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Personal Finance A Couple Is Planning For Their Future, In The Event Of Death Or Loss Of Employment

1531 words - 6 pages

PAGE PAGE 6 Unit 3 IP
Unit 3 Individual ProjectPersonal Finance ConceptsChristopher StanglewiczMay 17, 2007Tom and Sue Wright are planning for their family's future. In the event that one of them would die, they would like the survivors to be able to comfortably maintain their current lifestyle. The planning they complete now will save the remaining family members from undue financial hardship. This process may seem daunting, but taking it step by step, the Wrights can easily plan for their financial future in the event of a death.The family maintenance fund is an integral part of planning for your family's future. This fund will provide the remaining family members with the extra money they will need to maintain their current standard of living when one spouse is no longer alive. This will lessen the financial burden on the survivors. With a total loss of one income, a family could be financially devastated very quickly. The surviving parent may be forced to get a second job, sell the house, or other drastic measure in order to keep 'afloat'. It is for this reason that the family maintenance fund is so important. Calculating a family maintenance fund is basically a five step process.The Wrights have begun calculating the amount they will need in a family maintenance fund. This is the first step in the process; finding the monthly expenses of the survivors. The amount must assume that one adult has died. Expenses such as an extra car and extra lunch costs may not be needed but child care might be necessary. They estimate the remaining family members will need about 75% of their current combined take home pay of $80,000. They have also found that they will need an extra $50 a month for child care. This amount, based on their current after tax income, is $5050.$80,000 current income / 12 months = $6667 current monthly income$6667 current income x 75% = $5000 survivors expenses$5000 survivors expenses + $50 child care = $5050 total monthly survivors expensesThe second step is to calculate the survivors take home pay. Assuming that the remaining parent will continue to work full time, this will be $3333 per month. (40,000 yearly take home / 12 months) With both children in school full time, the remaining parent should be able to work full time. If the children were younger they would need to consider the possibility that the surviving parent may only be able to work part time. In the Wright's case, both adults are employed at a local university. So, they will most likely have the summers off and be able to rearrange their schedule to accommodate the children's needs.The Wrights have already calculated their estimated Social Security survivors benefits if one parent was to die. This is step three. Both children would receive benefits until age 18 and the remaining spouse would receive benefits until the youngest child is 16. They calculated this amount to be about $1000 per month if one of them was to die today.Step four is simply taking the...

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