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The Modern Financial Planning Sandwich

Crowdfunding-300x178Years ago it was understood that you had several generations to care for. You cared for your elderly parents (and often your grandparents). You also had yourself and your spouse to care for; you cared for your children, and often their children as well. That was the culture. Sometime in the early 1900’s that started to change. As pensions became the norm, and most generations were able to look after themselves, it switched away from cross generational care. Instead you looked after yourself and your kids until they were 21, and then they were on their own. That has slowly started to change again. Your accountant in Billings, Montana looks into this generational sandwich.

What is the Financial Planning Sandwich?

To understand what we are talking about, we must define the sandwich. Simply speaking, your parents are on the top, your children on the bottom, and you are right in the middle.

The issue with the sandwich is that common thinking and saving practices that were acceptable for your parents no longer apply. They find that their planning has fallen short due to high costs of living, expensive medical bills, inflation, and pensions that just don’t keep up.

The other issue with the sandwich is that your children are burdened with the high costs of school. It is no longer an option to send them off to college, and when they are done they have a good job that will provide for their living expenses. Instead, college costs have risen so enormously high that they have to move home for a few years in order to pay down their debt.

How Financial Planning has Changed

In order to better take care of our sandwich, we need to make sure that all aspects are handled. This may mean some tough conversations with your loved ones.

For instance, you should speak with your parents to make sure everything is in order as they approach the end of their life. Make sure they have their will up-to-date. Make sure they have an executor in order. Make sure that everything is lined up for probate if necessary. Make sure they have accounted for long term care needs. And make sure that they have accounted for a life that may last well into their 90’s or even longer.

Most of the time, your parents won’t want to have these discussions with you. They are still under the mindset that it’s nobody’s business.

Likewise, your kids will need an extra boost as well. Encourage them to apply for scholarships, there are millions of dollars available (many from external sources). Have them look at this like a job: a $1,000 should have an investment of 10+ hours. When they are still very young, purchase insurance for them. They will need life insurance their entire life, buying it while young makes it cheap and negates the risk that they have become unhealthy. If you have the means, start saving for retirement for them. Or at least help them along the way.

Understanding the Financial Planning Sandwich

The good news about the financial planning sandwich is that modern training for accountants, financial planners, and others on your team of advisors incorporates the sandwich planning. They all know about the stress that extended family puts on you, and they all can incorporate that into their plan with you. As your accountant in Billings, Montana, I can help you work through the tax issues of having a child move back in after college, or paying to care for an elderly parent.

Practical Taxes is your source for any accounting needs. We are a full service firm in Billings, Montana, and we can help with everything from tax preparation, to online payroll services, to getting your next business venture set up and off the ground.