icon-email icon-mapping

You Can't Take It With You

June 12, 2019

View Article
Gabriel Rakower

Gabriel Rakower

Insurance Representative

m: 9546438729

900 S Pine Island Rd
Suite 420
Plantation, FL 33324

Get Directions

Subscribe to get my Email Newsletter

Creating Healthy Financial Habits

Creating Healthy Financial Habits

When it comes to building wealth and managing finances well enough to live comfortably, it’s up to your participation in a long-term financial strategy, which – more often than not – depends on creating healthy financial habits NOW.

Check out these ideas on how you can do it!

Automate It
Fortunately for us, we live in the electronic age, which can make streamlining financial goals a lot easier than in decades past. Whether building savings, investing for the future, paying down debt, or any other goals, take advantage of the apps and information available online. Savings can be put on autopilot, taking a fixed amount from your bank account each month or each pay period. The same can be done for IRAs or other investment accounts. Many mobile apps offer to automatically round up purchases and invest the spare change. (Hint: Compare your options and any associated fees for each app.)

Be Mindful of Small Purchases
It can be much easier to be aware of making a large purchase (physically large, financially large, or both). Take a physically large purchase, for instance: it’s difficult to go into a store and come out with a washing machine and not have any memory of it. And for large financial purchases like a laptop or television, some thought usually goes into it – up to and including how it’s going to get paid for. But small, everyday purchases can add up right under your nose. Ever gone into a big box store to grab a couple of items then left having spent over $100 on those items… plus some throw pillows and a couple of lamps you just had to snag? What about that pricey cup of artisan coffee? Odds are pretty good that the coffee shop has some delicious pastries, too, which may fuel that “And your total is…” fire. $100 here, $8.50 there, another $1.75 shelled out for a bottle of water – the small expenses can add up quickly and dip right into the money that could go toward your financial strategy.

Paying with plastic has a tendency to make the tiny expenses forgettable… until you get that credit card bill. One easy way to cut down on the mindless purchases is to pay in cash or with a debit card. The total owed automatically leaves your wallet or you account, perhaps making the dwindling amount you have to set aside for your financial future a little more tangible.

Do What Wealthy People Do
CNBC uncovered several habits and traits that are common among wealthy individuals. Surprisingly, it wasn’t all hard work. They found that wealthy people tend to read – a lot – and continue learning through reading. Your schedule may not allow for as much reading time as the average billionaire – maybe just 30 minutes a day is a good short-term goal – but getting in more reading can help you improve in any area of life!

Another thing wealthy people do? Wake up early. This may help you find that extra 30 minutes for reading. You’ll get more done in general if you get up a little earlier. A 5-year study of self-made millionaires revealed that nearly 50% of this industrious group woke up at least 3 hours before their work day started.

Making these healthy financial habits a part of your regular routine might take some time and effort, but hang in there. Often, success is about the mindset we choose to have. If you stay the course and learn from those who’ve been where you are, you can experience the difference that good habits can make as you keep moving toward financial independence!

  • Share:

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, too.

In fact, money matters are the leading cause of arguments in modern relationships.* The age-old adage that love trumps wealth 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!)

  • Share:

Money Woes Hurt More than Your Bank Account

Money Woes Hurt More than Your Bank Account

How do you handle job stress?

Sticking to a solid workflow? Meditation? A stress ball in each hand?

Whichever way you choose to lessen the stress (that 80% of American workers experience), there’s another stress-relieving tactic that could make a huge difference:

Relieving financial stress.

Studies have found that money woes can cost workers over 2 weeks in productivity a year! And this time can be lost even when you’re still showing up for work.

This phenomenon is called ‘presenteeism’: you’re physically present at a job, but you’re working while ill or mentally disengaged from tasks. Presenteeism can be caused by stress, worry, or other issues – which, as you can imagine, may deal a significant blow to work productivity.

So what’s the good news?

If you’re constantly worried and stressed about how your family would cope if the income you bring in suddenly stopped due to an untimely passing, there’s a life insurance policy that could help you. Financing unexpected life events, saving for retirement for your spouse, or funding a college education for your children – these are just a few ways the death benefit of a well-tailored life insurance policy could be used to help provide for your loved ones in the event of a sudden tragedy.

A life insurance policy that’s tailored for you can provide coverage for those unknowns that keep you stressed and unproductive. Most people don’t plan to fail. They simply fail to plan. Think of a well-thought out insurance strategy as a stress ball for your bank account!

Contact me today, and together we’ll work on an insurance strategy that fits you and your dreams – and can help you get back to work with significantly less financial stress.

  • Share:

Savings Rates Need Some Serious Saving

Savings Rates Need Some Serious Saving
May 8, 2019

Ever hear the old story of the 7 years of plenty followed by 7 years of famine?

In the years when there was an abundance of crops, it was wise to store up as much as possible in preparation for the years of famine. However, if instead of saving you ate it all up during the 7 years of abundance, the result would be starvation for you and your family during the 7 lean years. This might be an extreme example in our modern, First World society, but are you “eating it all up” now and not storing enough away for your retirement?

The definition of retirement we’ll be using is: “An indefinite period in which one is no longer actively producing income but rather relies on income generated from pensions and/or personal savings.”

According to this definition, the “years of plenty” would be the years that you are still working and generating income. While you still have regular income, you can set aside a portion of it to save for retirement. This amount is called the “Personal Savings Rate.”

In 2017, the personal savings rate for Americans was approximately 2.4% annually. If you compare that with the average during the 1970’s of a 12.9% annual savings rate, you’ll see it has decreased significantly. This should set off some alarms concerning the impact on your retirement savings.

Suppose you want to retire at 65. Looking at the 10-year window from age 65 to 75, even if you’re planning to live on only half of the income that you were making prior to retirement, you would need to save up 5 years worth of income to last for the full 10 years – not to mention what you’d need after that. But if you’re currently saving only 2.5% of your income per year, it would take 200 years to save up 5 years of income replacement!

So unless someone discovers the elixir of everlasting life, we’re all going to need to do some serious “saving” of the personal savings rate.

