So we’ve covered Term, now let’s go over Whole Life policies.
In Whole life insurance, you pay a “fixed premium” for a “fixed coverage” amount. Both of these numbers are supposed to never change as long as the policy stays in effect. The costs of these policies on average can be up to 10 times that of Term policies of the same face value.
One reason for this is expense is that these policies are not just life insurance, but also act as an investment vehicle. A portion of your premiums each month go to investment accounts that the company sets up to earn income. A portion of the income is credited to them and a portion to the “cash value” of your account. Regardless of your age when you purchase, the cash value should be equal to the face value of your policy if you reach 100 years of age. That is one of the factors that determine your premiums to begin with.
Another reason for the higher cost is the length of your life. This insurance will be in force until you die, or reach 100 years of age. As you get older, you are more likely to die and hence the cost to cover you goes up for the company. Whole life generally overcharges you about 30% when you sign up so that as you age, the cost of your ever increasing risk is still covered. So, your costs don’t go up and they keep a healthy profit margin, win – win.
It is highly suggested by every non- insurance industry professional and even some of those to, that it is a bad idea to use whole life insurance as an investment vehicle alone. If you do not need the face value of the policy, you should not purchase this product.
Term life is by far the simplest and cheapest option out there.
Companies offer a variety of “Terms” meaning length of time. These can be be anything they want but typically fall in 10 – 20 – or 30 year lengths.
You then have your premium, which is based on your age and health at time of purchase.
So what you end up with is something like I purchased a few years ago. For $125 per year paid annually, I have $300,000 of coverage. It’s an all or none gamble. If I die in the 10 years the policy in is force, my wife gets the payout. If I live the full ten years then I get nothing and my payments to them stop. At that point I can buy a new policy under whatever terms are available.
Term policies are almost always convertable, this means that at any point during the term you can call your agent and ask them to turn your policy into a Whole life, Universal or Variable policy instead. Normally they will bend over backwards to do this for you, as they make a whole lot more money that way.
Term is a great option for anyone. It’s cheap, easy to understand and has no strings attached as the permanent life options do. If you are buying a home or having a child it’s a fast and easy way to protect them at little cost.
I suggest Term life to anyone who asks about insurance. The main reasons are the cost to value analysis and the investment options. If you can afford a product costing ten times more (whole life) why would you not just invest the extra in something that was built for that purpose?
Seriously man, you don’t need it. It’s going to come back to haunt you. It always does.
Here’s how the credit card companies work. If you are a freshman you will undoubtedly be a target so pay attention.
Every year the college campuses are canvased from Dorm to quad with those fold out party tables, you know the ones, those long fake wood finish ones you’ve played beer pong on for years now. On them are credit card applications and “free gifts” just for filling them out! no sir, you don’t even have to be approved and we will give you this frisby or if you prefer an energy sports drink!
You walk through campus and feel like an adult for the first time in a long time. You did it man, you’re there and now you are an adult. No parents, no rules. Some hot blonde walks up to you and asks for a moment of your time. With chin on floor you drool as she explains the program to your now vacant mind.They play off what you’re feeling, cause let me tell you that you feel the same way everyone else did their freshman year and she knows it. <That’s called taking advantage 😉 > So you fill out out this short form, take your plastic disc and go on your way. Dude, she was so into me.
Then it comes. Your first credit card. A little plastic ticket to the world. Your parents always told you “you need to use credit to build credit”, and so you do. You figure that a few red bulls or a new Laptop will help your education, so you make a few purchases $5 for a latte, $30 to fill your I pod…oh crap…latte stain on the jeans, well I needed a new pair anyhow.
8 weeks later you get the bill and have an aufully hard time figureing out how you spent $600 in a month when you swore you would only use it for emergencies and then “pay it right off”. Well,you don’t have $600 to send them and the minimum payment is only $35……cool I’ll send the$35 now and pay it back in the next month or two.
You been scammed sucka.
Here is the truth behind credit. You don’t NEED it. It is in fact a usefull tool and no matter what I say you are going to sign up for a card, that’s just how it is. So take these precautions when you do:
1- Leave it at home. Why? If you don’t bring it with you unless you need it for a specific reason like say to pay your tuition, buy a school book or make a payment that REQUIRES you to use it, you don’t let those $5 purchases add up. You got into college, I’m pretty sure you can scrape up $5 for a coffee.
2- Register your card online. Why? You can go to the website on the back of the card and sign up. This will let you pay your bill online in case you forget to mail it out. Which you will.
3- Leave your check book with your card. Why? Stop asking questions and let me explain! When you use your card, immediatly write a check for that amount and send it out. This way your card is always paid on time, no late fees, no negative credit reports. If you pay online, keep it by your computer and do the same thing.
4- Understand interest. It does’nt seem like much, but it adds up very quickly and can multiply overnight. You take an average of 70 years to pay off each purchase if you make minumum payments and overpay by thousands of times! Do you want to pay $2300.00 for a doughnut? Did’nt think so.
5- Learn about finance. This should really be #1 on the list. If your school offers courses, take them. If not, use the internet and read up. If not, have fun with your cash while it’s there, cause it won’t be for long.
For a better education on money start at the begining.
