in child support, so Dunagan suggests she place that money, plus a contribution of at least $100 monthly, into a 529 Plan to pay for her daughter’s college education. He suggests she invest in a growth mutual fund, which will grow tax deferred. After the wedding, Blackman should increase the monthly contributions to $300 because she only has seven years to save. Compounding her yearly contribution of $3,600 at 8% over seven years will produce $33,633.99 for her daughter’s college education.
PAY DOWN DEBT
To prepare for buying a home, she should use at least $350 each month to pay off debt. She should pay off the smallest balances quickly, and then move to the larger ones. Dunagan says, as she improves her payment history, her credit report will get better, putting her in position to buy a home within two years. After paying her bills on time for 12 months, he suggests she look into a Federal Housing Administration (FHA) loan, which has a 3% down payment program.
Although she will make the short-term sacrifice to pay for her $5,000 wedding, after it’s over, a portion of the $800 a month she was saving toward it should go into a savings account. By then, she should have also paid down some of her debt and can earmark those payments for saving, investing, and the down payment on a home and car.
BUY MORE INSURANCE
Blackman purchased her own $50,000 universal life insurance policy, and receives $100,000 worth of coverage from her employer. She should increase her coverage to $200,000 by purchasing a “term rider” on her universal life policy — additional temporary insurance that can be purchased for 10 to 20 years. If something were to happen to her between now and when her daughter finishes college, her daughter will be taken care of with the insurance money.
COMPARE CREDIT REPORTS
Because they’re getting married, Dunagan says Blackman and her fiancé should look at each other’s credit report “because the credit report will show all the consumer debt the person has, and how he or she is paying bills.” It will also let them know what they need to fix before they look for a house.
DISCUSS FINANCIAL GOALS AND ATTITUDES TOWARD MONEY
Blackman and her fiancé should discuss their goals and when they want to reach them. “To reach their goals, they’re both going to have to agree to save a certain amount of money every month,” says Dunagan.
Since Blackman admits to having a “spender” mentality, they need to be in agreement on who will take responsibility for paying the bills, and how they want to handle money as a couple. They must also determine whether they will have a joint checking account or run their finances separately. The couple should have a candid discussion about their finances, including taxes, possible inheritances, and other potential liabilities before they get married.Winner #25 Stephanie Blackman