What is a financial plan?

A financial plan is a comprehensive picture of your current finances, your financial goals and any strategies you’ve set to achieve those goals. Good financial planning should include details about your cash flow, savings, debt, investments, insurance and any other elements of your financial life.
What is financial planning?
Financial planning is an ongoing process that looks at your entire financial situation in order to create strategies for achieving your short- and long-term goals. It can reduce your stress about money, support your current needs and help you build a nest egg for goals such as retirement.
Creating a financial plan is important because it allows you to make the most of your assets and gives you the confidence to weather any bumps along the way. You can make a financial plan yourself or get help from a financial planning professional. Online services like robo-advisors have also made getting assistance with financial planning more affordable and accessible than ever.


9 steps in financial planning
1. Set financial goals
A good financial plan is guided by your financial goals. If you approach your financial planning from the standpoint of what your money can do for you — whether that’s buying a house or helping you retire early — you’ll make saving feel more intentional.
Make your financial goals inspirational. Ask yourself: What do I want my life to look like in five years? What about in 10 and 20 years? Do I want to own a car, or a house? Do I want to be debt-free? Pay off my student loans? Are kids in the picture? How do I imagine my life in retirement?
Having concrete goals can make it easier to identify and complete the next steps, and provide a guiding light as you work to make those aims a reality.

2. Track your money
Get a sense of your monthly cash flow — what’s coming in and what’s going out. An accurate picture is key to creating a financial plan and can reveal ways to direct more to savings or debt pay-down. Seeing where your money goes can help you develop immediate, medium-term and long-term plans.
For example, developing a budget is a typical immediate plan. NerdWallet recommends the 50/30/20 budget principles: Put 50% of your take-home pay toward needs (housing, utilities, transportation and other recurring payments), 30% toward wants (dining out, clothing, entertainment) and 20% toward savings and debt repayment. Reducing credit card or other high-interest debt is a common medium-term plan, and planning for retirement is a typical long-term plan.
Next steps
Free Budget Planner Worksheet
3. Budget for emergencies
The bedrock of any financial plan is putting cash away for emergency expenses. You can start small — $500 is enough to cover small emergencies and repairs so that an unexpected bill doesn’t run up credit card debt. Your next goal could be $1,000, then one month’s basic living expenses, and so on.
Building credit is another way to shockproof your budget. Good credit gives you options when you need them, like the ability to get a decent rate on a car loan. It can also boost your budget by getting you cheaper rates on insurance and letting you skip utility deposits.
Next steps
How to Build Credit
Emergency Fund: What It Is and Why It Matters
Emergency Fund Calculator
4. Tackle high-interest debt
A crucial step in any financial plan: Pay down high-interest debt, such as credit card balances, payday loans, title loans and rent-to-own payments. Interest rates on some of these may be so high that you end up repaying two or three times what you borrowed.
If you’re struggling with revolving debt, a debt consolidation loan or debt management plan may help you wrap several expenses into one monthly bill at a lower interest rate.
Next steps
Pay Off Debt: Tools and Tips
How to Pay Off Debt Fast: 7 Tips
5. Plan for retirement
If you visit a financial advisor, they will be sure to ask: Do you have an employer-sponsored retirement plan such as a 401(k), and does your employer match any part of your contribution? True, 401(k) contributions decrease your take-home pay now, but it’s worth it to consider putting in enough to get the full matching amount. That match is free money.
If you have a 401(k), 403(b) or similar plan, financial advisors also generally suggest that you gradually expand your contributions toward the IRS limit. In 2023, that’s $22,500, or $30,000 for those 50 or older.
Another savings vehicle for retirement planning is an IRA, or individual retirement arrangement. These tax-advantaged investment accounts can further build retirement savings by up to $6,500 a year in 2023 (or $7,500, if you are over 50).
Next steps
How Much Should I Contribute to a 401(k)?
IRA Contribution Limits Explained
6. Optimize your finances with tax planning
For many of us, taxes take center stage during filing season, but careful tax planning means looking beyond the Form 1040 you submit to the IRS each year.
For example, if you’re netting a sizable refund each year, you may be needlessly living on less throughout the year. Learning how and when to review your W-4, the form you fill out with employers, can help you to take control of your future. Adjust your withholdings on your W-4, and you either can keep more of your paycheck, or pay a smaller tax bill.
Getting cozy with the tax law also means looking into tax credits and deductions ahead of time to understand which tax breaks could make a difference when it comes time to file. The government offers many incentives for taxpayers who have children, invest in green home improvements or technologies, or are even pursuing higher education.
Next steps
Tax Planning for Beginners: 6 Tax Strategies & Concepts to Know
Federal Brackets and Income Tax Rates
20 Popular Tax Deductions and Tax Credits
7. Invest to build your future goals
Investing might sound like something for rich people or for when you’re established in your career and family life. It’s not. Investing can be as simple as putting money in a 401(k) and as easy as opening a brokerage account (many have no minimum to get started). Financial plans use a variety of tools to invest for retirement, a house or college.
Next steps
How to Invest Money: Choosing the Best Way To Invest for You
How To Invest in Stocks
Saving for Education: 529 Plan Rules and Contribution Limits
8. Grow your financial well-being
With each of these steps, you’re protecting yourself from financial setbacks. If you can afford it, decide whether you’d like to do more, such as:
Increasing contributions to your retirement accounts.
Padding your emergency fund until you have three to six months of essential living expenses.
Using insurance to protect your financial stability, so a car crash or illness doesn’t derail you. Life insurance protects loved ones who depend on your income. Term life insurance, covering 10-year to 30-year periods, is a good fit for most people’s needs.
Next steps
Backdoor Roth IRA: What It Is and How to Set One Up
What Is Life Insurance and How Does It Work?
9. Estate planning: Protect your financial well-being
Financial planning also means looking out for your future needs, as well as mapping things out for your loved ones. Creating a will can help ensure your assets are distributed according to your wishes. Other types of estate-planning documents can also provide your relatives with clarity on how you would like to be cared for, and who should manage your affairs.

