Sunday, July 29, 2012

Why do we need insurance?



Why do we need insurance?

By Keith Bunn Jr.
July 29, 2012


Is insurance really needed?

There are all different kinds of insurances out there. Two kinds of insurance, home and auto are mandatory to have especially if you have loans out on them. But what about the others, are they really needed? For some people it is an absolute must have, for others maybe not so much.

The purpose of insurance

The purpose of insurance is to transfer the risk of something happening to you, your family, or your property to the insurance company. It also protects you from any liabilities you may have in case someone is injured on your property or in any accidents you are involved in. To put more simply, if something were to happen and it will put a serious financial bind on you or your family or even cause you to go bankrupt, you need to have insurance on it.

What should you have and what should you drop

As I said above, some people absolute need to have some or all the different kinds of insurance and for others maybe not. Below are a few of my thoughts of the different kinds of insurances and whether or not it makes sense to have them.

·         Health and Dental: In my opinion, these kinds of insurance are a must have (especially health insurance) no matter what! Medical debt is the number one cause of bankruptcy in the U.S. today. You don’t necessarily need health or dental insurance for check-ups or booster shots but you do need them for cancer treatments and orthodontic care. It’s the major things that need to be done that you need to transfer that risk on.

·         Life Insurance: This is a big deal! To put simply, if you have a family that depends on your income to financially survive, you need life insurance. As a matter of fact, you need 10 times your annual income worth of a good 15 to 20 year level Term insurance. And if you have a spouse that stays home to take care of the household while you’re out working, you need to get anywhere between  $300,000 to $400,000 in term insurance on them as well, because they have an economic value too with all the cooking, cleaning, shopping, caring for the kids, etc… In both cases, the working and the stay at home spouse, the surviving spouse can take the insurance pay out and invest it to replace the lost income or to pay someone to do everything the stay at home spouse did. As for life insurance for your children… Most kids don’t earn an income so a simple rider policy in your work’s life insurance policy should be plenty to have on them. Now, if you are single and there is no one that will miss your income or if you will have a surviving spouse and family, that will be fine without your income due to having investments, and a high net worth, etc… then there is really no need to have life insurance. Now if you want to get some life insurance through your work to cover any burial expenses, that’s fine too.

·         Life Insurance In and Outside of Work: It makes sense to get some insurance through your work, but it also makes sense to get some Term insurance outside of work too. Let’s say you only have insurance through your work and you’ve had it for years. Then you have a heart attack or your doctor tells you have diabetes or some other major medical condition. As long as you’re still working and you’re paying your premiums, you’re covered, but as soon as you lose or quite your job, you are now uninsurable. So it makes sense to get some insurance outside of work.

·         I.D. Theft Protection: Identity theft protection is one of those must have insurances for everyone. Identity theft is the #1 blue collar crime in North America and seeing how there is no way to prevent it 100%, it makes sense to get it. But when you shop for the right one for you and your family, make sure that part of the insurance coverage it states that it will assign a case worker to your case to clean up the mess for you. If you don’t, you’ll have to spend an average of 600 hours to clean it up yourself.

·         Long Term Care: This insurance is a must have but not until you reached the age of 60 years old. This insurance is to cover any in home care or nursing home stay. The cost of in home care or nursing home stay can scramble any nest egg you may have and leave any surviving spouse with nothing once the other passes on. The reason I say not to get it before 60 years old is that the chances of you needing in home care or nursing home stay is almost zero, but the odds are against you every year you don’t get it past 60.

Summarize

I know this was a lot to go through so let’s summarize...

1.    You need to get health/dental insurance either inside or outside your work because those types of debt could bankrupt you if you don’t.

2.    You need 10 times your annual income worth of a good 15 to 20 year level Term life insurance (TERM ONLY). Get some for the stay at home spouse because they have economic value as well. Rider policies through your work are good enough to have on your minor children. If you're single and don’t have any dependents or if your family will be financially fine with the loss of your income, there is really no need for life insurance, but you can still get it if you want.

3.    Get some life insurance outside of work. If you get some major medical issue and then lose your job later, you will then be uninsurable.

4.    Identity theft is the #1 blue collar crime in North America and there is no way to protect yourself 100% so get a policy that cleans up the mess for you.

