Yesterday I posted the answers to the first half of questions to the authors of On My Own Two Feet and today I present the remaining questions and answers. If you missed part 1 you can find it here, otherwise here are the remaining questions:
Wisely Sunshine asked: My company doesn’t offer any match for the 401K plan and that make most of my co-worker chose not to participate in the 401K. Is it still a good idea to participate in the plan even without a match?
We recommend saving at least 10% of your gross income for retirement and a 401(k) is a nice easy set it and forget it way to do that. You tell your employer what percent you want taken out of your paycheck and how you want it invested and you’re on your way. You will still get the benefit of the tax-deferral and because the money is socked away before you ever see it, you won’t be tempted to spend it. If you are really into squeezing out the value of your retirement dollars, however, and don’t mind a little extra work – we’d recommend fully funding a Roth IRA first, and then doing your non-matching 401(k) contributions. On the margin, a Roth IRA is a slightly more attractive retirement vehicle than a non-matching 401(k) as you have more flexibility in terms of both investment choices and access to funds in the case of a true emergency.
MSMomsmoney asks: I am a single parent of three teenagers. My oldest is 17, and has type 1 diabetes and kidney disease. What is the best way for me to help her get her own health insurance when necessary (I plan to keep her on mine as long as possible).
Also what are some basics that all three of my kids should have knowledge wise before they leave the nest? My two daughters work, and have an ING account set up. Oldest daughter will be attending community college to start, other daughter wants to go to a University. Son is only 13.
Your children are very lucky to have such a loving, caring, forward-thinking parent! In terms of your oldest the rules of insurance are complex and evolving (and enough to give any sane person a migraine!). Generally speaking, with serious pre-existing conditions, getting health insurance through a group program (i.e. if your eldest goes to college or works for an employer offering health insurance) is the most cost-effective way. So encouraging your eldest to really investigate these options when considering schools and/or jobs will be important. Because plans vary widely with regards to treatment of pre-existing conditions, you may also want to speak with an insurance broker who specialized in health insurance to investigate other options. Depending upon the state you live in there may be special programs available. You can contact your state’s insurance regulatory office for further information. One last thing, given your eldest condition, you will want to make sure she understands the benefits of COBRA (coverage that she can purchase on her own for up to 18 months if she leaves a job) and HIPPA (legislation which will enable her to get portability of insurance) so that she is never left without coverage.
In terms of general advice for your children, the three basic steps to good personal financial hygiene are: Save, Invest, and Protect. Probably the most important lesson you can impart to your children is the importance of starting to save as early as possible. The next most important step is to teach them the potential perils of credit card use. Explaining to your children that if they can’t afford to pay off their credit card bill at the end of the month, they should be charging that item on it will go a long way. Finally, encouraging them to open up Roth IRAs as soon as they start earning money and to participate in employer-sponsored retirement plans at work is a great way for them to create a solid financial cushion.
Brenna asked: What are some ways to better prepare financially for having a child when there’s only one income, school loans and some consumer debt?
Children are such a bundle of love and joy but they definitely will put a strain on the pocket book! You are wise to prepare in advance. We’d recommend doing whatever it takes to pay down that consumer debt. For instance, before you have a child, you might take on a second job or really pare down your budget to sock away a little extra each moth towards reducing that debt. (Note, if your debt is $5,000 or less we recommend paying an extra $50 a month, if your debt is between $5,000 and $10,000 we recommend paying an extra $100 a month, and if it is over $10,000 we recommend paying an extra $150 a month). Once you’ve whittled away that consumer debt, we’d also strongly encourage you to save at least six months of living expenses to provide a financial cushion in case of job loss or illness.
Again I just want to thank everyone for taking the time to participate and I hope that the answers received are helpful to you. Another big thanks goes out to the authors for not only taking the time to respond to the questions but for putting together a great book that is sure to help many people with their finances.
Author: Jeremy Vohwinkle
My name is Jeremy Vohwinkle, and I’ve spent a number of years working in the finance industry providing financial advice to regular investors and those participating in employer-sponsored retirement plans.