A financial plan is a roadmap that help you achieve your goals financial planning can be done on your own or with a professional 


Types of financial planning help

A financial plan isn’t a static document — it’s a tool to track your progress, and one you should adjust as your life evolves. It’s helpful to reevaluate your financial plan after major life milestones, such as getting married, starting a new job, having a child or losing a loved one.
If you’re not the DIY type — or if you want professional help managing some tasks and not others — you don’t have to go it alone. Consider what kind of help you need:
Complete financial plan and investment advice
Online financial planning services offer virtual access to human advisors. A basic service would include automated investment management (like you’d get from a robo-advisor), plus the ability to consult with a team of financial advisors when you have other financial questions. More comprehensive providers basically mirror the level of service offered by traditional financial planners: You’re matched with a dedicated human financial advisor who will manage your investments, create a comprehensive financial plan for you, and do regular check-ins to see if you’re on track or need to adjust your financial plan.

Find a financial advisor near me

Specialized guidance and/or want to meet with an advisor face-to-face
If you have a complicated financial situation or need a specialist in estate planning, tax planning or insurance, a traditional financial advisor in your area may fit the bill. To avoid conflicts of interest, consider fee-only financial advisors who are fiduciaries (meaning they’ve signed an oath to act in the client’s best interest). Note that some traditional financial advisors decline clients who don’t have enough to invest; the definition of “enough” varies, but many advisors require $250,000 or more. If you want to know more about how much seeing an advisor will cost, read our guide to financial advisor fees.

Portfolio management only

Robo-advisors offer simplified, low-cost online investment management. Computer algorithms build an investment portfolio based on goals you set, and your answers to questions about your risk tolerance. After that, the service monitors and regularly rebalances your investment mix to ensure you stay on track. Because it’s all digital, it comes at a much lower cost than hiring a human portfolio manager.

Why is financial planning important?
Financial planning can help you feel more confident about navigating bumps in the road — like, say, a recession or historic inflation. According to Charles Schwab’s 2023 Modern Wealth Survey, Americans who have a written financial plan feel more in control of their finances compared with those without a plan
Once your basic needs and short-term goals have been addressed, a financial plan can also help you tackle big-picture goals. Thoughtful investing, for example, can help build generational wealth, and careful estate planning can ensure that wealth gets passed down to your loved ones.

