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Jacob Sensible is a financial advisor with decades of experience in the financial planning industry.  His journey into finance began out of necessity, stepping up to support his grandfather during a health crisis. This period not only grounded him in the essentials of stock analysis, investment strategies, and the critical roles of insurance and trusts in asset preservation but also instilled a comprehensive understanding of financial markets and wealth management.  Jacob can be reached at: jake.sensiba@mygfpartner.com.

Ways to Increase your Wealth

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Wealth, what is it? In a sense, it’s your net worth. Net worth is your assets minus your liabilities.

For a comfortable retirement, you’ll want to see that number tick upwards over the course of your working career.

But how to do you increase your wealth? Are there certain strategies that work better than others?

Let’s take a deep dive into some strategies for growing your wealth.

Decrease Expenses

You want to increase your wealth, decrease your expenses. I can probably list several things you’re wasting money on.

  1. Restaurant food
  2. Drinks at the bar
  3. Cable
  4. Movies at the theater
  5. Interest rate charges
  6. Transportation
  7. Clothing
  8. Frivolous purchases

It’s easy to reduce costs here. Restaurant food and bars – stop going out so much. Cable – cut the cord and sign up for Netflix, Hulu, or go to the library.

Movies at the theater – buy the movie or rent it from the library. Interest rate charges – negotiate your rate, use a balance transfer, or eliminate your debt.

Transportation – use public transport, walk, or ride your bike. Frivolous purchases – wait at least a day before you decide to buy.

Earn More

Ask for a raise, bust your butt to earn a promotion, which usually translates to higher pay, start a side hustle, become a freelancer, etc. There are several ways available to increase your earning power:

  • Drive for Uber or Lyft
  • Become a Tasker on TaskRabbit
  • Get paid for your skills – UpWork or Fiverr
  • Here’s a list of the most popular side hustles – Budgets are Sexy.

Real Estate

Real estate is a great way to increase your wealth. One of the more popular ways to do this is through rental properties.

Do your homework when looking for properties, you’ll want to look at:

  1. Location
  2. School district
  3. Real estate valuation
  4. Property taxes
  5. Community amenities
  6. Current listings and vacancies
  7. Natural disasters

If you find a good property, plan for a 20% down payment to avoid PMI. Once the rent starts flowing, you’ll find your wealth will climb. As you pay down the mortgage, the equity will increase, giving you more assets than liabilities.

Pay down debt

Debt is the number 1 detractor from building wealth. Not only does it prevent you from saving, investing, and/or acquiring assets, but you’re probably wasting money on interest payments.

You need to do what you can to get rid of your debt so you can start building wealth. As you pay off your debt, your wealth will increase because you will reduce your liabilities, which makes your net worth (aka wealth) go up.

In a general sense, there are five ways to help reduce your debt

  1. Debt snowball – Payoff your lowest balance first. Pay the minimum to all of your other balances and pay the most you can towards your smallest balance. Once that balance is paid off, redirect that money to the next lowest balance, and so on.
  2. Debt avalanche – Pay down your highest interest debt first. Pay the minimum to all of your other balances and pay the most you can towards your highest interest debt. Once that is paid off, redirect that money to your next highest balance.
  3. Balance transfer – There are many credit card companies that will offer an interest-free balance transfer. Take advantage of this if you have a credit card balance with a very high interest rate. This will save a lot of money on interest payments.
  4. Personal loan – Usually for credit card consolidation. Most credit card interest rates are crazy high. You get a personal loan to effectively lower your average interest rate. This will only work for you if you have decent credit, however, so do your homework.
  5. Refinance – This applies to students loan and mortgages (well really any loan, but these are the most common). You refinance to lower your interest rate, and sometimes (as is the case with student loans) to consolidate.

Increase your savings rate

A very common problem in this country is that people aren’t saving enough. The average savings rate in the U.S. is around 3% (source). That is a far cry from what people really need to save.

So what we have to do is increase our savings incrementally. Start with the highest percentage of your income you can possibly save. If that 1% that’s fine. If it’s 10%, that’s fine too. Just do what you can.

