7 Tips for Talking to Your Partner About Money

January 15, 2020

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Matthew Owens

Matthew Owens

Financial Professional

Post Office Box 743

Haysi, Virginia 24256

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January 15, 2020

7 Tips for Talking to Your Partner About Money

7 Tips for Talking to Your Partner About Money

Dealing with finances is a big part of any committed relationship and one that can affect many aspects of your life together.

The good news is, you don’t need a perfect relationship or perfect finances to have productive conversations with your partner about money, so here are some tips for handling those tricky conversations like a pro!

Be respectful
Respect should be the basis for any conversation with your significant other, but especially when dealing with potentially touchy issues like money. Be mindful to keep your tone neutral and try not to heap blame on your partner for any issues. Remember that you’re here to solve problems together.

Take responsibility
It’s perfectly normal if one person in a couple handles the finances more than the other. Just be sure to take responsibility for the decisions that you make and remember that it affects both people. You might want to establish a monthly money meeting to make sure you’re both on the same page and in the loop. Hint: Make it fun! Maybe order in, or enjoy a steak dinner while you chat.

Take a team approach
Instead of saying to your partner, “you need to do this or that,” try to frame things in a way that lets your partner know you see yourself on the same team as they are. Saying “we need to take a look at our combined spending habits” will probably be better received than “you need to stop spending so much money.”

Be positive
It can be tempting to feel defeated and hopeless that things will never get better if you’re trying to move a mountain. But this kind of thinking can be contagious and negativity may further poison your finances and your relationship. Try to focus on what you can both do to make things better and what small steps to take to get where you want to be, rather than focusing on past mistakes and problems.

Don’t ignore the negative
It’s important to stay positive, but it’s also important to face and conquer the specific problems. It gives you and your partner focused issues to work on and will help you make a game plan. Speaking of which…

Set common goals and work toward them together
Whether it’s saving for a big vacation, your child’s college fund, getting out of debt, or making a big purchase like a car, money management and budgeting may be easier if you are both working toward a common purpose with a shared reward. Figure out your shared goals and then make a plan to accomplish them!

Accept that your partner may have a different background and approach to money
We all have our strengths, weaknesses, and different perspectives. Just because yours differs from your partner’s doesn’t mean either of you are wrong. Chances are you make allowances and balance each other out in other areas of your relationship, and you can do the same with money if you try to see things from your partner’s point of view.

Discussing and managing your finances together can be a great opportunity for growth in a relationship. Go into it with a positive attitude, respect for your partner, and a sense of your common values and priorities. Having an open, honest, and trust-based approach to money in a relationship may be challenging, but it is definitely worth it.

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January 6, 2020

Are You Unwinding Yourself Into Debt in 2020?

Are You Unwinding Yourself Into Debt in 2020?

Americans owe more than $800 Billion in credit card debt.

You read that right: more than $800 billion.

It seems like more and more people are going to end up being owned by a tiny piece of plastic rather than the other way around.

How much have you or a loved one contributed to that number? Whether it’s $10 or $10,000, there are a couple simple tricks to get and keep yourself out of credit card debt.

The first step is to be aware of how and when you’re using your credit card. It’s so easy – especially on a night out when you’re trying to unwind – to mindlessly hand over your card to pay the bill. And for most people, paying with credit has become their preferred, if not exclusive, payment option. Dinner, drinks, Ubers, a concert, a movie, a sporting event – it’s going to add up.

And when that credit card bill comes, you could end up feeling more wound up than you did before you tried to unwind.

Paying attention to when, what for, and how often you hand over your credit card is crucial to getting out from under credit card debt.

Here are 2 tips to keep yourself on track on a night out.

1. Consider your budget. You might cringe at the word “budget”, but it’s not an enemy who never wants you to have any fun. Considering your budget doesn’t mean you can never enjoy a night out with friends or coworkers. It simply means that an evening of great food, fun activities, and making memories must be considered in the context of your long-term goals. Start thinking of your budget as a tough-loving friend who’ll be there for you for the long haul.

Before you plan a night out:

  • Know exactly how much you can spend before you leave the house or your office, and keep track of your spending as your evening progresses.
  • Try using an app on your phone or even write your expenses on a napkin or the back of your hand – whatever it takes to keep your spending in check.
  • Once you have reached your limit for the evening – stop.

2. Cash, not plastic (wherever possible). Once you know what your budget for a night out is, get it in cash or use a debit card. When you pay your bill with cash, it’s a concrete transaction. You’re directly involved in the physical exchange of your money for goods and services. In the case that an establishment or service will only take credit, just keep track of it (app, napkin, back of your hand, etc.), and leave the cash equivalent in your wallet.

You can still enjoy a night on the town, get out from under credit card debt, and be better prepared for the future with a carefully planned financial strategy. Contact me today, and together we’ll assess where you are on your financial journey and what steps you can take to get where you want to go – hopefully by happy hour!

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December 23, 2019

Setting Up Your Reindeers For Success

Setting Up Your Reindeers For Success

Dasher. Dancer. Prancer. Vixen. Comet. Cupid. Donner. Blitzen. (And Rudolph too, of course.)

This is a holiday roll-call that’s instantly recognizable: the reindeer that pull Santa’s magical sleigh. But what if things got so hectic at the North Pole (not a stretch when you’re in charge of delivering presents to every child on Earth), that when it was time to hitch up the reindeer on Christmas Eve, they were all out of order?

Prancer. Cupid. Dasher. Comet. Dancer. Vixen. Blitzen. Donner.

Hmmm, someone’s missing…. what happened to Rudolph? (Looks like he got left behind at the North Pole. In all the hubbub one of Santa’s elves forgot to review the pre-flight checklist.)

Since so much can change during the year from one crazy “Happy Holidays!” to the next, your ducks – or reindeer, that is – may not even be in a row at this point. They could be frolicking unattended in a field somewhere! And who knows where your Rudolph even is.

We can help with that. An annual review of your financial strategy is key to keeping you on track for your unique goals. Lots of things can change over the course of a year, and your strategy could need some reorganizing. I mean, did you hear about everything that changed for Prancer? (What do you call a baby reindeer, anyway?)

Here are some important questions to consider at least once each year (or even more often):

1. Are you on track to meet your savings goals? A well-prepared retirement is a worthy goal. Let’s make sure nothing drove you too far off track this year, and if it did, let’s explore what can be done to get you back on the right path.

2. Do you have the potential for new savings? Did your health improve this year? Did that black mark on your driving record expire? Changes like these have the potential to positively impact your life insurance rate, but we’d need to dig in and find out what kinds of savings might be in store for you.