Portfolio management is the process of building and maintaining an investment account. You can manage your own portfolio, or hire a portfolio manager or investment advisor.


Nerdy takeaways
Portfolio management involves concepts such as asset allocation, diversification, rebalancing and tax minimization.
There are two main portfolio management strategies: active management and passive management.
You can manage your portfolio independently, through a robo-advisor or with a portfolio manager.
Portfolio management can range in price: Some services are completely free while others charge 1% of your assets under management or more.



The idea of managing your own investments can feel daunting, but no matter how much money you have, there is a level of portfolio management right for you.
If you’re just starting out, you can explore index funds, or even automated portfolios if you don’t want to manage your own portfolio. If you have a more complicated financial picture, a financial advisor or wealth advisor may be more your speed.
What is a portfolio?
A portfolio is a person’s or institution’s entire collection of financial assets. This can include stocks, bonds, mutual funds, real estate, cryptocurrency, art and other collectibles. A “portfolio” refers to all of your investments — which may not necessarily be housed in one single account.
Portfolio management definition
Portfolio management is a cohesive investing strategy based on your goals, timeline and risk tolerance. Portfolio management involves picking investments such as stocks, bonds and funds and monitoring those investments over time. Portfolio management can be done with a professional, on your own or through an automated service.
What does a portfolio manager do?
You don’t need a portfolio manager if you’d prefer to manage your investments on your own, but if you’d rather be hands-off, you may want to work with a professional. A portfolio manager creates an investing strategy based on a client’s financial needs and risk tolerance, and provides ongoing portfolio oversight, adjusting holdings when needed.
If you’re working with an in-person portfolio manager, there are a few different credentials to look for. Anyone managing your money should at the very least be a registered investment advisor. Ideally, look for someone who is a certified financial planner. That means they have a very high level of education and a fiduciary duty to you as their client.

Active vs. passive portfolio management
The two main portfolio management strategies are active and passive management.

Active portfolio management
Active portfolio managers take a hands-on approach when making investment decisions. They charge investors a percentage of the assets they manage for you. Their goal is to outperform an investment benchmark (or stock market index). However, investment returns are hurt by high portfolio management fees — clients pay 1% of their balance or more per year to cover advisory fees, which is why more affordable passive portfolio management services have become popular.
Passive portfolio management
Passive portfolio management involves choosing a group of investments that track a broad stock market index. The goal is to mirror the returns of the market (or a specific portion of it) over time.
Like traditional portfolio managers, a robo-advisor — a service that uses a computer algorithm to choose and manage your investments for you — allows you to set your parameters (your goals, time horizon and risk tolerance). Robo-advisors typically charge a percentage of assets managed, but because there is little need for active hands-on investment management, that cost is a fraction of a percent in management fees (generally between 0.25% and 0.50%).
View our picks for the best robo-advisors
If you want more comprehensive help — investment account management, plus financial-planning advice — consider using a service such as Facet Wealth or Personal Capital. These services combine low-cost, automated portfolio management with the type of financial advice you’d get at a traditional financial planning firm — advisors provide guidance on spending, saving, investing and protecting your finances. The main difference is the meetings with your financial planner take place via phone or video instead of in person

