November 8, 2017, 11:26 am

What is Too Little Life Insurance? Too Much?

by: The Financial Blogger    Category: Insurance

If you are thinking about getting life insurance, or if you are evaluating a policy that you already have, you probably already know there are two main life insurance types: term life insurance and permanent life insurance. Both can provide coverage for the people in your life who would need help if you weren’t around any more. But both options are generally not right for each customer.

Without much forethought, it’s easy to get a life insurance policy that is too big, or too small, for your unique needs. In the first case, you can pay way too much money over the lifetime of your policy. In the other case, your dependents may not have the financial help they need when you pass on. These decisions have long term consequences. Do some reading, get some quotes, and obtain the best life insurance policy for you and yours.

Too Much Life Insurance

One of the most common causes for an individual having too much life insurance would be when they choose permanent life insurance, without actually needing it. There are variations to this model, but generally a permanent life insurance policyholder will 1) pay more money each month to ensure a death benefit to loved ones and dependents, no matter how long the policyholder lives, and 2) have money taken out of each monthly payment to save or accumulate cash value.

This savings component create a permanent life insurance policy’s cash value. Depending on the type of permanent life insurance you have, you might use this growing balance for income, to act as collateral for borrowing, or to increase the death benefit that will eventually go to someone you care about.

Typically, permanent life insurance policies are selected by people with estates, high net worth, those with complex investment needs, or those who want to make sure that their chosen policy benefits those who need it.

For all of these reasons, permanent life insurance can be a great option for many kinds of people. But for others, it may be a little too expensive and complex. This policy might seem like the only way to know for sure that your death benefit will have the effect you desire, but this assurance can usually be achieved other ways. Some of these people may be better served with more affordable and simpler term life insurance.

Too Little Life Insurance

37% of parents with children living at home do not have life insurance, according to the 2015 Bankrate Money Pulse survey. Among the remaining 63% that do have life insurance, one-third have less than $100,000 of coverage. That might seem like a lot of money, and it might be when considered as a lump sum. But $100,000 or less may not be enough to cover the living expenses of a people or people who have, up until this time, depended on you for their support.

If you find yourself in this situation, it’s time to get realistic about how much life insurance coverage your dependents, family, and loved ones actually need. For policyholders of term life insurance plans, additional coverage is probably more affordable than you think, and can certainly provide a better financial solution than insufficient coverage.

For people who purchased life insurance without thinking too much about the details, the end result is frequently too much, or too little coverage. If you haven’t bought life insurance yet, make sure you carefully consider your needs and the needs of those who will receive the death benefit of your policy. In the end, you can have just the right about of life insurance for your unique situation.

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November 2, 2017, 8:34 am

Six Hacks to Save You More Money

by: The Financial Blogger    Category: Personal Finance

Our lives are made up of tiny decisions that can have a big impact over time.

This concept applies to our financial lives as well. A $3 mocha may not seem like much in the moment but over the course of a year, when purchased consistently, you’ll spend over $700!

The power of time has an even bigger impact with compound interest. If you place just a few dollars every day into a retirement account, your savings will grow exponentially.

PSECU, a credit union in Pennsylvania, explores which of life’s daily expenses could be replaced with cheaper alternatives along with other ways to save money.

infographic

Think of everyday habits or purchases you make that could be cut or exchanged for something that costs less.

There are also other money-saving hacks like keeping your car tires inflated and hanging your clothes out to dry that may not seem like it saves you money till months down the road.

Lastly, make sure you are taking advantage of everyday spending by using a cash back credit card. Look for a card that doesn’t have an annual fee and make sure you pay it back in full each month so you don’t pay any interest.

Disclaimer: This post was written in collaboration with PSECU.

 

 

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October 31, 2017, 5:56 am

5 Important Things You Didn’t Know About SIP

by: The Financial Blogger    Category: Investment, Market and Risk

SIPs feed on the volatility of markets and generate wealth from market tides. Though based on the basic market concept but surfing the money market waves requires a complex set of abilities and skills.

