Category Archives: Finance

Tips to Create an Effective Budget For You

Do you think budgets are a concept only for penny pinchers? If you have a high salary, you may not see the necessity of tracking every dollar you spend. But creating an effective budget can still be highly beneficial to your wallet—no matter how big or small.

Wealthy people are anomalies compared to most of the world. Unlike most of us, they have plenty of savings and no debt. A budget will help keep things that way. Remember this universal truth: the earlier you start budgeting and saving, the harder your money will work for you. Frivolous shopping purchases, regular restaurants visits, and frequently giving to family and friends all add up quickly.

I’m not saying you shouldn’t indulge in these things from time to time, but being mindful of your spending habits allows you to save and invest a larger chunk of your paycheck each month. That way, instead of your money mysteriously disappearing, it will multiply.

“Planning and controlling consumption are key factors underlying wealth accumulation,” wrote Thomas Stanley and William Danko in The Millionaire Next Door. “Operating a household without a budget is akin to operating a business without a plan, without goals, and without direction.”

If You’re Spending Less, You Can Invest More

By maintaining an effective budget, you’ll know exactly how much money you’re saving, and in turn, you can give your savings a chance to work for you. Maintaining a monthly budget and investing for the future will also provide you with a sense of security. As you probably already know, there are considerable tax advantages to putting extra funds in your 401(k) retirement account, IRA, or health savings account (HSA). There many other investment opportunities available, from guaranteed products like annuities and CDs, to different mutual fund or stock portfolios.

Your extra savings from budgeting could also be used to buy real estate or invest in other business ventures. Obviously, these options come with different levels of risk and should be carefully assessed before taking the plunge. But once you create a budget, you’ll see there is a myriad of things you can do with your extra funds.

With this in mind, let’s examine the best way to create a monthly budget so you can ensure your money is always working in your favor.

Getting Started On a Budget

Creating an effective budget can accomplish another beautiful thing: it will cause you to pay attention to the things on which you are spending your hard-earned money. By focusing on your individual expenditures each week or month with a budget calculator or budget planner, you’ll probably make better decisions about how you spend, save and invest.

  • Track your expenses. Go through your bank statements and write out every bill and monthly expense. You may have to average some of them, but that’s okay. This includes all your utility bills, your mortgage, car payment, home, car, and life insurance, child support, child care, student loans, cell phone, gym membership, credit card payments, prescriptions and other outstanding loan payments. It’s best to write these out in a budget planner spreadsheet so you can have everything in front of you.
  • Record other expenses you encounter throughout the year (excluding monthly expenses) and divide by 12. This includes things like property taxes, car repairs and oil changes, vet bills, glasses or contacts, tax preparation fees, medical expenses, charitable giving, vacation expenses and also camps and lessons for your children if you have them. Dividing the total amount you spend on these items annually by 12 will give you an average of what you need to set aside per month.
  • Add up how much you spend in various categories per month. Go through your bank statement again and write out approximately how much you spend each month on essentials. These include groceries, gas, clothing. Don’t forget extras like restaurants, parking fees, hair salon fees, gifts, traveling and entertainment. Analyze these amounts. Are you happy with how much you’re spending in each area? If not, set a budget or limit of what you believe is reasonable and attainable.
  • Record your total monthly income after taxes and subtract all of the above expenses. How does your bank account look now? Are you spending more than you make or is there a considerable amount left over to save? If not, it’s time to make some adjustments in your budget planner in order to create a more sensible plan.
  • Stay on track. After you create your budget, start regularly tracking your expenses and checking your bank account to see if you’re staying on track. This is the hardest part. You can either do this with your own spreadsheet or use a website that does it for you like Once you enter your credit and/or debit card information, Mint tracks all of your expenses in various categories and sends you alerts if you have overspent in certain areas.

The 50/30/20 Rule and Emergency Fund

First, I recommend creating an easy-access emergency fund savings account that contains at least six months of your monthly income. Next, I would implement the 50/30/20 rule—reserving 50% of your income for essentials like housing and food, 30% for lifestyle choices, and 20% toward financial priorities such as debt payments, retirement contributions, and savings.