Portfolio management: Things to keep in mind
Portfolio management isn’t solely about building and managing an investment portfolio. Here are some concepts that can help you choose your investments and manage them wisely.
Asset location answers one question: Where are your investments going to live? The type of account you pick will become your investments’ home — and there are lots to choose from. The key is to pick the best type of investment account for your goals.
Part of picking an investment account is choosing between taxable accounts and tax-advantaged ones. This decision can have both short-term and long-term tax implications. You’ll want to be sure to use designated retirement accounts such as IRAs and 401(k)s for your retirement savings, because these offer tax advantages — for example, money you contribute to a Roth IRA grows tax-free. (Learn more about Roth IRAs and their tax benefits.) You may also want to have a standard taxable investment account to invest for non-retirement goals (such as saving for a down payment).
Asset allocation looks similar to asset location, but it refers to how your portfolio is divided up between different types of investments. This is usually related to your level of risk tolerance. For instance, if you have many years to go before you retire, you have more time to take risk, and so you can have a larger portion of your portfolio in riskier investments. If you’re closer to retirement, you may want to have an asset allocation with a larger proportion of less risky investments.
Diversification refers to spreading your investing dollars across different companies, geographies, sizes and industries. That way, if one particular industry sinks, your whole portfolio does not. For instance, investing in funds, which are essentially baskets of lots of different securities, provides more diversification than investing in a single stock.
Rebalancing is how portfolio managers maintain equilibrium within their accounts. Portfolio managers do this to stay true to the target allocation, or what percentage of the portfolio is in more risky investments versus less risky investments, originally set for the investment strategy. Over time, market fluctuations might cause a portfolio to get off course from its original goals. Read about ways to rebalance your portfolio.
Tax minimization is the process of figuring out how to pay less overall in taxes. These strategies work to offset or lower an investor’s exposure to current and future taxes, which can make or break an investor’s returns. It’s important to consider tax-efficient investing to avoid pricey surprises from the IRS.
Putting it all together
Portfolio management in the real world combines all of these aspects into one personalized portfolio. Say an investor is planning on retiring in five years and doesn’t want to take much risk. They have a 401(k) from their employer (their asset location) where they put a portion of their paycheck. Their asset allocation could be 50% stocks and 50% bonds. If this ratio changes over time, and the investor winds up with a portfolio closer to 55% in stocks, that gives them a riskier portfolio than they are comfortable with. The investor or a portfolio manager would then rebalance the portfolio to bring it back to its original 50/50 ratio.
Tax minimization can go hand and hand with asset location. For example, if you choose to locate your assets in a Roth IRA, you are inherently minimizing your taxes since qualified Roth distributions are tax-free in retirement.


How to manage your own portfolio

Portfolio management decisions are guided by four main factors: an investor’s goals, how much help they want (if any), timeline and risk tolerance.
1. Setting goals: Your savings goals — retirement, a home renovation, a child’s education or family vacation — determine how much money you need to save and what investing strategy and account type is most appropriate to achieve your objectives.

2. Figuring out how much help you want: Some investors may prefer to choose all their investments themselves; others would be more than happy to let a portfolio manager take over. If you can’t decide, a robo-advisor might be an ideal solution, as these services are very low cost. Portfolio managers will charge more than a robo-advisor, but they typically offer a customized portfolio and other services beyond portfolio management, such as financial planning.
3. Mapping out your timeline: When do you need the money you’re investing, and is that date set in stone or flexible? Your timeline helps inform how aggressive or conservative your investing strategy needs to be. Most investment goals can be mapped to short-, intermediate- and long-term time horizons, loosely defined as three years, three to 10 years and 10 or more years. If, for example, you need the money within three years, you’ll want to minimize your exposure to the short-term volatility of the stock market.

4. Determining your tolerance for risk: An investor’s willingness to accept risk is another key driver behind diversification decisions. The more risk you’re willing to take, the higher the potential payoff — high-risk investments tend to earn higher returns over time, but may experience more short-term volatility. The goal is to strike the right risk-reward balance, picking investments that will help you achieve your goals but not keep you up at night with worry.
Portfolio management vs. wealth management

Portfolio management deals strictly with a client’s investment portfolio and how to best allocate assets to fit their risk tolerance and financial goals. Wealth management is the highest level of financial planning, and often includes services such as estate planning, tax preparation and legal guidance in addition to investment management.





A financial plan may sound like a chore. But for successful investors, it’s the foundation on which to build, understand and achieve your goals. Having a written plan can increase confidence and result in more constructive financial behavior. However, the potential value of financial advice may vary based on the nature of the planning engagement. People working with a financial planner who is taking a holistic look at their needs, beyond just products and portfolio, are likely better off than those working with a planner who takes a transactional approach.