3. Have your coverage needs increased? Marriage, having a child, or buying a home are all instances in which your life insurance coverage probably should be increased. Have any of these occurred for you over the last year? Have you added the new family member as a beneficiary?

If you haven’t had a chance to review your strategy this year, we can fit one in before Santa shimmies down the chimney. Which of your reindeer do you need to wrangle back into the ranks before the New Year gets going?

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December 18, 2019

The Breakdown: Term vs. Perm

The Breakdown: Term vs. Perm

Navigating the world of life insurance can be a daunting task.

Even more daunting can be figuring out what policy is best for you. Let’s break down the differences between a couple of the more common life insurance policies, so you can focus on an even more daunting task – what your family’s going to have for dinner tonight!

Term Life Insurance
A Term life insurance policy covers an individual for a specific period of time – the most common term lengths being 10, 20, or 30 years. The main advantage of this type of policy is that it generally can cost the consumer less than a permanent insurance plan, because it might be shorter than a permanent policy.

The goal of a term policy is to pay the lowest premiums possible, because by the time the term expires, your family will no longer need the insurance. The primary thing to keep in mind is to choose a term length that covers the years you plan to work prior to retirement. This way, your family members (or beneficiaries) would be taken care of financially if something were to happen to you.

Permanent Life Insurance
Contrary to term life insurance, permanent life insurance provides lifelong coverage, as long as you pay your premiums. This insurance policy – which also can be known as “universal” or “whole” – provides coverage for ongoing needs such as caring for family members, a spouse that needs coverage after retirement, or paying off any debts of the deceased.

Another great benefit a perm policy offers is cash accumulation. As premiums are paid over time, the money is allocated to an investment account from which the individual can borrow or withdraw the funds for emergencies, illness, retirement, or other unexpected needs. Because this policy provides lifelong coverage and access to cash in emergencies, most permanent policies are more expensive than term policies.

How Much Does the Average Consumer Need?
Unless you have millions of dollars in assets and make over $250,000 a year, most of your insurance coverage needs may be met through a simple term policy. However, if you have a child that needs ongoing care due to illness or disability, if you need coverage for your retirement, or if you anticipate needing to cover emergency expenses, it may be in your best interest to purchase a permanent life insurance policy.

No matter where you are in life, you should consider purchasing some life insurance coverage. Many employers will actually offer this policy as part of their benefits package. If you are lucky enough to work for an employer who does this, take advantage of it, but be sure to examine the policy closely to make sure you’re getting the right amount of coverage. If you don’t work for a company that offers life insurance, don’t worry, you still may be able to get great coverage at a relatively inexpensive rate. Just make sure to do your research, consider your options, and make an informed decision for you and your family.

Now, what’s it going to be? Order a pizza or make breakfast for dinner? Choices, choices…

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December 16, 2019

How to Make Better Financial Decisions

How to Make Better Financial Decisions

Numbers never lie, and when it comes to statistics on financial literacy, the results are staggering.

Recent studies indicate that 76% of Millennials don’t have a basic understanding of financial literacy. Combine that with having little in savings and mountains of debt, and you have the ingredients for a potential financial crisis.

It’s not only Millennials that lack a sound financial education. The majority of American adults are unable to pass: “To be financially literate is to have the knowledge, skills, and confidence to make responsible financial decisions that suit our own financial situations.”

Making responsible financial decisions based on knowledge and research are the foundation of understanding your finances and how to manage them. When it comes to financial literacy, you can’t afford not to be knowledgeable.

So whether you’re a master of your money or your money masters you, anyone can benefit from becoming more financially literate. Here are a few ways you can do just that.

Consider How You Think About Money
Everyone has ideas about financial management. Though we may not realize it, we often learn and absorb financial habits and mentalities about money before we’re even aware of what money is. Our ideas about money are shaped by how we grow up, where we grow up, and how our parents or guardians manage their finances. Regardless of whether you grew up rich, poor, or somewhere in between, checking in with yourself about how you think about money is the first step to becoming financially literate.

Here are a few questions to ask yourself:

  • Am I saving anything for the future?
  • Is all debt bad?
  • Do I use credit cards to pay for most, if not all, of my purchases?

Pay Some Attention to Your Spending Habits
This part of the process can be painful if you’re not used to tracking where your money goes. There can be a certain level of shame associated with spending habits, especially if you’ve collected some debt. But it’s important to understand that money is an intensely personal subject, and that if you’re working to improve your financial literacy, there is no reason to feel ashamed!

Taking a long, hard look at your spending habits is a vital step toward controlling your finances. Becoming aware of how you spend, how much you spend, and what you spend your money on will help you understand your weaknesses, your strengths, and what you need to change. Categorizing your budget into things you need, things you want, and things you have to save up for is a great place to start.

Commit to a Lifestyle of Learning
Becoming financially literate doesn’t happen overnight, so don’t feel overwhelmed if you’re just starting to make some changes. There isn’t one book, one website, or one seminar you can attend that will give you all the keys to financial literacy. Instead, think of it as a lifestyle change. Similar to transforming unhealthy eating habits into healthy ones, becoming financially literate happens over time. As you learn more, tweak parts of your financial routine that aren’t working for you, and gain more experience managing your money, you’ll improve your financial literacy. Commit to learning how to handle your finances, and continuously look for ways you can educate yourself and grow. It’s a lifelong process!

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December 11, 2019

Party of Two?

Party of Two?

Life insurance is the most personal type of insurance you can have in today’s world.

But there seems to be a lot of confusion about it. Every consumer has different priorities and feelings. Add to that the fact that life insurance can be used for a variety of financial goals and needs, and you have a recipe for befuddlement.

When it comes to life insurance, most agree that if you have children, you should probably have it. There is no question. But what if you don’t have children? Do you need to purchase life insurance? Here’s why it may still be important, even if you don’t have kids now (or don’t plan to):

Many households need a dual income to survive.
Since women began entering the workforce en masse in 1960, household incomes have been on the rise. Many households have now adopted a lifestyle that depends on a dual income to maintain itself. If you’re in this situation, there might be some consequences of your life insurance decisions.

If something happened to you or your spouse, would the survivor still earn enough money to maintain their lifestyle? If the answer is no, consider how a life insurance policy might help.

Mortgage debt is big debt.
Mortgage debt in the United States is big – bigger than credit card or student loan debt. Still, mortgage debt is “healthy” debt assuming the growing equity in a home makes it worthwhile.

