Getting a Degree of Financial Security

June 14, 2021

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Denise and Chris Arand

Denise and Chris Arand

Executive Vice Presidents/Financial Strategists

2173 Salk Ave
#250
Carlsbad, CA 92008

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June 9, 2021

Mortgage Protection: One Less Thing To Worry About

Mortgage Protection: One Less Thing To Worry About

How many things do you worry – er, think – about, each day? 25? 50? 99?

Here’s an opportunity to check at least one of those off your list. Read on…

Think back to when you were involved in the loan process for your home. Chances are good that at some point during those meetings, a smiling salesperson mentioned “mortgage protection”.

With so many other terms flying around during the conversation, like “PMI” and “APRs”, and so much money already committed to the mortgage itself – and the home insurance, and the new furniture you would need – you might have passed on mortgage protection.

You had (and hopefully still have) a steady job and a life insurance policy in place, so why would you need additional protection? What could go wrong?

Before we answer that, let’s clear up some confusion.

Mortgage Protection Insurance is not PMI. <br> These two terms are often used interchangeably, but they are not the same thing.

Both Private Mortgage Insurance (PMI) and Mortgage Protection are insurance, but they do different things. PMI is a requirement for certain loans because it protects the lender if your home is lost to foreclosure.

Essentially, with PMI you’re buying insurance for your lender if they determine your loan is more risky than average (for example, if you put less than 20% down on your home and your credit score is low).

Mortgage protection, on the other hand, is insurance for you and your family – not your lender.

There are several types of mortgage protection, but generally you can count on it to protect you in the following ways:

  • Pay your mortgage if you lose your job
  • Pay your mortgage if you become disabled
  • Pay off your mortgage if you die

Say, That Sounds Like Life Insurance. <br> Not exactly. Mortgage protection actually can cover more situations than a life policy would cover. Life insurance won’t help if you lose your job and it won’t help if you become disabled. Mortgage protection bundles all these protections into one policy – so you don’t need multiple policies to cover all the problems that could make it difficult to pay your mortgage each month. (Hint: A life insurance policy would be a different part of your overall financial plan and often has its own separate goals.)

How Does Mortgage Protection Work? <br> A mortgage protection policy is usually a “guaranteed issue” policy, meaning that many of the roadblocks to purchasing a life insurance policy, such as health considerations and exams, wouldn’t be there.

If you lose your job or become disabled, your policy will pay your mortgage for a limited amount of time, giving you the opportunity to find work or to make a backup plan. Again, your house is saved, your family still has a roof over their heads, and you’re a hero for thinking ahead. Accidents happen and people lose their jobs every day. Mortgage protection is there to catch you if you fall.

One More Thing… <br>
A mortgage protection policy is a term policy, so you don’t need to keep paying premiums after your house is paid off.

Now that you know a little bit more about mortgage protection policies, have those 99 worries ticked down to 98? Reaching out to me for guidance on your financial worries could help you make that number smaller and smaller… 97… 96… 95…

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June 7, 2021

How to Make the Most of Your Life Insurance Policy

How to Make the Most of Your Life Insurance Policy

Your life insurance policy is one of the most important things you’ll buy in your lifetime.

Knowing how to make the most of it will help you sleep better at night and more easily plan for the future. We’re going to cover the aspects of life insurance with a focus on making those numbers work for YOU!

Choose a policy with enough coverage. As a rule of thumb, a life insurance policy should provide a death benefit that’s at least 10X your annual income. Why? Because the benefit can serve as an income replacement for your family if you pass away. A payout above 10X your annual income can provide your family with a generous financial buffer to recover and make a plan for their future. Buying enough coverage helps ensure your policy fulfills its function—to financially protect your family when you pass away.

Choose the right type of insurance. There’s no one-size-fits-all life insurance policy. They each have different strengths and shine in different circumstances.

Term life insurance, for instance, is typically better for families who need protection on a thin budget. That’s because term is often an affordable option for securing a large death benefit.

Permanent life insurance might be better if you’re looking for an investment that grows over time. It’s also a good choice if you need lifelong protection for your spouse and children, but don’t want to be burdened by higher premiums as they age. That makes it particularly attractive to families with permanent dependents or who are interested in wealth-building vehicles.

Choose a policy that fits your budget. Life insurance shouldn’t consume your income. Rather, it should protect your income in case of disaster. Get as much life insurance as your family needs, but don’t add all the bells and whistles if you can’t afford it!

You want a life insurance policy that protects your family, aligns with your goals, and doesn’t break your budget. If you’re not sure what that looks like, meet with a licensed and qualified financial professional. They can help you hammer out goals and find policies that help you meet those goals!

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This article is for informational purposes only and is not intended to promote any certain products, plans, or policies that may be available to you. Any examples used in this article are hypothetical. Before enacting a savings or retirement strategy, or purchasing a life insurance policy, seek the advice of a licensed and qualified financial professional, accountant, and/or tax expert to discuss your options.

June 2, 2021

Don't Panic: What You Need To Know For Your Life Insurance Medical Exam

Don't Panic: What You Need To Know For Your Life Insurance Medical Exam

I don’t know about you, but most people don’t like exams – either taking one or having one done to them.

But there’s no need to panic over your life insurance medical exam (yes, you’re probably going to have one). I’ve got some steps you can take before the “big day” to help prevent readings which may skew your test results or create unnecessary confusion.

