Category Archives: Finance

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Borrowers with adjustable rate mortgages could lose big – By Terence Loose

https://homes.yahoo.com/news/ARMs-lose-money-223146070.html

As you probably know, adjustable rate mortgages have lured aspiring homeowners with their attractively low interest rates. How low? Well, for the initial period of often five to seven years, they usually fall below the interest rate of a 30-year, fixed-rate mortgage. As a result, you would likely have a low monthly payment.

However, after that honeymoon period, ARMs adjust according to a predetermined index. In short, if interest rates go down, so does the rate on your ARM. But if they go up, your interest rate – and typically your monthly payment – rises, too, which is cause for concern.

Of course, ARMs do make sense for a lot of people. So read on for information that will help you decide whether to hold onto your ARM or look for new money-saving opportunities.

Interest Rates Will Likely Go Up

Since the interest rates on ARMs adjust after a set period of time, knowing where interest rates are headed would be helpful. But how can you tell where rates are going?

Well, in July 2014, the Federal Reserve confirmed that it would end what’s known as quantitative easing (QE4) in October. This decision will most likely increase interest rates. Here’s the simple version of why:

Beginning in January of 2013, in the QE4 program the Federal Reserve bought $85 billion worth of U.S. Treasury notes from U.S. banks every month, tapering off that amount beginning late last year. By buying these notes, QE4 increased the money that banks had to lend, increasing their competition for borrowers and therefore lowering interest rates.

Hence, when QE4 ends, rates will rise, says Jim Duffy, a senior loan officer with Primary Residential Mortgage, Inc.

“There’s absolutely no doubt that rates will rise once [the Fed] ends the stimulus. Rates only have one way to go when the Fed stops buying altogether, and that’s up,” Duffy says.

So how high will rates go? The Mortgage Bankers Association (MBA) projects rates reaching 5 percent for 30-year fixed rate mortgages by the second quarter of 2015. For comparison, as of September 11, 2014, the average interest rate for a 30-year, fixed-rate mortgage stood at 4.12 percent, according to Freddie Mac, one of the nation’s largest mortgage lenders.

But even a small jump in rates can have a huge affect on your ARM – and your wallet. Now, every situation is unique, but consider that a typical adjustment rate cap (the most your rate can adjust every adjusting period, usually each year) is 2 percent, according to HSH.com, the nation’s largest publisher of mortgage and consumer loan information.

We’ll assume that rates won’t rocket up by 2 percent a year and use half of a percent instead, along with a lifetime cap of 12 percent. This example shows how the monthly payment changes over the life of a $200,000 5/1 ARM that adjusts annually after year five, starting at a 3 percent interest rate.

Year       Interest Rate                     Monthly Payment

1 – 5        3 percent                             $843

6              3.5 percent                         $890

10           6 percent                             $1,119

15           8.5 percent                         $1,327

20           11 percent                          $1,499

22           12 percent                          $1,553

Again, every situation is unique, so if you have an ARM, you should check the terms of your contract, but as you can see, things can get expensive fast.

Fixed Rates are Still Historically Low

The big attraction of ARMs, of course, is the very low initial interest rate. But that can blind many to the fact that even after the past year or so of rising rates, 30-year fixed-rate mortgage rates are still extremely low, historically speaking, says Ellen Davis, a senior mortgage banker for Corridor Mortgage Group in Columbia, Maryland.

She says that while every case is unique, this is a very good reason to lock in a rate for 30 years by refinancing an ARM. It provides peace of mind that if rates do go up higher and faster than expected, you’re still okay, Davis explains.

“Right now fixed rate loans are amazingly low, so refinancing might make [homeowners’] current payment a bit higher [than an ARM] but give them the security of knowing that the mortgage payment will not change,” she says.

