Volume 13, Issue 4    


Shielding Your Finances FROM DISASTER

Recent catastrophic events, ranging from natural disasters to terrorist attacks, have clearly demonstrated that the homes and livelihoods in which Americans have invested over many years can be wiped out in a matter of hours. Once displaced, many victims of disasters struggle to get back on their feet financially. While there is little you can do to prevent a disaster from striking, there are steps you can take to protect yourself and your family from financial ruin should you be forced to evacuate your home in an emergency.

Here are some strategies you can use to prepare financially for potential disasters:

Store important documents in an "evacuation box." Collect and make copies of all your key financial and personal documents, including passports and birth certificates, marriage licenses, wills, property deeds, insurance policies, mortgage records, car titles, and stock and bond certificates. Make copies of the front and back of all credit cards and driver licenses. Then make a list of all your account and credit card numbers, as well as a written and photographic inventory of all your valuables. You should also prepare an envelope with enough cash or travelers checks to last your family about three days.

All essential documents should be stored in a bank safe-deposit box located some distance from your home or in an airtight, waterproof, and fireproof safe or container that can be easily taken with you in an emergency evacuation. Inform family members or trusted friends of the location of the box in case you are not able to retrieve it yourself.

Make sure you have access to cash. Avoid tying up all of your assets in real estate or investments that cannot be tapped without incurring significant penalties. Maintaining funds equal to three to six months' income in a savings or money market account should be among your top financial planning priorities. You may also want to have on hand several credit cards with high available balances or arrange in advance a line of credit that could be used in an emergency. If you have a 401(k) account with your employer, find out whether your plan allows you to take a loan out against your savings. Consider making contributions to a Roth IRA, which carries fewer penalties for early withdrawal than most other tax-advantaged retirement accounts.

Protect your property. If you live in an area that is frequently hit by natural disasters, consider what you can do to mitigate potential damage to your property. Depending upon the type of disaster likely to strike, you may want to take steps such as anchoring the foundation and roof, installing hurricane shutters on windows and glass doors, adding fire-resistant siding, securing objects that could fall, moving electrical panels and furnaces to upper levels, installing smoke detectors, and clearing brush from around the house. If you are uncertain about what improvements might be most effective, ask a building inspector to recommend structural or other types of changes. By taking measures to protect your home, you may also be able to negotiate a reduction in your homeowners insurance premiums.

Purchase necessary insurance coverage and review your policies regularly. Many people who have lost their homes to disasters find their insurance policies do not cover the cost of rebuilding. If you have homeowners insurance, review your policy annually to ensure it reflects the actual replacement cost of your home and its contents. This is especially important if your home has risen significantly in value or if you have made improvements to the property. Be aware that your policy may not cover damage due to specific causes, such as flooding. If the insurance you need is not available through private companies because you live in a disaster-prone area, find out whether state or federal insurance pools would provide coverage.

In addition to homeowners insurance, you should consider disability coverage to protect yourself and your family in case you are injured in a disaster and unable to work for a period of time. If you receive health benefits through your employer but lose your job, you can keep your coverage in force under a federal law known as COBRA. You should also make sure that your life insurance coverage is sufficient to meet the needs of your family. Keep in mind that it may be possible to withdraw some or all of the cash value from a whole or universal life insurance policy, if necessary.

Your individual circumstances will ultimately determine what steps you should take to protect yourself and your family from a possible disaster. You may also want to consult with an attorney about whether your family would benefit from additional legal protections, such as trusts, powers of attorney, or living wills. Remember, disasters strike with little or no warning—the time to prepare is now. 20/20

Winning Strategies TO SELL YOUR HOME

When you sell a home by yourself, there are more tasks ahead of you than just putting up a curbside sign and waiting for buyers to come to your door with money in hand. However, once you do a little "homework" and have all the facts, it may be easier to decide on selling your home yourself or using a broker.

Sellers, who are emotionally tied to their homes, often price them too high. It can be helpful to do a comparative study and match your home against similar homes in your neighborhood or town. If houses are not selling quickly, you may have to set the price a few thousand dollars lower than you originally intended. You might want to consider hiring an appraiser to get an idea of an appropriate selling price.

All too often, owners skimp on advertising. In addition to the "For Sale" sign in your front yard, post others where legally allowed. Include a telephone number and show your property by appointment only. Compile a brochure or fact sheet listing the asking price, lot size, individual rooms and dimensions, heating and cooling systems (with monthly utility bills for the last year), appliances or other fixtures included, present financing, taxes, and any unusual or particularly attractive features. The Internet can also be a useful tool when selling your home. People who may be considering relocating to your city or town could view a picture and fact sheet, which could spark their interest.

It may be wise to screen potential buyers. If they seem interested, ask how much of a down payment they can make. If you are getting close to a deal, you may want to ask the buyer to supply you with a financial statement from a bank or mortgage lender. A serious buyer most likely will be happy to provide the information requested. You may even want to ask buyers if they have obtained a "pre-approval" or "pre-qualification" letter from a bank or mortgage company, so that you may be certain the funds they are offering for your house would be available for them to borrow.