One important thing to keep in mind is that the exam’s purpose isn’t to pass or fail you based on your health. Your insurer just needs to understand the big picture so they can assign an accurate rating. Oftentimes, the news can be better than expected, and generally good health is rewarded with a lower rate. Alternatively, the exam might uncover something that needs attention, like high cholesterol. That might be something good to know so you can make necessary lifestyle changes.

Think of your exam as a big-picture view. Your insurer will measure several key aspects of your health. These areas help determine your life insurance class, which is simply a group of people with similar overall health characteristics.

Your insurer will most likely look at:

  • Height and weight
  • Pulse/blood pressure tests
  • Blood test
  • Urine test

Tests can indicate glucose levels, blood pressure levels, and the presence of nicotine or other substances. Body Mass Index (BMI) – a measurement of overall fitness in regard to weight – may also be measured as part of your life insurance exam.

So let’s find out what you can do to prepare for your exam!

The most obvious cause that could affect your results is medications you’ve taken recently. These will probably show up in your blood tests. Bring a list of any prescription medications you’re taking so your insurer can match those to the blood analysis.

Over the counter meds can interfere with test results and create inaccurate readings too, so it might be best to avoid them for 24 hours prior to your medical exam if possible. Caffeine can cause spikes in blood pressure.¹ Limit your caffeine intake or avoid it altogether, if possible, for 48 hours prior to your exam. Smoking can elevate blood pressure as well.²

Alcohol has a similar effect on blood pressure. Try to avoid alcohol for 48 hours prior to taking your life insurance medical exam.³ Some types of exercise can also spike blood pressure readings temporarily.⁴ If you can, avoid strenuous exercise for 24 hours before your medical exam.

Some types of foods can create false readings or temporarily raise cholesterol levels.⁵ It’s best to avoid eating for 12 hours prior to your exam, giving your body time to clear temporary effects. Scheduling your exam for the morning makes this easier.

Stress can affect blood pressure readings.⁶ (Surprise, surprise.) Try to schedule your life insurance medical exam for a time when you’ll be less stressed. After work might not be the best time, but maybe after a good night’s rest would be better.

Have any further questions on how you can prepare for your exam? I’m here to help!

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¹ “Caffeine: How does it affect blood pressure?,” Sheldon G. Sheps, M.D., Mayo Clinic, Jan, 26, 2019, https://www.mayoclinic.org/diseases-conditions/high-blood-pressure/expert-answers/blood-pressure/faq-20058543

² “Smoking, High Blood Pressure and Your Health,” American Heart Association, Oct 31, 2016, https://www.heart.org/en/health-topics/high-blood-pressure/changes-you-can-make-to-manage-high-blood-pressure/smoking-high-blood-pressure-and-your-health#.Wrz8uNPwZTZ

³ “Short-term Negative Effects Of Alcohol Consumption,” BACtrack, https://www.bactrack.com/blogs/expert-center/35042501-short-term-negative-effects-of-alcohol-consumption

⁴ “Does Exercise Raise Blood Pressure?,” Barrett Barlowe, SportsRec, Nov 28, 2018, https://www.sportsrec.com/6277164/does-exercise-raise-blood-pressure

⁵ “How to Prep for a Cholesterol Test,” Vanessa Caceres, Livestrong.com, Apr 29, 2020 https://www.livestrong.com/article/326114-what-not-to-eat-before-cholesterol-check/

⁶ “Managing Stress to Control High Blood Pressure,” American Heart Association, Oct 31, 2016, https://www.heart.org/en/health-topics/high-blood-pressure/changes-you-can-make-to-manage-high-blood-pressure/managing-stress-to-control-high-blood-pressure#.Wr0OsdPwZTY

May 26, 2021

The Better Choice: Federal or Private Loans for College

The Better Choice: Federal or Private Loans for College

Education can be one of the best investments you can make in your future.

Those with a bachelor’s degree earn, on average, almost $1 million more over their lifetime than those with just a high school diploma. And a person who gets a master’s degree can earn more money than someone with a bachelor’s degree!¹

But how should you pay for higher education? You may not have enough cash on hand to afford school. That means you’ll need student loans. That begs another question—should you get a federal or a private loan? There are many factors that go into answering this question. Let’s break down some pros and cons for both federal and private loans so you can decide which route is right for you.

Federal loans come straight from Uncle Sam. It all begins with filling out a FAFSA form. This form determines your eligibility for loans, grants, and work-study programs.

Federal student loan rates are typically lower than for private lenders. Federal loans also offer more flexible repayment options—you can make payments as a percentage of income or defer them until after school ends. You may also qualify for relief if you default on your loans. In general, a federal loan can be a good choice for many students, whether they’re pursuing a bachelor’s or master’s degree.

But remember, there are potential limitations to how much the federal government will lend you. Private loans may be needed to fill in the gaps. They typically charge higher interest rates and have stricter payment options. But they can sometimes be refinanced for better terms.

So if you need loans to afford your education, opt for federal loans first. Then, use private loans to cover the rest, refinancing as needed.

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¹ “The College Payoff: Education, Occupations, Lifetime Earnings,” Georgetown University Center on Education and the Workforce, 2011 https://cew.georgetown.edu/cew-reports/the-college-payoff/

² “Federal Versus Private Loans,” Federal Student Aid, https://studentaid.gov/understand-aid/types/loans/federal-vs-private

May 24, 2021

Why Families Buy Term Life Insurance

Why Families Buy Term Life Insurance

Why does term life insurance seem to be so common among your friends and family?

