Top Six Financial Priorities for the Sandwich Generation
By Saghir Aslam
Rawalpindi, Pakistan
(The following information is provided solely to educate the Muslim community about investing and financial planning. It is hoped that the Ummah will benefit from this effort through greater financial empowerment, enabling the community to live in security and dignity and fulfill their religious and moral obligations towards charitable activities)
The “Sandwich Generation”- adults caring for aging parents as well as children-faces several stressful challenges that come from trying to juggle everyone’s needs. One of these top stressors is finances, such as how to cover education and health care costs and still save enough for retirement. The demand often competes with one another –which is why setting clear priorities is so important.
Tips for setting those priorities to help you deliver the support to your loved one needs,without shortchanging yourself.
- Take care of your future first.
Saving enough for retirement should be your top priority, just like the flight attendant on an airplane tells the people around you to put on your oxygen mask before you assess the people around you, you have to take care of your needs before you help your parents and your kids.”
- Create or update investment plan.
Create an investment plan that will help you balance your financial goals with the needs of your children and parents. Review your budget, analyze your expenses, and set saving targets to help you prioritize planning for an upcoming expense such as college cost or long term care for your parents.
- Review your insurance coverage.
Protecting your income is always a good idea, but it’s even more important when you have two generations depending on you. Make sure you have enough life insurance in case something happens to you to pay off your mortgage and other debt and to help cover the future living expenses of your dependents. And don’t forget disability insurance: more than a quarter of today’s 20-year-olds will become disabled before they retire, according to the Council for Disability Awareness.
- Check on your parent’s financial health.
Though it might seem awkward, talk to your parents about their wishes for the future and their financial health. What financial assets and expenses do they have? Do they have/how do they plan to meet their financial obligations? Do they have a plan to cover the cost of long-term care? This conversation can help you help determine how much financial support you will need to provide, Larson says.
Also, make sure your parents have done adequate estate planning, and ask for copies of their will or trust, durable power of attorney, health care power of attorney, and advance health care directive. Make sure your own estate-planning documents are complete and updated as well.
- Consider reducing financial support for grown up children.
Many parents still help their grown-up children with their finances –sometime even to their detriment. “Many young Baby Boomers are still paying their kid’s expenses: cell phone bill or car insurance,” “They sacrifice their own financial security to pay for their children to have luxuries they don’t have.” If this is the case with you, talk with your child about the steps they can take to start becoming more financially independent.
- Look for ways to help reduce your taxes.
In some cases, you may be able to claim your aging parents as dependents. Also check with a tax advisor to see if their medical expenses qualify as a tax deduction. Another way that may benefit your financial bottom line is to setup a 529 plan for your children’s education expenses.
(Saghir A. Aslam only explains strategies and formulas that he has been using. He is merely providing information, and NO ADVICE is given. Mr. Aslam does not endorse or recommend any broker, brokerage firm, or any investment at all, nor does he suggest that anyone will earn a profit when or if they purchase stocks, bonds or any other investments. All stocks or investment vehicles mentioned are for illustrative purposes only. Mr Aslam is not an attorney, accountant, real estate broker, stockbroker, investment advisor, or certified financial planner. Mr Aslam does not have anything for sale.)
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