Jun 17 2015

Is My Employer-Provided Life Insurance Enough?

By |June 17th, 2015|General Personal Finance|Comments Off on Is My Employer-Provided Life Insurance Enough?|

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If the company you work for offers group life insurance, be sure to take advantage of this great benefit. Employers are not required to offer life insurance, so if yours does be sure to count your blessings. While having group life insurance is a nice bonus, it would be wise to consider purchasing additional life insurance on yourself.

Employer-sponsored group life insurance policies are different than individual life insurance plans in these ways:

  • There are no medical exams
  • They are designed one-size-fits-all
  • They have less individual coverage
  • They are only in affect while you work for that company

Medical Exams

To purchase an individual life insurance policy, you typically need to undergo a medical exam. The life insurance company uses your exam results as one of the determinants of how much your policy premiums will be. The healthier you are, the more inexpensive your premiums. If you are purchasing additional employer-sponsored life insurance beyond the 50,000 that most employers provide, compare these insurance costs to individual plans. You can see these individual life costs by getting a free term life insurance quote. You may be pleasantly surprised.

Employer-sponsored group plans offer the same amount of coverage at the same rate, regardless of the individual’s health. This may sound ideal, and it is a great employer benefit, but there are a few problems with relying solely on your company’s life insurance plan.

One-Size-Fits-All

Did you ever buy something that claims to be one-size-fits-all only to discover it definitely does not fit all? Employer-sponsored life insurance plans are designed to cover a large group and are planned as a one-size-fits-all package. They may not include any life insurance policy riders that would benefit you and your loved ones such as child riders, spousal riders, long-term care riders, or accelerated death benefit riders. A great benefit of having individual life insurance is how customizable it is for your unique situation. Life insurance through your work does not take your individual situation into consideration.

Coverage

Most employer-sponsored life insurance plans only pay for coverage that is one to two times your salary. While this extra amount is helpful to your loved ones if you died, it will not last much more than a year or two. The standard recommendation of life insurance coverage is 10 times your annual salary; this is not the perfect number for every family, but employer-sponsored plans do not come close to this coverage amount.

Employment-Based

Many people don’t realize that you can only collect on your group life insurance policy if it’s in force and you are employed with that company when you die. However, if you get sick or injured and are in the hospital long before you pass away chances are that you were terminated from the company. Many employer benefits contracts state that they will discontinue your benefits (including your life insurance policy) and terminate your employment if you are not able to make it to work after a month or so. Not only are your loved ones emotionally and physically devastated from your death, but they then find out you no longer have a life insurance plan in place and are also financially impacted.

Let’s say you were diagnosed with cancer and were in the hospital for a long period of time, but fought it and survived. You can rejoice that you are still alive to be with your loved ones, but your employment was still terminated. You now have to look for a new job. Maybe the next employer doesn’t offer life insurance. In this case, you will have to shop for life insurance on your own but now have a pre-existing condition which means life insurance may now be much more expensive or even unavailable.

Another situation when relying solely on your group life insurance policy could go wrong is if you are laid-off or if the company goes out of business. Say you are 55 years old and never purchased individual life insurance because you thought you were safe having it only through your employer. If the company goes out of business or starts laying people off, you are now 55 and have no life insurance. Your health and age play a huge role in determining the price of life insurance. The last thing you need to worry about as you get closer to retirement age is trying to find affordable life insurance. Again, your age and health play a big role in purchasing life insurance, so the sooner you buy life insurance the cheaper it will be.

Life insurance is a lot more affordable than most people think. According to LIMRA, consumers overestimate the cost of life insurance by nearly three times. Term life insurance is the most affordable way to protect your loved ones financially should something happen to you.

Example: A 30-year old non-smoking male can pay as little as $35 a month for a 30-year term policy with $500,000 worth of life insurance coverage to protect his family’s standard of living in case something unexpected happened to him.

Life insurance should be included in most financial plans. No one ever anticipates needing to use life insurance, but the unexpected happens. Make sure your loved ones are protected from financial disaster by being prepared. You can see how little it would cost you by getting a free and anonymous term life insurance quote today. This is one thing that you may wish you didn’t put off until tomorrow.

photo credit:  Pictures of Money

Jun 15 2015

Quick Trading Binary Options Conducted by the Book

By |June 15th, 2015|General Personal Finance|Comments Off on Quick Trading Binary Options Conducted by the Book|

7da9f2d4905741a6a225f19d5e9bbb0eBinary options underline the same classic type of trading adventure, yet they are limited. You are not allowed to adjust the trading times as you wish or according to trends and news. Instead, you need to decide on this time frame upfront. Practically, you need to determine the asset growth or fall over a specific duration of time. It looks easy, but quick trading binary options can actually get complicated. In the attempt to achieve any solid results, you do need to waste some time and learn about this option. Sooner or later, you will realize that all the time wasted to learn about quick trading binary options or to play on demo accounts will pay off.