As you get more comfortable with your monthly spending habits, this 50/30/20 ratio will change, eventually skewing toward saving more. Please remember, budgeting is often very trial-and-error. You may need to adjust it on a monthly basis until you get in a groove.

The Bottom Line: Don’t Give Up

One major advantage of creating an effective budget is the way it helps you discuss money and goals with your spouse or family. It also ensures everyone involved in the discussion is on the same page and understands the underlying plan. Statistics reveal money is the most common topic that couples argue about. But it doesn’t have to be that way. When you learn how to make a budget together and re-evaluate it each month, you’ll have a more positive outlook on your future together.

A budget can also set a positive example for your children or other family members. If you don’t want your loved ones to squander their money and opportunities, lead by example and create a budget. Let’s not sugarcoat it—sticking to a budget can be difficult. But it’s usually the difference between living a stressful retirement versus the retirement of your dreams. Much like a diet, you have to be dedicated in order to see results. Good luck and happy budgeting!

Tips to Create a Budget (Even if You Hate Budgets)

Many older clients I talk to have never had a budget and don’t want one. But at the same time, they are worried they won’t have enough money to retire. This is where some tough love comes in. Whether you like it or not, following a basic budget is the best way to live comfortably in retirement.

It’s very easy to talk about budgets and the importance of a budget, yet many clients have worked for 40 years and have been able to save, so whatever budget they had worked for them. And I understand that clients want to be enjoying their money in retirement––not stressing out over what they can afford. In fact, the worrying is the advisor’s job––that’s what the client is paying for. But it makes life so much easier for an advisor if they know what their clients’ spending habits are like.

I don’t mean that you necessarily have to log each and every dollar you spend either. Most people are guilty of not having a perfect budget––and it’s okay. Work out a compromise between having a full-blown budget and having none. And at the very least, create a budget that breaks out fixed costs including property tax, insurance, medical and basics (car, food, shelter). In fact, every budget should break expenses in two columns:

Fixed and Required Expenses

These include things you must pay for in order to survive:

  • Housing
  • Food
  • Clothing
  • Insurance
  • Medications

This category is only for non-optional expenses–– everything else needs to go into the second category. No exceptions.

Everything Else in Your Budget

Anything that is not integral to living and surviving goes into this second column–– and everything in this column instantly becomes optional. Yes, that includes travel. As much as most people look forward to traveling in retirement, it’s important to be realistic with your savings. If you simply don’t have the funds to do it, you need to pay for food instead.

Put another way, no matter what your current financial situation is, it’s important to remember that just because you have the option to spend money on something, that does not necessarily mean it’s a good idea.

If you feel the need to track every last dollar as part of your budgeting efforts, you should go back three months and look at what you spent. If some expenses are paid only once a year, you can factor those in later. Most budgeting books encourage you to start keeping track of your spending starting today, tomorrow, or at the start of the next month. Those methods simply don’t work.

Looking at behavioral reasons alone, you’ll be careful about what you spend going forward because you want the spreadsheet of your expenses to look good–– only to be upset later because you feel restricted from spending your own money.

By looking into your past spending, however, you’ll be able to identify your impulse buys and reflect on whether or not they were really worth it. Through that, you’ll develop better clarity about your financial habits and realize where you need or want to improve.

For example, I once met with a couple who was struggling to save enough and wanted to know what they could do to improve their situation. After looking back at their past three months of spending, they realized that they had spent an average of $1,000 a month on eating out. Once they realized that this wasn’t how they wanted to spend their money going forward and that the experience wasn’t worth it to them, it was easier for them to increase their grocery bill and still save $800 per month for other goals.

By breaking spending into two categories––the absolute necessities and the wish list items will separate––it means you won’t jeopardize your financial future for the wish list. This actually makes it less stressful, too, when your advisor points out you don’t have enough saved up. It doesn’t mean you’ll be poor; it just means that you have to approach wish list more strategically.