In the rush of daily life, planning for anything more than a few days in advance can seem like a headache. It’s natural to wonder: Does financial planning really help?
We think it does. Here are five reasons why:
1. A written financial plan increases confidence
Our survey found that 65% of people with a written financial plan say they feel financially stable, while only 40% of those without a plan feel the same level of comfort. Fifty-four percent of planners felt “very confident” they would reach their financial goals, compared with only 18% of non-planners.
Having a written financial plan gives you a measurable goal to work toward. Because you can track your progress, you can reduce doubt or uncertainty about your decisions and make adjustments to help overcome obstacles that could derail you.
2. A financial plan can jumpstart savings, even with a small amount of money
The most common reason cited for not having a plan is “I don’t have enough money.” This is a misconception. Planning, even in small steps, doesn’t take large sums of money to start.
In fact, financial planning can have a profound impact on lower-income households by helping people improve their saving and budgeting habits. A written plan helps savers prioritize their goals and, as mentioned earlier, provides a way to gauge success.
3. A financial plan can help you create an investment portfolio
Your financial plan can give you the full lay of the land: You’ll know what your goals are, how much time you have to reach them, and how comfortable you are with risk. Once you have a comprehensive view, you can figure out how to reach each individual goal.
That will involve both saving—setting aside money you’ll need in the short term or for emergencies—as well as investing, which is setting aside money you’ll need in the long term and that, ideally, can grow. And with your financial plan as a roadmap, you’ll be better able to make thoughtful investing decisions—instead of heading out without a sense of direction and just hoping for the best.
4. A financial plan can lead to better habits
Financial planning isn’t just about investing; it’s about what money can do for your confidence, security, and quality of life—such as the protection that life insurance offers or the peace of mind that an emergency fund can provide. Research also shows that planning supports sound money habits as well.

There are good investing habits, and there are healthy money habits. A written financial plan can lead to both.
5. Planning can be tailored to every personality type
Your approach to life can influence every decision you make, including those that involve your finances. By understanding the type of person you are with regard to planning, you can take proper steps toward reaching your financial goals.
Here are six types of financial planning personalities:
Organizer: Organizers love lists. Categorizing and arranging everything from their sock drawer to their personal finances gives them a warm, fuzzy feeling.
Architect: Architects are masters of both creativity and logic. They not only imagine the future but design solutions to make it happen.
Philosopher: Taken from the Greek word meaning “lover of wisdom,” philosophers enjoy thinking about and solving problems.
Dreamer: Dreamers are the free spirits of our world who shake their head in confusion at all those who schedule their lives to the last detail.
Improviser: Improvisers are typically quite self-sufficient with a deep desire for independence and doing things their own way.
Maverick: Mavericks are unafraid and unapologetic individuals who would rather reshape their world than try to fit in it.

How can you plan according to your personality?
For organizers, architects, and philosophers, forethought and proactively finding solutions are in their nature. A written financial plan can offer a sense of security while leaving room for improvement and possible growth.
Dreamers, improvisers, and mavericks may prefer spontaneity, but even a bit of planning can significantly help them achieve the freedom to live the way they want while fulfilling the future they imagine. A written plan can provide the structure to keep them financially grounded while allowing them to make changes on the fly or use their earnings to support a carefree lifestyle.

Why consider a professional financial planner?

Research has shown that households that work with a professional financial planner were more likely to make better financial decisions than those without a planner, taking into account portfolio risk levels, savings habits, life insurance coverage, revolving credit card balances, and emergency savings.2

In a study published in the Journal of Financial Planning, David M. Blanchett, Ph.D., CFA, CFP®, used six rounds of the triennial Federal Reserve Board’s Survey of Consumer Finances (from 2001 to 2016) to examine the results achieved by people using four information sources: financial planners (defined as advisors who provided more holistic services); transactional financial advisors (such as a banker or broker); friends; or the internet.

“Households working with a financial planner were found to be making the best overall financial decisions, followed by those using the internet, while those working with a transactional adviser were making the worst financial decisions,”
With over 70 million freelancers in the U.S., freelancing obviously appeals to a lot of workers and offers a lot of benefits to those who wish to work for themselves. However, it doesn’t offer a 401(k) program, and that means saving for retirement is not as easy as filling out a form and giving it to HR. In fact, freelancers are essentially their own HR department, and that adds some complexity.
On this episode of Financial Decoder, host Mark Riepe speaks with Susan Hirshman, a director of wealth management for Schwab Wealth Advisory and the Schwab Center for Financial Research. They discuss the challenges freelancers face in their financial lives, as well as the options they have to invest for retirement and get the most out of their savings.
To read the study Mark references about the effect of visualization on risk-taking, Check out “Imagining Risk Taking: The Valence of Mental Imagery Is Related to the Declared Willingness to Take Risky Actions” in the Journal of Behavioral Decision Making.
Follow Financial Decoder for free on Apple Podcasts or wherever you listen.
Fraudsters can use artificial intelligence to impersonate nearly anyone. Here’s how to help protect yourself from AI voice-cloning scams.