Veteran fund managers employ latest financial models and software and automatic money market timing instruments to ride the money market wave successfully.

SIP is the answer to the investment need of investing in the volatile yet gainful money markets without getting thrashed by the market waves, and mutual fund managers are increasingly supplying better to this need by making the SIP more investor-friendly. Most first time investors in SIP would be surprised to know the following investor-friendly features of SIP that make it so attractive for investors:

  1. SIP Investment Amount Can Be Very Nominal

Investors need not shell out lump sums for investing in mutual funds. By doing SIP investment, they can start investing with as little as Rs 500 to 1000 a month. As the money flows in more well-chosen units are bought by the investor and within quite a less time frame a well-diversified portfolio is created which yields high returns and the risk is completely diversified out. SIPs start showing very good returns within one to three years’ time frame though many SIPs are showing significant weekly, monthly as well as daily returns too.

  1. SIPs Have High Flexibility

There is no fear of losing money or being penalized if an investor wants to close SIP. Investors can close SIPs any time they choose to and get the invested amount as well as the applicable returns credited to their accounts. SIPs are becoming more and more flexible by the day with respect to schemes, payment frequency and plan alterability.

The payment frequency can be even weekly or daily; daily Sips are the latest in news. Earlier introduced flexible SIP options include step-up SIP, top up SIP, flexible instalment SIP, trigger-based SIP and pause SIPs. Investors also have the flexibility of choosing from different types of SIP schemes like conservative, balanced and growth SIP schemes.

  1. No Money Is Charged for Opening A SIP

Investors need not pay any money to the mutual fund firm or agent for starting a SIP. The investor just needs to submit the KYC documents and once those are approved the investor can apply for the SIP by filling in the mutual fund and SIP form. Upon successfully being subscribed investor would just need to pay the SIP amount as chosen by the investor.

  1. SIPs Offer High Returns

The average annual returns being made by conservative SIPs is 12 to 15 % which is quite high as compared to recent FD returns. Higher returns to the tune of 20 to 25 % annually or even higher can be attained from growth type mutual funds.

Recently the RBI has cut the FD rates even further and as such they are not capable of generating sufficient returns for the investors and additionally FD returns are taxable above the Rs 2 lakh per annum return limit (form 15 G/H are not accepted by the banks from investors earning more than Rs 2 lakh per year total returns from all FDs). The good news is that several SIP-based mutual fund schemes offer tax exemptions under the Income Tax Act especially those mutual fund schemes which invest in equities as returns from equities are not taxable.

  1. SIPs Can Be Purchased Easily

The investor need not fill up a myriad of documents and make repeated visits to the mutual fund office for purchasing a SIP-based plan. It is easy to purchase SIPs, and they can be purchased through the offline as well as online mode. The only essential criterion is filling with KYC documents with the mutual fund firm for first-time investors. But this is just a first-time requirement and not a repeated requisite. Once investors start to invest in a particular mutual fund firm they can make repeated purchases from the comforts off their homes.

Nowadays purchasing SIPs online has become quite simple. Investors can purchase directly from the mutual fund firm site or through the secure customer portals. Investors can even file the KYC application and documents online.

Benefits of purchasing SIP from secure customer portal overrides purchasing from direct company website in several ways. The essential difference lies in the fact that the former is customer oriented and not product oriented.

Investors can benefit in the following ways by investing through secure customer portal:

  • Comparative information on products and schemes and SIP calculator
  • Ratings of funds based on rating criteria of top rating agencies
  • Selection of firms only authorized by SEBI and RBI
  • Customer portal with accredited Fintech capabilities
  • Customer log in facilities and customized website
  • Investment and transaction records on customized website
  • Regular monitoring of purchased plans and funds
  • Highly secure transaction platform
  • Latest information and updates on investment products
  • Daily, weekly, fortnightly, monthly returns and NAV patterns

Investors can choose the best fit SIP option from the secure customer portal and make it their investment platform.

