Letâ€™s take a family in which the husband works outside the home. Especially when there are children, Iâ€™d like to see both adults carrying similar amounts of coverageâ€”at least $1 million. Why insure them equally? The wife may not be bringing in an income but she is providing a financial value. Upon her demise, the husband wonâ€™t be torn between earning an income and handling duties at home. Life insurance provides a wide range of choices for surviving family members.
Investigate and pursue all the new tax incentives that pertain to you.
Take advantage of tax credits, incentives, and rebatesâ€”especially any that are time sensitive. If you already own a home, invest in energy efficient equipment such as water heaters and furnaces. You can get a 30% tax credit of up to $1,500 for these appliances. Thereâ€™s also the [up to] $8,000 new home buyer tax credit. In some instances, this credit can be used to offset some of your closing costs. You should also use the IRS withholding calculator (www.irs.gov) to adjust income tax withholding after life-changing events. Avoid too little withholding, which might result if a home was foreclosed on, for example. In that case, the mortgage interest deduction would be eliminated, thereby increasing taxable income. Also, make sure you donâ€™t have too much withholding. If one spouse becomes unemployed, for example, the loss naturally results in a lower taxable income.
Looking for a (relatively) safe investment? Try short-term municipal bond funds.
Short-term municipal bond mutual funds are a great investment for people who have excess cash reserves and who want to earn more interest than what their savings account provides. I recommend these bonds to conservative savers who donâ€™t want to invest in stocks and who want to keep their cash fairly liquid. Short-term municipal bond mutual funds will earn 2% to 4% of tax-free interest, but to reap the full benefits you must give them a time frame of 18 months to two yearsâ€”theyâ€™re not something you can jump in and out of. And although the principal is not guaranteedâ€”it is a short-term fundâ€”there is very little fluctuation of the principal.
Marcia Wade also conducted reporting for this article.
This article originally appeared in the October 2009 issue of Black Enterprise magazine.