But mortgage debt can become a problem if a household’s income takes a hit. Life insurance can protect families from this risk by helping to pay off a mortgage, should something happen to you or your spouse. Either a term life policy or a special mortgage life policy can be used to pay off a mortgage.

Mortgage life insurance can be a nice layer of protection for couples that don’t have children but do have a mortgage.

Life insurance can be used as a savings tool.
Many life insurance policies offer a cash value. This means that certain policies can be cashed in whether or not a death has occurred. In this way, a life insurance policy can act as a savings tool.

Couples without children can pay into their policy in the form of the premiums, and then cash it out for a retirement dream: a new home, a hobby business, or an extended vacation. Using life insurance as a savings tool can offer tax benefits, a guaranteed savings method for the “savings challenged”, and a creative way to finance a dream. In short, it’s a savvy use of life insurance for couples who don’t have kids.

Funeral expenses can wipe out an emergency fund.
A life insurance policy can help cover funeral expenses for you or your spouse. This is one of the most common uses of life insurance. The average funeral today can cost between $7,000 and $10,000. That’s enough to wipe out an emergency fund, or seriously deplete it.

Having a life insurance policy in place can help cover expenses if you or your spouse were to pass away unexpectedly, so you can leave your fund for the day-to-day difficulties intact.

Whether you have children or not, a sudden illness or loss of a breadwinner can have lasting consequences for the loved ones you leave behind. Taking advantage of a well-tailored life insurance policy to shield them from an unnecessary financial burden if something were to happen is one of the best gifts you can give.

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December 9, 2019

The Keys to Paying Your Bills On Time

The Keys to Paying Your Bills On Time

Not paying your bills on time can have significant impacts on financial health including accumulating late fees, penalties, and a negative hit on credit scores.

But maybe you – or a friend – learned about those consequences the hard way. Most late bill payers fall into 1 of 3 camps: they forget to pay on time, they don’t have enough income, or they have enough income but spend it on other things.

In case you – or your friend – are stuck in 1 of these camps, consider the following tips to help pay the bills on time.

I forget to pay my bills on time.
If this is you, you’re actually in a more advantageous position. There are many easy fixes that can help get you back on track.

  1. Use a calendar. This is a tried and true, but often underutilized, method to track your bill due dates. When you get a notice for a bill – either by email, text, or snail mail – jot the due date on your calendar. You can also set a reminder if you use an electronic calendar.
  2. Fiddle with your due dates. Many companies offer flexible due dates. Experiment with what due dates work for you. Some people like to pay their bills all together at the beginning of the month. You may find that you like to pay some bills in the beginning and some in the middle of the month. It’s up to you!
  3. Take advantage of grace period/late fee waivers. If you do forget about a bill and have to make a late payment, give the company a call and ask them to waive the late fee. Late fees can add up, ranging from $10-50 depending on the account. It’s worth a try!

I don’t have the money to pay all my bills.
If your income doesn’t cover your outgo no matter how diligently you pinch those pennies, it won’t matter what type of bill payment method you use, you’re going to have trouble. If you’re in this situation, there are 2 solutions: increase your earnings or decrease your expenses.

  1. Find a side gig. Take a temporary part-time job to make some extra income. Delivering pizza in the evenings or on weekends might be worth doing for a few months to make some extra dough.
  2. Shop around. Shop around for savings. Prices vary on almost everything. Take a little extra time to make sure you’re getting the rock-bottom best prices on your insurance, cable, phone plans, groceries, utilities, etc.

I overspend and don’t have enough left to pay my bills.
Managing income and expenses takes some practice and persistence, but it is doable! If you find yourself consistently overspending without enough left over to cover your bills, try the following:

  1. Create a budget. Get familiar with your income and expenses. This is the only way to know how much disposable income you’re going to end up with every month. You can track your budget daily on an app like PocketGuard, Wallet, or Home Budget.
  2. Stash the money for bills in a separate account. Put your bill money in a separate checking or savings account. This will keep it quarantined from your spending money and help make sure it’s there when the bills come due.

Good Financial Habits
If you feel bill-paying-challenged, or you have a friend who is, try some of the above tips. Taking care of your obligations when you need to can relieve stress, build good credit, and reinforce healthy spending habits for life!

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December 2, 2019

Royal Wedding or Vegas? Keeping Your Wedding Costs Under Control

Royal Wedding or Vegas? Keeping Your Wedding Costs Under Control

The average cost of a wedding in the U.S. is over $33,000. That’s an expensive day by any standard.

By comparison, that amount might be enough for a down payment on a first home or for a well-equipped, late-model minivan to shuttle around your 1.6 to 2 kids – assuming your family has an average number of children as a result of your newly wedded bliss.

Having cold feet about shelling out that much cash for one day’s festivities? Or even worse, going into debt to pay for it? Here are a few ideas on how you can make your wedding day a special day to remember while still saving some of that money for other things (like a minivan).

Invite Close Friends and Family
Many soon-to-be newlyweds dream of a massive wedding with hundreds of people in attendance to honor their big day. But at some point during any large wedding, the bride or the groom – or maybe both – look around the well-dressed guests and ask themselves, “Who are all of these people, anyway?”

You can cut the cost of your wedding dramatically by simply trimming the guest list to a more manageable size. Ask yourself, “Do I really need to invite that kid who used to live next door to our family when I was 6 years old?” Small weddings are a growing trend, with many couples choosing to limit the guest list to just close friends and immediate family. That doesn’t mean you have to have your wedding in the backyard while the neighbor’s dog barks during your vows – although you certainly can. It just means fewer people to provide refreshments for and perhaps a less palatial venue to rent.

Budget According to Priorities
Your wedding is special and you want everything to be perfect. You’ve dreamed of this day your entire life, right? However, by prioritizing your wish list, there’s a better chance to get exactly what you want for certain parts of your wedding, by choosing less expensive – but still acceptable – options for the things that may not matter to you so much. If it’s all about the reception party atmosphere for you, try putting more of your budget toward entertainment and decorations and less toward the food. Maybe you don’t really need a seven-course gourmet dinner with full service when a selection of simpler, buffet-style dishes provided by your favorite restaurant will do.

Incorporate More Wallet-Friendly Wedding Ideas
A combination of small changes in your plan can add up to big savings, allowing you to have a memorable wedding day and still have enough money left over to enjoy your newfound bliss.