 

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September 27, 2017, 9:02 am

The Great Battle: Gold Standard vs. Fiat Money

by: The Financial Blogger    Category: Banks and You

Comparison begets real knowledge, but of course, solely from a proper one. Discussing about these topics in exquisite detail would require several pages, but this article has been written with the purpose of bringing a good overview in a laconic way.

Therefore, I hope this article helps you to learn more about each system, and based on that, arrive to your own conclusions on which one is the best.

About Inflation And Deflation:

Those who support a fiat money system argument that the principal and most dangerous risk of gold standard is that a positive demand shock for gold can bring risky levels of deflation. Nonetheless, most cannot bring solid arguments on how it would happen and if it would be really that dangerous. However, on the other hand, we can consult history and see that the gold standard of the 19th century suffered periods of deflation and inflation, but they were fairly moderate.

In addition, even the ‘wildest’ periods didn’t show a sign of uncontrollable deflation. Therefore, according to history, a gold-standard system doesn’t necessarily mean that gold demand shocks will result in extreme deflation.

History Supports It

Unlike the current fiat system that has never been properly run, so to speak, gold-standard has a brief yet successful mark in history. If we stick to the most exact definition, then we can say that the real international gold standard system simply lasted from 1870 to 1914.

And what did happen during those decades? Here is some of the evidence that shows the great potential of this system than in such a short time in history proved more than our current fiat system:

  1. A period of very little inflation that was easier to manage
  2. Increased living standards
  3. Drop in employment rates
  4. More competitive and productive industries
  5. Government interventions were reduce to a minimal expression

Moreover, some countries like England and the Netherlands had already adopted the gold-standard system before 1870, but it was only since the international adoption of it that it could finally show its true potential.

Unlike the current times we live in, none was coerced to subject to it. Every nation was free to join or simply look from the outside.

In addition, we can also point the following benefits this system brought to the nations that adopted it:

  1. International trade experienced one of the highest growth rates in history
  2. Capital mobility experienced its best days
  3. The exchange rates were surprisingly stable
  4. Speculation maintained within ‘acceptable’ boundaries
  5. Income and industrial production experienced an impressive growth
  6. Nations, public and private institutions trusted the international monetary system
  7. Liquidity was bountiful
  8. Excellent levels of price stability along with low levels of inflation

All in all, nations experienced several advantages that made them live some of the best years in their history.

If we compare this against the fiat system, then we will find many displeasing surprises…

Arguments Against The Gold Standard

The supporters of the fiat system have many arguments against the gold standards, however, the majority of them are baseless. But for the purpose of showing why it is the case, here you have the three most popular arguments used against this system:

Argument #1

“Gold is a synonymous of panics, therefore, central banks must be left to their own devices and gold must be avoided at all cost so our economies can be more stable”.

Affirming that panics emerge from gold is wrong in several senses, and that’s why we need to understand how they are created. First off, the causes of panics are several but amongst the most important we have:

  1. Overconfidence
  2. Overexpansion of credit
  3. A big scramble for liquidity
  4. A significant and abrupt loss in confidence

From this it is very easy to understand that the direct relationship between panics and gold is nonexistent, and hence, makes our example argument very weak and easy to refute. Moreover, gold is an excellent investment and should be a mandatory part of your portfolio. If you want to learn more about that specific point, then you should visit Marketreview.com.

Argument #2

“There’s simply not enough gold, therefore, it makes it unsuitable for a global economic system”

This is one of the most popular and weakest arguments out there. The key to refuting it is that our focus should shift from the quantity to the price. Then, there is a vast amount of gold in the world that is valued at the right price.

Now that we have these elements into account we can proceed to do the following conditional comparison: if the ounce of gold was worth $17K USD, then it would be comparable to the combined M1 money supply of the following countries:

  1. China
  2. Japan
  3. USA
  4. UE

Therefore, based on this, we can see that the problem of the quantity of gold in the world is a real issue at all.