Creating and sticking to an appropriate budget––even a broad one––is a great game plan for Baby Boomers and beyond.

Tips and Tricks to Manage your Grocery Budget

For most families, the grocery budget seems to be the hardest to control. Busy seasons might mean more wasted money on food waste and fast food, whereas the holidays could mean higher grocery bills for hosting social gatherings. How can a person save in the kitchen?

Address Food Waste

One way to manage your grocery budget is to take a good look at your food waste. How much food are you wasting each month? If you frequently throw away produce and other fresh goods, it could be a sign that you need to buy less. A lot of wasted food may also be a sign that you need to be more disciplined in the kitchen and actually prepare and eat the food you buy rather than ordering a pizza at the last minute. Every time you have to throw food away, it’s like throwing away a few dollars here and there. According to USAToday, “American households throw away about $640 each worth of food every year.” Who wouldn’t want an extra $640 at the end of the year for holiday spending or a small family vacation?

Meal Prep and Plan

The number one reason why most individuals and families don’t plan meals is because they believe it’s too time consuming, but it does not have to be. Even if it took you one hour a week to plan – which could help you save about $640 or more a year on food waste and other costs – that would save you about $12 an hour. For individuals making $12-15 an hour, the savings are like taking a paid week off of work.

To make life even simpler, look for pre-made meal plans. Several are available for free on the Internet, while other paid meal plans can cost about $10 a month. Specialized meal plans, such as 5 Dinners 1 Hour or Once a Month Meals, give shopping lists and instructions on how to prepare food in advance. For 5 Dinners 1 Hour, instructions are given for five meals to be prepped at the beginning of the week. The meals are then quickly cooked each night of the week with very little time and mess. Once a Month Meals offers instructions on how to prepare meals that can be kept in the freezer, reheated and eaten all month.

Even if you do not want to pursue a formal meal prep and plan, try to double one meal a week for the freezer. The best meals to double – and even triple – are lasagnas, casseroles, chili, soup, carnitas and meatballs. This method will slowly build up your freezer stash, affording you minimal grocery shopping some weeks.

Eat Less and Eat Simpler

As a whole, America has issues with overeating. If you’re struggling with the scale and with your grocery bill, eating less might be the solution you need. Blindly serving food onto plates for your family can mean that each person is eating one-fourth to one-half of a cup more than they really need. That little bit of extra food each night adds up.

Along with eating less, try eating simpler. Making delicious gourmet meals is great, but save the filet mignon and lobster recipes for special occasions. Instead, turn to simpler foods, such as beans, rice, chicken and eggs for meal staples. Two of the cheapest meals to prepare are bean burritos and eggs and toast. Meals don’t have to be fancy, just filling and healthy.

Here 5 Ways to Manage Wide Income Swings

According to a survey by the Pew Charitable Trusts, more than half (53%) of American families experience wide income swings. From 2014 to 2015, 34% of U.S. households had income shifts (up or down) of 25% or more. There’s a good chance that you, too, will experience some degree of financial inconsistency during your lifetime. Therefore, knowing ways to manage income volatility should be a priority for you and your family. (For more, see Surviving on an Irregular Income.)

Reasons for Wide Income Swings

If you are about to get married or divorced, your household income is going to change. Getting a job, changing jobs, receiving a raise, taking a leave of absence – all can affect pay and benefits a little or a lot. If you are self-employed, subject to fluctuations in the number of hours you work each week or dependent on commissions for much of your compensation, income inconsistency is a never-ending fact of life.

Step 1: Create a Budget

The first step in solving the problem is to list your monthly household expenses in one of three columns on a sheet of paper. The first column is for recurring bills, such as a car payment, utility bills and so forth. In the second column list all of your discretionary spending, including groceries, dining out, cable TV, etc. The third column should contain savings, investments and known future big-ticket expenses, such as medical procedures, home or car repair and so forth.