Grandma, can I borrow $100?”
If your grandchild has ever called with a request like this, take note: Cybercriminals can now use artificial intelligence (AI) to impersonate nearly anyone.
“In the past, fraudsters had to hope they could successfully imitate your friend or loved one,” says Peter Campbell, director of Schwab’s Financial Crimes Risk Management division. “Now, they can use AI to get the voice just right.”
Impersonation scams have been a problem for years, particularly targeting older individuals. But now that fraudsters require only a small audio sample—easily acquired from videos posted to social media—virtually anyone could be at risk of being deceived. “One downside to the AI revolution is often there can be no perceptible difference between a real and a cloned voice,” Peter says.
The antidote? “A healthy dose of skepticism,” says Andrew Witt, a senior manager at Schwab’s Financial Crimes Risk Management division. “If you get a call and something seems off, trust your gut and call the person back at a number you know is theirs.”
If you’re worried AI could help criminals with fraudulent voice verification gain access to your financial or other accounts, there’s good news: “While AI may be good enough to trick the human ear, the technology and tools available to large organizations like Schwab aren’t so easily fooled since they analyze discrete speech markers,” Peter says. “Nevertheless, you should report any unusual calls or account activity as soon as possible. Schwab’s Security Guarantee offers to ‘cover losses in any of your Schwab accounts due to unauthorized activity.'”1


Forging fraudulent relationships via social media is part of the latest financial scam. Learn the warning signs for these social media scams and how to avoid them.

In 2022, scammers on social media cost Americans $1.23 billion—a 54% increase over 2021, according to the Federal Trade Commission. One key difference with these newer scams: Instead of seeking financial assistance, they purport to offer help.
“As the use of social media has grown and companies have strengthened cybersecurity measures, bad actors are increasingly targeting the emotional vulnerability of individual users,” says Peter Campbell, director of financial crimes risk management at Schwab.
Many social media cons start with a fraudster claiming to be a mutual acquaintance of someone in your social network. Once a bond is formed over weeks or even months, they boast of big gains from an investing opportunity and offer you a way in.
Others use the stolen identity of a legitimate financial professional, sometimes setting up a fake website using her or his likeness. For example, in June 2022, the FBI warned of a cryptocurrency scam on LinkedIn in which bad actors posed as reputable financial professionals. After establishing a rapport, the scammers persuaded their victims to invest in what turned out to be a bogus cryptocurrency opportunity.
“It’s no longer just a phone call or a phishing email,” says Tiffany Wax, a senior manager at Schwab who works with Peter to combat online fraud. They’re now using social engineering combined with sophisticated technology, which is a real game changer.”
Tiffany and Peter offer a few tips to help social media users steer clear of scams:
“Be extremely selective about the information you share and the invitations you accept,” Peter says. That goes for not only Facebook and Instagram but also professional networks like LinkedIn.
Vet any new contacts or opportunities carefully—even Googling a name or details of an investment can unearth previous victims.
And finally: “If you own crypto, never share your private key or private wallet with anyone,” Tiffany says. “This may sound obvious, but you’d be surprised how often people are tricked into doing so.”
Of course, it never hurts to check with your financial advisor about any new investment opportunities that come your way. Many advisors—including those at Schwab—stay abreast of the latest scams.
“Fraudsters may be growing more sophisticated, but with a little effort you can still stay a step ahead,” Tiffany says.

Talking through these five money topics as your parents age could help bring peace of mind and relief to both you and your parents.

