A Back to School Homework Assignment for Parents

There’s a certain feeling that sets in after Labor Day which make us feel like fall is already upon us. Perhaps it’s the kids going back to school, or the cool mornings, or the rustling leaves. Regardless of what triggers these feelings, there is usually a subsequent reaction that follows once you have emotionally accepted that summer is over.

Traditionally the fall season brings a renewed motivation to start or complete projects that have been lingering on your “to do” list. While painting the bathroom or cleaning the garage may come to mind, chances are they are not going to have a long-term effect on the livelihood of your family. Although these may not impress the neighbors like a new farmer’s porch, here are some key financial tasks that should be on your radar. Set a good example for your kids and finish this homework assignment on time. First student to hand in their assignment gets a gold star. (For related reading, see: 8 Steps to an Organized Financial Life.)

Retirement Savings 

If you don’t already know your retirement contribution percentage and asset allocation, do yourself a favor and login into your 401(k) portal. Chances are, you set your contribution percentage and asset allocation during your first two weeks of employment and haven’t checked it since. To ensure your retirement matches your goals and expectations, it’s critical to build a large enough portfolio. Saving 10% to 15% of your income will go a long way to achieving those goals. For novice investors, target date retirement funds are a great way to ensure your portfolio is balanced properly without having to do any heavy lifting.

Life Insurance

Many employers offer free term life insurance to their employees equal to 1x their base salary. Unfortunately for most workers this is simply not enough. A good rule of thumb is that your life insurance should be 7x to 10x your total income (base + bonus). Before adjusting your coverage, make an appointment with a qualified insurance agent to determine the exact amount of coverage needed. Then you can shop around for the policy that best meets your needs while fitting your budget. Term life insurance policies are advisable for most because you to get substantially more coverage at a fraction of the cost of a whole life policy.

Tax Planning 

Traditionally, most people don’t start thinking about their taxes until February or March when their accountant asks for their supporting tax documents. Unfortunately, in most cases, it’s too late to change what has already happened and your tax liability is what it is. Take control over your taxes now by proactively taking steps to reduce your tax liability. Lower your taxable income by contributing more towards your retirement account. Maximize your deductions by donating cash, clothing or household goods to a qualified charity. Increase your tax withholdings to ensure you won’t owe a lot with your return. On the other hand, if you received a large refund last year, be sure you aren’t withholding more taxes than legally required. (For related reading, see: Is Life Insurance Through Work Enough?)

Estate Plan 

Most people recognize that an estate plan allows for the transfer of property at death. However, what many fail to understand is an estate plan also empowers parents to control who raises their minor children in the event anything were to happen to them. While you may have a grandparent or sister in mind, without a well planned will, there is no legal guardian appointed for your children. Rather than you picking a friend or relative who has similar values, and would exhibit the care and love your children deserve, the responsibility to appoint someone to raise your children usually falls to the state courts and social services department. Set up an appointment with a local estate planning attorney to find out what documents you need to ensure your children will be taken care of in the event anything were to happen to you.

Taking responsibility over key financial aspects in your life allows you to control your own destiny while protecting your loved ones in the event of a tragedy. Like many homework assignments, this may not be the most exciting thing you want to do in your spare time, but there is a lesson behind it. Unlike television and the movies where you can pause and rewind, there is no stopping life and you can’t go back in time. (For more from this author, see: 10 Habits of the Healthy, Wealthy & Wise.)