  • Share:

Why You Should Care About Insurable Interest

Why You Should Care About Insurable Interest
May 6, 2019

First of all, what is insurable interest?

It’s simply the stake you have in something that is being insured – and that the amount of insurance coverage for whatever is being insured is not more than your potential loss.

To say things could become a bit awkward might be an understatement if your insurable interest isn’t considered before you’re deep into the planning phase of a project or before you’ve signed some papers, like a title or a loan.

It’s better for your sanity to understand insurable interest beforehand. Where the issue of insurable interest often arises is in auto insurance. Let’s look at an example.

Let’s say you have a car that’s worth $5,000. $5,000 is the maximum amount of money you would lose if the car is stolen or damaged – and $5,000 would be the most you could insure the car for. $5,000 is your insurable interest.

In the above example, you own the car, so you have an insurable interest in it. By the same token, you can’t insure your neighbor’s car. If your neighbor’s car was stolen or damaged, you wouldn’t suffer any financial loss because it wasn’t your car.

Here’s where it might get a little tricky and why it’s important to understand insurable interest. Let’s say you have a young driver in the house, a teenager, and it’s time for him to get mobile. He’s been saving up his lawn-mowing money for two years and finally bought the (used) car of his dreams.

You might have considered adding your son’s car to your auto policy to save money – you’ve heard how much it can cost for a teen driver to buy their own policy. Sounds like a good plan, right? However, the problem with this strategy is that you don’t have an insurable interest in your son’s car. He bought it, and it’s registered to him.

You might find an insurance sales rep who will write the policy. But there’s a risk the policy won’t make it through underwriting and – more importantly – if there’s a claim with that car, the claim might not be covered because you didn’t have an insurable interest in it. If you want to put that car on your auto insurance policy, the car needs to be registered to the named insured on the policy – you.

Insurable Interest And Lenders
If you have a mortgage or an auto loan, your lender is probably listed on your policy. Both you and the lender have an insurable interest in the house or the car. Over time, as the loan is paid down, you’ll have a greater insurable interest and the lender’s insurable interest will become smaller. (Hint: When your loan is paid off, ask your agent to remove the lender from the policy to avoid any confusion or delays if you have a claim someday.)

Does Ownership Create Insurable Interest?
Good question. It might seem like ownership and insurable interest are equivalent – they often occur simultaneously. But there are times when you can have an insurable interest in something without being an owner.

Life insurance is a great example of having an insurable interest without ownership. You can’t own a person – but if a person dies, you may experience a financial loss. However, just as you can’t insure your neighbor’s car, you can’t purchase a life insurance policy on your neighbor, either. You’d have to be able to demonstrate your potential loss if your neighbor passed away. And no it doesn’t count if they never returned those hedge clippers they borrowed from you last spring.

So now you know all about insurable interest. While insurable interest requirements may seem inconvenient at times, the rules are there to protect you and to help keep rates lower for everyone. Without insurable interest requirements, the door is open to fraud, speculation, or even malicious behavior. A little inconvenience seems like a much better option.

  • Share:


TANOS0293_8.18

What Does “Pay Yourself First” Mean?

What Does “Pay Yourself First” Mean?
April 29, 2019

Do you dread grabbing the mail every day?

Bills, bills, mortgage payment, another bill, maybe some coupons for things you never buy, and of course, more bills. There seems to be an endless stream of envelopes from companies all demanding payment for their products and services. It feels like you have a choice of what you want to do with your money ONLY after all the bills have been paid – if there’s anything left over, that is.

More times than not it might seem like there’s more ‘month’ than ‘dollar.’ Not to rub salt in the wound, but may I ask how much you’re saving each month? $100? $50? Nothing? You may have made a plan and come up with a rock-solid budget in the past, but let’s get real. One month’s expenditures can be very different than another’s. Birthdays, holidays, last-minute things the kids need for school, a spontaneous weekend getaway, replacing that 12-year-old dishwasher that doesn’t sound exactly right, etc., can make saving a fixed amount each month a challenge. Some months you may actually be able to save something, and some months you can’t. The result is that setting funds aside each month becomes an uncertainty.

Although this situation might appear at first benign (i.e., it’s just the way things are), the impact of this uncertainty can have far-reaching negative consequences.

Here’s why: If you don’t know how much you can save each month, then you don’t know how much you can save each year. If you don’t know how much you can save each year, then you don’t know how much you’ll have put away 2, 5, 10, or 20 years from now. Will you have enough saved for retirement?

If you have a goal in mind like buying a home in 10 years or retiring at 65, then you also need a realistic plan that will help you get there. Truth is, most of us don’t have a wealthy relative who might unexpectedly leave us an inheritance we never knew existed!

The good news is that the average American could potentially save over $500 per month! That’s great, and you might want to do that… but how do you do that?

The secret is to “pay yourself first.” The first “bill” you pay each month is to yourself. Shifting your focus each month to a “pay yourself first” mentality is subtle, but it can potentially be life changing. Let’s say for example you make $3,000 per month after taxes. You would put aside $300 (10%) right off the bat, leaving you $2,700 for the rest of your bills. This tactic makes saving $300 per month a certainty. The answer to how much you would be saving each month would always be: “At least $300.” If you stash this in an interest-bearing account, imagine how high this can grow over time if you continue to contribute that $300.

That’s exciting! But at this point you might be thinking, “I can’t afford to save 10% of my income every month because the leftovers aren’t enough for me to live my lifestyle”. If that’s the case, rather than reducing the amount you save, it might be worthwhile to consider if it’s the lifestyle you can’t afford.

Ultimately, paying yourself first means you’re making your future financial goals a priority, and that’s a bill worth paying.

  • Share:

Big Financial Rocks First

Big Financial Rocks First
April 15, 2019

A teacher walked into her classroom with a clear jar, a bag of rocks, a bucket of sand, and a glass of water.

She placed all the large rocks carefully into the jar. “Who thinks this jar is full?” she asked. Almost half of her students raised their hands. Next, she began to pour sand from the bucket into the jar full of large rocks, emptying the entire bucket into the jar.

“Who thinks this jar is full now?” she asked again. Almost all of her students now had their hands up. To her students’ surprise, she emptied the glass of water into the seemingly full jar of rocks and sand.

