Taking Flight

With two incomes, the Knox family is ready for the next step

and they will likely explore the New Jersey market.

In the meantime, financial education is emphasized in the Knox household. The children have banks at home where they save coins provided weekly by Judith and Marcel.

After meeting with a financial adviser, Judith and Marcel are hopeful that they can save for their children’s educations, their retirement, a house, and a few extras, such as the occasional meal out. “I don’t feel as desperate — a house is definitely a real possibility,” Marcel says.

THE ADVICE
Certified financial planner Pierre Dunagan of the Dunagan Group in Chicago discussed the family’s finances with Marcel.

What’s working? “They accomplished goals together,” Dunagan says. He applauds the couple for their discipline. His advice:

Prepare for retirement. Though Marcel is in his 40s, it’s not too late to save. Dunagan found that the couple is receiving, on average, tax refunds of about $4,400 a year. “Instead of lending their money to the government for a year, they should adjust their withholdings so they can use that money for retirement savings,” he says. For starters, they should explore an S&P 500 index fund inside of Marcel’s retirement plan. Unfortunately, Marcel’s company does not match contributions and Judith’s company does not offer a retirement plan.

Step up the timetable for home purchase. Judith has started saving $2,000 a month toward the purchase of a new home, while Marcel pays for day-to-day expenses. Right now, the couple has $28,000 in a money market account earning 4.3%. Given the market, they might be able to get a deal on a house sooner than they think. Dunagan says the Knoxes should begin looking to purchase a home, with a 5% down payment. However, as soon as they make a purchase, they should shift their focus to retirement savings.

Increase life insurance protection. The Knoxes should each purchase term life insurance for at least $500,000. After they close on their home, this should be increased to $1 million each. Term life insurance is ideal for them, because it will give them sufficient coverage at a price they can afford. According to life insurance company IntelliQuote, such coverage would cost the couple approximately $80 to $100 a month.

“They need this level of coverage until the last child completes college,” Dunagan says. The couple plans to draft wills this year, Marcel says. Dunagan says the couple should take care of that sooner rather than later. They should also make sure their disability insurance is adequate for their needs.

Get a credit card. Even though Marcel doesn’t like credit cards, it’s not a good idea for the couple to be without them. The couple will want a strong credit rating when it comes time to purchase their home. Having no credit can hurt as much as having bad credit. The Knoxes should be sure to pay the balance in full each month to build a strong credit history.

Contribute to college costs. It’s advisable to begin studying up on college scholarship opportunities for the children. The college tab for all the children would

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