From there, we will take a few months to get used to that extra 1% or 10% not being there. Once you are familiar with less money, bump that percentage up 1. And once you get used to that, bump it up again.

The key is to make small positive changes for a lifetime. A small change each day or week for the rest of your life? You’ll see HUGE results from this.

Utilize retirement accounts

Retirement accounts are awesome. It’s a very effective way to save for retirement.

Plans for individuals – Traditional IRA and Roth IRA (Here to learn more about these)

Plans for businesses – 401(k) and SIMPLE IRA are the two most common. (Learn more here and here).

All four of these vehicles give your retirement savings the ability to grow tax-deferred. Meaning you don’t pay taxes while the money is inside the account. Additionally, three of these four could help lower your taxable income.

The two business plans are contributed to with pre-tax money. More money in the retirement account means less being taxes. The traditional IRA is contributed to with post-tax money, but you could receive a tax-deduction IF you qualify.

Roth IRA you use post-tax money, don’t receive a deduction or a reduction in taxable income, BUT your withdrawals will be tax-free.

Please look at those links for all the information and rules for each plan.

Develop a “delayed gratification” mindset

Having a delayed gratification mindset is so important when planning for your future. Our default behavior is to do the things that make us feel good right now, but it’s almost always in our best interest to delay that good feeling for a better one down the road.

You want that ice cream cone, but it will be more beneficial to your future self if you forego it and eat something healthy instead. You’d like to buy a new video game, but it would behoove you to buy a book, a course, or invest it.

Improve Financial Literacy

If you want to grow your wealth, you have to know what you are doing. Learn about budgets, retirement plans, and investing. Learn about assets and liabilities, and the various ways you can make money work for you.

If you know how things work, it’ll make it easier for you to follow through.

Automate

Automation can play a vital role in your quest for growing your wealth. Set your bills to auto-pay. This allows you to focus on more important things.

Also, automate your savings. Have it done right away so you don’t have the opportunity to spend it. Go next level with this and set your savings to automatically increase every so often. You’ll save more without even having to think about it.

Invest in yourself

Ben Franklin once said, “An investment in knowledge pays the best interest.” If you want to get promoted at work, get paid more for your skills, or just want to improve your life, invest in yourself.

Read books, take courses, listen to podcasts, watch YouTube videos, or find a mentor.

There is so much knowledge out there and there are so many opportunities to improve your life. Take the initiative and go get it!

Conclusion

Growing your wealth can be a challenging endeavor, but by using many of these tips, you can be on your way to making some very positive changes.

To learn more about growing your wealth and for our disclosures, visit www.crgfinancailservices.com.

 

If reading this blog post makes you want to try your hand at blogging, we have good news for you; you can do exactly that on Saving Advice. Just click here to get started.

Ultimate Estate Planning Guide

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Estate planning is a very important step in the financial planning process.

What does it mean, what are the steps, and what’s the most effective way to plan?

Let’s dive into these questions in this estate planning guide.

What is it?

Estate planning is the process of figuring out what you would like to happen to your assets when you pass away. Assets include retirement accounts, non-retirement accounts, and physical assets (house, cars, etc.).

What should I do?