“What do you think I’m trying to show you?” She inquired.

One eager student answered: “That things may appear full, but there is always room left to put more stuff in.”

The teacher smiled and shook her head.

“Good try, but the point of this illustration is that if I didn’t put in the large rocks first, I would not be able to fit them in afterwards.”

This concept can be applied to the idea of a constant struggle between priorities that are urgent versus those that are important. When you have limited resources, priorities must be in place since there isn’t enough to go around. Take your money, for example. Unless you have an unlimited amount of funds (we’re still trying to find that source), you can’t have an unlimited amount of important financial goals.

Back to the teacher’s illustration. Let’s say the big rocks are your important goals. Things like buying a home, helping your children pay for college, retirement at 60, etc. They’re all important – but not urgent. These things may happen 10, 20, or 30 years from now.

Urgent things are the sand and water. A monthly payment like your mortgage payment or your monthly utility and internet bills. The urgent things must be paid – and paid on time. If you don’t pay your mortgage on time… Well, you might end up retiring homeless.

Even though these monthly obligations might be in mind more often than your retirement or your toddler’s freshman year in college, if all you focus on are urgent things, then the important goals fall by the wayside. And in some cases, they stay there long after they can realistically be rescued. Saving up for a down payment for a home, funding a college education, or having enough to retire on is nearly impossible to come up with overnight (still looking for that source of unlimited funds!). In most cases, it takes time and discipline to save up and plan well to achieve these important goals.

What are the big rocks in your life? If you’ve never considered them, spend some time thinking about it. When you have a few in mind, place them in the priority queue of your life. Otherwise, if those important goals are ignored for too long, they might become one of the urgent goals – and perhaps ultimately unrealized if they weren’t put in your plan early on.

  • Share:


TANOS0210_4.18

Are You Unwinding Yourself Into Debt?

Are You Unwinding Yourself Into Debt?
April 10, 2019

Americans owe more than $1 trillion in credit card debt.

You read that right: more than $1 trillion.

That number is up 6.2% from 1 year ago. At this rate, 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. Carefully assess where you are on your financial journey and what steps you need take to get where you want to go – hopefully by happy hour!

  • Share:

Building your budget

Building your budget
April 1, 2019

The number of Americans who don’t have a budget is alarmingly high.

One poll puts the number at 34%.[i] That equates to over 100 million Americans who have no budget.[ii] Yikes!

You don’t have to be a statistic. Here are some quick tips to get you started on your own budget so you can help safeguard your financial future.

Know Your Balance Sheet
Companies maintain and review their “balance sheets” regularly. Balance sheets show assets, liabilities, and equity. Business owners probably wouldn’t be able run their companies successfully for very long without knowing this information and tracking it over time.

You also have a balance sheet, whether you realize it or not. Assets are the things you have, like a car, house, or cash. Liabilities are your debts, like auto loans or outstanding bills you need to pay. Equity is how much of your assets are technically really yours. For example, if you live in a $100,000 house but carry $35,000 on the mortgage, your equity is 65% of the house, or $65,000. 65% of the house is yours and 35% is still owned by the bank.

Pro tip: Why is this important to know? If you’re making a decision to move to a new house, you need to know how much money will be left over from the sale for the new place. Make sure to speak with a representative of your mortgage company and your realtor to get an idea of how much you might have to put towards the new house from the sale of the old one.

Break Everything Down
To become efficient at managing your cash flow, start by breaking your spending down into categories. The level of granularity and detail you want to track is up to you. (Note: If you’re just starting out budgeting, don’t get too caught up in the details. For example, for the “Food” category of your budget, you might want to only concern yourself with your total expense for food, not how much you’re spending on macaroni and cheese vs. spaghetti.)

If you typically spend $400 a month on food, that’s important to know. As you get more comfortable with budgeting and watching your dollars, it’s even better to know that half of that $400 is being spent at coffee shops and restaurants. This information may help you eliminate unnecessary expenditures in the next step.

What you spend your money on is ultimately your decision, but lacking knowledge about where it’s spent may lead to murky expectations. Sure, it’s just $10 at the sandwich shop today, but if you spend that 5 days a week on the regular, that expenditure may fade into background noise. You might not realize all those hoagies are the equivalent of your health insurance premium. Try this: Instead of spending $10 on your regular meal, ask yourself if you can find an acceptable alternative for less by switching restaurants.

Once you have a good idea of what you’re spending each month, you’ll need to know exactly how much you make (after taxes) to set realistic goals. This would be your net income, not gross income, since you will pay taxes.

Set Realistic Goals and Readjust
Now that you know what your balance sheet looks like and what your cash flow situation is, you can set realistic goals with your budget. Rank your expenses in order of necessity. At the top of the list would be essential expenses – like rent, utilities, food, and transit. You might not have much control over the rent or your car payment right now, but consider preparing food at home to help save money.

Look for ways you can cut back on utilities, like turning the temperature down a few degrees in the winter or up a few degrees in the summer. You may be able to save on electricity if you run appliances at night or in the morning, rather than later in the afternoon when usage tends to be the highest.[iii]

After the essentials would come items like clothes, office supplies, gifts, entertainment, vacation, etc. Rank these in order of importance to you. Consider shopping for clothes at a consignment shop, or checking out a dollar store for bargains on school or office supplies.

Ideally, at the end of the month you should be coming out with money leftover that can be put into an emergency fund (your goal here is at least $1,000), and then you can start adding money to your savings.

If you find your budget is too restrictive in one area, you can allocate more to it. (But you’ll need to reduce the money flowing in to other areas in the process to keep your bottom line the same.) Ranking expenses will help you determine where you can siphon off money.

Commit To It
Now that you have a realistic budget that contains your essentials, your non-essentials, and your savings goals, stick to it! Building a budget is a process. It may take some time to get the hang of it, but you’ll thank yourself in the long run.