It’s understandable. Chances are that no body ever told you you need one. Remember when your grandparents always said those weird things like having money put away “for a rainy day”? It’s not literal as so many of us thought when we were kids. Now that you’re older, have you ever stopped to actually think about what it means? No…..Thought so.
Saving money sucks I know. Why save it when you can die tomorrow? I want to play (awesome new$60.00 game) now dammit! Lets take a look at recent events for an all too real example.
Lets say you happened to live in Japan this week. Earthquake, tsunami, nuclear radiation and yeah snow too. Lets assume you weren’t totally screwed and your house was not washed out to sea but rather was damaged a bit and some of your stuff got wrecked. Were you expecting that? No. Now take a second and think about how much money you have in the bank. Liquid only, no credit, no assets, just cold hard cash. Not much right?
Lets add that the company you work for goes under…. literally…gone. You are now jobless and have a few extra expenses piled up on your front lawn. How are you going to pay the mortgage? How about car insurance, medical costs, Insurance premiums…how are you going to eat?
Extreme circumstance I know but how many people were caught unprepared and are suffering now because of it. Even in more run of the mill times, you can be kinda screwed by simple problems.
Let’s get back to your life. You’re doing ok, living paycheck to paycheck. Your bills are being paid on time and your credit cards aren’t all that bad, maybe even empty. Ask yourself this question now, What would it take to ruin me? A broken leg, a car accident, downsizing at work, there are dozens of things that happen every day and eventually one of them, big or small IS going to happen to you. I’m not saying this to be negative but rather to give you the chance to prepare and save your own ass before you lose it.
How to make an emergency fund:
Take that spread sheet we worked on a while ago and check some numbers out. Most important here is how much money it takes you to survive every month.
Now figure out how many months you are going to need to survive in case something changes your current circumstances. Most people are comfortable with 6 months, but it’s really a personal decision for you to make.
So if it costs you $2.000 a month to get by, you need a cushion of $12,000. A lot of money I know, but you can do it easier than you think. If you have the willpower to set aside $50.00 a paycheck and go deposit it then do it. If you feel like you won’t do it or won’t keep up after awhile, use some earlier tactics I taught you and use direct deposit. Change your deposits to automatically add That money for you so you can’t get off track.
“But I can’t afford that”
I call shenanigans on that my friend. Think of all the things you spend money on everyday. A pack of smokes, a latte, movies or even the little skull shaped air valve caps on your tires(creepy). You absolutely can find a few bucks here and there and if you can’t then your in over head and need to seek financial councilors.
Once you have the dollar amount figured out, you need to put the money somewhere. The key to an emergency fund is that you need to be able to access it in a pinch. With that said, I will type this next part in caps so you understand the importance of my words. DO NOT INVEST THE MONEY IN ANY WAY SHAPE OR FORM. I know it seems counter- intuitive to save money and not invest it in something, but trust me the whole point of an emergency fund is having LIQUID monies at your disposal. Investment vehicles add risk to your funds, tie them up for different lengths of time and defeat the purpose of the emergency fund.
Where to keep it:
Again this can be up for debate. Personally I say it should be kept in a Savings account. Don’t put it in checking because there are too many ways you can access the funds in a time of weakness. Best bet is savings because you can set it up so you can only get the money out by going to a teller and withdrawing in person. It also gives a better interest rate, though it’s still not much it’s better than nothing.
What ever you choose it needs to be accessible in a bind but pain in the butt enough that you won’t spend it on shoes or X box games. Now im tired, so good luck with all that.
With the economy and Job market the way they have been, more people started do it yourself (DIY) projects instead of getting contractors involved. While it is in fact a good idea to use professionals from time to time, trying the project on your own can have its own rewards.
1. Money- Obviously it can be a whole lot cheaper to do things on your own. When dealing with contractors, you have to remember that they don’t get paid for the materials, they only make money on labor. For any given job they may charge you 100% – 200% of your materials cost in labor charges.
Example: It cost me nearly $2,000 to purchase the materials I needed for a new roof on my house. The contractor, who was cutting me a deal at the time, charged about the same for the labor. On occasion they will charge 3-4k for the same job. It all depends on extra work needed, how many jobs they have coming in and other factors.
2. Time – Now this could go both ways. It takes you longer to do the job than if you were to just pay someone to do it, but it can be done on YOUR schedule. You don’t have to make appointments, get measurements done, and try to time deliveries with the work crews. You can wait it out and do it when you need to or when you can find time.
Example: I got a quote for a tile floor. The labor on the job was quoted at $2,400 assuming no “extra work” had to be done. They were going to take three days for the job. One for the sub floor, one for the tile and one to grout, and a fourth if I wanted it sealed. That means I would have to be home for the crew for four days in a row, missing work and any social invites. Then try keeping cats off your floors for a few minutes let alone days. What if they had to reschedule or what if the delivery was late? More time off work, more time fighting kitties. Not worth it. I did it my self when I had time and took a few MONTHS to finish it. I kept it cat print free learned a new skill or five and saved around $3,500 in expenses and lost wages.
3. Satisfaction – The most valuable thing in my opinion. Sure it took me months to finish the floor, but it pays me back every time I enter the room. The feeling of accomplishing something that you never thought you could do is quite nice and I feel that way every time I see the floor now. The complements I get from friends and co workers help too 🙂 .
What reasons can you think of to do a job yourself?