  • Get an inventory – physical and non-physical items. Physical items can include property (primary residence, rental property, land, etc.), vehicles (cars, boats, recreational vehicles, etc.), and precious metals (gold bullion, silver bullion, etc.).
  • Make a list of all debts – Mortgage, personal loans, car loans, credit card debt, etc.
  • Make a charity list – Organizations and/or charities you would like to leave a specific amount of assets for.
  • Make a few copies and send these lists to your estate administrator (more on this below)
  • Review retirement accounts – Retirement accounts include traditional IRA, Roth IRA, Rollover IRA, and employer-sponsored plans like 401(k), SIMPLE IRA, SEP IRA, 403(b), and 457. (Click here to learn more about these plans). Whichever account(s) you have, make sure the beneficiary information is up to date.
  • Review life insurance policies and annuities – Same go for any insurance policies/annuities you may have. Make sure the beneficiaries are accurate and up to date.
  • Assign Transfer on Death (TOD) designations to non-retirement accounts. A non-retirement account includes individual brokerage accounts, savings accounts, money markets, CDs, etc.
  • Create a will or a trust (more on these below)
  • Get a list of accounts and passwords – any online account you may have, create a list of accounts, usernames, and passwords. This makes it easy for the person in charge of your estate (executor) to cancel all these accounts.
  • Visit some professionals – Meet with a financial professional and an estate attorney so they can review your plan and help you with any corrections or things that you’ve missed.
  • Consolidate your accounts – If you have several bank accounts or retirement plans from past employers, consolidate them into one account. This makes it much easier on the executor.
  • Select who you want to get what – Specify who you’d like to give your house too, cars, other physical assets, and money. You like to think that your family won’t fight over who gets what, but it happens very often, so take your time here.
  • Write a living will – A living will is a document that you put together that states what medical treatment you would like to have done and what medical treatment you would not like to have done if you are incapacitated and/or unable to make any decisions.
  • Establish power of attorney – A power of attorney is someone that you trust to make decisions for you. There is a medical power of attorney and a financial power of attorney.

Estate administrator

The person in charge of your estate. If you have a will, this person is called the executor. If you have trust, this person is called a trustee. If there is no person named in the will as executor and/or there is no trust/trustee named, the courts will appoint a personal representative.

This person collects assets, pays debts, and pays out any remaining assets. If a will or trust has been drafted, then the executor or trustee has to act in accordance with the will or trust.

Wills

A will is a legal document created by you and your estate attorney that specifies who will be your executor, the beneficiaries that will receive the assets that haven’t been specified yet (retirement accounts and TOD designations), and when those assets will be transferred.

Trusts

A trust is similar to a will in regards to it being the “playbook” on who is in charge and where your assets will go. It is different, however, because you can transfer ownership of assets to a trust and any asset owned by the trust will avoid the probate process.

Probate

A court-based process where the will (if one was written) is verified of its validity. If it is, the court then goes ahead and appoints the executor named in the will as the estate administrator. This gives that person the ability to act in accordance with the will to distribute assets.

If there is no will, then the deceased died intestate. The court then appoints an estate administrator and they distribute the deceased assets in accordance with state law. They are also tasked with tracking down heirs of the deceased.

This can be an expensive process, however, so planning ahead to avoid probate as much as you can is always beneficial.

Conclusion

As I said in the beginning, estate planning is an important step in your financial planning process. Hopefully, you’ve learned a lot about what’s involved and what you need to do to sure up your estate plan.

For more information about estate planning and for our disclosures, visit www.crgfinancialservices.com.

 

If reading this blog post makes you want to try your hand at blogging, we have good news for you; you can do exactly that on Saving Advice. Just click here to get started.

What’s a Tariff and How Will it Affect Me?

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Tariff. It’s a word that you’ve probably hear a lot lately, but do you know what it means, how it’s applied, and how it’ll affect you?

What is a tariff?

In its most basic form, a tariff is a tax on goods imported from other countries

Why are they used?

There could be several reasons why a country would impose tariffs on certain goods and/or certain countries. Here are several of them:

  • Protecting employment – This is the one you are hearing about right now. President Trump wants to place tariffs on Chinese made goods. This will increase the cost of goods, which could make employers manufacture the goods themselves, which could warrant more hiring and more working Americans.
  • Protecting consumers – Countries levy tariffs for this reason if they feel a product coming from another country could danger domestic consumers. For example, if we import chicken and find out this chicken could be tainted or harmful, a tariff could be assessed to this, and force U.S. citizens to buy domestically.
  • Infant industries – If a country has an industry or sector that’s just getting started, a country could impose tariffs on similar products in order to limit competition and help that new industry grow.
  • National Security – More often than not, this has to do with defense. Most countries will manufacture and supply it’s defenses with their own products for obvious reasons.
  • Retaliation – Like what we’re seeing right now. Countries will impose tariffs in response to tariffs being imposed on them.

How do they affect U.S. consumers?

Tariffs affect consumers in a few ways. The first and biggest impact is that goods and services could cost more.

