Life Insurance - Are You Ready?

Do you know if you need life insurance? To be sure your loved ones are taken care of, there are a few questions you need to answer to determine your level of need.

What expenses will you leave behind?
If something happened to you today, how much debt would you leave behind? How much do you owe today for utilities, credit cards, medical bills, car loan, mortgage? At the very least, you should have a policy that will cover these basic needs.

Does anyone depend on you?
Aside from any pets you have living with you, do you have anyone who depends on you for their day-to-day living needs? Spouse? Children? Anyone else? If so, protect their financial future by giving them a block of money that will replace your annual income.

What future needs will your dependents have?
In addition to replacing your lost income, you have the chance to provide for your dependents future financial needs. You can plan for and provide a college fund or provide for possible future wedding expenses.

Have you saved enough money to take care of the above-mentioned needs? If you answered “yes” to any of the above questions, there is one more to answer. Here is a good model you can use to determine your life insurance need.

Current debt + Anticipated future needs + Income principal

Current debt would be one month’s worth of your average monthly utilities, total credit card debts, medical bills, loans, mortgage, or anything else you want to be paid off in the event of your death.

Anticipated future needs include expenses for college, wedding expenses, etc.

Income principal should be arrived at by taking your current annual income and divide that number by .01 (1%). The theory here is that a large enough block of money should be provided so that 1% can be withdrawn as a replacement of your income. Most investments return a higher interest rate than 1% so if that income block returns, say 5%, and your dependents are able to live off 1%, that equals a 4% raise which will help defray the effects of inflation.

The best rates for life insurance are when you are young and healthy. You might be able to improve your health, but so far there is no way to turn back the clock and make ourselves younger. Get your quote for life insurance and protect your loved ones today.

Debt Consolidation - 4 Benefits

Debt consolidation is the process of combining all your monthly debt payments into one manageable monthly payment. There are at least four benefits well worth consideration when trying to decide the best way to get out of debt.

For any debt plan to work, you first have to fully commit to avoid taking on any extra debt while you are trying to dig your way out of the current situation. If you’re ready to make that commitment and stick to it, then you’re ready to be free of your bad debts. Read on…

In debt consolidation, you pick a specific day of each month that you would like to make your payment. Part of the stress of carrying debt is remembering to pay everyone on time. When that doesn’t happen, you incur late charges, over the limit charges, and your once low interest rate may skyrocket because you are now perceived as a higher risk. With a debt consolidation plan, you make only one debt payment per month, which is usually set up as an automatic draft from your bank account.

Debt consolidation also brings welcome stress relief because you condense multiple debt payments into one manageable monthly payment. Now you don’t have to remember multiple payments. As long as you make your one debt payment per month for the life of the plan, all is well.

Debt consolidation also lowers your overall debt payment. People who enter into debt consolidation plans usually have several high interest debts they are trying to overcome. Depending on the method of consolidation (professional help, consolidation loan, refinance, etc.) the repayment terms of your loan are set for a fixed period and the interest rate is considerably lower.

Perhaps the best benefit of debt consolidation is lowered interest. Whether you secure a debt consolidation loan, complete a cash-out refinance, or work with a not-for-profit agency that has established relationships with your creditors, paying less interest on your debt means more money stays in your pocket. Also, more of your hard earned income goes directly to the principal balance. This allows you to pay your debts quicker and with less interest charged over the life of the plan.

Debt Settlement - 3 Important Considerations

Are you still afraid to answer phone calls from numbers you don’t recognize? Take a look at debt settlement after considering 3 important points of which you need to be aware. Debt settlement is a viable option when you’re still trying to make monthly payments only to see your balances continually rise and the ol’ pick-up and hang-up routine hasn’t scared away the debt collectors.

Debt settlement is a program where you hire a company to act on your behalf in settling your debts with your creditors and may be a strong consideration for you if you owe a high dollar amount (10k+) in unsecured debt.. Typically these debts have already landed in a debt collection agency. The program works like this: you stop making monthly payments to your creditors and pay instead to a savings or escrow account set up by your debt settlement company. They negotiate with your creditors and use the accumulated funds to settle your debts. Sounds good doesn’t it? There are negative impacts to debt settlement programs you need to be aware of before you begin.