And history does show that anything can happen. If you need proof, check out the average 30-year fixed-rate mortgage interest rate for July 1 of every decade from 1974 till now, according to the Federal Reserve’s historic data.:

July 1, 1974: 9.28 percent

July 1, 1984: 14.67 percent

July 1, 1994: 8.61 percent

July 1, 2004: 6.06 percent

July 1, 2014: 4.13 percent

How does that 30-year, fixed-rate mortgage look now? We thought so. And that’s without even showing you the 17.6 percent interest rate from 1982.

Fixed Rates Insulate You Against Inflation

A certain amount of inflation can be a good thing, which is why the Fed made one of its goals to stimulate it. For instance, slight inflation increases the value of things like your house. Of course, inflation also means the price of everything in your house, from the beer in the fridge to the couch you enjoy it on, also goes up.

But when you buy or refinance your home with a 30-year fixed-rate mortgage, you are essentially hedging against inflation, says Ian Aronovich, co-founder and CEO of GovernmentAuctions.org, a company that gives home buying and mortgage advice.

“As money loses it purchasing power, as has been the case for a while, it makes sense to take out a 30-year mortgage since you will be repaying it with dollars that are in all likelihood going to be worth less than they are when you bought the home,” he says.

Duffy says this helps offset other home and life expenses, too. If inflation does take hold, then as other things around the household eat up more and more income, it’s going to be very helpful to have a fixed rate and a fixed payment for housing, he says. As a result, people can control expenses, still put money away, and save for retirement.

“So you’re insulating your mortgage payment from inflation,” he says.

With an ARM, that insulation is not guaranteed, since your interest rate can rise along with everything else, notes Duffy.

ARMs Do Make Sense for Some

There’s a reason ARMs exist: They are a good product for some. In fact, our experts have identified three common situations in which an ARM might make a lot of sense.

The first is if you believe interest rates will go down in the future. Then, your rate will adjust down, not up. But we’ve already outlined why that’s unlikely.

The second situation when an ARM makes sense, says Davis, is if you plan to sell your home before the initial fixed-rate period of your ARM expires, or even soon after.

“Not all ARM holders should refinance. If their current ARM payment is low and they know that they will be moving within a certain period of time, that is a big part of the decision making,” she says.

The third scenario where an ARM may make sense is if you plan to refinance a home after you do some improvements, says mortgage broker Gloria Shulman, founder of Centek Capital in Beverly Hills. In that case, an ARM’s extremely low initial interest rate could save you a lot of cash, which you can use to fix up the home.

“For example, if you are buying a house you plan to renovate, it makes sense to apply for an ARM that can be refinanced when the house is worth exponentially more after you finish the work,” she says.

 

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Can Space Tourists Get Life Insurance? by Aaron Crowe

Astronaut

The Oct. 31 crash of a Virgin Galactic rocket that killed a pilot hasn’t stopped the company from continuing its quest to offer space tourists a chance to see the Earth from above, giving potential riders a chance to reconsider their life insurance options.

While life insurance might be the furthest thing from any space tourist’s mind, a loophole that allows current life insurance policyholders to retain such coverage if they fly into space remains, though the insurance industry may look to close it.

Skydivers, pilots and people with other high-risk jobs or hobbies must buy extra coverage on their life insurance policies. Space tourists, however, who either already have life insurance or are applying for a policy don’t have to mention their upcoming trip to space because insurers either don’t ask about space tourism or don’t exclude it from coverage.

The loophole means they’d likely have to pay if the policyholder died on a space trip.

There are little or no established life underwriting guidelines specifically for space flight, and such activity would probably be covered under common aviation clauses and exclusions, says Rob Drury, executive director of the Association of Christian Financial Advisors.

“For a life insurance company to deny coverage for space travel would require a specific exclusion of such activity,” Drury says. “If the current treatment of aviation activities is an indication, the greater likelihood is that a proposed insured would be underwritten at a higher risk class.”

Once a policy is issued, death benefits must be paid for any death regardless of cause, unless there is a finding of fraud, misrepresentation, or suicide within the policy’s contestability period of the first two policy years in most states, he says.

