The Risks And Rewards of Buying Life Insurance

courtesy of www.healthysciencebuilding.com

Life insurance can be an important tool to pay for any expenses after your death and some expenses while living depending on your policy. Once you have the magic number for amount of coverage you want, seek out comparisons for monthly premium rates and plan benefits. Be sure to check the company’s reviews. Also, get to know the financial strength ratings from S&P, Moody’s, Fitch, or A.M. Best, this will show how stable the company is. 

There are many rewards for buying life insurance

                                              -Paying off debt and hospital expenses
                              -Leave less financial responsibility on your grieving family
                                                            -Covering funeral costs
                                          -Providing a cushion for your spouse and/or kids
                                                      -Creating wealth for your heirs
                                                           -Protect a small business`
                -Some policies offer cash reserve--additional source of supplemental income

courtesy of www.sentinelgroup.com

But there are also many risks to buying life insurance:

      -The purchase price for your coverage changes as you age

                  -Health conditions diagnosed prior to buying life insurance can limit the amount of coverage you can purchase

-The financial institution or the company holding your benefit can go under, making it impossible to pay your benefit 

-Purchasing too little insurance can leave a burden on your family and purchasing too much coverage can be a waste

-Purchasing life insurance with your employer is more cost effective but if you leave your employer the plan may not transfer to an individual policy

The most common types of life insurance is term, whole, and variable. Term life is the purchase of a death benefit based on a group of years usually in 5 or 10 year increments. It is usually a cheaper alternative with high coverage but if you do not pass away within that time then you have to purchase another term. Whole life is the purchase of death benefit for the remainder of your life, stays in effect from purchase date until death. This type of policy offers a cash reserve and it is invested by the insurance company until the benefit is paid. Variable life is not as commonly selected but operates like whole life insurance with changes throughout a term of years for investment on cash reserve. For example, you would personally choose where your cash reserve is invested every ten years.

Last words of advice—keep your contact information up to date and your policy information accessible for people to find upon your passing. Hopefully, we will all live a long, beautiful life. In meanwhile, this gives you a head start to a make a decision on what will be best for you. Feel free to comment or share below or on social media at Instagram @practicalwallet, Twitter @practicalwallet,  and Pinterest @practicalwallet.

The Dreaded Budget Talk

Catching back up with the beginning stages of the buyer process, we are gonna make the dreaded dive into the less infamous budget talk. Everyone knows what it is but not everyone sees the value. To justify my viewpoint, let me tell you about a story of person I'll call Cotton. Cotton was excited to start college. Everyone told Cotton this is what he has to do because its the next step after high school. But Cotton lost interest in just following the "trend" and took a break. A concerned counselor met with Cotton emphasizing the need to continue to build his knowledge and to use college as a tool to lifetime relationships and personal growth. Cotton found his own value in the message and returned to flourish in his studies.

Now I say all that to say that when we have responsibilities with our income, the next step is budgeting. But people give all kinds of reasons of why budgeting is dreaded but we have to find our own value in it. Some may say its too much work, there's no room for error, its a boring way to live, they aren't discipline enough to keep to the budget, or it makes their money feel small. But to all those reasons, I have one response--cater your budget to you. By doing so, you can allocate money for miscellaneous or error, reward yourself to make budgeting fun, develop habits to create the discipline, monitor your spending to see all the many places your money is used, and understand there is value in pre-arranging your money. So if your dreading the budget just consider this...

picture courtesy by www.hypable.com

Budgeting is as instrumental to our finances as sleeping is to our personal health. The average adult should maintain 7-9 hours of sleep per day. Too much or too little will have an impact on our body’s functions. Too much or too little budgeting will cause over usage of credit cards, under-utilization of income, or inability to meet bill payments. So for our future home buyers and savers, budgeting is going to be key to achieving our goals. If you are a future home buyer; give yourself some "curb appeal" by showing great payment history and discipline with debt. If you are a saver, we need to continue to grow our disposable income. 

The principal of budgeting is to add up the income and assign an allocation for each thing that you usually spend your income on. Everyone's budget will be different, you can be general or you can be very specific. It can be from daily to monthly monitoring. So I’ll give an example of a balanced budget—one that can include personal interests and responsibilities...