  • Share:


[i] https://nypost.com/2018/01/18/americans-are-clueless-when-it-comes-to-personal-finance/
[ii] http://www.worldometers.info/world-population/us-population/
[iii] https://news.energysage.com/whats-the-cheapest-time-of-day-to-use-electricity-with-time-of-use-rates/

112355

Avoid these unhealthy financial habits

Avoid these unhealthy financial habits
March 27, 2019

As well-intentioned as we might be, we sometimes get in our own way when it comes to improving our financial health.

Much like physical health, financial health can be affected by binging, carelessness, or simply not knowing what can cause harm. But there’s a light at the end of the tunnel – as with physical health, it’s possible to reverse the downward trend if you can break your harmful habits.

Not budgeting
A household without a budget is like a ship without a rudder, drifting aimlessly and – sooner or later – it might sink or run aground in shallow waters. Small expenses and indulgences can add up to big money over the course of a month or a year. In nearly every household, it might be possible to find some extra money just by cutting back on non-essential spending. A budget is your way of telling yourself that you may be able to have nice things if you’re disciplined about your finances.

Frequent use of credit cards
Credit cards always seem to get picked on when discussing personal finances, and often, they deserve the flack they get. Not having a budget can be a common reason for using credit, contributing to an average credit card debt of over $9,000 for balance-carrying households.[i] At an average interest rate of over 15%, credit card debt is usually the highest interest expense in a household, several times higher than auto loans, home loans, and student loans.[ii] The good news is that with a little discipline, you can start to pay down your credit card debt and help reduce your interest expense.

Mum’s the word
No matter how much income you have, money can be a stressful topic in families. This can lead to one of two potentially harmful habits.

First, talking about the family finances is often simply avoided. Conversations about kids and work and what movie you want to watch happen, but conversations about money can get swept under the rug. Are you a “saver” and your partner a “spender”? Is it the opposite? Maybe you’re both spenders or both savers. Talking (and listening) about yourself and your significant other’s tendencies can be insightful and help avoid conflicts about your finances. If you’re like most households, having an occasional chat about the budget may help keep your family on track with your goals – or help you identify new goals – or maybe set some goals if you don’t have any.

Second, financial matters can be confusing – which may cause stress – especially once you get past the basics. This may tempt you to ignore the subject or to think “I’ll get around to it one day”. But getting a budget and a financial strategy in place sooner rather than later may actually help you reduce stress. Think of it as “That’s one thing off my mind now!”

Taking the time to understand your money situation and getting a budget in place is the first step to put your financial house in order. As you learn more and apply changes – even small ones – you might see your efforts start to make a difference!

  • Share:


[i] https://www.valuepenguin.com/average-credit-card-debt
[ii] https://www.fool.com/taxes/2018/04/22/how-much-does-the-average-american-pay-in-taxes.aspx

TAN108366-1018

4 Easy tips to build your emergency fund

4 Easy tips to build your emergency fund
March 25, 2019

Nearly one quarter of Americans have no emergency savings, according to a recent report.[i] Without an emergency fund, you can imagine that an unexpected expense could send your budget into a tailspin.

With credit card debt at an all-time high and no meaningful savings for many Americans, it’s important to learn how to start and grow your emergency savings.[ii] You CAN do this!

1. Where to keep your emergency fund
Keeping money in the cookie jar might not be the best plan. Mattresses don’t really work so well either. But you also don’t want your emergency fund “co-mingled” with the money in your normal checking or savings account. The goal is to keep your emergency fund separate, clearly defined, and easily accessible. Setting up a designated, high-yield savings account is a good option that can provide quick access to your money while keeping it separate from your main bank accounts.[iii]

2. Set a monthly goal for savings
Set a monthly goal for your emergency fund savings, but also make sure you keep your savings goal realistic. If you choose an overly ambitious goal, you may be less likely to reach that goal consistently, which might make the process of building your emergency fund a frustrating experience. (Your emergency fund is supposed to help reduce stress, not increase it!) It’s okay to start by putting aside a small amount until you have a better understanding of how much you can really “afford” to save each month. Also, once you have your high-yield savings account set up, you can automatically transfer funds to your savings account every time you get paid. One less thing to worry about!

3. Spare change can add up quickly
The convenience of debit and credit cards means that we use less cash these days – but if and when you do pay with cash, take the change and put it aside. When you have enough change to be meaningful, maybe $20 to $30, deposit that into your emergency fund. If most of your transactions are digital, mobile apps like Qapital let you set rules to automate your savings.[iv]

4. Get to know your budget
Making and keeping a budget may not always be the most enjoyable pastime. But once you get it set up and stick to it for a few months, you’ll get some insight into where your money is going, and how better to keep a handle on it! Hopefully that will motivate you to keep going, and keep working towards your larger goals. When you first get started, dig out your bank statements and write down recurring expenses, or types of expenses that occur frequently. Odds are pretty good that you’ll find some expenses that aren’t strictly necessary. Look for ways to moderate your spending on frills without taking all the fun out of life. By moderating your expenses and eliminating the truly wasteful indulgences, you’ll probably find money to spare each month and you’ll be well on your way to building your emergency fund.

  • Share:


[i] https://money.cnn.com/2018/06/20/pf/no-emergency-savings/index.html
[ii] https://www.experian.com/blogs/ask-experian/credit-card-debt-hits-an-all-time-high-how-much-do-you-owe/
[iii] https://www.nerdwallet.com/blog/banking/life-build-emergency-fund/
[iv] https://www.qapital.com/

TAN098393-1018

The return of – dun, dun, dun – Consumer Debt

The return of – dun, dun, dun – Consumer Debt
March 18, 2019

It might sound like a bad monster movie title, but the return of consumer debt is a growing concern.

A recent New York Times article details the rise of consumer debt, which has reached a new peak and now exceeds the record-breaking $12.68 trillion of consumer debt we had collectively back in 2008.[i] In 2017, after a sharp decline followed by a rise as consumer sentiment improved, we reached a new peak of $12.7 trillion.[ii]

A trillion is a big number. Numbers measured in trillions (that’s 1,000 billion, or 1,000,000 million – yes, that’s correct!) can seem abstract and difficult to relate to in our own individual situations. So let’s take a closer look.