Conclusion And Final Words

As we can see, after checking history and real facts, the gold-standard system has several advantages that the current FIAT system cannot offer. However, the supports claim that a well-run FIAT system would beat a well-run gold standard any day of week, but the question is: have we ever seen such a thing like a well-run fiat system? Debt creates increasing, inflation is skyrocketing, people are suffering the consequences and yet those very same supporters cannot see the problem.

Maybe, just maybe, it may be about time to rewind and learn a little bit more about the past.

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September 25, 2017, 9:36 am

The Four Worst Financial Millennial Mistakes

by: The Financial Blogger    Category: Personal Finance

Millennials differ in many ways from any other generation in recorded history. One critical way that they operate differently is in how they make financial decisions. As the first generation not to have classes like handling personal finances built into their education, and having all but doing away with paper money, Millennials are changing the way that Americans spend, save, and invest their money.

There are things that you can do to secure your financial future and others that can drive a nail through it. The problem for the Millennial crowd is that not all of them really understand the difference, and according to a credit union in Winnipeg, they are making critical financial mistakes that could potentially affect their resources for the future. The good news is that Millennials are just starting out in the financial world, and even if they make these four major financial mistakes, there is plenty of time to correct and turn them around.

They don’t take full advantage of what’s offered

It is a hard reality, but Millennials might not have the assurance of  social security in their later years. In fact, many might lose their safety net if things don’t turn around. That means that for a Millennial, things like 401(k)s and retirement funds are more critical than ever before. Once considered an option just to have some extra money, it is important for the Millennial generation to understand that they will likely be paying for their retirement themselves, no matter how much they are paying into the system now.

Many who are just entering the workforce are not taking advantage of retirement options. In fact, statistics show that only about 30% of young workers sign up for retirement savings options. The participation is so low that many companies are automatically signing their employees up, with 84% of twenty-somethings being enrolled automatically.  If you have the option, it is always a good idea to maximize pension or retirement savings accounts to secure your future.

Making earning the goal

Millennials have a new mindset when it comes to their occupation. Many have their eyes on the prize, but the prize isn’t to find something you love and do it for a lifetime. Many employees are going into industries purely because they will make a lot of money. What an older perspective knows is that industries come and go. If you want to be financially secure for a lifetime, you have to find something you love to do and stick with it.

When you choose something because of money, you have a tendency to jump around a lot, trying to find fulfillment. That means that you don’t ever really achieve success, either through your career path or your need for emotional fulfillment. If you want to ensure that you are set for your financial future, find what you love and create a life around it, instead of thinking you will work super hard for a couple of years for a big paycheck and then retire.

Not investing or saving early or enough

Those entering the workforce are having a hard enough time paying off their huge student loan debts, so the thought of putting money away seems almost laughable. That is leaving them without a safety net, spending outside their means, and landing them in a slew of trouble when they need money.

If you aren’t putting any money away for even a rainy day, you are setting yourself up for disaster. Just $20 a month is enough at least to start your savings. Incremental savings is what it is all about. It is never too early or too little to put some money away in your piggy bank for when you need it most.

When you do have a little amount, it is also a good idea to invest it. Not only will that make your money grow, but if you lock it up tight in an investment, then you’ve removed the temptation to spend it. Small investments are an excellent way to grow wealth.

Thinking about the quick buck

Millennials are always looking for the big payoff instead of earning a dollar’s wage. The internet and social media have taken the reality away from many young workers entering the workforce. Instead of working hard to achieve their goals and building a career, many bounce around looking for the new fad or get-rich-quick scheme. Again, it is much smarter to remember that slow and steady wins the race, instead of being the hare who falls asleep.

If you are a Millennial, the good news is that you have plenty of time to make the right financial decisions to grow wealth and to protect yourself for the future. If you correct these four mistakes, your outlook will be looking up.

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