Quick trading – perfect world?

There is no such thing as an accurate or perfect formula to teach you what quick trading binary options means, not to mention about doing it efficiently. If there was, everyone would be rich today, while most brokers would actually be broke. But then, there are some valuable lessons that can open some doors. Discovering strategies and techniques is up to you while you use a demo account. Meanwhile, you have to learn some hints upfront. Studying these lessons will save you time. You will eventually discover them yourself, but it takes practice and failed attempts to do it yourself.

As a general rule of thumb, selecting the right broker is a main necessity. The broker must be reliable and friendly. There are hundreds of them out there. Some of them have a top notch reputation, while others have low initial deposits. It is up to you to choose one, but then, do not exaggerate with the initial deposit. If it is too big for what you can afford to lose, just look elsewhere. A broker must be good for a beginner, but also meet your requirements. Apart from the financial part, requirements also imply having the right assets. If you are familiar with one or two assets in particular, you need a broker who can provide access to them. Otherwise, you risk losing money.

Sportsbook on financial assets

From some points of view, quick trading binary options is like placing sports bets. You try to predict a “score” over a specific period of time. The only difference is that you are responsible for choosing the time frame. Just like in the sports world, setting limits on your quick trading binary experience is mandatory. It is highly recommended to spend at least a few weeks trying new ideas and techniques on a demo account.  Most binary options brokers will offer a demo – we tested Bank Invest this morning.

Of course, demonstrative trading is far from doing it with real money – your money. When you use your money, you will actually win or lose it. This is why setting some limits is so important. Risking the whole balance or focusing on one single position is not always the smartest idea, despite the tempting payout rates in quick trading binary options.

Just make a quick decision about how much money you can afford to lose. Make it quick. Thinking too much and changing your mind too often will confuse you. Keep in mind that successful traders rarely reach to 10%. Most of them go up to 5% of their balance or even less. As a newbie, it is a good idea to follow the same trend. As you complete trades and figure what works and what does not, you will inevitably gain more experience. Confidence kicks in too, only to add to your earnings.

From a completely different point of view, emotions might become your worst enemies in quick trading binary options. It is easy to realize why. Emotions are good in your personal life, but this is pretty much it. Every newbie makes this mistake and allows emotions to make decisions for them. They end up leading the way. You lose a small percentage of your money and your emotions tell you that you need to recover it. Although every trader loses money every once in a while, impulsive trading is the last thing to do. You push for more and more, so you lose. Thank your emotions for that.

Instead, quick trading binary options is mostly about analyzing news, trends and economics. You require some complex math skills, as well as the possibility to understand the direction of you global markets. Things like good feelings and luck are out of discussion. As a newbie, you might base you quick trading binary options experience on these things, yet professionals know that they do not exist. Making money in this industry is all about your skills, education and ability to research news accordingly.

If you are having a bad day and you seem to lose money, it might be wise to just quit trading for the respective day. You may no longer think clearly, so you will probably make mistakes the next day. The same rule applies if you end up winning. Winning in quick trading binary options may fill your body with too much enthusiasm and that is when you start making mistakes. Once again, shut your computer off and go out. It has been a good day, so avoid ruining it with emotion based decisions.

Jun 10 2015

Here’s the skinny on reverse mortgages

By |June 10th, 2015|General Personal Finance|Comments Off on Here’s the skinny on reverse mortgages|

Reverse mortgages tend to elicit extreme reactions. Proponents tout them as an essential retirement planning tool, offering income to seniors who are in dire need of it. Critics say that deceptive ads for reverse mortgages take advantage of a desperate population, giving seniors the idea that the money being paid to them is already theirs, or some sort of return on investment.

In my opinion, products are not inherently good or evil. That being said, reverse mortgages are one of those products that tend to be either a great idea or a terrible mistake, with very little middle ground. In order to see why, it is important to understand how they work.