Coverage is provided by omission, meaning the underwriter doesn’t ask about an applicant’s plans to fly into space.

“If someone wants to run the bulls at Pamplona, his insurer might not like it, but they must pay in the event of death if the activity isn’t specifically excluded,” Drury says.

Astronauts are rated at $10 per $1,000 of coverage in addition to their approved rate based on amount of coverage, age and other factors, says Ellen Davis, president of Life Health Home Insurance Group. Space tourists can’t buy coverage yet, Davis says.

However, if the insurer doesn’t ask an applicant about space travel, then it would be covered under travel outside of the United States, she says.

Virgin Galactic’s SpaceShipTwo crashed during a test flight. The craft is designed to carry six passengers on two-hour suborbital flights that offer a few minutes of weightlessness. The company announced after the crash that it plans to continuing selling tickets at up to $250,000 per seat.

The good news is that while flying in a rocket sounds risky, even for insurers, not many people have died riding into space. No one has died in suborbital manned flights. There have been three fatal orbital space shots, including the space shuttles Challenger and Columbia with 14 deaths, and a Soyuz flight that killed one person.

Mention that to your underwriter next time you’re applying for insurance as a space tourist.

Aaron Crowe is a freelance journalist who specializes in content about personal finance and insurance.

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What Is A VA Loan?

The VA Loan became known in 1944 through the original Servicemen’s Readjustment Act also known as the GI Bill of Rights. The GI Bill was signed into law by President Franklin D. Roosevelt and provided veterans with a federally guaranteed home with no down payment. This feature was designed to provide housing and assistance for veterans and their families, and the dream of home ownership became a reality for millions of veterans. The GI Bill contributed more than any other program in history to the welfare of veterans and their families, and to the growth of the nation’s economy.With more than 25.5 million veterans and service personnel eligible for VA financing, this loan is attractive and has many advantages. Eligibility for the VA loan is defined as Veterans who served on active duty and have a discharge other than dishonorable after a minimum of 90 days of service during wartime or a minimum of 181 continuous days during peacetime. There is a two-year requirement if the veteran enlisted and began service after September 7, 1980 or was an officer and began service after October 16, 1981. There is a six-year requirement for National guards and reservists with certain criteria and there are specific rules concerning the eligibility of surviving spouses.

VA will guarantee a maximum of 25 percent of a home loan amount up to $104,250, which limits the maximum loan amount to $417,000. Generally, the reasonable value of the property or the purchase price, whichever is less, plus the funding fee may be borrowed. All veterans must qualify, for they are not automatically eligible for the program.

VA guaranteed loans are made by private lenders, such as banks, savings & loans, or mortgage companies to eligible veterans for the purchase of a home, which must be for their own personal occupancy. The guaranty means the lender is protected against loss if you or a later owner fails to repay the loan. The guaranty replaces the protection the lender normally receives by requiring a down payment allowing you to obtain favorable financing terms.

Why Do Mortgage Interest Rates Change? Part II

If the demand for credit reduces, then so do interest rates. This is because there are more people who are ready to lend, sellers, than people who want to borrow, buyers. This means that borrowers, buyers, can command a lower price, i.e. lower interest rates.

When the economy is expanding there is a higher demand for credit so interest rates go up. When the economy is slowing the demand for credit decreases and thus interest rates go down.

 This leads to a fundamental concept:

Bad news (i.e. a slowing economy) is good news for borrowers as it means lower interest rates.
Good news (i.e. a growing economy) is bad news for borrowers as it means higher interest rates.


Another major factor driving interest rates is inflation. Higher inflation is associated with a growing economy. When the economy grows too strongly the Federal Reserve increases interest rates to slow the economy down and reduce inflation.

Inflation results from prices of goods and services increasing. When the economy is strong there is more demand for goods and services, so the sellers and producers of those goods and services can increase prices. A strong economy therefore results in higher real-estate prices, higher rents on apartments and higher mortgage rates.