For example, President Trump put a tariff on steel and aluminum. You know what uses a lot of steel and aluminum? Vehicles. The makers of those vehicles will then pass the increased cost down to the consumer.

Personal cars, farming equipment, etc. will now cost more as a result of those tariffs.

The other effect it could have is employment. As mentioned before, if imported goods cost as much or more as domestic products (post-tariffs) it makes U.S. employers manufacture those goods in The States.

With the rapid increase in product creation, these employers will need to hire workers to create these products.

On the flip side, it could also negatively affect employment. With the increased cost of goods, companies could lay off workers in order to reduce the impact of that increase in expenses.

How do they affect the stock market?

We are already seeing an impact on the market. People hear that their costs will go up, or they hear the phrase “trade war,” and they start to worry. We’ve seen an increase in volatility this year, and a lot of that is due to these talks.

Here’s the thing, a healthy majority of investing is psychological. So any news that frightens investors will have an impact on the stock market. Scared people sell, and level-headed and/or institutional investors buy at lower prices, hence the dramatic up and down movements.

Companies that import a lot of goods will see an increase in cost, which could hurt their bottom line. Also, companies that export a lot of goods could see decreased demand due to the retaliatory tariffs put on by China and other countries. Again, bottom line.

A lot of investors look at that bottom line to make investment decisions. If they see a decrease in revenues, they could sell.

Additionally, the tariffs placed by other countries on U.S. products could have a negative impact on entire industries/sectors, which could hurt the companies in those industries and their stocks as a result.

Conclusion

No matter your opinion of President Trump, these tariffs are a net negative for the consumer. The increase in costs to consumers could be much greater than the increase in domestic employment, which is one of the goals with these tariffs.

Whatever happens with this mess, it’s important to know what the tariffs will impact and how consumers, industries, and the economy will be affected.

For more information on how to plan for these tariffs, and for our disclosure visit www.crgfinancialservices.com.

Must Know Tips When Buying and Selling a House

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Seeing as the housing market is incredibly hot right now, I found it appropriate to talk about buying and selling a house.

This is a very big decision and can be an extremely stressful endeavor. You can alleviate some of that stress if you know what to do and what to expect.

Buying

Do your homework

Whether you are building new or buying an existing property, you need to do your homework. Hire reputable contractors, realtors, inspectors, etc. You can cheap out with these services, but over the long-term, it’ll cost you.

Always do the inspection

This is a must, must! The inspection can save you so much money! Say you visit a house and love it, but want to get in ASAP, so you skip the inspection. After a few months, you notice some significant shifting and cracking.

Guess what, you need your foundation fixed. That could run you, depending on the severity of the issue, $20,000 or more.

Another example and costly example would be a roof replacement.

Not only can it save you money, but some issues found in the inspection can be added to your contract. If the inspector comes back with some issues, you can include that in your amended contract, and have the seller fix whatever the issue is before closing.

Finances

There are many financial conditions that come into play when buying a house.

  • Hidden costs – Inspection, appraisal, down payment, earnest money, etc.
    • Once you own it – property taxes, insurance, utilities, maintenance, etc.
  • Pre-approval – Get this done by a lender before you buy. If you have a pre-approval when you make an offer, your offer is more competitive
  • Improve your credit – Having your credit in the best possible condition is a must. A higher credit rating can lower your rate and could increase the amount you’re approved for.
  • Stay on budget – Don’t buy more house than you can afford. Live within your means and look for a price that’s below your pre-approval amount.
  • Avoid big purchases and new credit – This goes along with the rate you get and the approval process.
  • Debt/income ratio – This is one of the big parts in the approval process for your mortgage. The lender compares your income to all of your outstanding debt, along with what your possible mortgage payment will be. Income/debt ratio should be 43% or below.
  • What you need – W2s, tax returns, paycheck stubs, verification of employment

Selling

Clean and declutter

Make your home spotless. Vacuum and put lines in the carpet if you can. Sweep and scrub floors. Clean windows. Make sure the kitchen and bathrooms are especially clean.

Take pictures and art off of the walls, and leave minimal amounts of furniture. People want to walk into a home and imagine their art and their furniture. They want to “make themselves at home,” and imagine what it would be like if they lived there.

