathe it, BUT my husband prefers distance between home and work. As a result, as we are thinking about home purchases, I might have to give up my dreams of a big yard for a home walking distance to work. Houses closer colleges tend to cost more money. We also have to be realistic about the timeline. It is a lot better to save at least 20% for a down payment. We also have to think about the various hidden costs associated with homeownership. Once you have considered multiple things, you can be honest with yourself about how much house you can afford and how long it will take you to raise those funds. There is no competition, so do what fits your budget and your goals.
We are all different: I love traveling. You love gadgets. She loves yoga. He loves driving a nice car. They love buying a lot of books.
I believe that money should enhance our lives. Access to cash should allow us to do the things that we love. Look at your budget – if you tend to spend $500 on books a month then think about how you can cut out the things that do not bring you joy and think long term about the things you love.
If you are not passionate about cars like me, then you can buy yourself something functional that you pay less for. My car is a 2000 Toyota. I have kept it well, and it gets me from point a to b. Since I live walking distance to work, I hardly drive. Everything I need yoga, church, groceries is within walking distance or a two-mile radius. If I bought a pricier car, I would end up spending a lot on insurance for no reason.
I have a friend who loves gadgets. They spend almost nothing on clothes and save for the newest iPad or headphones (I have tried out fancy headphones – and let me tell ya, if I weren’t cheap I would get me some beats- also dear husband if you are reading this my birthday is today). On the other hand, I have had the same phone since 2014, and before that, I had last bought a phone in 2009. If it works, why change it. I like reliable brands that I can keep for a long time.
Do not spend money on things you do not value – that bring you no joy. I have stopped going to Marshalls because I would end up buying a lot of things that I hardly wear. I now buy clothes on a need to basis from brands that I like to wear.
I love traveling and going on vacations. I save for that and find ways to get to beautiful places within our budget. When we travel, I like to do touristy things – my husband would be fine sitting on a balcony with a cold beer, but he is a good husband so follows along with my plan.
Resources
Here are some of the top savings account options for your emergency fund.
I loved reading Dave Ramsey’s snowball method for paying off debt
Brainstorming life insurance
May 20, 2019 | Money Professor
Diaspora, are you to blame for your financial misery?
Some people have lived in the diaspora for years or what feels likes decades, and yet they look around and feel like they have nothing to show for all those years of hard work. Some people feel disappointed that they have been working all these years and maybe sending money “home,” but there is nothing to show for this either. Do you sometimes feel like this? I know I used to.
The truth is sometimes we are caught in a web of comparing ourselves to false standards that do not represent our truth. Before I dive into the hard stuff, I want you to hug yourself and say –
I am wonderful. I am not a failure. I have done my best, and I will continue to do my best.
Seriously, do this.
Ok- so the other truth is that maybe we find ourselves a little frustrated by our financial situation because we have not done a few things right. If you have been sending money back home for two decades and the receivers are still in the same situation or expecting you to keep remitting, then maybe your financial strategies need to change.
Over the weekend, I had some intense conversations on remittances. To be expected. My research and that of others studying remitting behavior across Africa, in Mexico, various Caribbean countries shows that on average, you diasporians are sending more than the average monthly income in your home countries. That’s right. You are sending between $200 and $500 on regular months. Then you send more for emergencies and other random events. You may be sending/remitting between 3 and 10% of your income. Your money is making western union rich – Just kidding.
The reason that you are upset or feel some type of way is because it sometimes looks like you will never stop sending. A friend of mine said sending money home sometimes feels like flushing money down the toilet – ouch.
People will never stop asking for money so you, my friend, have to decide how much you are willing to send, for what reasons and for how long you will fund that expense.
Those of you supporting parents probably have to accept that since many of our developing countries have an awful welfare system, you the children will need to be the buffer. That said there are things that we can do to not only improve the lives of our parents but also manage the financial bill.
So here are some ten things to think about
- Do your parents have a permanent home? In the village or the city- paying rent long term will cripple your finances. If you do not like where your parents are living, consider a long term investment in the type of upgrades that will make a happy place.
A year ago or so I spent some time at a cousin’s house in rural Masvingo and woow. Just woow – the house was better than most homes in the city, and everything was about 90% solar powered. They had a borehole and a water tank drawing water into the house. I had the best shower of my life.
