1. Do the arithmetic
Or if you are not a math person, get someone you trust to do it
2. Live Below Your Means
This is actually #1, but you won't know what it actually is until you do the arithmetic!
A. Downsize?
Annoyingly repeating - do the math. Moving expenses. etc.
B. Save on transportation
- Keeping a reliable car a long time feels really good when it is paid for!
- Can one person realistically use mass transit for commuting? Or can both, taking turns?
C. Shrink subsidies for adult children
If a longer-term situation and you are paying for 2 households for multiple years, look at housing options ...
D. Pay at least a little extra on your mortgage principal every month.
And / or car payment.
3. Get a Professional Opinion
(At least preliminary verbal.)
4. Use tax advantages available to you
Get the facts on which ones you / partner can use at your age / stage / work situation
- 401-k / 403-b matching contributions - arguably "free money."
- IRA (traditional) for an unattended or non-optimal 401-k / 403-b at a previous employer
- Individual 401-k (if you qualify)
- SEP (again if you qualify)
- Roth (Again, do the arithmetic.)
5. Have "The Money Talk" with your parents
A stitch in time saves nine
6. Analyze Long-Term Care Insurance and / or Disability Income Insurance
You can pay for an "Insurance Needs Analysis" without obligating yourselves to buy anything
- Employer insurance programs are typically less expensive per dollar of care.
- Understand if there are any circumstances when you could lose your coverage involuntarily
- If a spouse / partner / child would be thrown into financial hardship upon the death of the other partner / spouse, term insurance deserves a look
- If a retired or near-retires spouse / partner would be thrown into "permanent" financial hardship upon the death of a partner / spouse, consult a professional to understand your choices.
7. Social Security is a valuable but not the only possible source of guaranteed (joint) lifetime income.
- Get the facts. Understand your choices
- Often in hindsight the biggest "lifetime" mistake can be to begin Social Security too soon.
8. Cash is "King" / Empress
- A. Have ... or build ... a multi-month - even better 1 year - reserve to pay all your " need" expenses
- B. Understand your liquidity. Can a financial provider make you wait (e.g,) 30 days at the "wrong" time?
9. If the primary "money person" (temporarily) lost all ability to communicate (e.g. stroke, accident) who else knows where all the money is? And passwords?
- Make a list: Name, address, phone number, name of contact person, website - for all financial & insurance holdings.
- Use a Password Manager or agree on where passwords are "hidden."
- Have an Emergency Drill
10. Have an updated, signed accessible Durable Power of Attorney to enable the healthy spouse / partner to access / manage / act for the incapacitated partner.
- Understand your legal / financial rights. (Or lack thereof.)
- Absent the proper & timely paperwork - which can vary by financial institution - a spouse can not necessarily access the other spouse's IRA (for example.)