Fix the big issues

This could come out during the inspection too, but fix blatant, big issues. Roof repairs/replacement, furnaces, air conditioning units, etc. The goal is for someone to buy your house, so if you have the big issues taken care of, people have fewer excuses to say yes.

Curb appeal

Trim the hedging, cut the grasses, and make that garden look perfect. You need people to say wow before they walk in. If they love the house before they step inside, they’ll be in a better state of mind going in.

If your yard is ugly and they know it, they’ve already been disappointed, and everything they see inside won’t be as impressive.

Get the word out

Put that house on every and any social media, website, etc. as you can. Hopefully, your realtor does a lot of this for you, but the more people know about it the better.

Make sure you tell your neighbors also because the people who buy your house will, obviously, be living next to your neighbors. They want good people next door. Preferably, someone they know and trust.

Conclusion

Buying and/or selling a home is a very important decision, and probably the biggest purchase you’ll ever make.

Use these tips to help you through the process.

To learn more about the financial aspect of buying or selling a home, and for our disclosures, visit www.crgfinancialservices.com.

 

If reading this blog post makes you want to try your hand at blogging, we have good news for you; you can do exactly that on Saving Advice. Just click here to get started.

How does Investment Strategy Change with Age?

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As we all know, as we age and our lives change. Our financial responsibilities and investment strategies change along with it.

In most cases, there are two truths to abide by. You have saved as much as you can and invest according to your risk tolerance, time horizon, and goals.

But what else is there? How do my financial life and my investment strategy change with time?

Starting career

Either you are just out of school or have been in the workforce for a few years. Regardless of which path you came from, there are two things on your list. Get rid of debt, or at least get it under control, and save for retirement.

There are several ways to plan for debt repayment.

  • Debt Snowball
  • Debt Avalanche
  • Balance transfers (credit cards)
  • Personal Loan (loan consolidation)
  • Refinance (student loans)

Check out this post on paying off your debt, here.

Step two is saving for retirement. If the company you work for offers a retirement plan, sign up for it. Max out your contributions if you can, but at the very least, contribute enough to get the employer match (if it’s offered).

Also, open a Roth IRA. If you have a little extra, contribute some to a Roth IRA in addition to your workplace plan.

Your investments. Time is your best friend at this point. Most of your investment allocation should be focused towards growth. Don’t put all of your eggs in one basket, diversify among stocks and bonds.

Again, the majority (at least 70%) of your portfolio should be in stocks, in some form or another.

Starting family

If you’re like the average American, your family starts to form around your 30th birthday. Hopefully, you’ve got a good head start on paying down your debt and saving for your retirement. Continue on that path.

With a family, comes saving for your kid’s college education, as well as other expenses (house, car, etc.). Contribute a little every month to a 529 College Savings Plan. The funds within this account can be invested aggressively, similar to your allocation in your twenties.

Your retirement savings is still in a good spot. Similar to your twenties, regarding the stock and bond allocation.

One last thing, get some disability and life insurance. If you have people that count on you, you need to protect them.

High earning years

More than likely, this will be your forties and fifties. At this point in your life, the average American is in their peak earning years, so take advantage of that and increase your retirement savings.

This will also be the time that your kids either go off to college or enter the workforce. Congratulations (kind of) you are empty nesters. You no longer have a college education to save for. More can go towards your retirement.

More than likely, though, you will have miscellaneous expenses from your kids that you will continue to pay for.

Your investment strategy will change slightly. You are getting closer to retirement so it’s time to start protecting what you’ve saved. A little less in stocks and a little more in bonds. Think 60/40 or 50/50.

Near retirement

You are in the home stretch! At this point, your debts (including your house, hopefully) should be paid off. All assets and your retirement savings should be looking healthy.

Your investment allocation will be similar to the last section. Definitely 50/50 if not 40/60, stocks to bonds.

Retirement

Congratulations, you’ve made it to your retirement. This can be liberating for some, but for others, this is an emotional challenge.

You’ve spent the last 40 or so years saving for retirement and now you are expected to start spending it. This is very tough for a lot of people.