I have seen friends who choose to rent when they visit home because their parent’s house is not up to standard for their diaspora kids. I have also had some friends extend and improve their parent’s houses in high-density areas. You know your situation best, so plan accordingly.
- Do you have a plan for access to food? I was having the food conversation with my inlaws a while back when mom in law jumped in and said you don’t have to worry about us for food. Also- just to say my mom in law is incredible, she raised five wonderful men. Three are still single by the way JMy mother in law, and many of the women in her area are farming on a small plot of shared land. She grows enough maize/corn to last them the year, sweet potato (which she exchanges for labor), and they have a yearlong supply for vegetables. Instead of buying them food we invest in agriculture inputs, and each year the actual bill has reduced as she is modifying her seeds. We have also come up with a long-term plan to subsidize her labor costs.
I know others who are engaged in small scale chicken projects etc. The goal is to keep things manageable and support something that people have already started. If the idea comes from the diaspora, it will likely fail. Organic projects have a long shelf life.
- A significant expense for diaspora folks is school fees for siblings, nieces, etc. In most cases where the parents are late, you may need to keep this budget item until the child has completed their studies. However, if the parents are living, you will want to try and engage them. This type of conversation is hard, but this is something I have been actively working towards. I no longer accept “the father is useless” as an excuse. If he is living and breathing, I will find him and ask him to take care of his responsibility even if this means going to court or engaging in DNA tests. I am tired of our cultures, giving a free pass to absent fathers. I wish I had healthily engaged my relatives whose kids I supported to see if we could come up with a plan for me to help them help themselves. It is too late for me, but I hope this is not the case for you.
You will also need to have a post-graduation plan. Will the kids continue to University, find jobs, or start their own business? It should be made clear early on that not earning an income is not an option. Budget an extra year of school fees to use as start-up funds for their next stage of life. It is also vital to foster the spirit of giving back while they are young.
- Stop with the building projects. If you have been sending money for the last decade to build a house that is still at window level, it might be time to stop. I used to think building scams were a uniquely Zimbabwean problem but alas from Capetown to Cairo around to Jamaica and the Philippines it is a universal problem. You may be better off investing in a home in your host country/new home country or honestly just saving your money.
- Budget your money – my favorite sermon on giving was when our pastor told us that God does not like disorganized giving. If you are not planning your giving, then end up in debt -what you have done? Listen to me on this. Been there done that and never again! If you do not have – you do not have. Avoid financial emergencies by investing in small monthly payments for health care and funeral policies for key members of your family. Have an emergency fund but please stop creating crises for yourself.
- Do not borrow money to go home. Every year around Christmas, social media is awash with stories of folks taking out $5,000 loans to visit the home country. Look, unless you are going for a family emergency plan long term for the trip and wait until you have the money. Borrowing money with no way/ or resources to pay it back will make you miserable.
- Do not be a show-off. Stop using the money you do not have to buy gifts people do not want. Why are you clocking $3,000 on your credit card for t-shirts and sneakers? Does your 5-year-old cousin need jordans to know that you love them? Do you need to rent the flashiest car when you go home? BE SERIOUS –
This is also a message for me. I was the worst at this. I would spend and spend and spend unbudgeted money for gifts. People will be excited for 5 minutes before they start asking why you did not buy them this other thing.
Who are you trying to impress?
- Stop living a life you can’t afford. You are going home so now you want to spend $5,000 on new clothes? Look, I love treating myself but only if I have saved and can afford the new thing. In January, I did splurge a little on a new purse because I was feeling sad and wanted to cheer myself up. In my sadness, I still paid cash for it. I understand that sometimes we need a pick me up but not if that will make you miserable later. If you must- by yourself one special item and maybe don’t take it home. At our house beautiful things belong to everyone lol
Your family will not love you any less because you do not have the latest X item.
- Have you invested in your future? Do you have a retirement plan? Do you have a plan for if you get injured and have to stop working? What about if you get laid off? The western world is getting more and more expensive, and things do happen. We are human, not machines. When I interviewed nannies for a work project, job security was always a top concern. Many of our diaspora jobs do not provide a long-term cushion, so this is something we need to do for ourselves. Dear friend, please get yourself
- Life insurance – that covers death/repatriation and will live your loved ones, some cushion. Some even over disability cover
- A high yield savings account which can give you at least 2% interest
- Savings for at least five years after you stop working
- Invest in some technical training, an associate degree, or even returning to school full time. You are worth the investment
- Are you enjoying life?