For anything that tends to fluctuate, use past invoices or receipts to find an average. Always err on the side of the “worst case scenario” if you are not sure. At the end of this step you should know how much you need on a month-to-month basis. (For more, see Budgeting Basics.)

Step 2: Create Steady Income

When money comes in, deposit it in a savings account – not your checking account. Each month transfer exactly enough to cover your budget expenses for the upcoming month. The idea is that your income will fluctuate, but the amount you draw out each month will be the same. You will be paying yourself a set monthly salary, with any extra income remaining in savings, so you can draw on it in lean income months.

Step 3: Pay Bills and Get to Zero

The concept involved here is known as a zero-sum budget. You will start each month with exactly what you need in your checking account, and you will spend or designate all of it, eventually ending up with very little in your checking account .

Your budget should include both investment and debt repayment. It should also include saving (for those known big-ticket expenses). As almost all money has to leave the checking account each month, big-ticket savings should either go back into the savings account (and be accounted for) or into a separate savings account.

Step 4: Adjust – Rinse – Repeat

How you track your spending is up to you. You can use a pencil and paper, do-it-yourself spreadsheet or software such as YNAB (short for “you need a budget”). If you have discretionary funds left over, put them somewhere – debt repayment, big-ticket savings, investment or back into regular savings. It might take a few months before you know exactly what salary to pay yourself. Track and adjust as you go.

Step 5: Prepare for an Emergency

No matter how well you plan, there will always be unexpected expenses. You can plan to replace car tires when they wear out in six months but not a transmission that breaks down while you’re on vacation. Most experts suggest having three to six months “salary” set aside for emergencies or sudden temporary unemployment. Alternatively, a home equity line of credit or something similar can provide you with access to emergency cash if needed.

Ways to Improve Your Finances by Tracking Expenses and Net Worth

I hate the word “budget.” It reminds me of being on a diet. For some reason, In this day and age our human nature struggles with limits. So when I speak with people about their cash flow, I don’t talk about budgeting, I talk about expense tracking. I don’t care what you’re spending your money on, I just want to know how much money you’re spending and if those will costs be the same in retirement. Having this information is crucial to better understanding your financial position.

Tracking Monthly Expenses

I am old-school. I don’t use a pencil and graph paper, but I do use a spreadsheet and I store it in Google Drive, so at least the next time my hard drive crashes I will be ok. I started a perpetual spreadsheet that has nearly eight years of columns—a lot of historic information. Each month I can see how much my total expenses are because I enter the actual cost of living into my spreadsheet. I put the months across the top, and the categories on the side. At the bottom of the sheet, of course, I total up the cost of living and then also add in income to see if our household had a profit or a loss for that month. It is very powerful to be able to look at one row of data and see years of results, particularly if you’re running a surplus. I tell nearly every client they need to be doing this each month. But how many actually do the work? Pretty much nobody, which is sad, because it only takes an hour per month.

Tracking Personal Net Worth

It’s not just the expense tracking. From Gary Keller’s book, The Millionaire Real Estate Investor, I got the idea of buying a million dollars worth of real estate using other people’s money. I read the book in 2005 and 2016 and it was an excellent read both times. It was a little funny reading it in 2016 knowing about the 2008 crash, but nonetheless, the fundamentals are rock solid. In this book, Keller talks about how he met with his friend each week for breakfast, and each week they updated their net worth statements together and asked themselves, “What am I doing today to increase my net worth?”

In my opinion, updating your net worth statement weekly seems like overkill. However, I do suggest people track their net worth each month—similar to the expense tracking. What’s neat is that you can look at one row over years and years and see your progress. Of course, mine starts in 2009 since the last hard drive crash, and everything has been pretty darn good since then because it was the low of the recession. I like to track liquid assets, real estate, investments and liabilities. Each month you can see if your net worth increased or decreased.

Having this data, either in the form of an income statement or net worth statement, is what every business must have. But only 1% of households have this type of data. Data can help you understand what is actually going on, and help you make better decisions going forward, which is ultimately my mission. A lot of people make terrible decisions because they don’t have the understanding of where their money is going. Grow your net worth! Start by following the suggested exercises.