  • Consider a different day of the week. If you’re planning on getting married on a Saturday in June or September, be prepared to pay more for a venue than you would any other day of the week or time of the year. Saturday is the most expensive day to get married, and June and September are both peak wedding season months. So if you can have your wedding on, say, a Friday in April or November, this has the potential to trim the cost of the venue.
  • Rent a vacation house – or even get married on a boat. The smaller space will prevent the guest list from growing out of control and the experience might be more memorable than at a larger, more typical venue. Of course, both options necessitate holding the reception at the same location, saving money once more.
  • Watch the booze costs. There’s no need to have a full bar with every conceivable drink concoction and bow-tied bartenders that can perform tricks with the shakers. Odds are good that your guests will be just as happy with a smaller-yet-thoughtfully-chosen selection of beer and wine to choose from.
  • Be thrifty. If you really want to trim costs, you can get creative about certain traditional “must-haves,” ranging from skipping the flowers (chances are that nobody will even miss them) to purchasing a gently-used gown. Yes, people actually do this. Online outlets like OnceWed.com provide beautiful gowns for a fraction of the price of a new gown that you’ll likely never wear again.

There’s a happy medium between a royal wedding and drive-thru nuptials in Vegas. If you’re looking for a memorable day that won’t break the bank, try out some of the tips above to keep things classy, cool – and within your budget.

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November 27, 2019

Allowance for Kids: Is It Still a Good Idea?

Allowance for Kids: Is It Still a Good Idea?

Perusing the search engine results for “allowance for kids” reveals something telling: The top results can’t seem to agree with each other.

Some finance articles quote experts or outspoken parents hailing an allowance, stating it teaches kids financial responsibility. Others argue that simply awarding an allowance (whether in exchange for doing chores around the house or not) instills nothing in children about managing money. They say that having an honest conversation about money and finances with your kids is a better solution.

According to a recent poll, the average allowance for kids age 4 to 14 is just under $9 per week, about $450 per year. By age 14, the average allowance is over $12 per week. Some studies indicate that, in most cases, very little of a child’s allowance is saved. As parents, we may not have needed a study to figure that one out – but if your child is consistently out of money by Wednesday, how do you help them learn the lesson of saving so they don’t always end up “broke” (and potentially asking you for more money at the end of the week)?

There’s an app for that.
Part of the modern challenge in teaching kids about money is that cash isn’t king anymore. Today, we use credit and debit cards for the majority of our spending – and there is an ever-increasing movement toward online shopping and making payments with your phone using apps like Apple Pay, Android Pay, or Samsung Pay.

This is great for the way we live our modern, fast-paced lives, but what if technology could help us teach more complex financial concepts than a simple allowance can – concepts like how compound interest on savings works or what interest costs for debt look like? As it happens, a new breed of personal finance apps for families promises this kind of functionality.

FamZoo is popular, offering prepaid cards with a matching family finance app for iOS and Android. Prepaid cards are a dime a dozen but FamZoo’s card and app do much more than just limit spending to the prepaid amount. Kids can earn interest on their savings (funded by parents), set budgets according to categories, monitor their account activity with useful charts, and even borrow money – complete with an interest charge. Sounds a bit like the real world, doesn’t it? FamZoo can be as simple or as feature-packed as you’d like, making it a good match for kids of any age.

Money habits are formed as early as age 7. If an allowance can teach kids about saving, compound interest, loan interest, and budgeting – with a little help from technology – perhaps the future holds a digital world where the two sides of the allowance debate can finally agree. As to whether your kids’ allowance should be paid upon completion of chores or not… Well, that’s up to you and how long your Saturday to-do list is!

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November 25, 2019

What to Do First If You Receive an Inheritance

What to Do First If You Receive an Inheritance

In many households, nearly every penny is already accounted for even before it’s earned.

The typical household budget that covers the cost of raising a family, making loan payments, and saving for retirement usually doesn’t leave much room for extra spending on daydream items. However, occasionally families may come into an inheritance, you might receive a big bonus at work, or benefit from some other sort of windfall.

If you ever inherit a chunk of money (or large asset) or receive a large payout, it may be tempting to splurge on that red convertible you’ve been drooling over or book that dream trip to Hawaii you’ve always wanted to take. Unfortunately for many, though, newly-found money has the potential to disappear quickly with nothing to show for it, if you don’t have a strategy in place to handle it.

If you do receive some sort of large bonus – congratulations! But take a deep breath and consider these situations first – before you call your travel agent.

Taxes or Other Expenses
If you get a large sum of money unexpectedly, the first thing you might want to do is pull out your bucket list and see what you can check off first. But before you start spending, the reality is you’ll need to put aside some money for taxes. You may want to check with an expert – an accountant or financial advisor may have some ideas on how to reduce your liability as well.

If you suddenly own a new house or car as part of an inheritance, one thing that you may not have considered is how much it will cost to hang on to them. If you want to keep them, you’ll need to cover maintenance, insurance, and you may even need to fulfill loan payments if they aren’t paid off yet.

Pay Down Debt
If you have any debt, you’d have a hard time finding a better place to put your money once you’ve set aside some for taxes or other expenses that might be involved. It may be helpful to target debt in this order:

  1. Credit card debt: These are often the highest interest rate debt and usually don’t have any tax benefit. Pay these off first.
  2. Personal loans: Pay these off next. You and your friend/family member will be glad you knocked these out!
  3. Auto loans: Interest rates on auto loans are lower than credit cards, but cars depreciate rapidly – very rapidly. If you can avoid it, you don’t want to pay interest on a rapidly depreciating asset. Pay off the car as quickly as possible.
  4. College loans: College loans often have tax-deductible interest but there is no physical asset you can convert to cash – there’s just the loan.
  5. Home loans: Most home loans are also tax-deductible. Since your home value is likely appreciating over time, you may be better off putting your money elsewhere rather than paying off the home loan early.

Fund Your Emergency Account
Before you buy that red convertible, put aside some money for a rainy day. This could be liquid funds – like a separate savings account.

Save for Retirement
Once the taxes are covered, you’ve paid down your debt, and funded your emergency account, now is the time to put some money away towards retirement. Work with your financial professional to help create the best strategy for you and your family.

Fund That College Fund
If you have kids and haven’t had a chance to save all you’d like towards their education, setting aside some money for this comes next. Again, your financial professional can recommend the best strategy for this scenario.

Treat Yourself
NOW you’re ready to go bury your toes in the sand and enjoy some new experiences! Maybe you and the family have always wanted to visit a themed resort park or vacation on a tropical island. If you’ve taken care of business responsibly with the items above and still have some cash left over – go ahead! Treat yourself!

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November 20, 2019

Which Debt Should You Pay Off First?

Which Debt Should You Pay Off First?