For many, it’s simply the most affordable strategy for securing life insurance. And that means it can provide critical financial protection for many different situations. Here are a few of the most common reasons families choose term life insurance.

The power of term life insurance is that it’s typical affordable. It provides a death benefit for a limited term, typically 20-30 years, which means you can often purchase more protection at a lower price than other types of policies. As long as your protection lasts while you have financial dependents, you’re covered.

But there are more pragmatic reasons why families buy term life insurance. For many, it serves as a source of income replacement. When a breadwinner passes away, the income they provide is gone. That means a family might find themselves with a serious cash flow deficiency in addition to the tragic loss. The death benefit can replace the lost income.

A family might also need to purchase life insurance when they have dependents, such as college-aged kids with high educational expenses. If a family has dependents and no life insurance, the burden of funding higher education falls on the family, who are down an income. With term coverage in place, they have the financial power to help cover those bills with confidence.

Term life insurance can also be invaluable for families with high debt obligations. Because it’s often so affordable, term life insurance may provide significant coverage without diverting financial resources away from getting out of debt. And, if the policyholder passes away before the debt is eliminated, the death benefit can also go towards finishing off loans.

Finally, term life insurance can be used to cover the costs of funeral expenses. Families who don’t have any other form of coverage for these out-of-pocket bills often need extra cash to cover the costs of burial. Term life insurance is a simple way to pay for the funeral the family needs.

In conclusion, term life insurance can be a great way to cover the costs of many big ticket items and expenses at a reasonable cost. Would that be a good fit for your family? Contact me, and we can explore what it would look like for you!

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May 19, 2021

The Advantages of Survivorship Insurance

The Advantages of Survivorship Insurance

A survivorship policy pays out only after two people pass away.

Why does that matter? For many families, it doesn’t. They need more traditional forms of life insurance that protect income for their spouses and children.

But there are specific situations where survivorship insurance might be critical for your legacy. Read on for the advantages of survivorship insurance!

First, survivorship insurance can be an invaluable tool for estate planning. If one spouse dies, they can pass their assets to their spouse without facing federal estate taxes.¹ Not so for wealth left to future generations! For some couples with substantial assets to pass on to children, survivorship can leave a sizable death benefit that can offset the cost of estate taxes.²

If this strategy appeals to you, reach out to an attorney and a financial professional. You’ll need their help to get your estate in order and navigate your state’s tax system.

Second, survivorship insurance can cover ailing or elderly couples. As a rule of thumb, survivorship insurance is a good option for those who don’t qualify for term or permanent life insurance due to health or age. That’s because the rates are based on two life expectancies, potentially lowering rates and increasing your likelihood of qualifying.³ This is especially useful if the couple has children who are still dependents or will need special care.

In conclusion, survivorship insurance can be a powerful tool for specific people in specific situations. That’s why it’s best to collaborate with legal and financial professionals to make a decision that will be right for you and your family.

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¹ “An act of mutuality: Survivorship insurance,” Shelly Gigante, MassMutual, Mar 30, 2021, https://blog.massmutual.com/post/survivorship-insurance

² “An act of mutuality: Survivorship insurance,” Shelly Gigante, MassMutual, Mar 30, 2021, https://blog.massmutual.com/post/survivorship-insurance

³ “An act of mutuality: Survivorship insurance,” Shelly Gigante, MassMutual, Mar 30, 2021, https://blog.massmutual.com/post/survivorship-insurance

May 10, 2021

How Inflation Impacts Your Savings

How Inflation Impacts Your Savings

It’s time to wake up and smell the coffee!

The reality is that your retirement savings might be losing value every day. It’s because of something called inflation, and it may result in your finding yourself retiring with less than you anticipated. In this blog post, we’ll discuss how inflation affects your savings and what you can do about it.

First, what is inflation? Inflation is a measurement of how much prices are rising over time. And it’s not just that the price of gas is skyrocketing or some other commodity—inflation affects everything.

That may not necessarily be a problem for you, so long as your wages are increasing with the rate of inflation. Commodities might get more expensive, but your rising paycheck means you can still afford what you need. But if income isn’t keeping up with inflation, an upper-class income today may only afford you a middle-class income tomorrow!

But there’s another danger that inflation poses.

Let’s say you have $1 million dollars in the bank that you’ve put away for retirement. Good for you! You’ve probably already dreamed of how you’ll use that cash once you retire. A new home, a new car, worldwide travel, you name it!

But here’s the rub. Over time, the cost of those items (most likely) will steadily increase. So will the basic cost of living. By the time you retire, your $1 million has far less purchasing power than it did when you first started saving. You haven’t lost money, exactly. Your money has just lost value.

So how can you combat the slow decay caused by inflation?

Start by moving your money away from low, or no, growth places. Your Grandma may not like to hear this, but hiding money in your mattress is an easy way to torpedo its value over the long haul!

Find investments that actually grow over time and help beat inflation. Over the last 100 years or so, the average inflation rate has been 3.1%. That’s the bare minimum rate at which your investment should grow, if you’re using it for long-term wealth creation.

A licensed and qualified financial professional can help you with both of these steps. The sooner you start the process of protecting your wealth from inflation, the more you insulate yourself from the danger of waking up with less money than you’d thought!

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March 17, 2021

What You Need to Know About NFTs

What You Need to Know About NFTs

Are you sitting down? Because some memes are officially worth money. Lots of money.

And it’s not just memes. Digital art has exploded in value recently, leading some to scratch their heads and others to jump on the bandwagon.