The Financial Planning It’s About More Than Money

Life planning is different than traditional financial planning because the focus is more about who you are and who you want to be than it is about money.

Unlike people engaged in the traditional planning process, people engaged in the life planning process don’t look ahead to figure out how to maintain their current lifestyles in retirement. Instead, they look at how to change their current lifestyle to achieve the lifestyle of their dreams.

Read on to discover how you can use this approach to financial planning.

The Ideal Lifestyle

Many people credit the baby boomers for this trend – former flower children who grew up and were absorbed by corporate America, but who never lost their ideals. Just as the boomers redefined their “golden years” as a time to be more active than their predecessors were, some want to go a step further and redefine themselves.

For these people, the concept of money is intertwined with the concepts of spirituality, creativity, family, service and other emotional aspects of personal satisfaction. Happiness is measured in more than just dollars and cents. It’s not, “he who dies with most toys wins,” it’s, “he who gets the most out of life wins.”

For many, it’s more of a lifestyle change than anything resembling the retirement-planning process most of us are familiar with from 401(k) seminars at work or meetings with a financial advisor. The doctor who wants to be a painter, the law clerk who wants to be a poet and the city-dwelling office manager who longs for a cabin in the mountains are all increasingly turning to financial-service professionals for help in making those dreams come true.

Of course, the money plays a big role too.

SEE: Retirement Plans

Money and Sacrifice

There’s just no escaping the money (or the lack thereof). The mailman who wants to become Bill Gates is probably out of luck. However, the attorney who wants to trade in her suit to pick up a hammer and open a repair shop might be able to do it in cash. The others have to make choices, so they work with a financial advisor in order to determine how to develop the financial plan that will allow them to realize their personal goals.

Rather than trying to earn more money or build a bigger nest egg, a significant number of people need to make do with less in order to achieve their goals. Giving up the big house, trading in the BMW and skipping the month-long trips to Europe can help decrease expenses and enable people to trade in their day jobs for lower paying, but personally-fulfilling, professions and past-times.

If living in a small apartment frees up enough cash to increase time spent on the golf course, some people are willing to make the trade. In order to exchange the stress of corporate management for the quiet bliss of a career grooming pets, some people are willing to take a significant cut in pay. When you don’t like what you’re doing and know how you’d rather spend your time, life planning can help you make the transition.

It’s Your Life

If your goal is simply to retire, still be able to pay the bills and maybe a take a few trips each year, that’s one thing. If your goal is to trade in your spot in cube city for a spot behind the counter at your own bakery, that’s another thing entirely. Instead of asking yourself, “How much do I need to save,” ask yourself, “How am I willing to change my lifestyle in order to achieve my goal?”

From there, it’s more about the mechanics of orchestrating a transition than it is about saving a certain amount of money or earning a certain rate of return on your investments. Just as each person has his or her own definition of happiness, the decision to pursue a lifestyle change is highly personal. It can involve enormous upheaval, but it can also result in enormous satisfaction.

Prior to taking the leap, you should carefully examine your motivation and your financial resources. Then all you have to do is come up with the plan that will get you there.

News The True Cost of Attending College

College is expensive, and the costs appear to be rising. According to “How America Pays for College,” a recent study released by Sallie Mae, in the 2014-2015 academic year, the average family spent $24,164 on college fees, which represents a 16% increase from the previous year.

Many college students and their parents mistakenly think that tuition is the only cost that they need to prepare for. However, whether students major in English, biology or business there are many costs associated with the higher education experience–and they can add up rather quickly.

Room and Board

At many in-state universities, tuition isn’t even the biggest expense, according to Sean Moore, the founder of SMART College Funding. Moore says at many public schools, room and board cost more than tuition. According to research from U.S. News & World Report, the average student paid approximately $10,000 for room and board in the 2014-2015 school year.


