Each Person Needs a Financial Plan
At some point you will be responsible for your own money. If that's not currently the case for you, here are some ideas to help get your financial plan in order. The ups and downs of life necessitate that you step up your own financial understanding.
Retirement fund. Saving for retirement is crucial. Even small amounts can go towards U.S. savings bonds or mutual funds with an automatic savings plan. If you have more money to work with, diversify your holdings among several types of investments. The younger you are, the more you should consider growth investments, which are likely to increase your nest egg in excess of the inflation rate. True, your strategy may change over time, depending on your age, total assets, tax bracket, and tolerance for risk. But you should never totally stop investing for growth.
Disability insurance. Of course, picking winning investments isn't the only goal of good financial planning. Adequate insurance is also essential. For example, disability is far more common among middle-aged people than death, yet disability insurance is often overlooked. Consider supplementing any employer's coverage with your own policy. Most people aim to replace 60%-80% of pretax income, since disability payouts are generally tax-free. A disability policy should cover partial disability as well as total disability. You should be able to save money on premiums by opting for a longer waiting period before receiving benefits.
Life insurance. If you have dependents, you need enough life insurance to protect them. This is true even if you're a married stay-at-home mom, if your absence as caregiver would create financial hardship for your family.
Estate plan. Finally, prepare an estate plan that meets your needs. Review it with your accountant and your attorney every few years to ensure that you stay current with the tax law and with changes in your personal circumstances.