Here’s how Non-Fungible Tokens, or NFTs, work, and why you should care!

At their core, NFTs are simple pieces of digital art. They range from illustrated portraits of punks to “CryptoKitties” to the influencer equivalent of Pokémon cards—vlogger Logan Paul made $5 million in a weekend by selling one-of-a-kind trading cards featuring animated versions of himself.¹

Think of an NFT as a combination of a bitcoin and a trading card. They exist digitally and are sold online, but their value is totally dependent on being originals!

Each one has a unique blockchain ID, making them impossible to duplicate or forge. You can know beyond the shadow of a doubt that the digital artwork you’re buying is the real thing.

That makes every NFT a rare one-of-a-kind. And limited supply cranks up demand.

Where did NFTs come from? They started in niche internet subcultures. But they’ve made their way closer to the mainstream. Some people have even started viewing them as investment items. It’s easy to see why—a CryptoPunk drawing recently sold for $69 million.² There’s always a (very very small) chance that the simple NFT you buy today could be a rare collector’s item in 5 years. But it could also plummet in value the day after you buy.

Realize that the NFT market is uncharted territory. Predicting which NFT will be valuable is nearly impossible. There’s nothing wrong with dabbling in digital art here and there. But it’s best to stick with more stable and time-tested strategies if you’re aiming to grow long-term wealth!

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¹ “What Is An NFT—And Should You Buy One?,” Abram Brown, Forbes, Feb 26, 2021, https://www.forbes.com/sites/abrambrown/2021/02/26/what-is-an-nft-and-should-you-buy-one/?sh=7335a47824b2

² “Beeple NFT becomes most expensive ever sold at auction after fetching over $60 million,” Robert Frank, CNBC, Mar 11, 2021, https://www.cnbc.com/2021/03/11/most-expensive-nft-ever-sold-auctions-for-over-60-million.html

March 15, 2021

What You Need To Know About Life Insurance

What You Need To Know About Life Insurance

Buying life insurance is something that many people put off.

But it’s important to take the time to learn about what type of policy you may need and how much coverage you should buy. If you have a family, buying enough life insurance might be the most important part of your financial strategy.

Here are 4 things you need to know before you buy life insurance.

What is life insurance? Simply put, life insurance is an agreement between an insurer and a policyholder. When the policyholder dies, the insurer is legally obligated to pay a set amount of money, called a death benefit, to whomever the policyholder had predetermined.

Do you need life insurance? If people you love are dependent on your income, you may need life insurance. The death benefit can serve as a replacement for income that would vanish in the case of your passing. A personal tragedy doesn’t have to become a financial crisis!

What if I don’t have any dependents? Then life insurance may not be for you! However, you should note that life insurance might be useful if you’re carrying high levels of debt like student loans or a mortgage.

How much coverage should I get and how long should my policy last? As a rule of thumb, your life insurance coverage should be worth 10X your annual income. That should provide your family with a financial cushion while they grieve and plan for the future.

If you buy a term policy, be sure that it lasts through periods of high financial responsibility like paying a mortgage or raising a family.

If you want to learn more about life insurance, let me know! I can help you evaluate your financial situation and what a policy would look like for you.

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This article is for informational purposes only and is not intended to promote any certain products, plans, or policies that may be available to you. Any examples used in this article are hypothetical. Before enacting a savings or retirement strategy, or purchasing a life insurance policy, seek the advice of a licensed and qualified financial professional, accountant, and/or tax expert to discuss your options.

March 10, 2021

How to Reduce Debt

How to Reduce Debt

Paying off debt can be a great feeling.

The burden is lifted and you have more control over your financial situation. If you’re like many, however, paying down debt hasn’t been an easy task due to high interest rates and the sheer size of what you owe. Many people find themselves in situations where they feel helpless. But following some tips from this article can show you a path towards financial health!

Start by making a budget. Write down your income on a piece of paper or spreadsheet. Then, calculate how much you spend, on average, every month. If you can, categorize all of your expenses in order of amount spent. Be sure to also rank your debts from highest to lowest interest rate!

Then, subtract your expenses from your income. The result is how much cash flow you have available to attack your debt.

But before you start chipping away at what you owe, devote your cash flow to building an emergency fund. Why? Because it will provide a cash reserve to pay for unexpected expenses that you might otherwise cover with more debt!

Then, focus all your financial resources on your highest interest loan. Make minimum payments on all your debts until that top priority debt is eliminated. Next, move on to the next debt. Rinse and repeat until you’re debt free.

Track your spending and cut back where possible. When you budget, you might find that you have almost no cash flow. If that’s the case, you’ll need to reduce your spending. Start by cutting back on categories like clothes shopping and dining out.

Above all, be consistent! Reducing debt is no easy task but it’s doable. Cutting back on your spending and consistently budgeting may not be easy in the short-term, but the sense of relief that comes with being debt free is well worth the effort.

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March 1, 2021

How to Find Your Net Worth

How to Find Your Net Worth

Usually when we think of net worth we imagine all the holdings of a wealthy tycoon who owns several multi-million dollar businesses.

Net worth is just a balance sheet of a person’s assets and liabilities, not unlike the balance sheets used in business. You also have a net worth, and it’s important to know what it is.

Calculating your net worth is simple. First, you’ll want to tally up all your assets. These would include:

  • Personal property and cars
  • Real estate equity
  • Investments
  • Vested retirement plans
  • Cash or savings
  • Any amounts owed to you
  • Cash value of life insurance policies

Next, you’ll calculate your liabilities (what you owe someone else). These would include:

  • Loans
  • Mortgage balance
  • Credit card balances
  • Unpaid obligations

Your total liabilities subtracted from your total assets equals your net worth.

