Listen to the podcast: Taking Care of Your Parents' Finances
Written by: Jo Turner
If you’ve had to make the possibly difficult decision to take care of your parent’s finances, there are a number of steps you need to take to get things in order. Financial educators recommend that the first step is to track their cash flow. This may be difficult because parents often hide money from their children, may not rememberwhere they’ve put their money, or may not have kept records. Typically, income exceeds expenses until age 70, after which savings are usually needed to meet expenses.
Once you’ve determined where the money is coming from and how it’s spent, check your parents’ bills and expenditures to identify errors. If you find transactions that aren’t clear, you can request information in accordance with the “Fair Credit Reporting Act.” And, if you discover any suspected fraud or financial abuse, you should also report it to appropriate authorities immediately.
Finally, if they haven’t already done so, prepare a net worth statement. This will help you determine how long your parent’s savings will last. Identify ratios that will help you in planning their finances. For example, you should set a goal that for each dollar of debt, they should have $25 of assets. For retirees, no more than 10% of their income should be going to debt and they should have 70 to 90% of their net worth in investment assets, although that ratio can be lower for homeowners. If necessary, seek the help of a qualified and trusted financial professional to help you navigate what’s best for your parents.
Listening, learning and living together, it’s the science of life. “Family Album” is a co-production of University of Florida IFAS Extension, the Department of Family, Youth and Community Sciences and of WUFT-FM. If you’d like to learn more, please visit our website at familyalbumradio.org.