Good debt and bad debt
Mortgage debt still makes up the majority of consumer debt, currently 68% of the total.[iii] But student loans are a category on the rise, currently more than doubling their percentage of total consumer debt when compared to 2008 figures.[iv] Coupled with a healthier economy, these new levels of consumer debt may not be a strong concern yet, but the impact of debt on individual households is often more palpable than the big-picture view of economists. Debt has a way of creeping up on families.

It’s common to hear references to “good debt”, usually when discussing real estate loans. In most cases, mortgage interest is tax deductible, helping to reduce the effective interest rate. However, if a household has too much debt, none of it feels like good debt. In fact, some people pass on home ownership altogether, investing their surplus income and living in more affordable rented apartments – instead of taking on the fluctuating cost of a house and its seemingly never-ending mortgage payments.

Credit card debt
Assuming that a mortgage and an auto loan are necessary evils for your household to work, and that student loans may pay dividends in the form of higher earning power, credit card debt deserves some closer scrutiny. The average American household owes over $15,000 in credit card debt,[v] just under a quarter of the median household income.[vi] The average interest rate for credit cards varies depending on the type of card (rewards cards can be higher).

That level of debt requires a sizeable payment each month. Guess what the monthly credit card interest for credit card debt of $15,000 at an interest rate of 15% would be? $187.50! (That number will go down as the balance decreases.) If your monthly payment is on the lower end, your debt won’t go down very quickly though. In fact, at $200 per month paid towards credit cards, the average household would be paying off that credit card debt for nearly 19 years, with a total interest cost of almost $30,000 – all from a $15,000 starting balance! (Hint: Calculator.net has a great set of financial calculators that let you figure out how much it really costs to borrow money.)

You may not be trillions in debt (even though it might feel like it), but the first step to getting your debt under control is often to understand what its long-term effects might be on your family’s financial health. Formulating a strategy to tackle debt and sticking to it is the key to defeating your personal debt monsters.

  • Share:


[i], [ii], [iii] & [iv] https://www.nytimes.com/2017/05/17/business/dealbook/household-debt-united-states.html
[v] https://www.nerdwallet.com/blog/average-credit-card-debt-household/
[vi] https://www.cnbc.com/2018/09/12/median-household-income-climbs-to-new-high-of-61372.html

TAN107704-1018

How to save for a big purchase

How to save for a big purchase
March 13, 2019

It’s no secret that life is full of surprises. Surprises that can cost money.

Sometimes, a lot of money. They have the potential to throw a monkey wrench into your savings strategy, especially if you have to resort to using credit to get through an emergency. In many households, a budget covers everyday spending, including clothes, eating out, groceries, utilities, electronics, online games, and a myriad of odds and ends we need.

Sometimes, though, there may be something on the horizon that you want to purchase (like that all-inclusive trip to Cancun for your second honeymoon), or something you may need to purchase (like that 10-years-overdue bathroom remodel).

How do you get there if you have a budget for the everyday things you need, you’re setting aside money in your emergency fund, and you’re saving for retirement?

Make a goal
The way to get there is to make a plan. Let’s say you’ve got a teenager who’s going to be driving soon. Maybe you’d like to purchase a new (to him) car for his 16th birthday. You’ve done the math and decided you can put $3,000 towards the best vehicle you can find for the price (at least it will get him to his job and around town, right?). You have 1 year to save but the planning starts now.

There are 52 weeks in a year, which makes the math simple. As an estimate, you’ll need to put aside about $60 per week. (The actual number is $57.69 – $3,000 divided by 52). If you get paid weekly, put this amount aside before you buy that $6 latte or spend the $10 for extra lives in that new phone game. The last thing you want to do is create debt with small things piling up, while you’re trying to save for something bigger.

Make your savings goal realistic
You might surprise yourself by how much you can save when you have a goal in mind. Saving isn’t a magic trick, however, it’s based on discipline and math. There may be goals that seem out of reach – at least in the short-term – so you may have to adjust your goal. Let’s say you decide you want to spend a little more on the car, maybe $4,000, since your son has been working hard and making good grades. You’ve crunched the numbers but all you can really spare is the original $60 per week. You’d need to find only another $17 per week to make the more expensive car happen. If you don’t want to add to your debt, you might need to put that purchase off unless you can find a way to raise more money, like having a garage sale or picking up some overtime hours.

Hide the money from yourself
It might sound silly but it works. Money “saved” in your regular savings or checking account may be in harm’s way. Unless you’re extremely careful, it’s almost guaranteed to disappear – but not like what happens in a magic show, where the magician can always bring the volunteer back. Instead, find a safe place for your savings – a place where it can’t be spent “accidentally”, whether it’s a cookie jar or a special savings account you open specifically to fund your goal.

Pay yourself first
When you get paid, fund your savings account set up for your goal purchase first. After you’ve put this money aside, go ahead and pay some bills and buy yourself that latte if you really want to, although you may have to get by with a small rather than an extra large.

Saving up instead of piling on more credit card debt may be a much less costly way (by avoiding credit card interest) to enjoy the things you want, even if it means you’ll have to wait a bit.

  • Share:


TAN108360-1018

10 ways to save more this year

10 ways to save more this year
February 25, 2019

If you’re still writing “2018” on your checks, then it’s not too late to commit to a few New Year’s resolutions for 2019!

Here are some ideas for financial changes you can put in place today that can help get you closer to your saving and retirement goals.

1) Start a budget
There are few things that can paint your future financial picture as clearly as starting a household budget. In the process, you’ll track your spending – both in the past and in the future – and you’ll identify wasteful expenses as well as establish your priorities.

2) Start couponing
Once upon a time, clipping coupons could be quite a chore. Now, mobile apps make finding coupons for popular stores effortless, and there are online websites that provide promotional codes for all sorts of brands. If someone gave you money for buying something you were going to buy anyway, you’d take it, right?

3) Target home energy costs
Is your thermostat programmable? You can adjust your home temperature while you’re at work. Do you need to fix the insulation in the attic or that gap under the front door? Get to it as soon as you can! The longer you let those things go equates to money you might be saving on your energy costs.