The first time I went to England, my heart was broken as I saw the life of deep sacrifice that my mom was living to afford sending money home. I was hurt- deeply. I sent my mom $50 when I got my first paycheck- she laughed and said Pipo I am fine. I encouraged my mom to move into a nicer place and to start living a wholesome life. To take time off on weekends to attend church. To do one thing- just one thing that she loves. The people she was sending money to were living their best lives while her best life was being wasted in awful jobs and sacrificing joy. I speak to you as I would my mom – take care of yourself. Honestly, live in a decent place with heating. Buy healthy food, and you deserve that yoga class if that is your thing.
Diaspora do not be miserable
May 18, 2019 | Money Professor
Remittances and Black Tax 2: Dealing with and Living with Black Tax
Now that we know that there are historical reasons behind black tax – YOU can STOP blaming yourself or feeling let down by your parents. Anger and guilt can do a lot of harm to the soul.
First step: Develop an understanding of your financial responsibility
Before you even have the big talk with the family about money (these rarely end well) do your math. If your family expenses are not fixed, then try to go over your spending over the last few years – itemize each expenditure and cost, for example:
- Health care for mom $200 every month or 6 months
- Rent for the parents -$200 every month
- School fees for your baby sister and or niece $1,000 a year
- Agriculture inputs for gogo $300/year
- Groceries for the in-laws $500
Even if you are married, I would suggest doing this first part individually, then comparing your numbers and expenditures. You can decide on a plan together later.
Second Step: Evaluate each expense and prioritize
- Is this a necessary expense? If I do not pay for it, will it ruin someone’s life?
One of our favorite married couple mentors sat my husband and I down and asked us this question. Is this an expense that we need to be taking care of? Are you the only person who can take care of your niece’s tuition? What is the situation with the parents? If they are not late, are the parents in a position to make part payments for this expense or another?
- Rank the expenses in order of importance
You cannot cover every expense. You have to be honest with yourself about what you can afford and what you need to be paying for. If an expense is sinking you into debt, cut out other expenditures. You are the only one who can tell you an honest story about what it is that you can afford
- Cut out any frivolous expenses
My husband and I realized that we were paying for a lot of things that we shouldn’t have been. I also spoke to my therapist because one time I was feeling overwhelmed, and she said – people will never stop asking for money. You have to say no. I no longer give people cash for leisure trips. I cannot afford to pay for every church trip or kid’s school trip. I also no longer provide start-up funds for business projects because as my therapist gently reminded me – I am not a bank.
A lot of diaspora friends have lost a lot of money to half baked ideas that sink your money. But this is something that you need to decide for yourself.
- Decide if you are giving someone a loan or a gift.
Third Step: PLUG IT INTO THE BUDGET
Now that you know your black tax/remittance responsibilities plug the numbers into your budget and treat that number like any monthly bill. If the money you spend ranges from let’s say $100 to $500 then you want to set aside maybe $250 each month. THESE FUNDS ARE NOT PART OF THE EMERGENCY FUND. You know you will spend this much so set it aside.
If you are consistently going over budget, you will need to adjust some things in your budget to make this bill fit into the equation.
FOURTH STEP: Family talk (only and only if you need to)
If possible, you may want to have an honest conversation with your family about how much you can afford to give them each month. I will write a separate post with a step by step guide on opening up this kind of conversation. It does not have to be a big thing, and not everyone in the family needs to know your plans. I discussed my ideas with my mom, and that was it.
LIFE HAPPENS:
Because life happens and sometimes, we need to spend a little more – I keep what I call a Zimbabwe emergency fund. I put in $30 a month in one acorns account just for this and minor emergencies.
I do not have a foolproof plan for dealing with back tax, and I still get shocked once in a while– please share your tips for a remittance/black tax survival.
May 6, 2019 | Money Professor
RETIREMENT IS COMING
SOURCE: GETTY IMAGES
ARE you thinking about retirement? I know it sounds crazy if you are in college, in your 20s or like me in my early 30s. But no matter where you are on this journey you should be thinking about it. If you are in your 40s, 50s or 60s maybe retirement feels a little close, and you are feeling worried. Worry not – as long as you start planning today then you are not late or too early. Depending on where you are- your strategies will be different.
TARGETED AUDIENCE: Everyone with a special focus on the immigrant professional. You probably asked yourself-what the heck is a 401k anyway?