Also lenders naturally want to see a positive return on their money as their reward for lending it. This leads to the concept of the “real” rate of return. This is typically 3% per year. If inflation is 4 % per year, lenders will want to earn 7% per year on their money.

Likewise, if prices are rising rapidly, people are inclined to borrow “today’s” money so as to repay it with “tomorrow’s” money, which will be worth less.

Mortgage rates tend to move in the same direction as interest rates. However, actual mortgage rates are also based on supply and demand for mortgages.

 There is usually an almost fixed spread between A credit mortgage rates and treasury rates. This is not always the case. For example, bank failures in the Far East in the late 90s caused mortgage rates to move up while treasury rates moved down as fearful investors fled to the safety of the treasury bonds and notes.

Bonds Rates

There is an inverse relationship between bond prices and bond rates. This can be confusing. When interest rates move up, bond prices move down and vice versa. This is because bonds usually have a fixed price at maturity––typically $1000. The bond will start off being sold for the face value, $1000 and at a set interest rate. If interest rates go down, then this bond will go up in price so that these bonds will remain fairly priced compared with current bond offerings. Obviously the longer before the bond matures for the face value, $1000, the greater the price premium will be to enjoy that higher than current yield for the rest of the bond’s term.

The inverse also applies. If interest rates move up, the bond seller will have to reduce his price to offer a similar yield to current bond offerings.

Questions? Contact us at info@mortgagelinkhome.com or visit our web site at www.mortgagelinkhome.com

Why Do Mortgage Interest Rates Change? Part I

To understand why mortgage rates change we need to know why do interest rates change and there is not one interest rate, but many interest rates!

Prime rate: The rate offered to a bank’s best customers.
Treasury bill rates: Treasury bills are short-term debt instruments used by the U.S. Government to finance their debt. Commonly called T-bills they come in denominations of 3 months, 6 months and 1 year. Each treasury bill has a corresponding interest rate (i.e. 3-month T-bill rate, 1-year T-bill rate).
Treasury Notes: Intermediate-term debt instruments used by the U.S. Government to finance their debt. They come in denominations of 2 years, 5 years and 10 years.
Treasury Bonds: Long debt instruments used by the U.S. Government to finance its debt. Treasury bonds come in 30-year denominations.
Federal Funds Rate: Rates banks charge each other for overnight loans.
Federal Discount Rate: Rate New York Fed charges to member banks.
Libor: : London Interbank Offered Rates. Average London Eurodollar rates.
6-month CD rate: The average rate that you get when you invest in a 6-month CD.
11th District Cost of Funds: Rate determined by averaging a composite of other rates.
Fannie Mae Backed Security rates: Fannie Mae, a quasi-government agency, pools large quantities of mortgages, creates securities with them, and sells them as Fannie Mae backed securities. The rates on these securities influence mortgage rates very strongly.
Ginnie Mae-Backed Security rates: Ginnie Mae, a quasi-government agency, pools large quantities of mortgages, securitizes them and sells them as Ginnie Mae-backed securities. The rates on these securities affect mortgage rates on FHA and VA loans.

Interest-rates move because of the laws of supply and demand. If the demand for credit (loans) increases, so do interest rates. This is because there are more people who want money, buyers, so people who are willing to lend it, sellers, can command a better price, i.e. higher interest rates. If you have questions about your mortgage please contact me or visit my web site at www.mortgagelinkhome.com.

Can I Afford to Send My Kid to College?

It’s the question every parent dreads. Although the answer hopefully is yes, you’ll have to plan ahead. Unless you are very well off financially, you can’t expect to sit on the sidelines for years and then suddenly find the funds to pay for college when your child is ready to go. The best thing to do is to start saving as early as possible, even if you’re able to save only a small amount at first.

How much will college cost in the future?

For the 2004/2005 academic year, the average annual cost of a four-year public college is $14,924 and the average annual cost of a four-year private college is $30,581. (Source: The College Board’s Trends in College Pricing Report 2004.) The total figures include five expense items: tuition and fees, room and board, books and supplies, transportation, and personal expenses.