Tapping your home’s equity

Reverse mortgages are available to those who are at least 62 years old. They resemble a home equity loan or line of credit in that they allow you to convert some of your home’s equity into cash. There are no restrictions on how that cash is used, which makes the reverse mortgage an appealing option for seniors who are worried about retirement income. The money can be taken as a lump sum or installments, and it doesn’t need to be repaid until you move, sell the home, or die.   There are few more fundamentals that must be understood before the reverse mortgage option is considered as part of a retirement plan, however.

They are expensive. Interest rates and closing costs on a reverse mortgage tend to be higher than on other mortgage or home equity products, which reduces the amount available to you.

You are still responsible for taxes, insurance, and maintenance on the home. Not much explanation required there, I don’t think.

Your heirs will not get your house unless they can pay back the reverse mortgage after you die. This might be viewed as a desirable outcome if you are worried about saddling your heirs with property they will then have to dispose of. But if your house represents a significant portion of your estate, it is important to understand that your children or other heirs may not get it.

Moving to a nursing home counts as moving out. Moving out means your reverse mortgage will need to be repaid. Long-term care is expensive, so locating the extra cash to make the mortgage payments may prove difficult.

A last resort

When you consider the drawbacks, reverse mortgages don’t look all that appealing. But they do have one feature that makes them something of a jewel among retirement options – they are available when nothing else is. By the time we reach age 62, the die is largely cast. There may be very few working years left to pad a nest egg, and the options have dwindled. Seniors who find themselves without adequate retirement savings can use reverse mortgages to supplement their income, pay off debt, fund medical expenses, or simply create an emergency fund.

Essentially, including a reverse mortgage in your long-term retirement plan is probably unwise. But as a last resort for those who reach retirement without enough savings, reverse mortgages can be a lifeline.

Jun 8 2015

When paying off debt, it pays to plan

By |June 8th, 2015|General Personal Finance|Comments Off on When paying off debt, it pays to plan|

Debt is like that toxic friend you’ve had for as long as you can remember; you know the situation needs to be addressed, but you put if off because the process will be unpleasant. However, with friends and finances, waiting until the situation refuses to be ignored can lead to catastrophic – and unnecessary – consequences.

Get over it

Often, the shame or embarrassment we feel about debt can hinder efforts to bring it under control. It’s easy to see why – for the most part, people who are prone to casual mention of a debt situation are those who want you to know they don’t have one.

If you are ashamed of your debt, it’s time to get over it. How you got there is irrelevant – once you have it, a student loan and a credit card balance are both negative lines in your net worth calculation. Face the facts and forget about what anyone else thinks – there is nothing to be gained there.

Turn off the faucet

If you find yourself spending on credit cards, figure out why. Write down all of your expenses for three months, both credit and cash. Then cross out the ones you could have lived without. If the resulting total exceeds your monthly income, cross out some more. Then use this information to build a budget going forward.

Finally, and this is the important part. TAKE YOUR CREDIT CARDS OUT OF YOUR WALLET. This simple advice saved me thousands of dollars at a time when I needed to get my spending under control. Freeze the cards in a cup of water, give them to your mother for safekeeping, or cut them up – it doesn’t matter.

Make your plan realistic

If you’re reading this, you probably love a good “get out of debt” story as much as I do. It’s easy to find examples of folks who tightened their belts, lived on beans and rice, and proudly and inspirationally detailed their experiences on the Internet. And really – my hat is off to them.

But it’s important to know yourself. Just as in managing, cash, understanding what will work for you is paramount to successful debt management. That’s not to say there won’t be sacrifices, but severely restricting your spending all at once is like extreme dieting. It feels like progress for a while, but for most of us it leads to a binge that could make all your efforts for naught.

Redefine the process

If you’re having trouble facing your debt, redefine it. Although debt is often the consequence of spending, paying it off actually belongs on the savings side. Putting aside the recommended 20% of income each month becomes easier if you count your extra debt payments as savings.

Think of your savings as a large bucket. Now imagine that someone cut out the bottom of the bucket and placed it on top of a large hole. Any money you try to put into the bucket will be swallowed by the hole. In order to start filling the bucket, you must first fill in the hole.

The reason that I like this analogy is that it allows you to plan for the long term. Rather than viewing paying off your debt as an isolated, overwhelming task, incorporate it into your long-term picture. Once the debt is paid, the money going to debt can be redirected toward savings goals.

Give yourself the best chance of long-term success

Of course, not all of your 20% savings should be going to debt, no matter how dire your situation. The best intentions in the world won’t help if you have to pull out your credit cards for an unexpected expense. Before you really dig into your debt, put aside at least $1000 for emergencies. If you have to tap into it, redirect your extra debt payments until you build it back up.