NOTE: This post is about regular retirement goals (after 60). I love the FIRE movement (Financial Independence Retire Early), but I am not sure that is for me. I have however learned a lot from the movement, and I encourage you to read as much as you can from them. FIRE folks aim to retire as early as 29 or 39. To meet those goals they live on less than 25% of their income and make so many sacrifices.
SO HOW DO I GET STARTED?
Bonus disclaimer: To prepare for this post I had two phone calls with financial advisors from our retirement management fund- you can call anytime and its free (double check to be sure), I also spoke to my bank then two financial advisor friends who donated their time. The advice was pretty consistent across the board which made me feel confident to write this blog. I have also been reading a ton of books, blogs and I LOVE reddit. However, there is a lot I do not yet know so please correct me and share knowledge from your experience.
How much do you need to retire? It depends on your current budget– you will need about 85% of your current income in retirement. Some advisors say this amount may even be too little because retirement lifestyle can be expensive. Enjoying retirement might include traveling more (without company reimbursement), and I don’t know about you, but when I am home, I eat more and shop more. At the same time, you may already be living a debt free life – No mortgage and no debt! PAY OFF THAT DEBT! BUT our kids might need more financial help, so there is that –
BEFORE we get bogged down with numbers, let’s think about the different ways available to us to save for retirement. Younger readers- I wish I had started saving in college or early 20s. You are at the best stage to start saving. I promise 🙂
Dave Ramsey, Nerd Wallet and a whole bunch of other money smart people say you should put at least 3% of your income towards retirement. However, 15% is better – but since many of us are still starting just putting something is good. My very first full-time job did not offer me an employer match or contribution so after doing my budget and looking at my debt I could only contribute $100 each paycheck. I worked that job for two years; the employer fund had great returns. I recently checked the account in preparation for this blog and my very small contribution has grown to $6,000. Just this quarter alone I made gains of $745 – YAY! I anticipate some losses in the next few years, but I am sure it will bounce back.
SAVING FOR RETIREMENT WITH EMPLOYER-SPONSORED (pre & post-tax) PLAN 401/403/IRA
- 401 (k) or 403(b) This is a pre-tax invest plan offered but employers. Breaking it down:
- Safe harbor Some employers put in money into your account whether or not you make any contributions. This is called a safe harbor contribution. These are rare but quite common in higher education. Yay to academia. The various schools I have worked for have each offered anywhere between 3 percent and 9 percent just because I worked there.
So, let us say Chipo earns $50 000/year and my employer safe harbor is 3% – each year her employer will put in $15 000 annually into her retirement plan. This is an additional benefit to your salary.
If Chipo does not add anything else according to this 401(k) calculator, she will have $232k for retirement at the age of 67 with a 6% rate of return.
- Employer Match: A more common plan is one in which the employer says if you put in at least 3% of your income, we will also put in 3% this would be a 100% match. Nice. So, you put in 3% and get 3% in free money- a lot of young people lose out on this benefit because they do not put in the minimum required to get the match. Others say they will match up to 3% so if you only put in 1%, they will put in 1% if it is a 100% match.
Back to Chipo with $50 000
3% self-contribution will be $1500/year
3% employer match $1500
Assuming a 6% rate of return starting at the age of 33 with $0 savings so far, she will have $445k in retirement. By putting in just 3% of her income, she has doubled her retirement funds.
- My fav situation is when you have both the safe harbor and the match. The lingo is a bit complicated- you can read more here. At a few universities, the contributions look like this
Your employer will invest safe harbor 3% regardless of what you put in
Your employer will then match up to 3% of your investment
You will put in 3% into your fund
Nice! Under this plan, you will get 9% invested towards retirement.
Assuming a 6% rate of return starting at the age of 33 with $0 savings so far, she will have $697k in retirement. This is the BEST!
Benefits of a 401(k) fund
- Tax benefits: If you max your pre-tax contributions to the allowed amount for 2019 which is $19 000 for those under 50 and an additional $6,000 for those over 50.
You will only be taxed on (annual income-tax contribution). This includes an employer contribution.
- You will have to pay taxes after retirement – this is when a ROTH 401(k) might look a bit more attractive.
- How do I know what plan is best? Let your budget inform you. There are seasons when you want to reduce your tax bill by contributing more.
- Shelter from creditors- Most plans offer creditor protection.
- Employer matches and contributions – discussed above. Most employers do not contribute to post-tax contributions.