The number could be positive, or it could be negative. Students, for example, often have a negative net worth because they may have student loans but haven’t had a chance to build any personal assets.

It’s important to realize that net worth isn’t always equal to liquid assets. Your net worth includes non-liquid assets, like the equity in your home.

Measuring your net worth regularly can be a strong motivation when saving for the future—it can mark progress toward a well-reasoned financial goal.

When you’re ready to put together a personalized strategy based on your net worth and (more importantly) your future goals, reach out! We can use your current net worth as a starting point, while keeping focused on the real target: your long-term financial picture.

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February 17, 2021

Spend Less or Earn More?

Spend Less or Earn More?

What’s the most effective way to meet your financial goals—increasing your income or cutting your spending?

The answer? It depends on your situation. While both strategies can be useful, they’re not interchangeable. Read on to discover the advantages and limitations of each approach… and which one may be right for you.

Spending less: An immediate solution with a fixed floor. There’s no doubt that cutting expenses is the fastest way to move closer to your financial goals. Canceling a streaming service, clipping digital coupons on your phone, and carpooling are simple lifestyle adjustments that take only seconds or minutes to accomplish.

But stricter budgeting can only go so far. Moving back in with your parents, walking to work, and never having fun again may still not be enough. There’s only so much you can cut before you seriously decrease your quality of life!

Earning more: High effort, massive potential. On the surface, increasing your income can seem like a daunting task. Developing your skills, working an extra job and starting a side hustle or business can be labor and time intensive. Furthermore, some of those investments may not pay off immediately—a business or side gig may not generate significant income for weeks, months, or even years!

But those investments also have massive payoff potential. Once you’ve mastered a skill, your earning power is only limited by the market demand for your abilities and your time. And as you grow more and more competent, your potential to earn only increases.

The takeaway? Spending less is a quick and simple move towards your financial goals. But, over the long-term, earning more has far more potential to create the wealth you desire. If you need to quickly increase your cash flow, create a budget and reduce your excess spending. But when your financial situation stabilizes, take inventory of your skills. You might be surprised by how many money earning talents you have, if you take the time to cultivate them!

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February 10, 2021

How to Save for Large Purchases

How to Save for Large Purchases

So you’re saving for retirement. Good for you!

You’re further in the game than a lot of people. But retirement’s probably not your only financial priority that requires saving for. Buying a house, raising children, buying cars for your children, and paying for college for your children are just a few expenses you can expect along the way. Preparing for those purchases now can protect your finances from getting blindsided when the time comes. Here are a few steps you can take to start preparing for substantial purchases today.

Write down upcoming expenses and purchases. Make a timeline of all your major, non-regular expenses. Determine how much they could cost, and then rank them in terms of urgency and importance. If it’s urgent and important–like saving for the delivery of a newborn–address it as soon as possible. If it’s important, but less urgent–like toddler-proofing your home–schedule it for later.

Budget out how much you’ll need and start saving. Once you have your priorities straightened out, figure out how much you’ll need to have saved and how much time you have available. Then, set up automatic deposits that put aside money for your savings goals.

Seek higher interest rates. Saving for your purchases in accounts with higher interest rates can give your money the extra juice you need to crush your goals. That may mean opening a high interest savings account with an online bank. But for some items, you might be able to find accounts specifically designed to help you. Meet with a licensed and qualified financial professional and see what options you have available!

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January 11, 2021

Simple Ways to Streamline Your Budget

Simple Ways to Streamline Your Budget

Is your budgeting system slowing your financial progress?

It’s not hard to tell if it is. Consistently ignoring your budget and failing to see results like increased cash flow and reduced debt could be indicators that something’s wrong.

Fortunately, it’s not hard to streamline your budgeting process. Here are two simple steps you can take to make your budget more manageable and more effective.

Prioritize your short-term budgeting goals <br> Splitting your cash flow between non-discretionary spending, savings, your emergency fund, and debt reduction may make you feel like you’ve got all the bases covered, but spreading yourself too thin might actually be diminishing the power of your money. It creates a house of cards that’s waiting to collapse!

Instead of trying to knock out everything at the same time, your budget should reflect your current financial situation. Prioritize where you put your money for the goal you’re trying to achieve. Start by putting all your excess cash flow towards an emergency fund. Then, target your debt. And finally, start directing your income towards building wealth. You’ll more effectively clear the obstacles that block the way towards financial independence.

Automate everything <br> What if there were a way to automatically make wise financial decisions without even thinking about it? That’s the power of automation.

Once you’ve determined your short-term budgeting goal, set up automatic deposits that move you closer towards achieving it. If you’re building an emergency fund, set up an automatic transfer from your checking account to a high-interest savings account every payday. You can do the same with essential bills and utilities as well.

Once you prioritize and automate your budget, there’s a great chance that you’ll see real progress towards your goals. And once you see progress you’ll feel empowered, maybe even excited, to keep pushing towards building wealth and creating financial independence.

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December 21, 2020

Permanent or Term Life: Which is right for you?

Permanent or Term Life: Which is right for you?

Life insurance has many benefits.

Most people purchase life insurance to serve as a safety net for the financial health of their family if something happens to them as the primary provider. A life insurance policy in such cases could be used for funeral costs, medical bills, mortgage payments, or other expenses.

