Do I Need To …?

Personal finance is a tricky business for young families. Things can change so quickly during the start of a relationship that questions can pile up on top of each other. It can get so daunting that some of those questions can be forgotten, resulting in loss funds or a unforeseen situation. This can cause frustration within the young family — something that isn’t needed at such an early point.

Most of the questions come with simple answers that take a short time to address. Here are some of the more common queries and responses.

Do I need to get life insurance? Yes, unless you’re so wealthy that your family will be taken care of during the unfortunate death of you or your spouse. Young people who are in good health and don’t smoke can obtain a sizable life insurance policy for well under $100 dollars a month. You want to make sure that each policy is 10 times current salary and that you purchase term instead of whole life insurance. Families with children can add them on as a rider to a life insurance policy in case of their untimely death.

Do I need to establish credit in order to buy a home? Many lenders would like you to think so, but it isn’t the case in today’s housing market and the more stringent qualifications that came about after the Great Recession. Few no down payment mortgages are available to those with poor credit . These days, lenders are looking for some money up front before they consider doling out mortgages. The best practice is to get pre-qualified for a mortgage, keep your home search in that range, and provide a sizable down payment  to the lender to avoid a credit review.

Do I need to get a credit card in order to obtain good credit? Think about the logic of this question for a second. In many cases people rack up thousands of dollars on a credit card and take years take to remove it via minimum payments, thus creating a record on a report saying you are currently paying off a large sum of money. How does this sound smart? Just forego the credit card and work to build wealth for your family so you don’t need anyone to review a report.

Do I need to create a Limited Liability Corporation (LLC) for my new business? It depends on the type of business you’re considering. Selling homemade lace doilies at craft shows probably does not require the establishment of an LLC. On the other hand, creating your own self-publishing business to produce new works of fiction should be labeled under an LLC in order to protect you just in case someone says you plagiarized their work.

Do I need to obtain a Employee identification Number (EIN) for my business? Again, it depends on the type of business and if you will have any employees or contractors work with you. Using the lace doily example, an EIN number wouldn’t be required unless their popularity exploded and you needed to hire others to help you make them. What an EIN does is help business owners separate their profit and expenses from their personal records.  

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