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A Five-Minute Financial Checkup

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December 2005
A Five-Minute Financial Checkup

By Rajesh Jyotishi

End of the year is a great time to review your finances and make sure you are headed in the right direction. Basic financial planning begins by asking some basic questions to make sure you are doing the right things and are managing the possible risks in life.

Here is a quick five-minute financial checkup you can do on your own. Where you find you are not sure or know that you have a shortcoming, consult an advisor to help you get back on track.

The foundation of financial planning is insurance, because if you are not properly insured while you are building your wealth and retirement, you and your family can take a major financial hit in the event of a catastrophic loss. Since auto and homeowner insurance is required by law or a mortgage company, we will assume you have at least that coverage in place. But if you are renting an apartment or a home, you might want to consider some rental insurance.

1. Do you have proper health insurance? Yes No Not Sure

It is a good idea to have some basic health insurance.Most people can pay for doctor visits without much problem, but if you were involved in an accident or had a major illness, you could spend your life savings very quickly.

2. Do you have adequate amount of life insurance? Yes  No Not Sure

A rule of thumb states that you should have minimum 5-10 times your annual salary in life insurance. The amount of life insurance you need could vary depending upon the size of your family, lifestyle as well as other financial obligations such as loans.

3. Do you have disability income insurance? Yes No Not Sure

Let's face it. Our lives revolve around our paychecks. If an accident or illness kept you from working, how long could you last on your savings? A good long term disability insurance can help you manage the possibility of this risk. The premiums can vary depending upon your age, occupation, gender as well as the benefits you select.

4. Are you saving enough for retirement? Yes No Not Sure

People are living longer and longer today due to advances in healthcare. If you retire at age 60, you could conceivably live past age 80 or even 90. If you had to provide for yourself for 20-30 years in retirement, would you have enough assets? The earlier you start, the better off you could be. Try to maximize your IRAs and 401k plans from your employer. Not only will it benefit you in retirement, it could save you taxes today.

5. Are you prepared for the high costs of college education? Yes No Not Sure

If you have children who will be going to college, it may surprise you to know that the cost could be as much as $100,000 for a 4-year public college and as much as $300,000 for a private college. If they pursue graduate studies, it could be even more. You might want to consider a 529 college savings plan. Georgia has a very good 529 plan and you can get more information and do an online application at www.gacollegesavings.org.

6. Do you need long term care insurance Yes No Not Sure

Long term care insurance is often the most overlooked type of insurance. Most expenses related to long term care such as nursing home care and home healthcare are not covered by private health insurance or Medicare. Expenses for such care could cost as much as $60,000/year in this area and much higher in other areas. It could be one of your highest expenses in retirement. Please consult an advisor if you are not sure whether you need it.

7. Is your estate plan up to date? Yes No Not Sure

For most people, an adequate estate plan may be just simple wills, with durable powers of attorney for healthcare and financial reasons accompanied by a living will in the event you are on a life support system. For others with a sizable estate, you may need to consider some form of trusts to reduce your taxable estate and to avoid the expenses and delays of probate. Regardless, estate planning should be considered seriously as part of your overall financial plan and should be reviewed periodically.

8. Is your investment strategy sound? Yes No Not Sure

A good investment strategy involves defining your long term objectives and understanding your risk tolerance. Many people who lost a significant amount of money when the stock markets were declining never took the time to do proper asset allocations and define their objectives. If you are not comfortable with the way your portfolio is performing, it may be a good idea to seek guidance.

Generally speaking, if you answered Yes to most of these questions, you are probably on the right track. If you answered No or Not Sure, it wouldn't hurt to consult a financial advisor. If you would like a free consultation to review any of these items, please contact our offices at 770-451-1932, ext. 101 or email RJ@shalinfinancial.com.

Happy Holidays!


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