You’re finally convinced you need a life insurance policy, and you’re ready to buy. But what do you need exactly? What type of life insurance is best for you?

When preparing to purchase life insurance, there are two main types of policies to consider – permanent and term. Read on for a short primer on the differences and which one may be right for you.

Term life insurance at a glance <br> Term life insurance offers life insurance coverage for a set amount of time – the “term”. If you pass away during the term, the policy pays out to your beneficiary. A term policy is sometimes called a pure life policy because it doesn’t have financial benefits other than the payout to your dependents should you die within the term.

There are different terms available depending on your needs. You could purchase a term life policy for 10, 20, or 30 years.

Term life insurance pointers <br> When purchasing a term life policy, consider a term for the number of years you’ll need coverage. For example, you may want life insurance to provide for your child in case you die prematurely. So, you may select a 25-year term. On the other hand, you may want a life insurance policy to help with the mortgage should something happen to you. In this case, you may opt for a 30-year term which will expire when your mortgage is paid off.

You’ll need to purchase enough insurance to cover your family’s needs if something happens to you and you cannot provide for them. Term life insurance benefits could serve as income replacement for your wages, so buy enough to pay for the expenses your paycheck covers.

For example, if you cover the mortgage, car payment, and child care, make sure the term life policy you purchase can cover those expenses.

Term life insurance policies when appropriately used should expire around the time the need for them goes away, such as when your children are self-sufficient, or your mortgage is paid off.

Permanent insurance at a glance <br> This type of policy can provide coverage for your entire life, unlike a term policy that expires at a set time. A permanent life policy also contains an investment benefit which is known as the policy’s cash value. The cash value of a permanent life policy grows slowly over time but is tax-free (provided you stay within certain limits), so you don’t pay taxes on the accumulating value.

A permanent life policy can be borrowed against. You can borrow against the cash value, but you must abide by the repayment terms to keep the policy payout unchanged.

Some permanent life insurance policies offer dividends. The dividends are paid to the policyholders based on the insurance company’s financial profits. Policyholders can take dividends in the form of cash payouts or use them to earn interest, payback a loan on the policy, or purchase additional life insurance coverage.

Some of the key points regarding permanent life insurance include: <br>

  • The premium can remain the same throughout the policy term if you abide by the conditions and terms in the policy
  • The policy offers a guaranteed death benefit

Cost of life insurance <br> Term life insurance is generally less expensive than permanent life insurance because the policy has a pre-selected term. Permanent life insurance, on the other hand, covers the insured for their entire lifespan, so you can expect premiums to be higher.

Which life insurance policy is right for you? <br> If you aren’t sure which policy is right for you, talk to a qualified financial professional who can help you find the right type of life insurance policy to meet your goals and budget.

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This article is for informational purposes only and is not intended to promote any certain products, plans, or strategies for saving and/or investing that may be available to you. Market performance is based on many factors and cannot be predicted. Before investing or enacting a savings or retirement strategy, seek the advice of a financial professional, accountant, and/or tax expert to discuss your options.

December 7, 2020

How To Save Money On Transportation

How To Save Money On Transportation

Americans drain a huge portion of their income on transportation.

It eats up roughly 16% of our income every month, the majority of which is spent on car purchases ($331 per month), then gas and oil ($176 per month), and then insurance ($81 per month).¹

But what if you made that money work for you?

Here are some simple ways to spend less on getting around, so you can save more for your future!

Drive the speed limit <br> Speeding is never a good strategy. Zipping around town with your pedal to the floor is dangerous for you and others and realistically doesn’t save you much time.¹ Even worse, speeding can cost you money in the long term.

Obviously, speeding tickets are expensive. They cost about $150 on average.² They also have a nasty habit of increasing insurance premiums by up to 25%.³ But that’s not all. Rapidly accelerating and suddenly stopping reduces the efficiency of your engine and can cost you at the pump as well. Stick to the posted speed limit, accelerate gradually, and drive safely!

DIY the basics <br> There are plenty of car maintenance basics you can handle from the comfort of your own garage. For instance, a new air filter can boost your gas mileage by up to 10%.⁴ They’re also cheap and usually easy to change out once they get dirty. Even something as simple as inflating your tires can boost your car’s performance.⁵ Remember to do your research and consult your car’s owner manual.

Take the bus <br> If public transportation is available, use it! Research says trading your car for a bus or train can save you over $10,000 annually.⁶ The cost of tickets and metro passes pales in comparison to car insurance premiums, car maintenance, loans, and gas.

Buy Used <br> Don’t have access to public transportation? Stick with used cars and drive them as long as you can.

New cars almost always lose value. By the end of their first year, a new ride will shed 20% to 30% of its value. Over 5 years it loses 60% of its value.⁴ Unless you’re restoring a vintage masterpiece or have cash to blow, you’re much better driving an older model of the same car for a fraction of the price.

Remember, how you get around is a practical problem. It doesn’t need to be fancy or flashy when you’re starting your journey towards financial freedom. Utilize local transportation options, buy a clunker that you maintain yourself, and drive the speed limit. Your wallet will thank you in the long term!