From my experience and in my opinion, you should retain some sort of activity. Something that gets you out of the house, something that forces you to socialize, and something that makes you use your brain.

Staying social and sharp mentally could add some extra time to your life.

Your investments should be conservative. At least 40/60, but the more conservative the better. And it’s usually not a bad idea to keep some of your savings in cash, for emergencies such as health expenses (which will certainly go up at this point).

You don’t have many or any, more chances to earn more money, so it’s very important that you protect what you’ve saved.

Conclusion

The above information can be very useful to the average person. Paying off your debt and making your retirement savings a priority is very important.

Unfortunately, there is a retirement savings crisis in America. People aren’t saving nearly enough for retirement. They are counting on other sources, like Social Security or pensions to fund their retirement.

This isn’t enough. You won’t receive enough from Social Security to support yourself and pensions are few and far between, nowadays. We all need to do a better job of saving.

This article was created for informational purposes only. The above items are not to be taken for personal financial advice. Please consult with a professional about your personal situation.

To learn more about retirement savings and investing, and for our disclosures, visit our website: www.crgfinancialservices.com.

 

If reading this blog post makes you want to try your hand at blogging, we have good news for you; you can do exactly that on Saving Advice. Just click here to get started.

The Difference between an HSA and an FSA?

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Introduction

Nowadays, health insurance and the medical care you receive are expensive. There are some products available to help you with those expenses, however. This is great for people who need to make sure that they are covered for their medical needs. It is lucky that we have access to these services as well as emergency care for those times when we need to be seen quickly. If you are unsure of where your centers and clinics are near you, you may want to look into ‘urgent care near me‘ online, to find one in your location. But that is a discussion for another time. Right now we need to discuss how to deal with your medical outgoings in the best way possible.

Enter in the HSA and the FSA. These two products are making it easier for consumers to save for and pay for medical care.

But how does each of them work? Which one is better?

What’s an HSA?

An HSA is a Health Savings Account. These types of accounts are available to people who have High-Deductible Health Plans (HDHP).

An HDHP is defined as a health insurance plan with a deductible of $1,350 for individuals and $2,700 for families, and an out-of-pocket maximum of $6,650 and $13,300, respectively.

An HSA is sometimes offered by the insurance company that provides the health insurance, but can often be applied for at many financial institutions.

An HSA has several key characteristics.

  • Contributions are made pre-tax or tax-deductible
  • Assets grow tax-free
  • Funds used on qualified medical expenses aren’t taxed upon withdrawal/use
  • The maximum contribution is $3,450 for individuals and $6,900 for families
    • Contribution max increases by $1,000 at age 55 or older
  • Can no longer contribute once 65 and on Medicare
  • Can invest contributions in mutual funds, stocks, and other investment products
  • Unused funds can be carried over year-after-year

Qualified medical expenses include the following.

  • Medical services
  • Emergency medical services
  • Medical equipment

You can find a complete list of eligible expenses here.

What’s an FSA?

An FSA is a Flexible Spending Account. Only employees of eligible employers qualify for an FSA.

There are several characteristics of an FSA.

  • Use it you lose it – Unused funds do not carry over from one year to the next
  • Contributions are made pre-tax via payroll deduction
  • Contribution maximum is $2,650. Your spouse can contribute an additional $2,650 too
  • Can be used on qualified expenses
    • Deductibles
    • Copayments
    • Medical services
    • Medical equipment
    • Prescription medication
    • Can’t be used on premiums
    • See the full list of qualified expenses here.
  • You may have two extra options available to you depending on your employer
    • You have an extra 2 ½ months to use up funds from the previous year
    • You can carry over $500 from the previous year

Which is right for you?

It very much depends on what is available to you. If you don’t have a High deductible health plan, then you are ineligible for an HSA. If your employer doesn’t offer an FSA, I’m sorry, that’s not available to you either.

If you have the option to pick between the two, most often I would lean towards the HSA and there are a few reasons why.