4) Buy “pre-owned” items
When we think “pre-owned” we tend to think of cars. But the truth is that almost all consumer items depreciate. How much might you save by buying a refurbished phone instead of a new phone? Used laptops may cost a fraction of what you’d pay for a brand new computer. When it’s time to replace household items, consider buying used.

5) Use the 30 Day Rule to keep impulse spending in check
If you’ve got money burning a hole in your pocket, just wait. It won’t really burn you. By waiting 30 days before making a purchase, you’ll have time to decide if you really need the item or if it was just an impulse buy.

6) Use a shopping list
Want a way to stay focused when shopping and avoid wasteful spending? It might seem obvious, but get in the habit of using a shopping list. Before you head to the store, take a few minutes and write out a list (on paper or your phone), and include only the items you need. Stick to the list!

7) Quit smoking
Smoking seems to be less common these days, but for many households it’s still a costly expense that literally goes up in smoke. Think about how much you could put towards your retirement instead if you kicked the habit. (As a bonus, your health will probably improve.)

8) Stop using credit cards
Credit cards are the most expensive type of debt in many households. If you make a plan to pay off credit card debt and to save credit for (real) emergencies, you’ll probably wish you had given up your credit card habit sooner.

9) Cancel unused memberships and subscriptions
Memberships and subscriptions have a way of becoming forgotten – that is, until they automatically renew. Ouch. Keep the ones you want or need, cancel the others.

10) Cut the cord
Cable TV has become a norm but is your family really using it? Try to find less expensive ways to watch shows or movies online. Major broadcast networks can be picked up for free with an HD antenna.

Bonus ideas: Get a strategy in place to start building an emergency fund. Check your insurance policies to make sure you have the coverage you need. Research some ways in your community to have free (or nearly free) fun with your family.

It might take a little extra effort, but putting any of these ideas in place this year will help you and your family save more of your hard earned money and help get you closer to your retirement goals.

  • Share:


115688

How to live without credit cards

How to live without credit cards
February 13, 2019

Our parents, uncles, aunts, and maybe even our grandparents tried to warn us about credit cards.

In some cases, the warnings might have been heeded but in other cases, we may have learned the cost of credit the hard way.

Using credit isn’t necessarily a bad thing, but it may be a costly thing – and sometimes even a risky thing. The interest from credit card balances can be like a ball and chain that might never seem to go away. And your financial strategy for the future may seem like a distant horizon that’s always out of reach.

It is possible to live without credit cards if you choose to do so, but it can take discipline if you’ve developed the credit habit.

It’s budgeting time
Here’s some tough love. If you don’t have one already, you should hunker down and create a budget. In the beginning it doesn’t have to be complicated. First just try to determine how much you’re spending on food, utilities, transportation, and other essentials. Next, consider what you’re spending on the non-essentials – be honest with yourself!

In making a budget, you should become acutely aware of your spending habits and you’ll give yourself a chance to think about what your priorities really are. Is it really more important to spend $5-6 per day on coffee at the corner shop, or would you rather put that money towards some new clothes?

Try to set up a budget that has as strict allowances as you can handle for non-essential purchases until you can get your existing balances under control. Always keep in mind that an item you bought with credit “because it was on sale” might not end up being such a great deal if you have to pay interest on it for months (or even years).

Hide the plastic
Part of the reason we use credit cards is because they are right there in our wallets or automatically stored on our favorite shopping websites, making them easy to use. (That’s the point, right?) Fortunately, this is also easy to help fix. Put your credit cards away in a safe place at home and save them for a real emergency. Don’t save them on websites you use.

Don’t worry about actually canceling them or cutting them up. Unless there’s an annual fee for owning the card, canceling the card might not help you financially or help boost your credit score.[i]

Pay down your credit card debt
When you’re working on your budget, decide how much extra money you can afford to pay toward your credit card balances. If you just pay the minimum payment, even small balances may not get paid off for years. Try to prioritize extra payments to help the balances go down and eventually get paid off.

Save for things you want to purchase
Make some room in your budget for some of the purchases you used to make with a credit card. If an item you’re eyeing costs $100, ask yourself if you can save $50 per month and purchase it in two months rather than immediately. Also, consider using the 30-day rule. If you see something you want – or even something you think you’ll need – wait 30 days. If the 30 days go by and you still need or want it, make sure it makes sense within your budget.

Save one card for occasional use
Having a solid credit history is important, so once your credit balances are under control, you may want to use one card in a disciplined way within your budget. In this case, you would just use the card for routine expenses that you are able to pay off in full at the end of the month.

Living without credit cards completely, or at least for the most part, is possible. Sticking to a budget, paying down debt, and having a solid savings strategy for the future will help make your discipline worth it!

  • Share:


[i] https://www.myfico.com/credit-education/improve-your-credit-score

115279

Save the money or pay off the debt?

Save the money or pay off the debt?
February 11, 2019

If you come into some extra money – a year-end bonus at work, an inheritance from your aunt, or you finally sold your rare coin collection for a tidy sum – you might not be quite sure what to do with the extra cash.

On one hand you may have some debt you’d like to knock out, or you might feel like you should divert the money into your emergency savings or retirement fund. They’re both solid choices, but which is better? That depends largely on your interest rates.

High Interest Rate
Take a look at your debt and see what your highest interest rate(s) are. If you’re leaning towards saving the bonus you’ve received, keep in mind that high borrowing costs may rapidly erode any savings benefits, and it might even negate those benefits entirely if you’re forced to dip into your savings in the future to pay off high interest. The higher the interest rate, the more important it is to pay off that debt earlier – otherwise you’re simply throwing money at the creditor.

Low Interest Rate
On the other hand, sometimes interest rates are low enough to warrant building up an emergency savings fund instead of paying down existing debt. An example is if you have a long-term, fixed-rate loan, such as a mortgage. The idea is that money borrowed for emergencies, rather than non-emergencies, will be expensive, because emergency borrowing may have no collateral and probably very high interest rates (like payday loans or credit cards). So it might be better to divert your new-found funds to a savings account, even if you aren’t reducing your interest burden, because the alternative during an emergency might mean paying 20%+ rather than 0% on your own money (or 3-5% if you consider the interest you pay on the current loan).

