What should they do about their monthly income shortfall?
Relax. It's just $350 or so, and they have savings to cover it. The big fix will be for Jane to earn some income whenever she's ready following the arrival of their second baby. Jane slipped in the fact that she'd received her substitute-teaching license and previously made close to $150 a day subbing at Charlie's high school. Hello! Do that three or four times a month and the deficit will be a surplus.
Should they buy a home?
Nope. Too much about their life is up in the air. They moved to be close to her father. Let's wait and see how they feel in a year or two. If they want to relocate again, a house with a mortgage will weigh them down.
Do they have enough life insurance?
Jane had impressively taken the initiative to purchase two level-term life insurance policies, but both had a death benefit of $200,000; it should be closer to $750,000 (in general, I recommend that your policy have a value equal to about 25 times the amount of annual income your family needs to live securely). To make that bigger benefit affordable, they can shift from their current 30-year policies to 20-year policies. The shorter term will reduce the monthly premium but still provide plenty of protection.
Shouldn't they be saving more?
Sure. But there's no cause for panic. They are dutifully paying $320 a month on a $23,000 student loan; once it's paid off, they can redirect that monthly amount toward retirement savings. The real issue is that Jane, like many people, doesn't have a clue as to what specific investments are in those accounts—which are crucial to her family's future security. Her homework is to sit down with her financial adviser and start learning. (For more on taking control of your investments, see What's in Your Retirement Account?)
When I reviewed Jane's financial information before our talk, it was obvious she'd made smart decisions and had a keen sense of responsibility. Then we connected, and I learned about her amazing heart as well. My biggest hope was for her to be able to see these great qualities in herself.
A few weeks later, Jane followed up with me: "I've been repeating my mantra and had some really good discussions with my husband," she said. "I feel better already."
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