Getting Started: Financial, Legal and Insurance Basics
By Kristi Vaughan
Congratulations, you are out on your own!
Whether this is a long-awaited event or a sudden change that’s resulted from some combination of age, change in marital status or culmination of education, there are certain financial, legal and insurance basics you should take care of … and probably sooner rather than later.
Some of these you (or your parents) will already have addressed. Others can go to the top of your “to do” list.
Financial
- Social Security number. If you’ve held a job or had to file a tax return you probably already have one. If you can’t find the card, you’ve had a name change or you don’t remember the number, you can request a new card by downloading an application or contacting your local Social Security office.
- Bank account. The days of keeping money in the mattress are long gone. And besides, you’ll need checks to pay bills and ATM cards to get cash when the bank isn’t open. Many banks will charge reduced fees, or waive fees entirely, if you keep minimum deposits, link accounts or agree to do your banking electronically.
- Retirement account. If you didn’t open a retirement account when you received your first paycheck (even if you were a teenager) you’ve already lost out on some growth potential. If your employer offers a 401(k) plan, join it even if you are only investing $10 a week. If you aren’t eligible for an employer-sponsored plan, check with your bank or an investment counselor about opening an Individual Retirement Account.
- Credit card. Credit card debt can be the downfall of many a person—especially when you are starting out and seem to need so many things. But if properly managed, credit cards can be tools of convenience. And you’ll almost always need one to rent a car or reserve a hotel room! The major credit card companies including MasterCard® and Visa® have basic information about credit cards on their Web sites. Additionally, Web sites such as ASAPCreditCard.com let you compare fees and interest rates.
- Safe deposit box. You can rent one of these at your local bank for a relatively low fee. Unless you have a lot of valuables you won’t need a big box; the smallest of boxes usually is sufficient for storing your passport, birth certificate, motor vehicle title and other hard-to-replace documents.
Insurance
- Auto. You own a car or motorcycle you may have been required to get insurance by your state’s Motor Vehicle department. Check to make sure you have at least the minimum amount required by law. If you want to save money, consider increasing the deductible amount or eliminating collision (but only if you are prepared to pay those amounts should they be needed).
- Medical. Does your employer provide health insurance? Get at least enough to cover catastrophic illness. If you cannot get health insurance through your employer, check to see if your state has a health insurance program or whether you can get insurance through a trade or professional group to which you might belong.
- Homeowners/renters. You may not yet own a home but you have to be living somewhere. Renters’ insurance is similar to homeowners insurance in that it usually covers personal liability and damage to items you own, including furniture.
- Life. If you have no dependents and no real financial responsibilities you may not yet need life insurance, or at least not any amount beyond what it would take to cover funeral expenses and settlement of your estate. Rates, however, do rise with age so you may want to discuss with a financial advisor the possibility of getting life insurance at a young age.
- Disability. Disability insurance provides a certain amount of income replacement should you be unable to work because of an injury or illness. The amount of coverage and what is covered varies by policy. Many people get disability insurance through their employers but it also can be purchased privately.
- Umbrella. Umbrella insurance is excess personal liability insurance that covers claims exceeding the limits of your home and auto policies. Check with the company that issued those policies.
Legal
- Will. A will is the legal document that sets forth your wishes in the disposition of your property after you die. If you do not have a will, the matter goes to the state courts to decide.
- Medical directive. Also sometimes called a living will, a medical directive is a legal document that sets forth your wishes on medical care should you, because of accident or illness, be unable to express them.
- Power of attorney. A power of attorney authorizes another individual to act in your behalf should you be unable to.