It’s a likely bet that costs will continue to rise, but by how much? During the last few years, college costs increased at an average rate of about 5 to 6 percent each year as colleges tried to control escalating costs. But going forward for the next 10 years, college costs are expected to increase a bit more, about an average of 7 or 8 percent per year. (Source: FinAid, 2002 report on college inflation, based on figures provided by The College Board and the Bureau of Labor Statistics.)

How will I pay for it?

Many parents save less than 100 percent of their child’s education costs before college. Usually, they put aside enough money to make a down payment of sorts on the college bill. Then, at college time, parents can supplement this down payment by:

  • Obtaining private loans (e.g., home equity loan, margin loan)
  • Obtaining financial aid-related loans (e.g., PLUS loan)
  • Tapping their own investments (e.g., mutual funds, 401(k) plan, IRA, cash value life insurance)
  • Having their child apply for financial aid (e.g., student loans, grants, scholarships, work-study)
  • Having their child contribute a portion of his or her savings and/or investments
  • Having their child obtain a part-time job during college

How much should I save?

You’ll want to put aside as much money as possible in your child’s college fund. The more money you put aside now, the less you or your child will need to borrow later. Start by estimating your child’s costs for four years of college. Then decide how much of the bill you want to fund-100%, 75%, 50%, and so on. To meet your goal, you’ll need to use a financial calculator to determine how much to put in your college fund each month. Click below to calculate what it might cost to send your child to college.

College Funding Calculator

In many cases, the amount of money you should contribute really boils down to how much you can afford to contribute. Every situation is different. You’ll need to take a detailed look at your family’s finances in order to determine what you can afford to add to your child’s college fund each month.

Start a savings program as early as possible

Perhaps the most difficult time to start a college savings program is when your child is young. New parents face many financial strains that always seem to take over–the possible loss of one income, child-related spending, and the competing need to save for a house or car, or the demands of your own student loans. Yet this is the time when you should start saving.

With many years to go until your child starts college, you have time to select investments that have the potential to outpace college cost increases (but keep in mind that any investments that offer higher potential returns may involve greater risk of loss). In addition, you benefit from compounding, which is the process of earning additional funds on the interest and/or capital gains that your investment earns along the way. With regular investments spread over many years, you may be surprised at how much you may be able to accumulate in your child’s college fund.

But don’t feel bad if you can’t put aside hundreds of dollars a month right from the start. Start with a small amount, say $25 or $50 every month, and add to it whenever you can. You’ll have a head start, as well as peace of mind knowing you’re doing the best you can.

Now is also the time to speak to a Financial Planner who will help to answer all of your questions regarding saving for college, retirement and/or doing a major renovation on your home. We work with several exceptional Financial Planners and ask that you contact one or all to help you meet your financial goals.

Question:

Should I take out a home equity loan to pay for my child’s tuition?

Answer:

If you own a home and have equity in it, you may want to consider taking out a home equity loan as a source of funds for your child’s private school or college tuition. A home equity loan is secured by the equity you have built up in your home and can be structured as either a revolving line of credit or a second mortgage.

With a revolving line of credit, your lender establishes a credit limit that depends on the amount of equity you have built up in your home and your ability to make payments. You can then access as much money as you need (up to the maximum amount allowed) whenever you need it by writing a check or using a credit card.

Interest rates are variable and tied to the Prim Rate Index which is governed by the Federal Reserve Board. Your monthly payments will also vary, depending upon your outstanding balance.

If the home equity loan is structured as a second mortgage, you borrow a fixed amount (sometimes as much as 100% of the equity in your home) that is transferred to you in full at the time of the closing. You must then repay that amount over a fixed term, just like you do on your original mortgage.

The advantages of a home equity line of credit or a home equity loan include tax-deductible interest and, in most cases, a more favorable interest rate than credit card loans. Keep in mind, however, that a home equity loan puts your home at risk because it serves as collateral for the loan. In other words, your lender can foreclose on your home if you fail to repay the loan.