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¹ “The Average American Spends Way More on Transportation Than You’d Guess, ” Christy Bieber, The Ascent, Apr 28, 2020, https://www.fool.com/the-ascent/credit-cards/articles/average-american-spends-way-more-transportation-youd-guess/

² “The True Cost of a Speeding Ticket,” Lars Lofgren, I Will Teach You to be Rich, https://www.iwillteachyoutoberich.com/blog/cost-of-speeding-ticket/

³ “Managing the Hidden Costs of Car Depreciation,” Nicole Arata, Nerdwallet, Jul 17, 2017, https://www.nerdwallet.com/article/insurance/auto-insurance-rates-after-speeding-ticket#:~:text=Car%20insurance%20typically%20goes%20up,clean%20record%2C%20our%20analysis%20found.

⁴ “Changing Your Air Filter Can Improve Your Gas Mileage,” Harris Tire, https://harristirecompany.com/changing-your-air-filter-can-improve-your-gas-mileage/#:~:text=A%20clean%20air%20filter%20can,a%20typical%20tank%20of%20gas.

⁵ “The Importance Of Proper Tire Inflation,” AAA, https://www.aaa.com/autorepair/articles/the-importance-of-proper-tire-inflation

⁶ “Public transit users can save $10,160 annually, says APTA report,” Metro, Jun 8, 2018, https://www.metro-magazine.com/10032643/public-transit-users-can-save-10-160-annually-says-apta-report#:~:text=Individuals%20who%20ride%20public%20transportation,more%20than%20%24847%20per%20month.&text=The%20savings%20are%20based%20on,owning%20and%20driving%20a%20vehicle.

December 2, 2020

Facts About Disability Insurance

Facts About Disability Insurance

How are you protecting your income?

Maybe you already have a life insurance policy worth about 10 times your annual earnings. That should help protect your family in the case of your untimely passing.

But what if you aren’t able to work during your lifetime?

It’s more common than you might think. 1 in 4 20-year-olds will become disabled before they reach 67, and 67% of private-sector workers have no disability insurance.¹ Here are some basic facts about this essential line of protection for you and your family.

Disability insurance has a lot in common with life insurance. <br> At first blush, it might be hard to distinguish between life insurance and disability insurance. But there are some key differences that are worth exploring.

Disability insurance activates when you can’t work <br> Life insurance pays out in the case of your passing. Disability insurance can provide a stable income replacement if an injury, accident, illness, or something else renders you unable to work.

There are two types of disability insurance: long-term and short-term Short-term disability insurance can replace your income if you can’t work for a few months. Long-term disability insurance can protect you if a serious health issue takes you out of the field for more than 6 months.

Employers sometimes offer disability insurance (but it might not be enough) It’s not uncommon for employers to provide their workers with some form of disability insurance. As of 2018, 42% of private sector employees had access to short-term disability insurance via their work, while 34% had long-term disability insurance options.²

However, it’s worth noting that this might not be enough to fully protect you and your family. Disabilities can increase your expenses, so you’ll need a strategy that replaces your current income and then some. Make sure your employer-provided plan will give you enough to cover all of your needs in the case of a disability and help your family for the long haul. If it doesn’t do either of those, you may need to turn to private coverage.

The government offers disability benefits (but they might not be enough, either) <br> Social Security does provide disability coverage to individuals who have worked long enough and paid enough into the system. However, applying for it is a time consuming process. Also, average monthly payments were just over $1,000 as of 2017.⁴ Do your research to see if you’re eligible and if you’ll receive enough before you apply.

Above all, meet with a licensed and qualified financial professional to weigh your options and start developing a plan. They’ll assist you as you evaluate your need for protection, what employer-provided options you might have, and how disability insurance fits into your overall financial strategy.

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¹ “Fact Sheet: Social Security,” Social Security Administration, https://www.ssa.gov/news/press/factsheets/basicfact-alt.pdf

² “Employee access to disability insurance plans,” Bureau of Labor Statistics, U.S. Department of Labor, https://www.bls.gov/opub/ted/2018/employee-access-to-disability-insurance-plans.htm

³ “Disability Benefits,” Social Security Administration, https://www.ssa.gov/benefits/disability/

⁴ “Disability Insurance: Why You Need It and How to Get It,” Barbara Marquand, Nerwallet, Oct. 20, 2017, https://www.nerdwallet.com/blog/insurance/disability-insurance-explained/

November 25, 2020

Money Black Holes You Should Avoid

Money Black Holes You Should Avoid

It’s true that sometimes you’ve got to spend money to make money.

But there are plenty of things that people spend money on that give them absolutely no return. Some of these are obvious (lottery tickets and ponzi schemes), but others are subtle parts of our lifestyle. Here are three money black holes that you should avoid at all costs!

New Cars <br> Nothing feels better than driving off the lot with a new set of wheels. Until, that is, you realize that your car’s value has already started plummeting.

The most important rule to remember is that cars are practical tools, not long-term investments. Blowing a huge stack of cash might feel cool, but it’s a huge misallocation of money if you don’t have any to spend. Try to find a used model of the same car that’s five years old or more. Chances are you’ll get many of the same features for a fraction of the cost.

Pricey Phones <br> It seems like phones are improving every day and in every way. But is your high-end, name brand personal assistant really worth the steep price tag? Phones always decline in value after you buy them; The highest value-retaining phone dropped almost 50% a year after its release.¹ Unless your mobile device is a tool of your trade (i.e., you’re a TikTok influencer), dodge the hype and choose a cheaper or refurbished alternative.

Designer Clothes <br> New threads are awesome. You’ll never feel more like a hero than when you first hit the town in a freshly fitted suit or a designer t-shirt.

They’re also insanely expensive. Sure, they might not all cost $1,690 like a Tom Ford long sleeve solid T-Shirt. But regularly buying top-of-the-line clothes can burn huge holes in your wallet.