Raw Dollar Amounts
Relatively large loans might have low interest rates, but the actual total interest amount you’ll pay over time might be quite a sum. In that case, it might be better to gradually divert some of your bonus money to an emergency account while simultaneously starting to pay down debt to reduce your interest. A good rule of thumb is that if debt repayments comprise a big percentage of your income, pay down the debt, even if the interest rate is low.

The Best for You
While it’s always important to reduce debt as fast as possible to help work toward financial goals, it’s also important to have some money set aside for use in emergencies.

If you do receive an unexpected windfall, it will be worth it to take a little time to think about a strategy for how it can best be used for the maximum long term benefit for you and your family.

  • Share:


113893

The top 8 reasons to consider life insurance

The top 8 reasons to consider life insurance
January 23, 2019

Life will often seem to present signals about financial moves to make.

Starting your first job babysitting or mowing lawns? Probably a good idea to begin saving some of those earnings. Need to pay for college? You’ll want to apply for scholarships. Have a friend who’s asking you to invest in his latest business scheme? Maybe you’ll pass.

As for life insurance, there are certain events that herald when it’s an appropriate time to think about purchasing a policy.

Following are a few of those key times…

Tying the knot or taking the plunge
Whatever you call it, if you’re getting ready to walk down the aisle, now is a good time to think about life insurance. A life insurance policy will protect your spouse by helping to replace your income if something were to happen to you. Many couples rely on two incomes to sustain their lifestyle. It’s important to make sure your spouse can continue to pay the bills, make a mortgage payment, and provide for any children you might have, etc.

Buying a home
If you’re in the market for a home, life insurance should also be a consideration. There are particular types of life insurance policies that will pay off the remaining mortgage if something happens to you. This type of life insurance can help provide a safety net for you and your spouse if you are planning on taking on a mortgage.

Someone becomes dependent on you financially
Another life event that signals a need for life insurance is if someone were to become dependent upon you financially. We might think our only dependents would be our children, but there are other situations to consider. Do you have a relative that depends on you for support? It could be a sibling, parent, elderly aunt. It’s prudent to help protect them with a life insurance policy.

You’ve got a business partner
Life insurance can be invaluable if you’re starting a business and have a business partner. A life insurance policy on your partner or the key leaders in your company can help protect the business if something happens to one of the main players. While the payout on a life insurance policy won’t replace the individual, it can help see the company through financial repercussions from the loss.

You have debt that you don’t want to leave behind
If you’re like most Americans – you probably have some debt. There are two problems with carrying debt. One, it costs you money and isn’t good for your financial health. Second, it can be a problem for your loved ones if you pass away unexpectedly. A life insurance policy is helpful to those who are left behind and are taking on the responsibility of your debt and estate.

You have become aware of “the someday”
Sooner or later we all have to consider our last stage of life. A life insurance policy can help you plan for those last days. A life insurance policy can help cover funeral costs and medical bills or other debts you may have at the end of your life. The payout can also help your beneficiary with any final expenses while settling your estate.

You fell in love with a cause
If you are attached to a certain charity or cause, consider a life insurance policy that can offer a payout as a charitable gift when you pass away. If you are unattached or don’t have any children, naming a charity as your life insurance beneficiary is a great way to leave a legacy.

You just got your first “grown-up” job
Cutting your teeth on your first “grown-up” job is a great time to consider your life insurance options. If you have an employer, they may offer you a small life insurance policy as a perk. But you likely will need more coverage than that. Consider purchasing a life insurance policy now. The younger you are, the less you may pay for it.

Life gives us clues about financial moves
If we know what to look for, life seems to give us clues about when to make certain financial moves. If you’re going through any of these times of life, it’s time to consider purchasing a life insurance policy.

  • Share:


112808

New Year, New (Financial) You!

New Year, New (Financial) You!
January 16, 2019

The new year is best known for resolutions.

The trouble is that many new year’s resolutions don’t survive past the first month or so. Why is that? You might suspect it’s because we set unrealistic goals or lack the proper motivation.

If you’ve got some financial resolutions you want to stick to, the key is to set realistic goals and have the proper discipline to hang in there, especially when the going gets tough.

Consider the following tips. Everyone can improve their finances and – as a bonus – you won’t end up with a basement full of barely-used exercise equipment that’s standing in for clothes drying racks.

Put away your credit cards
Do you have a fireproof box at home? (You probably should to store your extra-important documents, like the title to your car or your will.) This might be the perfect place for your credit cards. Many families struggle with credit card debt and in many cases, they aren’t even sure where the money actually went.

Credit can be a crutch that only ends up helping us postpone healthy financial habits. The frequent result is years of accumulating interest payments and growing balances that may prevent you from maximizing your savings. (Debt also may lead to household friction.) Lock the credit cards in the strongbox and make a pact with the rest of your household to use a credit card just for when you have a real emergency – and this would only occur if you’ve depleted your normal emergency fund.

Get your own life insurance policy
It’s great to see families insured by at least an employer-sponsored policy, but how insured are they really? Employer plans usually don’t follow you to the next job, and the benefit for your family is typically limited to a fixed amount, such as $50,000, or in some cases up to one to two times your salary.[i] That’s probably not enough coverage for your family – and it might disappear at any time if you were to change jobs. Get a quote for your own life insurance policy that better meets your needs and that you can control.

Make a budget
Many of us think we know where our money goes, but making a budget will illuminate your spending in vivid, full-color detail. You might startle your family with loud exclamations as you realize how much you actually spend on gourmet coffee stops, eating out, clothes, golf accessories, etc. It can add up quickly. A budget may not only help you cut spending, but it may also help you build your emergency savings (yes, this should be a budget item) and start piling away more money for retirement (another necessary budget item).

Know your number
Nope, not the winning lottery number. In this case, your number is the one that can help you reach a financial goal. Saving for retirement without knowing how much you’ll need or how much you can put away each month is like running a race blindfolded. You need to see the course and the finish line ahead. That’s your number. Whether saving, paying down debt, or accomplishing any other financial goal, you need to identify the number that will define your short-term targets and help you reach your ultimate destination.