Before you take out a home equity loan, contact me to see if a home equity loan is the right choice for you.

Ellen

Paying for College

School’s back in session, and if you’ve got young children, you’re probably trying to think of ways to pay for their higher education. Take a look at this article by Joseph Kapp, “A Good Plan Just Got Better.” You’ll find some good information in it.

Ellen

A Good Plan Just Got Better

By Joseph Kapp
(In conjunction with Lincoln Financial Advisors, a registered investment advisor.)

The cost of a college education can be staggering. Expenses at private universities currently average more than $30,000 a year*. The annual cost for state colleges averages about $15,000*. For many families, qualified tuition programs — also called Section 529 education savings plans — are attractive ways to help meet future education expenses.

How Section 529 Plans Work
Section 529 plans are education savings programs sponsored by most states under Section 529 of the Internal Revenue Code. Beginning in 2002, private educational institutions have been able to sponsor prepaid tuition programs. You can contribute to a Section 529 plan regardless of your annual income or your age, and your contributions can be for the benefit of a grandchild, niece, or nephew, as well as your own child.

With a 529 plan, you either invest a lump sum or make periodic contributions to an account set up for a designated child. While different programs do place limits on lifetime contributions, most limits are in excess of $100,000, and some are greater than $200,000. The plan account is professionally managed according to an investment program you set up when you make your initial contribution. When the child is ready for college, generally you — not the child — withdraw the amount needed to pay qualified education expenses, such as tuition, room and board, supplies, and equipment.

Tax Advantages
Money invested in Section 529 plans grows free of federal income tax and possibly state income tax for participating residents in many states. Some states also allow you to deduct investments in Section 529 plans for state income-tax purposes, up to certain limits, if you participate in your own state’s program. In addition, the plan investment managers can move money between different investments as needed with no capital gains tax consequences, something you can’t do with a regular investment account.

Since 2002, payouts from state plans are tax free, and beginning in 2004, payouts from all Section 529 plans will be excludable from income. These tax benefits are scheduled to expire at the end of 2010, unless further action by Congress is taken. (Note that after 2001 tax-free withdrawals cannot be used for the same expenses for which HOPE or Lifetime Learning Credits are claimed.) Withdrawals for anything other than qualified education expenses are subject to income taxes and may be subject to an additional 10% federal tax penalty.

Investments in Section 529 plans qualify for the federal gift-tax annual exclusion. This exclusion lets you make tax-free gifts of up to $12,000 a year ($24,000 if your spouse agrees to join in your gifts) to each of as many people as you choose. A special tax provision allows you to contribute up to $60,000 in one year and treat the contribution as if it were made over five years so it qualifies for the exclusion. So you and your spouse could contribute as much as $110,000 in one year for each of your children or grandchildren, free of gift tax.

The money you invest in a 529 plan, as well as all future appreciation on that money, generally is removed from your estate for estate-tax purposes. However, if you make the five-year/$55,000 election, and die within five years of the election, a prorated portion of the contribution will be included in your estate. Using the annual exclusion to make gifts to grandchildren has generation-skipping transfer (GST) tax advantages, too. No GST tax will be applied to contributions that qualify for the annual exclusion.

Portability
Starting in 2002, money can be transferred tax free from one qualified tuition program to another qualified tuition program for the same beneficiary. Other transfer rules vary from state to state. In case the designated child decides not to attend college, you have the option of changing the account beneficiary to another family member. Family members include the beneficiary’s spouse, siblings, first cousins, children, nieces, nephews, and their spouses. Take care, though, when changing beneficiaries. Gift and GST taxes could apply if the new beneficiary you name is a generation below the old beneficiary.

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The Sandwich Generation: Part 4

Considering the needs of your children

Your children may be feeling the effects of your situation more than you think, especially if they are teenagers. At a time when they are most in need of your patience and attention, you may be preoccupied with your parents and how to look after them.