  • You are able to contribute more, which gives you more money to use on qualified expenses and could effectively lower your tax liability.
  • You can carry over unused contributions year-after-year.
  • This can be used as a retirement savings vehicle. Decades of contributions and compounding returns could give you a sizeable amount to use on medical expenses in retirement

You should not use an FSA if you are in good health. An FSA is more appropriate for someone with recurring and somewhat predictable medical expenses. If you are healthy, the odds of you contributing to an FSA and not using the funds, are pretty high.

Conclusion

Health insurance and medical care are expensive. Having an FSA or an HSA available to lessen the blow of those expenses is HUGE.

It is very important to know which one you can use, and which one would be the most beneficial to you.

Use this information to carefully select and effectively use what’s available to you.

To learn more about saving for medical expenses and for our disclosures go to www.crgfinancialservices.com.

 

Types of Life Insurance

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Insurance can take many forms, but one of the most important and often most overlooked is life insurance.

If you have a family or anyone that relies on you to support them, you need life insurance. Even if you don’t have a family, getting coverage now when it’s less expensive is a better alternative than waiting until you have a family, needing coverage, and paying more for it.

There are several different types of life insurance, however, and you need to know what they are before you can select the one that meets your needs.

What are the different kinds?

  • Term Life
    • Renewable
    • Level term
    • Decreasing Term
  • Whole Life
  • Universal Life
    • Guaranteed Universal
    • Indexed Universal
    • Variable Universal
  • Variable
  • Simple Issue
  • Guaranteed Issue

What are the characteristics?

  • Term – This is the cheapest form of life insurance you can buy. There are no bells and whistles to this type of policy. You are paying for the death benefit, and that’s it. It can expire with term lengths ranging from 5 to 30 years.
    • Renewable term – Smaller term lengths, but the policy automatically renews at the end of each term. There is a step up in premium at each renewal, though.
    • Level term – Most common form of term insurance. Death benefit and premium payments stay the same over the life of the policy.
    • Decreasing term – Death benefit and premium payment decrease over the life of the policy. People buy this because as they accrue more assets, the less they think they’ll need for a death benefit to support their family.
  • Whole life – Is one of the more expensive forms of life insurance. You are insured for your entire life, and there are no expiration dates. Additionally, the policy will build up cash value through an investment component. The average rate of return is around 2%-3%.
  • Guaranteed Universal – Cheaper than most other types of life insurance, except for term. Generates little cash value, less than whole life. Late payments can forfeit the policy, wasting every past premium payment. The death benefit will not change.
  • Indexed universal life – Cash value component is marked to an index, like the S&P 500. Upon inception, you decide on the participation rate. If you select 80%, you will participate in 80% of the index. For example, if the market goes up 10%, you only go up 8%. However, if the market goes down 10%, you don’t go backward. Your return for that period is 0%. Additionally, there can be a cap placed on the amount of gains that you make. Premium payments and death benefit can be flexible.
  • Variable Universal – Cash value is tied to an investment account. Requires hands-on management. Can take partial distributions or loans from the cash value. Unlike the indexed universal, the cash value in a variable policy can go backward if the investment account declines.
  • Simple issue – All of the above policies require a medical examination. This is part of the underwriting process and helps the insurance company calculate your insurability. A simple issue policy does not require an examination. You take a questionnaire and that is it. However, you can be turned down depending on your answers. If you lie, you can be charged with fraud if caught. Don’t lie.
  • Guaranteed issue – This is the most expensive form of insurance you can get. Reason being is there is no underwriting of any kind. You get the policy you apply for. The coverage amounts/death benefits available are low compared to other coverages, however.
  • There are a number of smaller or niche types of insurance, a good example of these are marriage insurance, burial insurance, or final expenses insurance.

Which one should you buy?

Good question. I guess it all depends on what you are willing to pay and the features you want in an insurance policy.

In my opinion, life insurance should be viewed as any other type of insurance policy. You are paying for protection and that should be it.

If you want money to accrue in a cash value account, determine what it would cost for a whole life policy, compare that to the cost of a term life, and invest the difference between the two.

However, there are certain life insurance companies, usually the bigger, better-known ones, that have made dividend payments to whole life insurance customers.