“While some colleges, especially public universities may promise lower tuition, they tend to increase costs,” says Mike Pelosi, the digital media director for CardBlanc’s personal finance education platform for young adults. He explains that this allows schools to keep the sticker price low although the final bill is much higher. “
It’s not uncommon to see a course that costs say, $2000 to take, but the final bill is $2300 due to fees. Over the course of 120 credits this adds up,” says Pelosi.

 These additional charges may vary by institution but can include student activity fees, health fees, and library fees.

A 2013 report by the General Accounting Office found that the cost of college textbooks increased by 82% from 2002 to 2012. “Books will run $100-$400 per semester, and for students in medicine/engineering/science, it’s on the higher side,” says Pelosi. Used or rented books are an option. However, to get around that, Pelosi says many colleges are starting to self-publish their own books—which usually cannot be found online. That being said, it’s important to be aware of copyright laws when using self-published books.


“Very few meal plans are all-inclusive, and students should budget extra money for meals away from school,” advises Moore. Students who eat out instead of preparing food–either by choice or because their dorm rooms are not equipped with ovens could spend exuberant amounts of money on dining out.


Those club memberships may look impressive on your resume, but they’re not free. According to Pelosi, students could pay between $150 – $200 per membership fee. Further, Pelosi says that there are alternative ways of getting the benefits you’d receive from a club, “The proliferation of online job boards, LinkedIn, and
 other connective technology has eroded the ability of clubs and organizations to
 deliver the promised goods of jobs and connections.” He adds that fraternities and sororities also have associated fees.

Testing Fees

If students are going into a professional program, such as 
nursing, pre-law, or pre-med, they will likely have to pay testing fees Pelosi says, “You’ll need extra funds for test prep courses, the materials for those courses, registration fees, and associated travel costs to actually take the test.” For instance, Pelosi says, “If
 you’re an education major, there are at least three tests–in general 
education testing and concentration you will have to take before obtaining 
a license.” He says this can cost an extra $1000.


For students bringing a car, Moore says to factor in the cost of insurance, parking, and maintenance. And if students travel home during the year, Pelosi says multiple plane rides or train trips throughout the course of four years adds up.


Depending on the major, students may need to purchase software. “For example, when I was completing my M.A. in Economics and Statistics, I had to purchase STATA, Minitab, and SPSS, and pay for training resources to learn this,” says Pelosi. He adds, “Computer scientists, graphic artists, statisticians/math majors, and closely associated majors all need certain software and hardware components not included in the cost of a class.”

Dropped Classes

“While often uncomfortable, a discussion about taking extra classes or needing to repeat a class is important,” says Moore. He advises families to realistically budget for how long will it take the student to graduate. “Unfortunately, the four-year
 degree has become the exception rather than the rule, and families may need to
 budget for an extra year, or two.”

How to Teaching Financial Literacy To Kids

Financial literacy is the ability to use knowledge and skills to make effective and informed money management decisions. Personal financial literacy encompasses a range of money topics, from everyday skills such as balancing a checkbook to long-term planning for retirement. While literacy – the ability to read and write – is a fundamental part of the education system, financial literacy is often left out of the equation. In the United States, fewer than half of states have any financial literacy requirements for their K-12 education systems, and only four states require high school students to take personal finance classes.

While there is a movement to include more finance-related coursework in elementary, middle and high school settings, parents and guardians are the primary educators when it comes to teaching children the skills they need to develop a strong foundation for life-long financial competence. Many adults, however, avoid talking to kids about money, because they lack confidence in how they’ve handled their own finances. This is unfortunate, because adults have two things that children do not when it comes to finances: experience and perspective. You do not have to be a financial rock star with a perfect track record to teach your child personal finance basics and get the money conversation started. If your finances are currently in a mess, you can work to get them in order and be a positive role model.