Here are some things to keep in mind as you try to balance your family’s needs:

  • Explain fully what changes may come about as you begin caring for your parent. Usually, children only need their questions and concerns to be addressed before making the adjustment.
  • Discuss college plans with your children. They may have to settle for less than they wanted, or at least take a job to help meet costs.
  • Avoid dipping into your retirement savings to pay for college. Your children can repay loans with their future salaries; your pension will be the only income you have.
  • If you have boomerang children at home, make sure all your expectations have been shared with them, too. Don’t be afraid to discuss a target date for their departure.
  • Don’t neglect your own family when taking care of a parent. Even though your parent may have more pressing needs, your first duty is to your children who depend on you for everything.
  • Most importantly, take care of yourself. Get enough rest and relaxation every evening, and stay involved with your friends and interests.

Finally, keep lines of communication open with your spouse, parents, children, and siblings. This may be especially important for the smooth running of your multi-generation family, resulting in a workable and healthy home environment.

Ellen

Want to share your ideas? Post a comment, or send me an email!

The Sandwich Generation: Part 3

Caring for your parents

Much depends on whether a parent is living with you or out of town. If your parent lives a distance away, you have the responsibility of monitoring his or her welfare from afar. Daily phone calls can be time consuming, and having to rely on your parent’s support network may be frustrating. Travel to your parent’s home may be expensive, and you may worry about being away from family.

To reduce your stress, try to involve your siblings (if you have any) in looking after Mom or Dad, too. If your parent’s needs are great enough, you may also want to consider hiring a professional geriatric care manager who can help oversee your parent’s care and direct you to the community resources your parent needs.

Eventually, though, you may decide that your parent needs to move in with you. If this happens, keep the following points in mind:

  • Share all your expectations in advance; a parent will want to feel part of your household and may be happy to take on some responsibilities.
  • Bear in mind that your parent needs a separate room and phone for space and privacy.
  • Contact local, civic, and religious organizations to find out about programs that will involve your parent in the community.
  • Try to work with other family members and get them to help out, perhaps by providing temporary care for your parent if you must take a much-needed break.
  • Be sympathetic and supportive of your children–they’re trying to adjust, too. Tell them honestly about the pros and cons of having a grandparent in the house. Ask them to take responsibility for certain chores, but don’t require them to be the caregivers.

Considering the needs of your children

Tomorrow’s post deals with the effect your added responsibilities have on your children, and how to cope with it.

Ellen

Want to share your ideas? Post a comment, or send me an email!

The Sandwich Generation: Part 2

What can you do to prepare for the future?

Holding down a job and raising a family in today’s world is hard enough without having to worry about keeping the three-headed monster of college, retirement, and concerns about elderly parents at bay. But if you take some time now to determine your goals and work on a flexible plan, you’ll save much stress–and expense–in years to come.

Planning ahead gives you the chance to take the wishes of the entire family into account and to reduce future disagreements with your siblings over the care of your parents.

Here are some ways you can prepare now for the issues you may face in the future:
Start saving for the soaring cost of college as soon as possible.

  • Work hard to control your debt. Installment debts (car payments, credit cards, personal loans, college loans, etc.) should account for no more than 20 percent of your take-home pay.
  • Review your financial goals regularly, and make any changes to your financial plan that are necessary to accommodate an unexpected event, such as a career change or the illness of a parent.
  • Invest in your own future by putting as much as you can into a retirement plan, where your savings (which may be matched by your employer) grow tax deferred until you retire.
  • Encourage realistic expectations among your children; their desire to attend an expensive college will add to your stress if you can’t afford it.
  • Talk to your parents about the provisions they’ve made for the future. Do they have long-term care insurance? Adequate retirement income? Learn the whereabouts of all their documents and get a list of the professionals and friends they rely on for advice and support.

Caring for your parents

In tomorrow’s post, I’ll go over some of the things you should consider when you become the caretaker for your parents.

Ellen

Want to share your ideas? Post a comment, or send me an email!