Plotting A New Direction - Page 3 of 3 - Black Enterprise

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Black Enterprise Magazine January-March 2019 Issue

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the insurance proceeds and other assets. If he leaves the death benefits directly to the children, his former wife would automatically get it as their guardian. Also, the trust will protect his children should he remarry. In addition, he needs to draft a will.

Douglass recommends that Vaughn draft a will to establish guardians in the event that he and his former wife both pass away, as well as set up a trustee to handle his finances. Also, by identifying a power of attorney, there would be someone in place if he became disabled.

Invest an extra $600. Since he no longer pays alimony but is accustomed to shelling out about $600 monthly, Vaughn should apply that money toward his investment plan. He is currently putting $100 each month into a Smith Barney aggressive growth mutual fund. However, he should consider investing in a mid-cap or small-cap value fund. This way he can minimize volatility in his portfolio and move toward value without sacrificing growth. He should invest the $2,000 cash prize in these types of mutual funds.

Build liquidity to purchase rental properties. Vaughn needs to build liquidity while paring down debt. He still has about $15,000 in credit card debt that he is adamant about paying off. Unless he begins to build up his cash reserve, he will simply increase his debt. Vaughn admitted that his spending habits hurt his savings plan. So, if he still wants to acquire rental properties and follow in his father’s footsteps, he could buy a house below market value and fold his debts into the new mortgage.

Consult with former wife about claiming both biological children. Vaughn currently claims one child as a dependent on his tax return. Since he is earning practically twice as much as his former wife, and is in a higher tax bracket, he needs the tax savings -in this case, $5,000 -more than she does. She can still use her home as a tax write-off. Plus, as head of household, she can continue to claim her daughter and get the earned income credit.

In the event that he decide
s to remarry, Smith says, Vaughn should consider a prenuptial agreement to safeguard the assets he brings into the marriage. The agreement should be coordinated with his insurance policy, will, and trust documents.

Vaughn should have a prenuptial agreement to negotiate for whatever he’s going to leave his children “if that’s going to exceed half his estate,” Douglass says.


Full Time $60,000
Part Time 15,000
Total $75,000


Checking $1,000
Savings 1,000
Mutual Fund 1,500
401(k) 5,000
Market Value of Home 310,000
Value of Car* 15,000
Total $333,500


Mortgage $260,000
Credit Card Debt 15,000
Auto Loan 21,000
Student Loans 10,000
Total $306,000
NET WORTH $27,500

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