1 Smart Finances for Young Families 11 steps to give new parents control of their financial destiny David Port Author, Caveman ’ s Guide to Baby ’ s First Year & Caveman ’ s Pregnancy Companion Financial writer/editor Husband, father of two July 21, 2010

2 Why PLAN TODAY for the future? Financial advisors now put the magic retirement savings number for Generations X and Y at $2 million-$3 million. By 2025, four years of college will cost anywhere from $170,000 (in-state public) to $350,000 (private). And these are conservative estimates! 4 in 5 Americans expected to fall short of meeting financial needs in retirement unless they change saving habits now. More Americans are being forced to work longer and delay retirement because they didn’t adequately plan or save. Social Security destined for insolvency by 2037, leaving you and your kids without a key source of retirement income. WOULD YOU BELIEVE?

3 Phase 1: CRAWLING 1. Establish a HOUSEHOLD BUDGET Track, calculate average monthly income and outflow (spending) What’s leftover after necessities (food, shelter, transportation, childcare, etc.) are covered? This is discretionary income. So, how to use that leftover dough?

4 Phase 1: CRAWLING 2. CONSOLIDATE & SIMPLIFY ACCOUNTS Checking, savings, CDs, money market accounts, credit cards, etc. Joint accounts for ease of tracking, management, leverage (higher interest rates, lower fees), accountability to one another. Key question: maintain separate accounts too?

5 Phase 1: CRAWLING 3. DEBT: Reduce It, Control It How much do you owe as a family [credit cards, loans (school, cars, etc.)]? Consider consolidating debt at a lower rate (today’s low rates favor such a move) Move out of higher-interest debt (refinance a mortgage, move money into lower-interest-rate credit card) Pay down debt Control the urge to use plastic

6 Phase 1: CRAWLING 4. Establish an EMERGENCY FUND Easily accessible (liquid) funds to cover unexpected expenses (medical emergency, etc.) Find an interest-bearing vehicle—not one that restricts access (like a longer-term CD)

7 Phase 2: STANDING & WALKING 5. Draft a WILL No fun envisioning your own demise, but… Explicit instructions on what happens with your children, your assets, etc., when you and/or your spouse die To be updated as your family and assets grow, circumstances change

8 Phase 2: STANDING & WALKING 6. INSURE Yourselves! Life insurance (permanent or term) to protect surviving spouse and children Disability insurance to replace lost income Health insurance, so all healthcare costs don’t come out-of-pocket

9 Phase 2: STANDING & WALKING 7. Establish, fund a RETIREMENT ACCOUNT If you don’t have one, set one up through employer or yourself (if self-employed). If you have one already, FUND IT! New baby? Time to update beneficiaries.

10 Phase 3: IN FULL STRIDE 8. Establish a COLLEGE SAVINGS PLAN 529 plan most widely used—solid tax advantages All states have 529 plans. Some offer tax breaks for using home state plan.

11 Phase 3: IN FULL STRIDE 9. Become a HOMEOWNER Low mortgage rates, lagging real estate prices make it a good time to buy Use your home to build equity, assets instead of paying rent

12 Phase 3: IN FULL STRIDE 10. Seize control of your TAX SITUATION Tax breaks are plentiful (deductions for home ownership, home office, childcare etc). It’s your job to capitalize on them. Due diligence: Keep abreast of tax code changes. Hire an accountant or do it yourself

13 Phase 3: IN FULL STRIDE 11. Draft a big-picture FINANCIAL PLAN Encompasses all the aforementioned elements: investments, retirement account(s), insurance Multipurpose: build assets; protect assets; save for specific purposes; accumulate enough to last a lifetime; leave legacy for heirs, charity Find an advisor you trust

14 Get Busy! Draft a prioritized to-do list of responsibilities. Divide & conquer: Run through items on the to-do list with your spouse, with each of you taking on those you’re most comfortable doing. (Keep in mind, some are best accomplished jointly.) For those neither of you are comfortable (or capable of) tackling, find an expert advisor to help (insurance broker, financial planner, accountant, etc.) Don’t wait — the more items you cross off the to-do list, the better you’ll sleep! Don’t let it stress you out! Tackle responsibilities at your own pace; don’t let it become a source of strife.

15 The information contained herein represents the opinions of the presenter and does not necessarily reflect the opinions of MetLife. L [exp0711][All States]