Over the life of the policy, that dividend can grow large enough to where it actually pays your premium for you. But this isn’t the case with all customers and dividends are not guaranteed.

There are generally two things to consider when picking out a policy.

One, what are you looking for? Do you just want straight life insurance? Or are you looking for a few more features, like cash value or a chance for growth?

Two, what can you afford? Regardless, you should have some form of insurance coverage, especially if you have a family.

Conclusion

Life insurance is incredibly important. I stress this point even more if you have a family with people who count on you for support.

Consider each of the points illustrated above and choose the best form of insurance for your personal situation.

Life insurance product features and availability vary by state. Restrictions and limitations may apply. For federal income tax purposes, life insurance death benefits generally pay income tax-free to beneficiaries pursuant to IRC Sec. 101(a)(1). In certain situations, however, life insurance death benefits may be partially or wholly taxable. Please consult a financial professional for additional information. All guarantees are based on the claims-paying ability of the insuring company.

To learn more about life insurance and to view our disclosures, visit our site > www.crgfinancialservices.com.

 

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Everything You Need to Know to Set Up Your Own Emergency Fund

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How many of you have had an unplanned expense recently? How much was it $500? $1,000?

Unplanned expenses are anything but, unplanned. Sure, we don’t know when they will occur, but they will occur.

Being able to “plan” for those expenses will save you a lot of grief, and will probably save you money.

If you don’t have a rainy day fund, how do you pay for an unexpected expense? Your credit card?

Having an emergency fund has many benefits, and having one set up can make a big difference in your life. But how do you save for emergencies? What characteristics does an emergency fund have? And when should you use it?

What is an emergency fund?

It’s exactly how it sounds. It’s an account, usually a savings account or a money market account, that you designate for emergencies.

You set this up to “plan” for unexpected expenses. For example, you set aside money for the future in case your car breaks down or your furnace stops working.

Why do you need one?

The emergency fund is designed to save your monthly budget. Unexpected expenses can be expensive and can do significant damage to one’s monthly budget.

If you have money set aside for a rainy day and something unexpected happens, you can use the money from your emergency fund to pay for that expense. Your monthly budget isn’t affected at all.

What are the characteristics of an emergency fund?

There aren’t really many characteristics of an emergency fund. Here’s essentially what you need:

  1. You need an account separate from your checking account.
  2. This separate account needs to be easily accessible and liquid.1
  3. You should have 3-6 months worth of expenses saved in this account.
  4. You can have too much.
    1. Having 3-6 months, or even a year is fine, but anything else should be saved and invested for your retirement. (Savings accounts earn next to nothing in interest)

What strategies can you implement to save for an emergency?

There are many things you can do to save money for your emergency fund.

  1. Create a budget
    1. List your income
    2. List your necessary expenses (housing, transportation, food, etc.)
    3. List your discretionary spending (fun money)(keep this to a minimum)
    4. Compare income to expenses and adjust as necessary
  2. Reduce your expenses
    1. Cut the cable, use subscriptions instead
    2. Eat out less, or don’t eat out at all
    3. Rent movies, TV shows, and books from the library
    4. Walk or ride your bike instead of driving (when applicable)
    5. Control your utilities (open windows during summer, layer up during winter)
  3. Automate your savings – Set up automatic transfers from your checking to your savings. Have it take place at the first of the month or every Monday. If this happens first, you can’t spend it away.

When should you use it?

You should use your emergency fund whenever you have an unexpected expense that could disrupt your monthly budget.

Here’s a small list of examples:

  • Car repairs
  • Home repairs
  • Emergency, short-notice flights
  • Life expenses post-job loss

When shouldn’t you use it?

Your emergency fund shouldn’t be used on large once per year costs like:

  • Property taxes
  • Owed taxes
  • Holiday spending

Conclusion

Unplanned expenses can wreak a person’s monthly budget. It helps and makes a dramatic difference to have money set aside for a rainy day.

Besides the financial aspect of having an emergency fund, you also have a psychological benefit. Peace of mind knowing that you have money available if a large expense were to come into your life.

For more information about emergency funds and for our disclosures go to www.crgfinancialservices.com

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