Perhaps it was their upbringing, but both my parents were the “we don’t talk about money” types. Even now, as I work in the financial industry and know the money topics we should be talking about as my parents age, their mindset has made these conversations a challenge.
My parents divorced when I was 12, so I’ve had two sets of these conversations: one with my mom and one with my dad. My mom was diagnosed with Alzheimer’s in 2021. Fortunately, she did a lot of up-front work with an estate attorney. It was such a relief to my siblings and me that she had documented her decisions prior to her disease setting in. This meant we had a plan we could follow that clearly stated her wishes. This was one less burden to carry.
My dad is a different story. He has never wanted to talk about money. But gradually I was able to open the conversation. After chipping away over a period of about a year, we came to a great outcome.
Difficult as they may be, these discussions have brought peace of mind for our entire family. My hope is that sharing my story can give you ideas on how to approach these conversations with your loved ones. Here are five things that helped me.
1. Start slowly, and try to meet your parents where they are.
I tried to open the estate planning conversation several times with my dad, and my approach wasn’t hitting right. My dad and I are incredibly close. I’m super comfortable with him in every other way, but I just didn’t have the right words, and he seemed to shut down the discussion before I could make much progress.
I decided to tell my dad about my friend Dana. Every time Dana visits her parents, her dad quizzes her: “Do you remember where my passwords are? What will you do when this or that happens?” and so on. I shared that with my dad and explained it would be important for me to know some of these things too. He listened but didn’t react immediately. The next time I came over, he handed me a folder filled with all his account information, passwords, balances, and everything I would need to know. Progress!
While my dad has a will, no matter what I tell him, he still won’t create a trust. All you can do is share information and offer to partner on the strategy they want to take. It’s important to meet them on their terms and not be overly forceful with an approach they’re not comfortable with.
2. Explore if you will need to provide support for your parents as they age.
Some people may be put in a position where they need to support their aging parents financially, as caregivers, or both. It can be hard to know what to expect until you get to the point where your parents may need help. And this could induce a level of shame that they didn’t plan adequately and are now a burden on their children. It’s important to approach these conversations with extreme openness and no judgement.
In my mother-in-law’s case, she has always been very open with my husband about what she has and doesn’t have for retirement. About eight years ago, we bought a house as an investment and let my in-laws live there rent-free. This has allowed them to have a better quality of life during their 70s by eliminating a significant financial obligation. It also provides my husband and me with a strategy for forced savings and unrealized investment gains. Win-win!
If you can get your parents to open up and share their financial picture with you, it could help you determine whether they are in good shape or if you’re going to need to supplement. If it’s the latter, knowing in advance gives you time to start saving and planning for that inevitability.
3. Consider getting these four documents in place.
These four documents can clarify your parents’ wishes ahead of time and allow you to manage their affairs if that becomes necessary.
Revocable living trust: This allows your parents to appoint a trustee who can manage the trust and its assets in the event of incapacity.
Power of attorney (POA): This legal document gives a trusted individual control over any financial matters your parents specify, such as paying bills, making gifts, or managing property. Without a POA, a court may need to appoint a conservator to manage their financial affairs.
Advance directive: Also called a living will, this legally binding document allows a person to spell out their preferences regarding medical intervention and end-of-life care. You may want to consider exploring if your parents also want to establish a health care proxy (sometimes called a medical POA), which gives a loved one the legal authority to make medical decisions regarding any situations not covered by the directive.
HIPAA authorization: The Health Insurance Portability and Accountability Act’s privacy rule established a national standard meant to protect an individual’s medical records. A signed HIPAA authorization form would allow you to speak with your parents’ doctors about their medical situation.
Luckily, my mom was always a planner and did this paperwork in advance of her dementia. It’s a comfort to have her true wishes on paper so it’s not clouded by her disease. I’ve also gone through the process of drafting these legal documents with my husband, and it spurred a healthy discussion that we likely wouldn’t have had otherwise about both our financial and medical needs and aspirations.
4. Find out if your parents have long-term care insurance.
The average 65-year-old today has a roughly 70% chance of needing some type of long-term care (LTC) in the future, according to the U.S. Department of Health and Human Services. The cost for LTC currently ranges from about $50,000 to $100,000 per year, according to the Genworth Cost of Care Survey.
Neither my parents nor my husband’s parents have long-term care insurance. We know there are likely to be some expenses for both our mothers that they will not be able to handle. So, we know we need to save more to help them in the future. Again, it’s important to understand the full financial picture so you can make a plan and not be caught off guard with unexpected financial obligations.
5. Alert your parents to scams.
When we first noticed my mom’s dementia issues, my sister and I knew we had to jump right in and make sure things were in order, which included reviewing her bank accounts. We noticed a lot of random subscription charges for $20 to $50 per month, and we didn’t recognize any of the payees. My sister and I quickly realized our mom was getting scammed. On her cell phone, she was getting over 100 texts per day with messages like: “Hey Carolyn, your $15,000 IRS check is ready. Click here to get it. Put in your Social Security number.” She started engaging with some of these texts, which then signed her up for subscriptions and memberships that chipped away at her account balances.
My sister and I had to dedicate many hours over several months to calling and threatening legal action for each subscription. In the end, we got back a lot of the money. However, we could not control the amount of text spam she was getting every day. We also could not prevent her from clicking on the links. We ended up changing her cell phone number and, since then, we monitor usage very closely.
I would recommend talking to your parents about scams and sharing specifics and stories. It’s important for everyone to have awareness of how these things can start and what they look like because some of them are incredibly believable. If they know it happened to someone they know, it will likely hit closer to home. Suggest that your parents add a trusted contact to their financial accounts, which allows a financial firm to move more quickly when addressing suspected fraudulent activity.
Getting to relief