Also, you should always contribute at least a little bit to your retirement accounts, especially if you have an employer match. Once your debt is paid and you begin to redirect that monthly allocation, you can increase your contributions and try to make up any ground you lost filling in the holes.

Jun 4 2015

Accounting Software Must be Easy to Use

By |June 4th, 2015|General Personal Finance|Comments Off on Accounting Software Must be Easy to Use|

If your accounting software isn’t easy to use, it’s useless – here are some tips for how your accounting software should make your life easier.

accounting software

Ease of use is a key element of good small business accounting software. The reason is plain and obvious; most small businesses are small in size, with few people to do a lot of tasks. Time to spend on an extensive learning curve tends to be rare to non-existent. The software should, as nearly as possible, run well from the start with minimal advance user preparation. Most small business managers that act as bookkeepers and perform an accounting function do not do it by choice, but by necessity. These are vital functions, and the business would likely nor continue nor grow without them. However, in small business environments these tasks often take time and personnel away from the main business.

Accounting for Non-Accountants
The mantra of most small business managers is that I am not an accountant. The overall mission of most businesses does not involve financial products, and accounting expertise is often not on staff. Online accounting software can build-in the principles of data organization that contribute to reports and presentations that meet generally accepted accounting practices.

The Main Functions Must Be Clear and Simple
Most businesses have to keep records of accounts; they have to pay others and get paid by customers and clients. Accounting software can help the essential tasks of paying on time and getting paid promptly. Other main functions include payroll, tax records, and expenses. Invoice management is an essential function for most businesses because receivables are the primary source of revenue and a critical asset. Smaller businesses and micro-businesses often have simple accounting needs. If they begin to grow, their needs also expand. Multiple bank accounts, credit facilities, and expanded staff or outsourcing are but a few of the typical areas of growth. Expandable accounting software is ideal for these businesses; one can add or begin to use new features as needed. Continuity in accounting software is an added benefit, as expandable software avoids the need to change brands and start learning new systems.

Reports and Documents
There are many requirements and situations in which managers need reports. Using sources of financing, estimating taxes, and developing proposals are but a few instances for making financial reports. Some reports can be done automatically simply by setting categories and updating data on a frequent basis. Reports and documents are easier without the need to research and check data manually or in every instance. Automated data collection provides a great place to begin most reports.

Online Access Adds Versatility and Flexibility
The small business environment is increasingly an online environment providing access to markets and opportunities anywhere within the reach of the Web. Online access provides flexibility for owners and managers of small businesses. They can access the systems from remote locations and at any time. Using mobile devices such as phones and tablets, one is never away from the system, and this extends the locations for getting work done. One does not have to go to the office or even sit in front of a computer or workstation. Managers can stay on top of details while traveling. Mobile access permits collaboration and team input into problem-solving or work on projects. Many small businesses establish an online presence with a virtual office or executive suite; accounting software can integrate with these systems for effective presentations, Web pages, and dashboards.

Experience is the Teacher
Owners and managers can learn while using small business accounting software to adapt it to new uses and extend the benefits. The key is a simple and easy to use system that promotes a seamless system start-up. Once the user successfully initiates the system, they gain familiarity. Experienced users can apply the software tools to their individual situations, and many devise unique ways of handling problems and reducing time and effort. One can continue to learn from software provider’s resources as well as real-time activities.

Saving Time and Reducing Effort
Accounting software can perform many tasks that managers might otherwise do manually. They can replace spreadsheets and ledgers. They can perform the basics of double-entry bookkeeping and keep records in accordance with accepted accounting practices. When the business needs reports for internal management and external requirements, accounting software can provide easy access to current data on key categories like sales, bank balances, cash flow, payables, and receivables. The software is ideal for managing multiple bank accounts, credit cards, and lines of credit. It can display information on graphic forms that provide quick analysis of the condition of the business.

Technical Support is Vital

Small business owners and managers benefit from easy access to an extensive range of technical support for small business accounting software. The difference between frustrating failure and rewarding success can be a short phone call that helps orient the user correctly. Technical assistance providers with high levels of proficiency and experience can quickly point users away from points of confusion. If the provider seeks to offer a simple, straightforward small business accounting software system, then technical assistance must be an essential part of the overall service. Passive forms of technical assistance can be effective too. Questions and answers pages can add to understanding and demonstrate best practices.

