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Understanding Finances

To begin planning for yourself and the elder in your care, or to prepare for working with a financial planner, you will need to analyze two things:

  1. Cash flow—determined by calculating current income and expenses including health insurance
  2. Net worth—the current value of all assets (including the house or apartment) after you have subtracted all debts

Start by locating all important financial and legal records and documents. Use the Caring for Your Parents List of Important Documents (PDF) to help you. It is also important to review beneficiary designations on any life insurance policies, annuity contracts, and 401k/IRA accounts to make sure they are current. You should also be sure that you have a letter of permission from your parent or the elder in your care to contact and discuss his or her financial accounts and insurance policies. A good financial analysis should include the following:

Current Income

  • Personal income from pensions and other retirement benefit systems, such as 401ks, including their required minimum distributions
  • Personal income from annuities and investments, such as mutual funds, stocks and bonds
  • Rental income
  • Income from public sources such as Social Security, SSI (Supplemental Security Income for aged, blind, and disabled people who have little or no income), and Veterans Benefits. (If you have questions about Social Security, you can go to the Social Security Web site or call or visit your local Social Security office. Call 800-772-1213 toll free (TTY 800-325-0778) to locate an office near you.)

Current Expenses

  • Rent or mortgage payments
  • Real estate taxes
  • Utilities and telephone bills
  • Bills for uninsured medical expenses, such as dental work or eyeglasses
  • Insurance premiums
  • Medications
  • Food
  • Clothing, toiletries, and other personal items
  • Entertainment
  • Gas, car maintenance, and other transportation expenses

Insurance Coverage

  • Health care
  • Prescription drugs
  • Long-term care
  • Life insurance death benefits
  • Medicare/Medicaid
  • Veterans Benefits

Assets

  • Real estate
  • Cash, CDs, stocks, bonds, mutual funds
  • Deferred annuities
  • Cash value of life insurance

Debts

  • Mortgages
  • Credit card balances
  • Car payments
  • Outstanding bills/loans

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