Money conversations with parents can feel heavy and uncomfortable, but once you have them, both you and your parents will likely feel relieved. Your parents can feel good knowing they have your support and their wishes and legacy will be honored. And you can feel relieved knowing what you may be up against, potentially needing to save extra to support your parents, or helping to honor your parents’ wishes as they age. If you haven’t already, start these conversations. You can be a sounding board, a partner, and a support system to help your parents.

What are the risks of peer-to-peer payment apps? Here’s what you should know to avoid potential pitfalls and scams

Peer-to-peer (P2P) payment apps—such as PayPal, Venmo, and Zelle®—have simplified money transfers by requiring only a name, email, or phone number to send or receive funds almost instantly. But as their popularity has increased, so have incidents of fraud.
“One common scam is a text purportedly from your bank that asks if you want to authorize a $500 payment to a P2P app,” says Andrew Witt, a senior manager in Schwab’s financial crimes risk management team. When you reply “no,” an impostor passing as a bank representative calls you to report an account breach. They then ask for your credentials, along with the one-time code frequently sent to validate access. “That allows them to associate their device with your account,” he says.
This type of fraud exists in a gray area of the Electronic Fund Transfer Act, which typically requires banks and/or P2P services to refund consumers for unauthorized transactions. “Currently, your bank or P2P app is not required to reimburse you for any authorized payments—even if they are inadvertent transfers to the wrong recipient or the result of a scam,” Andrew says. “But rules may change, and some financial firms, including Schwab, may reimburse you on a case-by-case basis, so check how they handle such liabilities.”
To protect yourself against both fraud and human error:
Verify unexpected requests: If you receive an unusual inquiry from someone claiming to represent your financial institution, hang up and call an official number to verify the authenticity of the request.
Enable enhanced security settings: Two-factor authentication requires you to confirm your identity in two ways—usually a password plus a verification code sent via email or text—neither of which should ever be divulged to a third party. If your payment app allows it, you should also set up a password, PIN, facial recognition, or a fingerprint that must be used to complete each transaction.
Confirm before you click: Unlike traditional bank or credit card transactions—which you may stop payment on or dispute—P2P app transfers are like sending cash. Typically, you won’t be able to cancel or reverse a transaction after it’s processed, so make doubly sure you’ve got the right recipient before you hit send.
Sign up for fraud alerts: These automatic notifications will alert you to suspicious activity, but you should regularly check your account statements as well.
If, despite your best efforts, you pay the wrong person or find yourself the victim of a payment scam, take action right away:
Report the incident to your financial institution and the P2P company through which you made the transaction. Even if you authorized a payment by mistake, reporting it in a timely manner may increase your odds of recovering the funds.
Also report any scam to the Federal Trade Commission and the Consumer Financial Protection Bureau to help curtail future fraud.










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