My Best Financial Advice: Five Cent Nickel

We asked some of the top personal finance bloggers to give a short summary of their single best piece of financial advice. Five Cent Nickel responded:

Be sure to cover your ass(ets). As important as saving and spending habits are, true financial responsibility involves much more. It may sound boring, but there really is no substitute for things like proper insurance coverage and estate planning — and once you have these sorts of things in place, be sure to re-assess your needs periodically.

For more details, see Ten Simple Ways to Cover Your Ass(ets).

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  1. IANYL, but …

    5) If you know you intend to have more children, you can have a will written that will cover future children (afterborn children) as well. Some lawyers try to soak young families by having them rewrite their wills every two years, and that’s simply not appropriate, and many young families just avoid the issue completely to avoid the problem. Rewrite when your circumstances change substantially (death, disability, big money gained or lost, first child, adoption, done having kids, etc.), or when your children (assuming your will is properly written to cover all children) start reaching milestones like majority.

    6) The court will name guardians for your child regardless. If you pick crack-whores as guardians for your children in your will, the court is not giving your children to the crack-whores. ABSOLUTELY do it in your will, but don’t be paralyzed (as many families are) by the thought that, “Well, Aunt Jill may no longer be able to care for children in five years …” If she can’t, the court won’t give them to her. The court will always decide in the best interest of the child, regardless of what you say. If there’s nothing objectionable about whoever you picked, great, but if you pick someone awful or if circumstances change, the court will decide based on what’s best for the children. (And if the children are old enough, they’ll probably get to voice an opinion as well.)

    7 & 8) These may not be necessary if you have a spouse and living parents. You can look up the “descent of surrogacy” statute in your home state and discover who would make your health care decisions. I don’t have children, and I have eight decision-makers under the statute all of whom I trust to make decisions about my health that I would agree with. Whether you need a living will depends on your age, your personal health issues, your closeness with family members who would be decision-makers under the statute, and your comfort-level in having the discussion with them.

    Many hospitals ignore living wills (this is not legal but it occurs; they don’t want to be sued by angry family for pulling the plug on you) so EVEN IF YOU HAVE ONE it’s important that your family know your wishes.

    As for Powers of Attorney (PoAs), most banks simply refuse to honor them without a court order. They’re dead easy to forge. You may need a PoA for other reasons, but what many savvy elderly people do is open a joint account with their designated “money caretaker” child or children. The child or children (who would have been the agents under the PoA) can then access the money in the joint account when necessary to pay hospital bills and things like utilities, etc.

    This does open your account to the possibility the child will clean it out, but hopefully if you trust your child enough to make him or her your PoA agent, you trust him enough to put him on a joint account.

    (For funeral expenses, if you opt not to prepay, you can also open a “POD” or “Payable on Death” account that will disburse to the person you designate, like “John Doe POD Jane Roe” so when John dies, Jane will get the $$ in the account, but she can’t touch it until he dies. This can also be a way to avoid probate or estate administration in certain very limited circumstances, or to provide immediate money to a dependent while the estate goes through court.)