American combined consumer debt now exceeds $13 trillion high.

Here’s the breakdown:

  • Credit cards: $931 billion
  • Auto loans: $1.22 trillion
  • Student loans: $1.38 trillion
  • Mortgages: $8.88 trillion
  • Any type of debt: $13.15 trillion

Nearly every type of debt can interfere with your financial goals, making you feel like a hamster on a wheel – constantly running but never actually getting anywhere. If you’ve been trying to dig yourself out of a debt hole, it’s time to take a break and look at the bigger picture.

Did you know there are often advantages to paying off certain types of debt before other types? What the simple list above doesn’t include is the average interest rates or any tax benefits to a given type of debt, which can change your priorities. Let’s check them out!

Credit Cards
Credit card interest rates now average over 15%, and interest rates are on the rise. For most households, credit card debt is the place to start – stop spending on credit and start making extra payments whenever possible. Think of it as an investment in your future, one that pays a 15% guaranteed return – the equivalent of a 20% return in the stock market or other taxable investment.

Auto Loans
Interest rates for auto loans are usually much lower than credit card debt, often under 5% on newer loans. Interest rates aren’t the only consideration for auto loans though. New cars depreciate nearly 20% in the first year. In years 2 and 3, you can expect the value to drop another 15% each year. The moral of the story is that cars are a terrible investment but offer great utility. There’s also no tax benefit for auto loan interest. Eliminating debt as fast as possible on a rapidly depreciating asset is a sound decision.

Student Loans
Like auto loans, student loans are usually in the range of 5% to 10% interest. While interest rates are similar to car loans, student loan interest is often tax deductible, which can lower your effective rate. Auto loans can usually be paid off faster than student loan debt, allowing more cash flow to apply to student debt, emergency funds, or other needs.

Mortgage Debt
In most cases, mortgage debt is the last type of debt to pay down. Mortgage rates are usually lower than the interest rates for credit card debt, auto loans, or student loans, and the interest is usually tax deductible. If mortgage debt keeps you awake at night, paying off other types of debt first will give you greater cash flow each month so you can begin paying down your mortgage.

When you’ve paid off your other debt and are ready to start tackling your mortgage, try paying bi-monthly (every two weeks). This simple strategy has the effect of adding one extra mortgage payment each year, reducing a 30-year loan term by several years. Because the payments are spread out instead of making one (large) 13th payment, it’s likely you won’t even notice the extra expense.

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November 11, 2019

What Are the Effects of Closing a Credit Card?

What Are the Effects of Closing a Credit Card?

Americans owe over $900 billion.

If you’re on a mission to reduce or eliminate your credit card debt, you may decide to just close all your credit cards. However, some of the consequences may not be what you’d expect.

Lingering Effects: The Good and the Bad
Many of us have heard that credit card information stays on your credit report for 7 years. That’s true for negative information, including events as large as a foreclosure. Positive events, however, stay for 10 years. In either case, canceling your credit card now will reduce the credit you have available, but the history – good or bad – will remain on your credit report for years to come.

Times when cancelling a card may be your best bet:

  • A card charges an annual fee. If you’re being charged an annual fee for the privilege of having a credit card, it may be better to cancel the card, particularly if you don’t use the card often or have other options available.
  • Uncontrolled spending. If “retail therapy” is impeding your financial future by creating an ever-growing mountain of debt, it may be best to eliminate the temptation of buying with credit by cutting up those cards.

When You Might Want to Hang Onto a Credit Card:
You may not have known that one aspect your credit score is the age of your accounts. Canceling a much older account in favor of a newer account can leave a dent in your credit score. And canceling the card won’t erase any negative history, so it may be best to hang on to the older credit account as long as there are no costs to the card. Also, the effects of canceling an older account may be larger when you’re younger than if you have a long credit history.

Credit Utilization Affects Your Credit Score
Lenders and credit bureaus also look at credit utilization, which refers to how much of your available credit you’re using. Lower percentages help your credit score, but high utilization can work against you.

For example, if you have $20,000 in credit available and $10,000 in credit card balances, your credit utilization is 50 percent. If you close a credit card that has a credit limit of $5,000, your available credit drops to $15,000, but your credit utilization jumps to 67 percent (if the credit card balances remain unchanged). If you’re carrying high balances, going on a credit card cancelling rampage can have negative effects because your credit utilization can skyrocket.

To sum it all up, if unnecessary spending is out of control or there is a cost to having a particular credit card, it may be best to cancel the card. In other cases, however, it’s often better to just use credit cards occasionally, or if you have an emergency.

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October 30, 2019

Handling Debt Efficiently – Until It’s Gone

Handling Debt Efficiently – Until It’s Gone

It’s no secret that making purchases on credit cards will result in paying more for those items over time if you’re paying interest charges from month-to-month.

Despite this well-known fact, credit card debt is at an all-time high, rising another 3% per household. Add in an average mortgage of over $200,000, plus nearly $25,000 of non-mortgage debt (car loans, college loans, or other loans) and the molehill really is starting to look like a mountain.

The good news? You have the potential to handle your debt efficiently and deal with a molehill-sized molehill instead of a mountain-sized one.

Focus on the easiest target first.
Some types of debt don’t have an easy solution. While it’s possible to sell your home and find more affordable housing, actually following through with this might not be a great option. Selling your home is a huge decision and one that comes with expenses associated with the sale – it’s possible to lose money. Unless you find yourself with a job loss or similar long-term setback, often the best solution to paying down debt is to go after higher interest debt first. Then examine ways to cut your housing costs last.

Freeze your spending (literally, if it helps).
Due to its higher interest rate, credit card debt is usually the first thing to tackle when you decide to start eliminating debt. Let’s be honest, most of us might not even know where that money goes, but our credit card statement is a monthly reminder that it went somewhere. If credit card balances are a problem in your household, the first step is to cut back on your purchases made with credit, or stop paying with credit altogether. Some people cut up their cards to enforce discipline. Ever heard the recommendation to freeze your cards in a block of ice as a visual reminder of your commitment to quit credit? Another thing to do is to remove your card information from online shopping sites to help ensure you don’t make mindless purchases.

Set payment goals.
Paying the minimum amount on your credit card keeps the credit card company happy for 2 reasons. First, they’re happy that you made a payment on time. Second, they’re happy if you’re only paying the minimum because you might never pay off the balance, so they can keep collecting interest indefinitely. Reducing or stopping your spending with credit was the first step. The second step is to pay more than the minimum so that those balances start going down. Examine your budget to see where there’s room to reduce spending further, which will allow you to make higher payments on your credit cards and other types of debt. In most households, an honest look at the bank statement will reveal at least a few ways you might free up some money each month.