Pay check for 3/12/16:      $1800
Item	Budget
Rent	$900
Utilities	$100
Food	$175
Transportation	$50
Subscriptions: Netflix, Kindle	$20
Entertainment	$60
Hair	$45
Credit Card 1-Discover	$50
Tithe/Donation	$160
Savings 1-Retirement	$70
Savings 2-Miscellanous	$20
Savings 3-House	$150

I now entrust you, my readers, to start or continue to budget to find ways to maximize your income. Theoretically, the budget should be categorized by the following percentages: 50% to bills, 10% to savings, 10% to personal wants/needs, and 30% to insurance, food, travel/entertainment. Catch our next post on March 30th about how much life insurance is enough? Comment or share below or on social media at Instagram @practicalwallet, Twitter @practicalwallet,  and Pinterest @practicalwallet.

How To Buy A Home Like You Wash Your Clothes

via GIPHY

So you want to buy a home but you don’t know where to begin or end? As you have already gathered, buying a home is not simple, easy, or quick. In fact, it will take a few posts before I can really break down the essentials of home buying but for today I will try to simplify it to a comparison of your Saturday morning wash day. Maybe it would look something like this…

Step 1: Gather all your dirty clothes. Or in the case of home buying; gather your facts, Research & Budget. Determine how much you can afford, how much do you want to pay per month, how and what amount should you save for the deposit, and what will the mortgage lender require from you. (Hint: lenders usually require proof of recent tax returns, proof of employment, verification of liquid assets, good credit score, good debt to income ratio, etc.) Identify the cities or towns you prefer to live in. The most important decision in home buying is location---your distance to work, family, fun, school, and safety. Budgeting will help you set guidelines for your spending and savings.

Step 2: Sort the clothes by colors. Now, you will sort your facts, Prioritize & Plan. Ask yourself what will take first. I recommend doing the most difficult task first—for me it’s lowering my debt but maybe for you its saving, credit building for the first time, or credit repair. Attacking things piece by piece will keep the process less complicated and less overwhelming. Planning for those priorities will help guide you to your goal.

Step 3: Pretreat the heavy stains. Let’s Repair & Protect our credit. Review your credit report for negative marks and take the biggest marks (that are not due to fall off before your home purchase) under repair—pay down your credit limits to a usage of 33% or less, pay your creditors, remove false claims on your report, ask for a pay to remove debt plan with your creditors. Protect your credit by continuing to make on time payments with your current accounts, limiting the usage of your credit cards, avoiding requests for new credit accounts or loans, and monitor your credit report for suspicious activity.

Pic courtesy of bridalguide.com

Step 4: Find the right washer. Do we need a big machine or small one…is it a big home or small one. Time to Find your Home Style & Preferences. In short, what do you require versus what can you live without in a home. What’s your house style---to name a few there’s Victorian, Cape Cod, rancher, colonial.  Do you want a condo or a single family home? How many bathrooms, bedrooms, and closet/storage space? What appliances or amenities are needed---washer/dryers, pools, fireplaces, basement, wood floors, or private parking?

Step 5: Load the clothes and wash. Time to load the bank. Meet with a lender to Get Preapproved. Getting preapproved lets you know the amount the lender will pay after the home is appraised and the title is presented. Now things are getting started, you have leverage over others who may bid for the home you select and may only have prequalification for the loan or unstable financing.

Step 6: Rinse cycle. Time to rinse out the professionals and Find your Realtor. Maybe you can get someone to recommend a good realtor to you. This person should be knowledgeable in the community you are seeking, well suited for the position based on years of residential selling experience, and available during your schedule to provide services. Find out what is the cancellation policy for open houses or suspending your home search all together. And most importantly what is their commission rate?

Step 7: Final Spin Cycle and remove the clothes. Finally, we found our home; we will perform a home inspection, and Make an Offer. Don’t buy blindly, consider a general home inspection, mold inspection, and flood zone check. If the offer you make to the seller is accepted, we have to close the deal. The closing process involves the completion of legal forms, the official title search, and payment for the title transfer occurs.

You’re probably thinking wow that’s so much information and honestly it is. But keep with us as I break down each step and show you ways to complete each step. And as your knowledge increases things will begin to become clearer to you what the best choices to make are. Feel free to comment or share. We are also on Instagram and Twitter as @practicalwallet!