Fortunately, you have some fun alternatives at your fingertips. Off-price retailers might sometimes carry your favorite brands at a fraction of the cost. And thrift stores can be goldmines of high quality finds if you’re adventurous enough to explore them with a friend!

Remember, it’s okay to spend money on cool gadgets and gear if you’ve saved up for them or you’re already financially independent. But if you’re just setting out on your journey, it’s best to practice some discipline and seek out cheaper alternatives to these potentially dangerous money black holes.

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“Depreciation among top smartphone brands compared: Apple’s iPhone tops the list as the least depreciating brand,” Abhin Mahipal, SellCell, Oct 14, 2019, https://www.sellcell.com/blog/depreciation-among-top-smartphone-brands-compared-apples-iphone-tops-the-list-as-the-least-depreciating-brand/#:~:text=Apple%20once%20again%20blows%20the,release%2C%20making%20it%20worth%20%24580.

November 23, 2020

Dollar Cost Averaging Explained

Dollar Cost Averaging Explained

Most of us understand the meanings of “dollar” and “cost”, and we know what averages are…

But when you put those three words together – dollar cost averaging – the meaning may not be quite as clear.

Dollar cost averaging refers to the concept of investing on a fixed schedule and with a fixed amount of money. For example, after a careful budget review, you might determine you can afford $200 per month to invest. With dollar cost averaging, you would invest that $200 without regard to what the market is doing, without regard to price, and without regard to news that might impact the market temporarily. You become the investment equivalent of the tortoise from the fable of the tortoise and the hare. You just keep going steadily.

When the market goes up, you buy. When the market goes down, you can buy more.

The gist of dollar cost averaging is that you don’t need to be a stock-picking prodigy to potentially succeed at investing. Over time, as your investment grows, the goal is to profit from all the shares you purchased, both low and high, because your average cost for shares would be below the market price.

Hypothetically, let’s say you invest your first $200 in an index fund that’s trading at $10 per share. You can buy 20 shares. But the next month, the market drops because of some news that said the sky was falling somewhere else in the world. The price of your shares goes down to $9.

You might be thinking that doesn’t seem so great. But pause for a moment. You’re not selling yet because you’re employing dollar cost averaging. Now, with the next month’s $200, you can buy 22 shares. That’s 2 extra shares compared to your earlier buy. Now your average cost for all 42 shares is approximately $9.52. If your index fund reaches $10 again, you’ll be profitable on all those shares. If it reaches $12, or $15, or $20, now we’re talking. To sum up, if your average cost goes up, it means your investment is doing well. If the price dips, you can buy more shares.

Using dollar cost averaging means that you don’t have to know everything (no one does) and that you don’t know for certain what the market will do in the next day, week, or month (no one does). But over the long term, we have faith that the market will go up. Because dollar cost averaging removes the guesswork involved with deciding when to buy, you’re always putting money to work, money that may provide a solid return in time.

You may use dollar cost averaging with funds, ETFs, or individual stocks, but diversified investments are potentially best. An individual stock may go down to zero, while the broad stock market may continue to climb over time.

Dollar cost averaging is an important concept to understand. It may save you time and it may prevent costly investment mistakes. You don’t have to try to be an expert. Once you understand the basics of dollar cost averaging, you may start to feel like an investment genius!

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Market performance is based on many factors and cannot be predicted. This article is for informational purposes only and is not intended to promote any certain products, plans, or strategies for saving and/or investing that may be available to you. Examples used in this article are hypothetical. Before investing or enacting a savings or retirement strategy, seek the advice of a licensed financial professional, accountant, and/or tax expert to discuss your options.

September 30, 2020

Life Insurance Next Steps

Life Insurance Next Steps

During the course of Life Insurance Awareness Month, we’ve been focusing on understanding the ins and outs of life insurance.

We’ve discussed why life insurance is necessary, who needs it, what kinds of protection are available and even defined key terms so you can know exactly what you’re looking at!

So what’s next? Application. <br>

Dale Carnegie once said, “Knowledge isn’t power until it is applied.”

There’s an obvious difference between knowing about life insurance and actually being insured. So how do you get started? If you’re looking at getting life insurance for yourself or a loved one, here are 3 helpful steps to consider.

1. Reflect on what’s important. Now this may seem like an obvious thing to do, but it’s absolutely critical that you think about the areas of your life that you really care about and nail those down. Ask yourself, “If something happened to my ability to earn income, who would be affected and who do I specifically want to be cared for?” Your answer(s) to this question will help determine what needs to be protected.

2. Determine your budget. After you’re done with the first step, it’s time to put your money where your mouth is. How much would you be willing to set aside to ensure those things are protected? Run a thought experiment in your mind: “Would I be willing to set aside $50 per month? $100? $200? $400?” This process will help you ‘take the temperature’ about what you’re willing to commit.

3. Seek guidance. Find a licensed and trained financial professional you trust and who offers life insurance products to give you an accurate quote or illustration based on your situation. They will be able to guide you on finding the right type and the right amount of insurance to fit your needs.

No one likes to think about what would happen in the event of a premature death, disability, or critical illness. But whether we think about it or not, the reality is the same: people we care about will be affected by the loss of an income earner. Remember, life insurance isn’t something we can buy in a store. You have to apply! Owning life insurance is more of a privilege than it is a right. So don’t merely spend time accumulating knowledge. We encourage you to apply that knowledge…and in this case, apply for life insurance!

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