- Secret: You can withdraw for certain things with no fines. For example, you can withdraw money towards your first home payment up to $50k and for a medical bill. I am excited about this option (my financial advisors were too). Most of us do not have access to family loans for that first house or substantial medical bill, and this is a nice option to have. You will pay yourself back with interest, and you may lose out on returns during the time the money is out, but you can also avoid ridiculous interest rates. It could be a win-win with the right kind of research and planning. -plans differ on this so please do a double check.
Downsides of a 401(k) fund
- Taxed at withdrawal – you could be in a higher income tax bracket at retirement
- You can only start withdrawing at age 59.5.
- Fines for early withdrawal for unspecified reasons.
- Some plans have high fees. Do check with your retirement plan about the associated costs. I received a tutorial from TIAA to understand my fees, and so far I am happy with what they offer. Almost every fund has fees so you should not let this derail you too much.
A Roth 401(k)
With the Roth 401(k) you get can still contribute the same max of $19,000 but after tax. This means that when you withdraw your money in retirement, you will not owe taxes (except on the interest). This is a good option if you are in a position to pay a higher tax bill- probably great for younger folks who may have lower responsibilities early on in their career.
HSA – HEALTH SAVINGS PLANS
SOURCE: GETTY IMAGE
This is a little-known secret. It is a great tax-free way to save for future health expenses during your healthier years. Your employer offers you two or three health care plans. One has low monthly payments and higher out of pocket (HIGH DEDUCTABLE). There is usually a max for what you pay out of pocket with either plan so you will not be entirely stranded. This plan allows you to add $3, 500 for an individual and $7, 000 for out of pocket costs. Some employers will also contribute to this plan – some make a 50% contribution which is very nice. The money will grow with interest. You only need to use the funds for health care expenses, and they roll over from year to year.
Your plan will give you a list of what is approved.
I set aside $500 for our family of two the first time I played around with this. I have been able to pay for co-pays, acupuncture herbal tea, some cold medication. I have a debit card linked to the account. If the purchase is not approved, it makes a huge BING sound lol.
Keep your receipts. You can ALWAYS submit for reimbursement.
Other things with health care: Check if your plan covers things like a gym membership, yoga- you can tell I love yoga. I go every day for two hours when I can. The costs can add up quickly.
POST-TAX CONTRIBUTIONS
401(K)
Same as pre-tax but after you have paid your tax bill. For 401 the max is still $19,000. This is an option if your employer does not offer after tax.
Roth IRA
In contrast, Roth IRA contributions are made with after-tax dollars. That is, they don’t reduce the amount of your gross income, or your tax bill, the year you make them. The tax benefit you get comes at retirement, when you don’t owe any income tax on the money you withdraw from your Roth IRA—because you already effectively paid it, back when you contributed.
If you withdraw after the age of 59.5, then there are no fees associated with the withdrawal or penalty. This means you get access to your money a whole decade earlier than with traditional 401k.
Summary
PRE-TAX – You reduce your annual tax bill by however much you put into the pre-tax plans. You will pay tax in retirement.
401(K) elective deferral plans – you can put in up to $19,000 for 2019.
HSA- If you have a high deductible health plan you can put in $3,500 for an individual and $7,000 for a family
POST-TAX
IRA: this is the more popular plan-you can contribute up to $6,000 per year
DISCLAIMER: MoneyProfessor is my personal blog. I provide general information – not professional or financial advice. Opinions and representations on are my own. I am not providing financial advice or legal advice on my blog. I am only providing general information. You should consult a professional before making any financial or legal decisions.
May 3, 2019 | Money Professor
Today’s post was unplanned. I was thinking of finishing up a series on remittances and black tax but something a friend said has been nagging me. I had written to ask if White Zimbabweans/Africans also deal with black tax. In her response, she shared that she and her siblings were starting to discuss post-retirement help for their aging parents and grandparents. Like most parents in Zimbabwe, they too have lost their retirement and their pension is no longer worth much. My friend shared that her parents were able to assist her and her siblings through college allowing her to graduate without any college debt.
Caring for parents is not black tax
While my mom did not pay for my college, she did invest a lot in my early education. I believe this set me up to get full scholarships for college which also allowed me to graduate without debt. My parents in law also did the same for their 5 boys. Perhaps it is that I will be spending a bit of time with my mom in the next few weeks or that I am seeing that my young girl is no longer so young and I would love to see her work less, travel more, do more fun things and relax. My mother as I have mentioned many times was a trader and has worked really hard her whole life. In fact, this month marks the first time that mom has been able to take a week off from work. Imagine that!