5.    Get long term care insurance on your 60th birthday to cover any in home care or nursing home stay you may have later. If you don’t, it could scramble any nest egg you may have and leave any surviving spouse with nothing once the other has passes on.

Questions

1.    Do you have adequate health/dental for you and your family?

2.    Do you have enough life insurance for you and your family?

3.    Do you have too much or too little on your minor children?

4.    Is there life insurance on the stay at home spouse?

5.    Do you really need life insurance?

6.    Do you have life insurance outside of your work?

7.    Do you have identity theft protection insurance? If so, does it clean up the mess for you or is it left for you to do?

8.    Is it time to get long term care insurance yet? If it is, what are you waiting for?

I hope my posts inspire you to look at what you’re doing financially and if needed, make some changes that will cause you to win financially. I also look forward to reading your views on any articles or postings that I may post. For more money news, facts and ideas, follow me on Facebook, or Twitter. Thanks you!


Sunday, July 22, 2012

Don’t Pay Extra On Debts


Don’t Pay Extra On Debts

By Keith Bunn Jr.
July 22, 2012


For over a year now you have heard me say, “Pay down your debts!” Normally the way you do that is by paying extra on your debts starting with the smallest debt and working your way to the biggest. But there are times, paying extra on your debts doesn’t make sense.

Pay Minimum Payments only

When there is a foreseeable emergency in your future, it makes sense to stop your Debt Snowball temporarily and just save as much cash as you possibly can to prepare for that emergency. Emergencies like…

·         Going to have a baby: Having a baby isn’t normally an emergency, but there can be complications during pregnancy and child birth. When both mother and child are home safe and sound, then you can take the extra money you’ve been saving and start your debt snowball again.

·         Job loss: If your employer announces that there will be some layoffs in the near future and the chances that you’ll be on that list is good to great, then again, temporarily stop your snowball and pile up cash. Once you know you’re not going to be laid off or you did get laid off but found a new job, you can take the extra money you’ve been saving and start your debt snowball again.

·         Medical issues: If you or someone in your family has been diagnosed with a disease or serious illness that is going to take a lot of treatments. It again makes sense to start making minimum payments on your debts and save money to help battle the issues that have come about. And once again, once the illness has passed, you can take the cash you built up (if any) and start your debt snowball again.

·         Death: Unlike the previous bullet points, the death of a love one has to be treated a little differently. If the passing love one was a young child or spouse, our brains are just not working right because of the grieving process we would all go through and it really doesn’t matter who you are, it is times like this where anyone of us can make huge financial mistakes during our grief. In this case, it is better to stop paying extra on your debts and just pay the minimums for at least 6 months. Just give yourself time to go through the grieving process and once you can start thinking right again, you can continue with your debt snowball.

Questions

This week, I only have one question to ask. What other kind of emergencies can you think of that would make sense to stop your debt snowball, make minimum payments, and pile up cash?

I hope my posts inspire you to look at what you’re doing financially and if needed, make some changes that will cause you to win financially. I also look forward to reading your views on any articles or postings that I may post. For more money news, facts and ideas, follow me on Facebook, or Twitter. Thanks you!


Sunday, July 15, 2012

Financial Stress in the Workplace





Financial Stress in the Workplace

By Keith Bunn Jr.
July 13, 2012


USA Today

In the July 11th edition of USA Today’s money section, they had a small poll listing towards the bottom of the page saying, "What is the most common cause of on-the-job distraction". The distractions were...

People stopping by your office: 27%
Phone calls: 26%
E-mail alerts: 19%
Text messages: 10%
Don't know: 10% (that was really one of the distractions)
Social Media: 8%


A Bigger Distraction

Although I'm sure those are true distractions, there is another distraction that didn't make the cut, which in my opinion, is a greater distraction and effects more people by far.
Personal finance issues effect about 55% of the work force today. When yours, mine, or anyone else's finances are a mess, it can occupy most of our waking moments just trying to figure out how we can pay the car payment, the light bill, or just put food on the table. It can be extremely stressful at time and we've all been there a time or two.
In a YouTube video I watched the other day, financial coach and speaker, Chris Hogan said, "You can't manage something you're not aware of." Meaning, if you don’t know where your money is going, there is no way you can stop it from going there and he is absolutely right! So how do you start? Well, you have to have a plan.