If you need assistance, "homeowners service agencies" may prove a lower-priced alternative to traditional full commission brokers. These companies generally charge a flat fee—based on the asking price of the house—to screen prospective buyers, arrange appointments, suggest a price, and negotiate with buyers. However, showing the house would be the owner's job.

If you decide to sell your home on your own, remember the following tips:

  1. Price It Fairly. Compare your house to others in your neighborhood that have recently been sold, and factor in any improvements or unusual assets.
  2. Advertise. Use more than just a "For Sale" sign on your lawn. Circulate brochures, run ads in the local newspapers, and put notices on bulletin boards and real estate websites.
  3. Screen Buyers. Before accepting an offer, ask the buyer to supply a financial statement or get mortgage pre-approval or pre-qualification.

When should you decide to discontinue selling the home on your own? Assuming a house is properly priced and in a reasonably active market, a homeowner attempting to sell without professional assistance should allow six to eight weeks without a written offer. With help from a service agency, give it four months. After that, call a professional real estate broker.

Selling a home on your own can be a great deal of work, but you may save many thousands of dollars that would normally be "lost" to real estate commissions. On the other hand, while the prospect of improving one's financial position is tantalizing, the task may be too time-consuming or beyond your expertise. Professional real estate assistance, whether from a service or a broker/agent, may "save" you more than you realize as you set out to sell your own home. As you can see, there is no perfect answer to whether or not you should sell your house by yourself. However, doing a little research and arming yourself with some information can better help you decide what is the best strategy for you and your situation. 20/20


Over the next two decades, the most chronicled generation in America will gradually enter retirement. At that point, each wave of baby boomers will quickly discover if their retirement plans, Social Security, and personal savings will be sufficient to maintain their existing lifestyles and needs.

Baby boomers—a name given to those born from 1946 to 1965—have been noted for their creation of the "computer age," quest for physical fitness, and expectations for living long and full lives. Now, as the boomers pass into middle age, many are beginning to focus their attention on retirement.

Unlike the previous Great Depression-to-World War II generation, many baby boomers believe they cannot depend on receiving Social Security benefits during their retirement years. In fact, many economists question the future "security" of the Social Security trust funds.

To further compound concern, many employed boomers may not have employer-funded retirement plans. Since, in today's work world, employees, rather than employers, generally assume full responsibility for funding their retirement plans, it is no surprise that uncertainty and worry occupy the minds of many of those without guaranteed pensions.

Broadening Perspectives

What can boomers do to determine if their savings and assets will sufficiently fund their retirement years? Definitive answers are often elusive. After all, life is filled with many variables, and no one really knows for sure what the future holds. However, even with these constraints, boomers can gain much insight by estimating and analyzing the following:

  • Potential income sources (e.g., income-producing real estate, inheritances, etc.)
  • Projected balances of retirement and savings plans
  • Costs of future health care needs
  • Annualized rate of inflation over retirement years
  • Amount of Social Security income to be received
  • Percentage of present income required during retirement years
  • Length of years retirement may last or life expectancy

Survey Says. . .

A 2006 survey conducted by the Employee Benefit Research Institute* found that only 24% of Americans are very confident they will have enough money to live comfortably in retirement. In addition, 14% of current workers believe they will need less then 50% of pre-retirement earnings to maintain their standards of living in retirement, and an additional 36% project their needs will be 50%–70% of their current incomes. However, 62% of current retirees report that their needs equate over 70% of their pre-retirement incomes.

As is true of every generation facing the retirement planning process, baby boomers should have a disciplined savings program in place. If you're a baby boomer, keep in mind that periodic or haphazard deposits may be counterproductive. With a commitment to success and a scheduled plan, you can work toward building the necessary retirement funds to secure your own financial future. 20/20

* Source: Retirement Confidence Survey, Employee Benefit Research Institute, 2006.

    Building Your Child's: FINANCIAL FOUNDATION

    It is important to begin as early as possible to help your children understand the power of money and the responsibilities that accompany it. By gradually introducing your children to money matters, you provide them with the opportunity to deal with money directly. Here are some things you can do to help build your children's financial foundation:
    • Have your children go with you when you cash your paycheck, make regular deposits to your savings account, or go grocery shopping. Also, teach your children how to prioritize purchase decisions and put money away for a future goal.
    • Allow your children to handle their allowances in their own ways. However, in order to teach fiscal discipline, it is important that you keep their allowances on a set schedule.
    • Provide opportunities to earn extra cash for special events or personal wishes, and give them regular opportunities to save.

    By giving your children the tools to deal successfully with money now, you can help build their financial skills for the future. 20/20

    The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Entities or persons distributing this information are not authorized to give tax or legal advice. Individuals are encouraged to seek advice from their own tax or legal counsel.
    The information contained in this newsletter is for general use and it is not intended to cover all aspects of a particular matter. While we believe all information to be reliable and accurate, it is important to remember individual situations may be entirely different. Therefore, information should be relied upon only when coordinated with professional tax and financial advice. The publisher is not engaged in rendering legal, accounting, or financial advice. Neither the information presented nor any opinion expressed constitutes a representation by us or a solicitation of the purchase or sale of any securities. This newsletter is published by Liberty Publishing, Inc., Beverly, MA, COPYRIGHT 2007.