Like other provocative topics, money is something that kids will hear about outside the home – at school, summer camp, sports practice and at friends’ houses. While this may sound harmless (what could they possibly hear that could be that bad?), kids can get the wrong message about money by getting information from their peers. For example, your child might hear a classmate say that rich people are lucky. If your child believes that wealth is a result of luck, what motivation will he or she have to handle money responsibly? It’s important to clarify at a young age that most wealth is not a result of luck – that most people work hard and make smart decisions to “get rich.” Even if you don’t know the difference between defined benefit and defined contribution pension plans, you can provide accurate information, introduce ideas, spark interest and awareness, and help empower your children to take control of their financial lives.

By teaching your children about money, you help them discover the relationships between earning, spending and saving. In doing this, children also begin to understand the value of money. This financial literacy can begin at a young age with simple money concepts such as counting coins and making change for purchases. Older children can learn about savings accounts, balancing a check book and creating a personal budget. The key is to teach a concept and let them try, even if it means a little extra time in the toy store while your little one painstakingly counts out coins from his or her piggy bank.

Letter Of Instruction Finance

In this article we’ll take you through everything you should include in your letter of instruction and explain what it can and can’t do for you. (To begin with the basics, read Getting Started On Your Estate Plan and Six Estate Planning Must-Haves.)

A Simple Remedy
One of the most important features of a letter of instruction, sometimes called a letter of intent, is it provides specific information regarding personal preferences in medical or funeral care or details concerning dispersion or care of personal assets that legal documents may not be able to outline. Letters of instruction can be used for many different things, but one of their main uses is simply to lead the person who must settle your estate through the process step by step in plain language that he or she can easily understand.

A good letter of instruction should contain at least the following information:

  • A complete list of all assets, both liquid and illiquid
  • The whereabouts of any and all tangible assets that are not readily accessible
  • The names, passwords, PIN numbers and account numbers of all liquid assets, including bank, brokerage, retirement and investment accounts (To learn more, read Managing Your Documents To Minimize Disaster.)
  • The names and contact information of any bankers, brokers, attorneys or other professionals who handle your assets
  • Informal information regarding the dispersion of assets, such as who would get a sentimental possession or heirloom (the will may state that these articles are to be distributed according to the letter)
  • Preferred charities for donations, if they are expected instead of flowers
  • Location of most recent copies of all financial and Social Security statements, tax returns, and legal documents (such as wills and trusts) (To learn more about wills, read Why You Should Draft A Will.)
  • List of all financial account beneficiaries and their contact information, if necessary
  • The location of all titles and/or deeds for real estate property, rental property, oil and gas leases, etc.
  • Your Social Security number and birth certificate
  • Location (and keys to) all safe deposit boxes
  • Any divorce and/or citizenship papers, or applications thereof
  • Contact information of any debtors, such as mortgages, credit cards and car loans
  • Contact information for any and all insurance coverage, especially life insurance. (For related reading, see Protect Your Kids And Pets With Custom Insurance.)
  • Care and placement of any pets (To find out how to care for Fido after you pass away, read Keep Your Pets’ Trust.)
  • Contact information for all retirement account or estate beneficiaries (To learn how to protect all of the important information you’ve just collected, read Identity Theft: How To Avoid It and Keep Your FInancial Data Safe Online.)

In the next section of the article we’ll show you how you can use a letter of instruction to augment your regular will, or leave a personal message for your loved ones.

Make the Letter Your Own
This letter can also outline more personal desires, including such details as where you want to be buried and the kind of funeral that you want. You can specify location, funeral home or even what type of flowers you would like, or whether you would like your ashes to be displayed at the ceremony. You can use the letter to voice other personal requests that may be inappropriate for a will or trust, such as a general sentiment about how you would like your heirs to use their inherited assets. You could even tell your aunt that she better not wear the blue hat with the giant bird on it to your funeral.

Another advantage is you can use the letter to expand on your living will, elaborating on the medical conditions under which you would like to be taken off of life support in more detail than is permitted in a healthcare or medical power of attorney. Many people also include an ethical will inside this letter. An ethical will is a document that allows you to pass down your values, beliefs and ideals to your loved ones.

