Our daughter is a special needs child, who doctors say will live about half as long as the average adult. Thereís also a good chance she will be under our care her entire life. We just finished Baby Step 3 of your plan, so we have all of our debt paid off except for the house, and we have an emergency fund of three to six months of expenses saved. We have health insurance, too. However, we were wondering how the situation with our little girl affects retirement planning and college funding?
I know this may sound strange, but the situation with your daughter really doesnít affect things all that much. The only real difference is that it sounds like youíll be responsible for your sweet daughter for the foreseeable future ó not just until sheís 18 or 21.
If you donít already have it, you and your wife should both buy 10 to 12 times your annual incomes in term life insurance. Make sure the money from the policies is set up to go into a special needs trust that would be managed for her care. That way, your baby will be taken care of in the event something unexpected happens to you.
Otherwise, just keep following my plan. Baby Step 4 means you start putting 15 percent of your income into pre-tax retirement plans, like Roth IRAs and mutual funds. Baby Step 5 is college funding, if thatís a consideration for her, followed by paying off your home early. Then, of course, the last Baby Step is building wealth and giving.
Financially speaking, youíre looking at filling a need in the event of your deaths. This should be covered by life insurance or investments. If you reach a point where your investments are substantial, and money from those things can adequately cover her needs and the needs of your family, then you can always drop the insurance policies.
God bless you all, Jonathan.
Time to raise prices?
My husband has his own one-man painting business, and I help him with the books. We were wondering how you know when itís time to implement a price increase. Also, what should the increase be?
I grew up in the real estate business, so Iíll use the apartment-complex model as my example. If your building is completely full, then itís time to raise prices a little bit until you have a vacancy.
In this type of scenario, you want a healthy level of vacancy, meaning youíre always going to be losing some customers as you go up in prices.
In your husbandís case, if heís booked through the end of the month, heís way underpriced. Just keep on turning in your bids, and donít make a big deal about things. It isnít like a tenant, in your case, where youíre going back time and time again except in rare cases. You might start with a 10 percent increase, and see what happens for a while. If that goes well, wait a bit and raise them another 10 percent.
There are only so many hours in a day this guy can work, so the only other option is to take on staff. But before I start staffing, Iím going to raise prices and cut the number of customers that way. In most cases with the construction business, if you show up when you say you will, complete the job when you say you will, and you do high quality work, thereís almost no ceiling on what you can make.
ó Dave Ramsey is Americaís trusted voice on money and business, and CEO of Ramsey Solutions. He has authored seven best-selling books. The Dave Ramsey Show is heard by more than 11 million listeners each week on more than 550 radio stations and digital outlets. Follow Dave on Twitter at @DaveRamsey and on the web at daveramsey.com.
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