Have a sale. To get a jump-start if money is still tight, you might want to turn some unused household items into cash. Having a community yard sale or selling your items online through eBay or Offerup can turn your dust collectors into cash that you can then use toward reducing your balances.

Transfer balances prudently.
Consider balance transfers for small balances with high interest rates that you think you’ll be able to pay off quickly. Transferring that balance to a lower interest or no interest card can save on interest costs, freeing up more money to pay down the balances. The interest rates on balance transfers don’t stay low forever, however – typically for a year or less – so it’s important to make sure you can pay transferred balances off quickly. Also, check if there’s a balance transfer fee. Depending on the fee, moving those funds might not make sense.

Don’t punish yourself.
Getting serious about paying down debt may seem to require draconian measures. But there likely isn’t a need to just stay home eating tuna fish sandwiches with all the lights turned off. Often, all that’s required is an adjustment of old spending habits. If your drive home takes you past a mall where it would be too tempting to “just pick a little something up”, take a different route home. But it’s important to have a small treat occasionally as well. If you’re making progress on your debt, you deserve to reward yourself sometimes. All within your budget, of course!

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October 23, 2019

Top Reasons Why People Buy Term Life Insurance

Top Reasons Why People Buy Term Life Insurance

These days, most families are two-income households.

That describes 61.9% of U.S. families as of 2017. If that describes your family (and the odds are good), do you have a strategy in place to cover your financial obligations with just one income if you or your spouse were to unexpectedly pass away?

Wow. That’s a real conversation-opener, isn’t it? It’s not easy to think about what might happen if one income suddenly disappeared. (It might seem like more fun to have a root canal than to think about that.) But having the right coverage “just in case” is worth considering. It’ll give you some reassurance and let you get back to the fun stuff… like not thinking about having a root canal.

If you’re interested in finding out more about Term insurance and how it may help with your family’s financial obligations, read on…

Some Basics about Term Insurance
Many of life’s financial commitments have a set end date. Mortgages are 15 to 30 years. Kids grow up and (eventually) start providing for themselves. Term life insurance may be a great option since you can choose a coverage length that lines up with the length of your ongoing financial commitments. Ideally, the term of the policy will end around the same time those large financial obligations are paid off. Term policies also may be a good choice because in many cases, they may be the most economical solution for getting the protection a family needs.

As great as term policies can be, here are a couple of things to keep in mind: a term policy won’t help cover financial commitments if you or your spouse simply lose your job. And term policies have a set (level) premium during the length of the initial period. Generally, term policies can be continued after the term expires, but at a much higher rate.

The following are some situations where a Term policy may help.

Pay Final Expenses
Funeral and burial costs can be upwards of $10,000. However, many families might not have that amount handy in available cash. Covering basic final expenses can be a real burden, especially if the death of a spouse comes out of the blue. If one income is suddenly gone, it could mean the surviving spouse would need to use credit or liquidate assets to cover final expenses. As you would probably agree, neither of these are attractive options. A term life insurance policy can cover final expenses, leaving one less worry for your family.

Pay Off Debt
The average household in the U.S. is carrying nearly $140,000 in debt, and it’s clear that many families would be in trouble if one income is lost.

Term life insurance can be closely matched to the length of your mortgage, which helps to ensure that your family won’t lose their home at an already difficult time.

But what about car payments, credit card balances, and other debt? These other debt obligations that your family is currently meeting with either one or two incomes can be put to bed with a well-planned term life policy.

Income Protection
Even if you’ve planned for final expenses and purchased enough life insurance coverage to pay off your household debt, life can present many other costs of just… living. If you pass unexpectedly, the bills will keep rolling in for anyone you leave behind – especially if you have young children. Those day-to-day living costs and unexpected expenses can seem to multiply in ways that defy mathematical concepts. (You know – like that school field trip to the aquarium that no one mentioned until the night before.)

But Wait, There’s More
A well-planned term life insurance policy can provide other benefits as well, including living benefits that can help prevent medical expenses from wreaking havoc on your family’s financial plan if you become critically ill. One note about the living benefits policies, though: If the critical and chronic illness features are used, the face value of the policy is reduced. But which might be more prepared to take a financial hit: the face value of the life insurance policy that just helped you cover your medical expenses… or your child’s college fund?

In some cases, policies with built in living benefits may cost more than a standard term policy, but it may still cost less than permanent insurance policies! And because a term policy is in force only during the years when your family needs the most protection, premiums can be lower than for other types of life insurance.

Term life insurance can provide income protection to help keep your family’s financial situation solid, and help things stay as “normal” as they can be after a loss.

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October 21, 2019

Is Survivorship Life Insurance Right For You?

Is Survivorship Life Insurance Right For You?

A survivorship life insurance policy is a type of joint insurance policy (a policy built for two).

You may not have thought much about that type of insurance before, or even knew it existed. But joint policies, especially survivorship policies, are important to consider because they can provide for heirs, settle estates, and pay for final expenses after both spouses have passed.

Most joint life insurance policies are what’s known as “first to die” policies. As the unambiguous nickname suggests, a first to die policy is designed to provide for the remaining spouse after the first passes.

A joint life insurance policy is a time-tested way of providing for a remaining spouse. But without careful planning, a typical joint life policy might leave a burden for surviving children or other family members.

A survivorship life insurance policy works differently than a first to die policy. Also called a “last to die” policy, a survivorship policy provides a death benefit only when both insured spouses have passed. A survivorship policy doesn’t pay a death benefit to either spouse but rather to a separate named beneficiary.

You’ll find survivorship life insurance referred to as:

  • Joint Survivor Life Insurance
  • Second-to-Die Life Insurance
  • Variable Survivorship Insurance

Survivorship life insurance policies are sometimes referred to by different names, but the structure is the same in that the policy only pays a benefit after both people insured by the policy have died.

Reasons to Buy Survivorship Life Insurance
We all have our reasons for buying a life insurance policy, and often have someone in mind who we want to protect and provide for. Those reasons often dictate the best type of policy – or the best combination of policies – that can meet our goals.

A survivorship policy is well-suited to any of the following considerations, perhaps in combination with other policies:

  • Final expenses
  • Estate taxes
  • Lingering medical expenses
  • Payment of debt
  • Transfer of wealth

It’s also most common for a survivorship life insurance policy to be a permanent life insurance policy. This is because the reasons for using a survivorship policy, including transfer of wealth, are usually better served by a permanent life policy than by a term insurance policy. (A term life insurance policy is only in force for a limited time and doesn’t build any cash value.)

