human resources departments to see if they are maximizing the benefits their companies offer. If so, Miller advises the couple to seek out additional disability insurance.
Antonio’s $200,000 life insurance coverage and Christine’s own $100,000 policy is not enough to cover their needs. “If something happens to either of them, their plans go out the window, and one possibility could be losing their home,” Miller says. He recommends that they increase their insurance to cover their home, their children’s education, and loss of employment.
FOLLOW THE MONEY TRAIL
Miller suggests that the Blackmans document their expenses for 30 days since they really aren’t sure where all their money goes. Through a self-analysis, they can determine where they are overspending. Working in the couple’s benefit, says Miller, is that with the exception of a 10% tithe to their church and eating out a few times a month, they aren’t big spenders. Keeping a record of every penny spent for a month will likely reveal areas where they can improve.
CREATE AN EMERGENCY FUND
The Blackmans understand how devastating the unexpected can be; they don’t want to come up short again. The $2,000 they already have in a money market account should be designated for emergencies. They should try to have a minimum of $9,000 in that account to give them a six-month cushion. Given Christine’s history of illness, the couple should save enough to cover a year’s worth of expenses.
MAKE GOOD USE OF CONTEST WINNINGS
With the $2,000 they receive from BE, the couple should take $500 and open an IRA. Christine should roll over the $700 she has from a former employer’s 401(k) plan into an IRA and add $500 to it for a total of $1,200. They should place $500 toward a college fund for the youngest child and put the remaining $500 in their emergency fund.
GET GOING ON RETIREMENT
Although the Blackmans are still young, there’s no reason to delay establishing retirement accounts. Setting up vehicles such as a 401(k) and an IRA lowers their income so they can reap tax benefits now. Miller recommends conservative, large-cap growth funds with proven companies. “Christine’s illness changes the dynamics of their risk profile,” he says. While Miller likes the notion of purchasing multifamily homes, which offer cash potential, doing so in the next couple of years will mean taking on substantial debt. That strategy carries some risk because that debt likely won’t vanish before they retire.
TACKLE THE CHILDREN’S EDUCATION
The Blackmans have a $2,800 savings bond that they should give to their daughter for her first year of school while she explores grants, scholarships, and loans. Miller also advises the Blackmans to set up a college savings plan for their 7-year-old. They can easily afford to contribute $100 a month. Given the time before the money will be needed, Miller suggests growth mutual funds.
Winner No. 41 Antonio Blackman
Financial Snapshot: Antonio Blackman
|Market Value of Home||$210,000|
|Market Value of Two Cars||20,000|
|Money Market Account||2,000|