I am sure you have many feelings about your parents as well and perhaps like me you are also beginning to think of how you can support them towards retirement. I have been asking myself how I can financially include care for my mother in my financial planning. I am lucky that my mother lives in a country with some type of pension fund for the elderly, but that amount is very little. My mom and I have many open money conversations, so I feel confident knowing what she needs on a monthly basis.
The list of the ten best countries to live for the elderly does not include any African countries.
So, for those of us with parents on the continent or other places with less secure pension funds we will need to start planning earlier in order to be able to support our parents. We really want to be in a place where we can provide care with a lot of love and very little strain. Most parents are also a little reluctant to discuss these issues because talking about money is hard and it is probably harder if we feel like the people, we love and cared for think we have become a burden. So, do be gentle and kind, in your thoughts and in the conversation when you are ready to have it.
What are some things to think about as we plan to care for our parents?
- Food, utilities and other everyday expenses: Do your parents have enough finances to cover everyday finances? How much is their budget for food and utilities?
- Health Care: If your parents do not have health insurance through work or the state you want to make sure that you get on this ASAP
- Do they have any prescription medications that they need regularly? What is the cost for that? Is this something that they can afford without your help if not, have you included their care in your monthly budget?
- Those of us with parents who insist on working will need to very vigilant here. Our health care plan for mom in law includes good orthopedic shoes because she refuses to REST!!!!
- Life Policy/Insurance: You want to make sure that you have some life coverage policy that includes your parents if they do not already have one.
- Mortgage/living arrangements:
- Is their home paid off? If not, what is the monthly mortgage/rent payment is this something that they can afford without getting into debt or will you need to assist them?
- A dear friend dealing with this told me that it is really important not to abruptly move parents simply because we think place B will be cheaper. As people get older their community is really important, friends and a shared history go a long way in keeping a healthy mind and healthy heart. When I had this conversation with my mom, I realized the importance of her being near her church, volunteer centers, small jobs and friends. Mom’s weekly lunches with friends and singing in the choir keep her calendar somewhat full and this is critical.
- Do you need to make any modifications to their home? When my dear late grandmother was getting on, we had to change the bathroom and bedroom furniture to accommodate a supportive bed and wheel chair. Even in the U.K. which has public health care, this is something we had to pay for. My grandmother in law whom I adore is no longer as fit as she once was. She still loves to hike up the little Masvingo hills to do her farming – this gives her much pleasure but strains her back- we have been investigating walkers that can get her up and down. If you have any suggestions send them my way – PLEASE – we love that she loves farming, but we love her more than the yummy goodies she harvests.
- DEBTS – You will want to know if they have any outstanding debts that have to be taken care off. It will be awful for the parents to lose their home over small amounts that you could have helped cover
- TRAVEL- Parents and seeing their grandkids is a whole mission. While my husband and I do not yet have kids, I have 9 nephews and nieces and my mother would like to see all of them. Obviously, those with children will need to cover the cost of travel for the parents – if this is you then you will have to decide how often you will want parents to travel or to go and see them and the associated costs. If your parents live with you, they may still want to travel to see the other kids or go on social trips. In our case, we have tried to budget for travel to the US for both sets of parents over the next few years. DO NOT FORGET TRAVEL INSURANCE!
- WILL & OTHER ESTATE PLANNING
- Do they have a will? This is not an easy conversation to have but it is important.
- Do they have an up-to-date durable power of attorney for finance?
- Do they have an up-to-date durable power of attorney for health care?
- Does their health care power of attorney contain a health-care directive that spells out their wishes for life-prolonging care?
Planning with siblings
If you have siblings, you may want to sit down as a team and discuss these issues. I know that this is not always possible because of family dynamics. In an ideal situation, you may want to divide the various responsibilities amongst yourselves.
LOVE FIRST
Remember that this conversation (even when you have it with yourself) must come from a place of love and thoughtfulness. Tell your parents that you love them as often as you can.
DISCLAIMER: MoneyProfessor is my personal blog. I provide general information – not professional or financial advice. Opinions and representations on are my own. I am not providing financial advice or legal advice on my blog. I am only providing general information. You should consult a professional before making any financial or legal decisions.
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