#1-Your credit record will take a negative hit
When you stop making payments to your creditors, that is going to show as a negative mark on your credit record. If you are to the point of using a debt settlement company, your credit record has probably already absorbed several negative hits and you may be thinking that it can’t get any worse. Well, it certainly can. Read on to the next section.

#2-Watch out for the summons
Any of your creditors may elect to turn the debt over to an attorney in your area who will secure the debt as a judgement. No, you don’t have to own assets to get a judgement filed against you. To avoid this happening to you, make sure your debt settlement company is actively working your file and not making ridiculous offers for settlement that are damaging to your efforts. If they keep making offers that are too low and decide instead to sit back and let your escrow account get a little bigger, that is a good way to wear out the patience of the creditor. Next thing you know, someone you have never seen before walks up to you at your kids baseball game and hands you an invitation to defend yourself in in court. If it gets to this point, settlement is no longer an option. It’s balance in full and you may even get awarded the attorney fees and court fees it your creditors had to pay to sue you.

#3-The forgiven amount of the debt remains on your credit
Debt collection agencies used to have a great tool to entice debtors to settle. After the money changed hands, creditors would show the debt on as “settled in full” on your credit record and show a zero balance. Not anymore. The forgiven amount remains on your credit record. One other little known fact: you get a 1099 at the end of the calendar year if the forgiven amount is $600 or over. You may have been forgiven a large part of your debt, but now you have an obligation to the IRS to pay income tax on the forgiven amount.

Still a good option
Debt settlement is still a good option for those facing insurmountable principle balances and interest charges that just keep piling up. Just make sure your debt settlement company is making fair offers based on your ability to pay and not based on how much they want to try to stick it to your creditors. Also be sure to get letters from your creditors showing your account as being settled and hang on to those letters forever. Despite the best efforts, sometimes things fall through the cracks and you get a call from someone demanding payment on a debt you already settled. If that happens, dig out the original settlement letter and fax it to them. Case closed.

Health Savings Account (HSA)

Health Savings Account (HSA) – Should I Get One?
For people who are tired of the high cost of health insurance, starting a Health Savings Account (HSA) is a great option for consideration. Some don’t even carry insurance because they have the ability to self-insure. It only takes one catastrophic event to put you in the hospital and drain you financially. A health savings account (HSA) is an excellent tool that gives you portable health coverage at a low monthly cost, tax reduction, and tax-free savings.

Lower you health insurance premium
One requirement of an HSA is that you carry a high deductible health plan (HDHP). So, the higher the deductible, the lower your monthly premium. In most cases, your monthly premium can be lowered by at least 25% up to 50% and higher depending on the cost of the health plan you have currently.

Make your insurance plan portable
Most people have health coverage through their employer. This has been a great benefit for many years and has enabled employers to attract and retain talented employees. Some, however, find themselves staying with a job they are not satisfied with simply because of the health plan. By taking control of your own health plan, you gain a certain amount of freedom in knowing that you don’t have to stay in a job for fear of losing your health coverage.

Reduce your taxes
Contributions to your health savings account are 100% tax deductible. For every dollar you put into your account, you reduce your taxable income. Since your taxable income is reduced because it is being sheltered in an HSA, that eases your tax burden every April 15th. In addition, all health savings account distributions are tax-free as long as the funds are spent for covered expenses.

Build savings
Possibly the best benefit of a health savings account are the savings you can build over time. HSA contributions can be invested in an FDIC insured account or in a wide variety of investments including mutual funds, stocks, or bonds that will earn even higher interest rates. Interest earnings in an HSA are also completely tax free. Once you retire, you can use the account for ANYTHING tax free.

Consider the possibilities
If a family of 4 started an HSA and contributed the maximum allowable each year (currently $5450) invested at 4%, they would have a net gain of approximately $681 at the end of year #2. So what? That gain is what you would have left over after you subtract the annual premium and $1,000 in medical expenses from interest earned. What happened? In essence, your insurance coverage cost you nothing.