In Naked With Cash, seven anonymous Consumerism Commentary readers publicly track and analyze their finances on a monthly basis. For almost a decade, I tracked my own finances on Consumerism Commentary; now I’m sharing the benefits of public accountability with the participants. I’ve partnered with financial planners who will offer some guidance along the way. Read this introduction to learn more about the series.
LastDollar is on Team Neal, with Certified Financial Planner Neal Frankle. Get up-to-date on LastDollars’s progress by reviewing her update from last month.
LastDollar’s own analysis and comments, including her thoughts on this month’s theme of estate planning, are followed by feedback from Neal Frankle.
Comments and analysis from LastDollar
I feel like I’m getting back on track — if there is such a thing in my world. The kids have returned to school, which means I get a few days of solid work-time in each week. Right now, we do have doctor appointments at least once a week, and I generally need to run to school once a week or more for some situation, but it is still an improvement over summer as far as time-to-work goes.
September (and also October) are marketing months for the business. Things are quite steady, but I’ve noticed a definite decline in the number of new clients and inquiries we are getting, so in September my business partner and I did some marketing outreach. We’re going to do the same throughout the month of October and see what kind of results we get from the efforts.
Estate planning: I think about this pretty often, since I am a single mother of two children. Right now, I have a whole life insurance policy that should more than cover my immediate burial needs; I have a 20-year term policy that would provide financial support to my children if I should pass before they are self-sufficient adults.
What I did not do with the term life policy, however, is designate how those funds can be used. I made the kids’ grandparents the beneficiaries until the kids are old enough to manage it themselves, as I believe my parents would use the money for the kid’s needs and educational expenses. If something should happen to me though, the kids would go to live with their father. I feel pretty good about naming my parents as the beneficiaries on this life insurance policy, as I’m certain if the money was left for their dad to control he wouldn’t make the best decisions with it.
I should definitely get a will created; I think that is where I could indicate something about selling the house and making sure any profit on the sale goes into an account for the kids when they’re older. It’s not a high priority right now because there wouldn’t likely be anything left over if the house sold anytime in the near future. Because I’m divorced from the kids’ dad, the chances of something happening to us at the same time is extremely slim, so I already know he would end up with custody of the kids if something happened to me. (That’s terrifying in itself!)
Really, what I need to be doing is planning to live forever.
I believe this is probably the extent of my ability to do any estate planning. I know how important it is, and I do think about it, but right now I just need to focus on the here and now. I need to get out of debt while handling our existing living expenses and raising my kids.
Feedback from Neal Frankle, CFP
Thanks. Glad the kids are back in school and giving you a little room to breathe. On the estate planning side, it’s great that you bought life insurance with the kids in mind. I do, however, have a few comments on what you wrote.
I am not an attorney and I recommend you consult with one. Generally, people don’t have much to say as to how the beneficiary can use life insurance proceeds unless they set up an irrevocable trust designed to hold life insurance. If you feel strongly that the grandparents would act in the kids’ interests, the arrangement you have might be OK. But keep in mind that you can’t force your parents to do anything. And what happens if they pass away before the kids become adults?
It does sound like it was very smart not to name the kids’ father as beneficiary, but I would rethink naming your parents.
I like the direction you are going on the with the will, but I want you to also consider the option of getting a family trust. This could have the added benefit of solving the “life insurance proceeds” question as well. Again, this is a question for the attorney.
I totally get the sentiment of focusing on the here and now. Enjoy your family and get out of debt. In your shoes, I’d do the same thing. But when you do come up for air and have the bandwidth to deal with these items, I hope you’ll consider these questions and bring it up with your attorney.
Feedback from Luke Landes
One of the drawbacks to Naked With Cash in this first year is the lack of an emphasis on income and expenses. Knowing more about these can help determine if a participant’s net worth is making the progress it should be making.
I’ve already mentioned that you’re doing well considering your circumstances. There’s some good news. You’ve had a client willing to pay increased fees, and you wrote about an opportunity with a client who might be receiving funding in the coming months. These are good developments, but are you making the most out of them?. Your cash situation would frighten me. Not including your home or your car, your assets are in a dangerous position. You need an emergency fund, and your tax liability is troubling.
I understand your challenges, but what I’m scared of is seeing the Naked With Cash year end without any behavioral adjustments or any significant improvements in your financial situation. I hope publicly tracking your finances has allowed you to get a better understanding of your situation, but the goal is for more than just that, it’s to determine what kind of changes you can make — given your circumstances — and move forward.