Remember, this type of letter does not have to meet any kind of legal format or other formal requirements; it can be handwritten on plain notebook paper and kept in a file drawer if you like. Anything goes in a letter of instruction; micromanagers can even use these letters as chance to write their own obituaries.

A letter of instruction provides an easy shortcut for those who will have to settle your affairs once you are gone. As with any other estate planning document, it should be updated at least annually and kept in a safe place where it is accessible by your relatives or executor. While this letter is not required in any technical sense, it can serve as a final gesture of consideration for those you have elected to settle your affairs.

Some Tips for Family Wealth Transfers

A lack of communication and planning can be costly to the family in terms of taxes and other issues involving transferring parent’s wealth to the next generation and making sure they are cared for properly in old age. While this might sound like it only pertains to the very wealthy this is not the case.

Family money conversations are important and a trusted financial advisor can be a help in facilitating and moderating these family discussions as well as in guiding them through the entire estate planning process.

Family Financial Discussions

Fidelity’s study suggests four key ground rules to having successful family money discussions:

  • Initiate family discussions early.
  • Don’t be shy about bringing up detailed questions.
  • Let parents have the final say about their finances and care.
  • Have follow-up conversations.


This acronym from Fidelity stands for Priorities, Readiness, Estate Plan and Papers. The PREP approach can help everyone be prepared for meaningful and productive family money conversations.

Priorities. This is about fully understanding the parent’s goals and objectives for retirement. Parents should have an idea of what they want out of retirement, a vision for their lives. Children should be prepared to discuss any concerns about these plans. If the parents, for example, are planning to retire abroad how will the family get together and who will care for them in the event of serious illness?

Readiness. This entails knowledge of the parent’s financial situation. Parents should have a handle on all sources of retirement income, an estimate of the expenses associated with their lifestyle and details of how they will handle retirement healthcare expenses. Children should help parents test drive their plan to see if it is feasible.

Estate Plan. This is about having the parent’s estate planning documents in order and up to date. Parents should make decisions about their care in the event they become incapacitated. Who would care for them? Who would have powers of attorney over their assets? Who is the executor or trustee of their estate in the event of their death? From the children’s point of view, they might suggest the best family member to handle each of these tasks. Factors might include physical proximity to their parents and who is best in dealing with money issues.

Papers. It is important that everyone knows where key documents and papers are located. Parents should make a list of their key documents and papers and where they are located. Children can help their parents determine what documents are in place and which may need updating or creation.

Role of the Financial Advisor

Financial advisors can help clients plan for intra-generational wealth transfers in a number of ways. Adult children may have questions about how to approach the topic with parents if their family is not in the habit of having open family money discussions. A financial advisor can help them understand the issues involved and some of the questions to ask. They might also suggest some ice breakers to help the children open these difficult discussions with their parents or other older relatives.

For parents a financial advisor can be a great sounding board for their ideas about wealth transfer. Who do they want their money to benefit? Do any of their children have special needs that must be addressed in terms of funding? What do the parents want out of retirement? What are their feelings about long-term care? Do they have long-term care insurance or have they made other provisions to deal with these expenses? An advisor can often suggest ideas and strategies the client might not have considered. Additionally, most financial advisors will have relationships with estate planning attorneys and sources to obtain long-term care insurance if needed and can provide referrals to these vetted professionals.

A financial advisor can also be the perfect person to help moderate and facilitate a family financial conversation. As a disinterested third party they are detached from the emotional issues that are inherent in these types of conversations. As experienced financial professionals who have seen a number of different family situations they can offer ideas that the parents and the family may not have considered.

Lastly, most financial advisors have encountered adult children whose goals seem more about their own financial well being than that of their parents. At the end of the day the wealth transfer discussion should be first and foremost about making sure that the parent’s or older relative’s needs and desires are met before worrying about the next generation. This includes their retirement goals and that proper care is provided for their later years. The advisor can help prevent the goals of seemingly greedy children from negatively impacting their parents.