The Plan

1.    Emergency Fund: It is extremely important that the first thing you do is to get an emergency fund started. If you make more than $20,000 per year, you should have $1,000 tucked away for a rainy day. If you make $20,000 per year or less, that fund should be at least $500. This baby emergency fund is just enough to catch life’s little mishaps. Later, after you’re debt free, come back to this fund and build it up to 3 to 6 months’ worth of expenses.

2.    Write a Budget: You need to make and live on a written budget each and every month. Why every month? Because each month won’t be the same. You will have birthdays, holidays, weddings, graduations, anniversaries… you get the point. The best kind of budget I know of is called the Zero Base Budget. To put it simply, income minus outgo equals zero each and every month. And if you’re married, work with your spouse on making the budgets. This is both of your mess!

3.    Pay Necessities First: We all have our own definitions of what necessities are so let me explain. Necessities are Food, Shelter, Utilities, Transportation, and clothing. Notice that I didn’t say cable/satellite, cell phones, or restaurants. Just what you need to live on so you can fight another day.

4.    Make a List: Make a list of all your debts except your mortgage. List them and start paying them off in the order of smallest to largest amounts owed, not smallest to largest interest rates. By paying them off in the order of amounts owed, it will give you some quick wins and help you stay motivated.

This whole thing of getting out of debt, living on a budget, and living on less than you make is not an easy task at first. It’s hard, but it is worth it!
Hebrews 12:11 says, “No discipline seems pleasant at the time, but painful. Later on, however, it produces a harvest of righteousness and peace for those who have been trained by it.”

Questions for you

·         Have you ever done a budget before?

·         If you’ve had one that failed, what do you think went wrong?

·         Do you understand what a Zero Based Budget is?

·         Do you understand why an Emergency Fund is so important?


Social Media

I hope my posts inspire you to look at what you’re doing financially and if needed, make some changes that will cause you to win financially. I also look forward to reading your views on any articles or postings that I may post. For more money news, facts and ideas follow me on Facebook, or Twitter. Thanks you!

Sunday, July 8, 2012

Death and Money


Death and Money

By Keith Bunn Jr.
July 8, 2012


Grandma

Years ago, my grandma prepaid her funeral at the age of 90 for $2,000. Even though her funeral cost were about $6,000, everything was paid for. Doesn’t sound like a bad plan until you think of how much she could have had if she would have invested that money in mutual funds for her funeral instead of prepaying for it.


Prepaying is not a good idea

Prepaying for anything doesn’t do anything more than offset the cost increase of the item or service due to the increase of inflation. In other words, the rate of return on your prepaid item or service is only what the inflation increase is from the time you prepaid to the time you actually use the item or service. Nationally, the average rate of inflation on funerals is about 4%. That is a horrible rate of return for anything!
Statistically, if you have reached the age of 40 years old, you are more than likely going to reach 80. So if you took $3,000. and invested it at a 10% rate of return, and didn’t add a single penny more to it for 40 years, you would have just over $161,000. I think you could be buried for that. Now if you got 12% instead 10%, you would have just under $356,000. I don’t know why you couldn’t have an outstanding funeral for that.


Fear of the stock market

After the past few years of the stock market going up and down like a rollercoaster, a lot of people today are afraid to put any of their hard earned money into the stock market and I don’t blame them.
But if people knew that in any rolling 5 year periods of the stock market’s history, 97% of the mutual funds have made some money, and in any rolling 15 year period, 100% of the mutual funds have made money. In fact, including the time of the Great Depression, there has never been a time in the market’s history that a mutual fund was worth zero. But you have to leave that money in that investment alone for a minimum of 5 years. If you are still skittish about the stock market, I would suggest that you find an investment broker that will take the time to sit down with you and teach you how all these investments work
What I would do is invest in a mutual fund that you are comfortable with and just forget about it. I would put the investment paperwork, with a note attached to it saying, “Cash in to pay for funeral!!”  and put it with all your other important paperwork like any insurance policies, deeds, bank account information, WILLS, etc…


Pre-arrange your funeral

If you want to take more stress off your family at the time of your death, you could always pre-arrange everything. You can pre-select your casket or urn, tombstone, and even where you want to be buried, etc… and just leave a list of everything you want done
Anything you can do now will take the stress off your family and it will be another way to show how much you love them.
I would love to hear some stories of how your passing love one pre-arranged their funeral, both financially and in other ways that took the stress off your family. Or if there is something I missed that you’d like to add I’d love to hear that too!!