Benefits of Survivorship Life Insurance

  • A survivorship life policy can be an effective way to transfer wealth as part of a financial strategy.
  • Life insurance can be difficult to purchase for individuals with certain health conditions. Because a survivorship life insurance policy is underwriting coverage based on two individuals, it may be possible to purchase coverage for someone who couldn’t easily be insured otherwise.
  • As a permanent life insurance policy, a survivorship life policy builds cash value that can be accessed if needed in certain situations.
  • Costs can be lower for a survivorship life policy than insuring two spouses individually.

The good news is that life insurance rates are more affordable now than in the past. That’s great! But keep in mind, your life insurance policy – of any type – will probably cost less now than if you wait for another birthday to pass for either spouse insured by the policy.

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October 16, 2019

Tips on Managing Money for Couples

Tips on Managing Money for Couples

Couplehood can be a wonderful blessing, but – as you may know – it can have its challenges as well.

In fact, money matters are the leading cause of stress in modern relationships. The age-old adage that love trumps riches may be true, but if money is tight or if a couple isn’t meeting their financial goals, there could be some unpleasant conversations (er, arguments) on the bumpy road to bliss with your partner or spouse.

These tips may help make the road to happiness a little easier.

1. Set a goal for debt-free living. Certain types of debt can be difficult to avoid, such as mortgages or car payments, but other types of debt, like credit cards in particular, can grow like the proverbial snowball rolling down a hill. Credit card debt often comes about because of overspending or because insufficient savings forced the use of credit for an unexpected situation. Either way, you’ll have to get to the root of the cause or the snowball might get bigger. Starting an emergency fund or reigning in unnecessary spending – or both – can help get credit card balances under control so you can get them paid off.

2. Talk about money matters. Having a conversation with your partner about money is probably not at the top of your list of fun-things-I-look-forward-to. This might cause many couples to put it off until the “right time”. If something is less than ideal in the way your finances are structured, not talking about it won’t make the problem go away. Instead, frustrations over money can fester, possibly turning a small issue into a larger problem. Discussing your thoughts and concerns about money with your partner regularly (and respectfully) is key to reaching an understanding of each other’s goals and priorities, and then melding them together for your goals as a couple.

3. Consider separate accounts with one joint account. As a couple, most of your financial obligations will be faced together, including housing costs, monthly utilities and food expenses, and often auto expenses. In most households, these items ideally should be paid out of a joint account. But let’s face it, it’s no fun to have to ask permission or worry about what your partner thinks every time you buy a specialty coffee or want that new pair of shoes you’ve been eyeing. In addition to your main joint account, having separate accounts for each of you may help you maintain some independence and autonomy in regard to personal spending.

With these tips in mind, here’s to a little less stress so you can put your attention on other “couplehood” concerns… Like where you two are heading for dinner tonight – the usual hangout (which is always good), or that brand new place that just opened downtown? (Hint: This is a little bit of a trick question. The answer is – whichever place fits into the budget that you two have already decided on, together!)

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October 14, 2019

Getting a Degree of Financial Security

Getting a Degree of Financial Security

The financial advantage gap between having a college degree and just having a high school diploma is widening!

In 2015, the average college graduate earned 56% more than the average high school graduate. This is the widest gap between the two that the Economic Policy Institute has recorded since 1973!

This income difference is making saving for retirement difficult for millennials without a college degree. According to the Young Invincibles’ 2017 ‘Financial Health of Young America’ study, millennial college grads – even with roadblocks like student debt – have saved nearly $21,000 for retirement. That’s quite a lot more as compared to the amount saved by those with a high school diploma only: under $8,000.

However, a college grad may encounter a different type of retirement savings roadblock than a reduced income – student loan debt. But the numbers show that even with student loan debt, the advantages of having a college degree and a solid financial strategy outweigh the retirement saving power of not having a college degree.

Here’s an issue plaguing both groups: more than two-thirds of all millennial workers surveyed do not have a specific retirement plan in place at all.

Regardless of your level of education or your level of income, you can save for your retirement – and take steps toward your financial independence. Or maybe even finance a college education for yourself or a loved one down the road.

The first step to making the most of what you do have is meeting with a financial advisor who can help put you on the path to a solid financial strategy. Contact me today. Let’s work to get your money working for you.

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October 9, 2019

Are You Sitting Down?

Are You Sitting Down?

When things go wrong or we face an unexpected expense, we usually have one of two choices: Use credit to navigate a short-term cash crunch, or dip into savings.

In either case, it’s a good idea to have liquid funds available. Using credit can actually make your money problem worse if you don’t have enough to pay off the balance each month to avoid incurring interest charges. If you use savings but don’t have a comfortable cushion put away, repairing your home’s ancient A/C system may deplete your emergency stores, leaving you with nothing to replace the washer and dryer that decided to break down at the same time.

Ideally, you’ll have enough money saved to cover the unexpected. However, if you’re like many American households, that may not be the case. The U.S. personal savings rate continues to fall.

National Savings Rate
The savings rate is calculated as the ratio of personal savings to disposable personal income. In March 2018, the U.S. personal savings rate was about 3% shows that we’re not as good at saving as we used to be. In the past, the long-term average personal savings rate was over 8%, with some periods of time when it was over 15%. Kind of shames our current 3% savings rate, doesn’t it?

The national personal savings rate is also skewed by higher income savers, with the top 1% saving over 51% and the top 5% saving nearly 40% of their disposable income. Unsurprisingly, lower income families can have more difficulty with saving, as most of their paycheck is often already earmarked for basic bills and normal household expenses.

A recent survey by GOBankingRates found that nearly 70% of Americans have less than $1,000 saved and more than a third have nothing saved at all. Yikes. Age and levels of responsibility can influence savings rates. Anyone with a growing family – particularly a homeowner or a household with children – knows that surprise expenses aren’t all that surprising because the surprises just keep coming. This can put pressure on the best laid plans to try to increase savings.

How to Save More
If you have a 401(k), your contribution to it comes from a payroll deduction, meaning your 401(k) contribution is paid first – before you get the rest of your paycheck. If you have a 401(k) or a similar type of retirement account, there are lessons that can be borrowed from that account structure which can be used to help build your personal savings.

Paying yourself first is a great way to begin building your emergency fund, which can leave you better prepared for the proverbial rainy day. If you look at your monthly expenses, and if your household is like most households, you’re almost certain to find some unnecessary spending.