If you need help with your goals or aren’t sure how to find the number you need to know to prepare for your future, reach out. I have some ideas we can discuss.

  • Share:


[i] https://www.policygenius.com/life-insurance/group-life-insurance/

113384

Budgeting 101: Where should I start?

Budgeting 101: Where should I start?
January 14, 2019

It’s the new year so there are bound to be some new resolutions you want to stick to.

If one of them is improving your budgeting skills – or maybe just creating a budget in the first place – read on for some guidelines that may help reduce some of your expenses (including what you might call the essentials).

Start with debt and interest rates
If you have any loans in your name, rest assured there will be interest associated with those loans, unless you’ve got a really nice aunt who leant you some money interest-free. From the borrower’s perspective, interest is simply the expense of receiving money from a creditor which you’re required to pay back over time. No one wants to pay higher interest than necessary.

In contrast to other expenses, like rent, food, or entertainment, interest itself produces absolutely no value for the borrower. The borrowed money may produce value, but the interest itself does not. For that reason, you’re going to want to pay as little interest on your loans as possible.

One strategy is to transfer credit card balances to lower APR credit cards – just beware of transfer fees. Read the fine print to make sure the new card actually carries a lower interest rate, as sometimes the rate after the introductory period may go up. If you can refinance any of your loans, like student, auto, or home, consider it. For example, there’s no reason to pay 5% if you can pay 4%. (Again, make sure you understand the terms and any fees involved.)

Slim down the essentials
This is the time when all items in your budget are going to come under consideration. Everything is on the table. For transportation, any reduction in cost you can make is going to depend on your location. If you live in a high-density urban area and you normally drive yourself or use public transit to get to work or other destinations, ask yourself if you can walk or cycle instead. These options often provide health benefits as well. If you live in a rural area, you’re probably going to drive to get to where you want to go, but think about using an electric bicycle or motorcycle as an option to help save on fuel.

The key? Look at the essential sections of your budget and mentally run through how you obtain those essentials, like driving to the nearest grocery store or who your landlord is. Then brainstorm alternatives for paying for these items or services – anything is fair game! (For example, would your landlord reduce your rent if you help out with yard maintenance?) Finally, do a little research and analysis to see if those alternatives are cheaper (and feasible).

Eliminate non-essentials
The next step is to look at each non-essential and determine its utility to you. If you barely think about the actual purchase, you might have simply developed the routine of purchasing that item or service (think: “monthly movie subscription service you never use anymore”). In that case, the hardest part might be combing through your credit card statement and nixing the services you never use. Another example of routine, autopilot spending might be the soda you buy with your lunch. Do you really need it? Maybe not. Switching to tea or coffee that you can brew at home may be cheaper. And water is (usually) free.

Repeat this process with every non-essential. Are you really using your 10GB/mo mobile internet plan? If not, look for a lower, more cost-effective GB plan. The key here is to try to distinguish between convenience and necessity.

Don’t discount the discount
There are discounts everywhere, from loyalty programs to manufacturers’ coupons to seasonal specials. If there is an essential that burns your budget, it may be worth checking to see if you’re eligible for a government program.[i]

Some credit cards offer rewards programs, but be very careful to pay off the full amount each month to avoid accruing interest, otherwise your rewards could be negated.

Keep the big picture in mind
Sometimes it can be hard to justify the time and effort that might be involved to save $2 per day. It’s just two dollars, right? But look at the accumulated savings. Saving $2 per day for a full year translates to $730. If you choose to brew that tea instead of buying the soda, maybe you can afford the 10GB plan instead of the 1GB plan.

  • Share:


[i] https://www.usa.gov/benefits

112806

Behind the curtain: How your insurance premium is determined

Behind the curtain: How your insurance premium is determined
January 7, 2019

Ever wonder why you’re paying the premium you’re paying?

It’s not arbitrary. Read on to take a peek into some factors that can determine the amount you’ll pay.

An insurance company issues contracts that provide coverage in the form of compensation due to a covered financial loss in exchange for premium payments. Insurance companies use statistics and probability projections to determine how much money someone should pay based on the probability that person will make an insurance claim. Those more likely to make a claim are typically required to pay a higher premium.

How insurance works
The concept itself is relatively simple: bad things happen sometimes and people want to avoid financial ruin that could arise from those bad things. To maintain peace of mind, or sometimes by law, people will obtain insurance to reduce the risk of ruin. People also use insurance to “make themselves whole” again after financial issue, such as a car accident or the loss of income.

All those who want to obtain insurance apply to be part of a pool. The insurance company then calculates how many people are in the pool, how much money they’ll probably need to pay insurance claims, then calculate each individual’s risk to the company.

Which factors affect premiums
Which factors affect premiums vary widely across insurance types. Driving style and vehicle value are obvious determining factors in car insurance. But so are other factors you may not be able to change, like location: those who commute to work spend more time in their cars and thus increase the probability of having an accident, simply for being in the car longer.

Health and life insurance focus on healthy lifestyles. If you’re more likely to live longer and require less medical attention, the lower your premiums. Renters and homeowners insurance consider the value of the property and the contents therein. Insurance plans will also vary based on the amount of coverage they offer. If your fire insurance only covers $2,000 worth of possessions, all things being equal, you’re probably going to pay a lower premium than someone who wants $20,000 of coverage.

Reducing your premiums
To avoid frequently making lower-risk members pay for the claims of higher-risk members, not everyone is thrown together in the same pool. If you can adjust your personal risk factors so that you’re entered into a different pool, you might see substantial reductions in your insurance premium. Your insurance company or agent should be able to help you identify which factors you score high for in riskiness so you can try to reduce your costs.

For example, if you smoke, quitting may greatly reduce your premiums (although you may have a waiting period like 12 months after you quit in order to qualify as a non-smoker). If you have several speeding tickets, ask how much a driving school certificate might help reduce your premiums.

The takeaway here is that your riskiness is based on a quantification of factors and the probability that any one of those factors will trigger a claim. Changes you can make in your lifestyle may add up to significant savings with your premiums, so it’s worth looking into!

  • Share:


112352

Subscribe to get my Email Newsletter