I hope my posts inspire you to look at what you’re doing financially and if needed, make some changes that will cause you to win financially. I also look forward to reading your views on any articles or postings that I may post. For more money news, facts and ideas, follow me on Facebook, or Twitter. Thanks you!


Monday, July 2, 2012

Healthcare



Healthcare
By Keith Bunn Jr.
July 2, 2012

History was made

As we all know by now, on June 28th, the Federal Supreme Court Justices declared that Obamacare is constitutionally sound as a tax. This will mean a lot of different things to a bunch of different people. I will not get into the meat and potatoes of whether or not this healthcare plan is a good idea for our country, because to tell you the truth, this topic confuses the snot out of me. With hearing all the pros and cons from a bunch of different people and sources, I’m just not sure what’s what.

Even though I’m not sure about Obamacare, I do know that having a good healthcare plan is accentual as being part of a healthy financial plan.

What you can do

I don’t know about you, I’m not will to leave my families future in the hands of a government that can’t even make up their minds on the simple choices for this country. So what I ask myself is, “What can we do to improve our lives and/or future?” So when it comes to getting affordable healthcare, this is what I’ve come up with.

1.    Increase your deductibles and/or your co-pay amounts. Most people today have an 80/20 insurance plan, which means if you need to use the insurance, your insurance company pays 80% of the bill and you pay 20%. Well if you were to increase your deductible and went to a 70/30 plan, you assume more responsibility and a greater risk than before and that will cause your premiums to go down.
2.    Increase your Stop-Loss without decreasing your Maximum Pay.  Stop-Loss is the maximum amount of out of pocket cost you’ll have to pay. Let’s say that you had a $10,000 Stop-Loss, you would pay your deductible, plus your 20% (if you had an 80/20 plan) up to $10,000. Everything above that, your insurance company would pay 100%. If you had a good 3 to 6 months saved in your emergency fund, you would be able to afford a $15,000 to $20,000 Stop Loss. Maximum Pay is the total amount your insurance company will pay. If you have a half a million dollar Max Pay and the total cost is above that, whatever the remainder is, you’re on your own. I would keep your Maximum Pay to be a minimum of $1 million.
3.    Another way to keep your family’s healthcare down is by using a Health Savings Account (HAS). An HSA is a tax-sheltered account with a high deductible. A typical HSA account has around a $5,000 deductible but has lower premiums than your typical PPO insurance plans. One of the good things about an HSA is that after you have reached your deductible, the insurance company pays 100% of the medical cost. So an HSA makes sense if you and your family fall into two different categories. They are really, really sick or really, really healthy. If you or your family member is seriously sick and you will burn through that $5,000 deductible easily each year, the HSA would be a good plan because all you would have to pay each year is the $5,000 deductible, plus your monthly premiums. That’s it! Your insurance company pays 100% after all that. Now if your family is really health, meaning, you hardly ever go to the doctor at all. You can build up each year a tax deferred savings account by saving your deductible each year. This account can then only be used for medical reasons of any kind no matter what your income is. But in a sense, this account, over time, will turn into another big hairy ‘medical’ emergency fund on top of your 3 to 6 months fund. The only way an HSA doesn’t make sense is if you go to the doctor often enough to where you don’t reach your deductible limit but use enough of the savings to where you hardly have anything left.
  
So my questions to you are…

If you’re upset about Obamacare or just how our government has handled this whole healthcare issue, are you willing to take yours and your family’s healthcare plans in your own hands now?

What changes can you make to your existing insurance plan and lower your premiums?

Remember folks, the government can’t fix your life or your problems. You need to take the necessary steps to fix your own issues. 

I hope my posts inspire you to look at what you’re doing financially and if needed, make some changes that will cause you to win financially. I also look forward to reading your views on any articles or postings that I may post. For more money news, facts and ideas, follow me on Facebook, or Twitter. Thanks you!