Making the Right Choice

A trial and demonstration are excellent tools for selecting small business accounting software. One can project circumstances that occur in one’s business. Many small business managers note that too often a demonstration focuses on the strengths of the software rather than the needs of my business. Ease of use is a critical factor when selecting accounting software. Frequently the users have little time to learn and low levels of prior accounting knowledge. There are many helpful items on the Sage One website to determine the best fit for your small business accounting software. One can even have a hands-on demonstration at http://na.sage.com/us/sage-one

Jun 1 2015

Understanding who benefits from 529 plans

By |June 1st, 2015|General Personal Finance|Comments Off on Understanding who benefits from 529 plans|

I’m a big believer in getting bang for your buck. When it comes to saving for college, the 529 plan definitely deserves a place in your portfolio. There are reasons for this, which I’ve written about before, but there are also misconceptions that should be brought into the light.

As a savings solution for the middle class, 529 plans appear to have an image problem. Public perception seems to be that the high account limits and tax breaks offered by 529 plans benefit the wealthy, and certainly there is a great deal of truth to this. If your position is to oppose any sort of provision that benefits folks with lots of money, this probably isn’t in your wheelhouse.

The way I see it, there isn’t much logic in opposing something simply because it benefits someone else (I realize that this makes me almost un-American these days.)   The truth is that there is plenty for the rest of us to like about 529s, if only we pay attention.

Here are the major tax benefits of 529 plans, not coincidentally listed in order of the ascending income of those who benefit most. If you are planning on funding someone’s education, it’s important to understand this savings option.

Tax-free earnings

529 plans offer federal tax-free earnings on qualified withdrawals, i.e. withdrawals that are used to pay for college expenses. Additionally, many states offer this benefit, and some even offer deductible contributions (up to the limit set by the state.) Withdrawals taken to offset a scholarship, employer tuition assistance or veterans benefits are subject only to income tax on earnings, allowing the owner to reap the benefits of tax-deferral for those amounts.

Since the tax-free earning feature appears to be under fire lately, let’s look at what happens if taxes turn out to only be deferred. Consider an investment of $1,000, followed by monthly $100 investments, 7% return rate (net of fees, compounded monthly) over a period of ten years. For a person in the 25% tax bracket, a taxable account would earn $4,354. That same account, tax deferred, would earn $6,420. Taxes upon distribution would bring this number to $4,815 – about 10% more than the earnings in a taxable account.

In the worst case, nonqualified withdrawals are subject to the aforementioned tax on earnings and an additional 10% penalty those earnings. The 10% penalty would bring the earnings number to $4,173. The worst case scenario – where you don’t end up using the money for college at all – costs you $361 over ten years. This picture improves as your tax bracket goes up – at 30%, the numbers are close to equal. Not a terribly risky gamble to take with money that would otherwise be invested in a taxable account.

Accelerated Gifting

Another tax feature of 529 plans is accelerated gifting. For 2015, the gift tax exclusion limit is $14,000 per person. However, 529 plans allow you to front-load up to five years of gifting, so that you can contribute $70,000 to one beneficiary’s account without incurring gift tax.

I know. We’re back to the wealthy again. The degree to which this feature is touted probably feeds into popular misconceptions about who benefits from 529 plans. If you have $70k you’re looking to park somewhere – congratulations. Put the money to work all at once, rather than piecing it out over five years and missing out on potential gains (see my post on dollar cost averaging.)

But it’s important to remember that $70,000 is the high end. The gifting provision applies to any amount over $14,000 (and below $70,000), and I know a few grandparents with that kind of money to pass along. 529 plans allow them to gift money to grandchildren without actually giving it.

The accelerated gifting provision makes 529 plans a useful estate-planning tool, which brings me to my next point.

Estate Planning Benefits

Once assets are gifted through a 529 plan, they are removed from your estate for estate tax purposes (though if you die before the beginning of the fifth year, a pro-rated amount will revert back and be subject to estate tax.) However, since you are the owner of the account, you retain control of the assets. This is my favorite part – you can reduce your estate tax exposure and still keep your money. Furthermore, if you designate a successor account owner, those assets will pass into the hands of your designee without going through probate.

(And yes. The estate tax exclusion for an individual for 2015 is $5.34 million. This one benefits only the wealthy.)

The bottom line is that the tax benefits of 529 plans matter to anyone who might be planning to send a beneficiary to college. And the penalties for not using the money as intended are relatively minor.

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