Life insurance: Cornell currently has a 20-year term policy for $500,000 and Jammie has $250,000 worth of coverage. They have $10,000 on each of their children as riders. “They need to double those amounts.
Cornell makes $60,000 a year, approximately $48,000 after taxes. If Cornell were to die and Jammie was to live off of that $500,000, it would provide her with about $20,000 a month. If he had a $1 million life insurance policy, that would provide her with about $40,000 a month.â€ That would be closer to Cornell’s lost income. He recommends the same for Jammie. Long feels that they could make better use of the money that they pay for their children’s policies. “I think they’re just a money maker for insurance companies,â€ Long explains.
Property casualty insurance: Long recommended that the couple raises their liability coverage; the Brookses only had the state minimum. Considering how well the couple has recovered, such a move is “penny wise and pound foolish,â€ says Long. “If they were involved in an accident and someone was injured, $20,000 doesn’t go very far,â€ he adds. “Now that they have substantial home equity and are developing assets, it’s very important that they increase their protection.â€
Finding a financial planner: Although the Brookses are on a solid path, they like the option of being able to consult with a professional for major financial decisions, but are unsure of how to find the best adviser. Long suggests they visit the National Association of Personal Financial Advisors and the Garrett Financial Planning Network. He recommends finding an adviser “who doesn’t get paid a commission and doesn’t sell products. You want to work with someone who has your best interests.â€ They should also engage in independent research and check advisers out at: SEC.gov, FINRA.org, the Attorney General’s office, and with their state insurance commissioner.
“If [financial planners] get angry, defensive, or try to make you feel dumb, that means they are trying to hide something. You don’t want to work with someone like that,â€ Long cautions.
Children’s education: Let’s say Jammie and Cornell’s two children, ages 4 and 2, attend the University of Illinois, where annual tuition is currently $26,000 on the main campus. According to Long, the couple could save approximately $13,000 a year (in today’s dollars) if they put $250 into the Illinois Bright Star savings plan. This projection, says Long, is based on a blended rate of return–or 8% in the first several years and 6% afterwards–as well as an annual tuition increase of 5%.