Start paying yourself first – by putting some money aside in a separate account or a safe place. This can help prevent some of those unnecessary expenditures (because there won’t be money available) while also leaving you better prepared.

The next time the car needs repairs, the A/C stops working, the fridge stops freezing, or the lawnmower breaks down, you’ll be ready – or at least you’ll be in a better position to bail yourself out!

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October 2, 2019

3 Easy Ways To Save For Retirement (Without Investing)

3 Easy Ways To Save For Retirement (Without Investing)

Our retirement years will be here sooner than we think.

Ideally, you’ve been putting away money in your IRA, 401k, or other savings accounts. But are you overlooking ways to save money now so you can free up more for your financial strategy or help build your cash stash for a rainy day?

1. Pay Yourself First.
If you’re making contributions to your 401k plan at work, you’re already paying yourself first. But you can also apply the same principle to saving. (If you open a separate account just for this, it’s easier to do.) If you prefer, you can accomplish the same thing on paper by keeping a ledger. Just be aware that paper makes it easier to cheat (yourself). With a separate account, you can schedule an automatic transfer to make the process painless and fuhgettaboutit.

Here’s how it works. Whenever you get paid, transfer a fixed dollar amount into your special account – before you do anything else. If you don’t pay yourself first, you might guess what will happen. (Be honest.) If you’re like most people, you’ll probably spend it, and if you’re like most people, you might not really know where it went. It’s just gone, like magic.

Paying yourself first helps to avoid the “disappearing money” trick. Hang in there! After a while, as the money starts adding up, you’ll impress yourself with your savings prowess.

2. Got A Bonus From Work? Great! Keep it.
What do you think most people are tempted to do if they get a bonus or a raise? What are YOU most tempted to do if you get a bonus or a raise? Probably spend it. Why? It’s easy to think of 100 things you could use that extra cash for right now. Home repairs or upgrades, a night out on the town, that new handbag you’ve been coveting for months… Maybe your bonus is enough for you to consider trading in your car for a nicer one, or getting that new addition to your house.

Receiving an unexpected windfall is fun. It’s exciting! But here is where some caution is wise. Pause for a moment. If you had everything you needed on Friday and then get a raise on Monday, you’ll still have everything you need, right? Nothing has changed but the calendar. If you hadn’t gotten that bonus, would your life and your current financial strategy still be the same as it was last week? Consider putting (most of) that extra money away for later, and using some of it for fun!

3. Pay Down That Debt.
By now you’ve probably heard a financial guru or two talking about “good” debt and “bad” debt. Debt IS debt, but some types of debt really are worse than others.

Credit cards and any high-interest loans are the first priority when retiring debt – so that you can retire too, someday. Do you really know how much you’re paying in interest each month? Go ahead and look. I’ll wait… Once you know this number, you can’t “unknow” it. But take heart! Use this as a powerful incentive to pay those balances off as fast as you can.

The cost of credit isn’t just the interest. That part is spelled out in black and white on your credit card statement (which you just looked at, right)? The other costs of credit are less obvious. Did you know your credit score affects your insurance rates? Keeping those cards maxed out can cost more than just the interest charges.

Every month you chip away at the balances, you’ll owe less and pay less in interest. (You’ll feel better, too.) And you know what to do with the leftover money since you knocked out that debt. Hint: Save it.

But keep this in mind – life is about balance. It’s okay to treat yourself once in awhile. Just make sure to pay yourself first now, so you can treat yourself later in retirement.

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September 30, 2019

So You Want to Buy Life Insurance for Your Parents...

So You Want to Buy Life Insurance for Your Parents...

Playing Monopoly as a young kid might have given you some strange ideas about money.

Take the life insurance card in the Community Chest for instance. That might give the impression that life insurance is free money to burn on whatever the next roll of the dice calls for.

In grown-up reality, life insurance proceeds are often committed long before a policy holder or beneficiary receives the check they’re waiting for. Final expenses, estate taxes, loan balances, and medical bills all compete for whatever money is paid out on the policy.

If your parents don’t have a policy or if you think their coverage won’t be enough, you can plan ahead and buy a life insurance policy for them. Your parents would be the insured, but you would be the policy owner and beneficiary.

A few extra considerations when buying a life insurance policy for your parents:

  • Insurable interest still applies. If your parents already have a significant amount of life insurance coverage, you may find that some insurers are reluctant to issue more coverage. Insurable interest requires that the amount of coverage doesn’t exceed the potential financial loss. (In other words, if your parents already have enough coverage, a company may not want to insure them for more.)
  • Age can limit coverage amounts. Assuming that your parents are older and no longer generating income, coverage amounts will be limited. If your parents are younger and still have 20 or more years ahead of them before they retire, they can qualify for a higher amount of coverage.
  • Age can limit policy types. Certain types of life insurance aren’t available when we get older, or will be limited in regard to length of coverage. Term life insurance is a good example. Your options for term life insurance will be fewer once your parents are into their sixties. The available term lengths will also be shorter. Policies with a 30-year term aren’t commonly available over the age of 50.

How Can I Use The Life Insurance For My Parents?
Depending on the amount of coverage you buy – or can buy (remember, it may be limited), you could use the policy to plan for any of the following:

  • Final expenses: You can expect funeral costs to run from $10,000 to $15,000, maybe more.
  • Estate taxes: Estate taxes and so-called death taxes can be an unpleasant surprise in many states. A life insurance policy can help you plan for this expense which could come at a time when you’re not flush with cash.

Can Life Insurance Pay The Mortgage Or Car Loans?
It isn’t uncommon for parents to pass away with some remaining debt. This might be in the form of a mortgage, car loans, or even credit card debt. These loan balances can be covered in whole or in part with a life insurance policy.

In fact, outstanding loan balances are a very big consideration. Often, people who inherit a house or a car may also inherit an additional mortgage payment or car payment. It might be wonderful to receive such a generous and sentimental gift, but if you’re like many families, you might not have the extra money for the payments in your budget.

Even if the policy doesn’t provide sufficient coverage to retire the debt completely, a life insurance policy can give you some breathing room until you can make other arrangements – like selling your parents’ house, for example.

You Control The Premium Payments.
If you buy a life insurance policy for your parents, you’ll know if the premiums are being paid because you’re the one paying them. You probably wouldn’t want your parents to be burdened with a life insurance premium obligation if they’re living on a fixed income.

Buying insurance for your parents is a great idea, but many people don’t consider it until it’s too late. That’s when you might wish you’d had the idea years ago. It’s one of the wisest things you can do, particularly if your parents are underinsured or have no life insurance at all.

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