Posts Tagged ‘Financial Services’

Life Insurance: cash value Vs term

August 29th, 2010
Metropolitan Life Insurance New York
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All life insurance involves paying premiums over time.  If you die the insurance policy pays based upon the terms of the agreement.

I believe that you should have enough life insurance so that if you, or your partner, pass away you can live off the interest.  Assume a 4% return on your investment.
If you need $40,000/year income then you’d want to have 1 Million dollars in life insurance.
Now, cash value life insurance Vs term life insurance.
Cash Value Life Insurance has a savings component involved in the policy.  A portion of your premium is placed in a separate savings account that accrues value over time, which can later be reclaimed if the policy is ended. Premiums for cash value life insurance are typically 7-10 times higher than those of term life insurance. Other names for cash value policies are whole life and universal life policies.
Term Life Insurance covers you for a specific period of time – typically, 10, 15, 20, 30 or 35 years from when the policy starts. As long as you pay you are covered and if you die while the term insurance policy is active, your beneficiaries will receive the amount of specified coverage. They differ from cash value policies in that the  premiums do not partially go towards a savings plan and are much lower.
Stick With Term Insurance – don’t mix investments and insurance.
I believe that you should not mix your insurance and your investments.  Thus, I recommend staying away from cash value policies.  The return on investment is not typically very attractive and you will likely be able to do much better investing the difference between the cost of a term policy and a cash value policy.
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Posted in Cash Value Life Insurance, Financial Education, Life Insurance, Millionaire Mind, Return on Investment, Saving, Term Life Insurance

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Gift Cards, now take 5 years to expire

August 24th, 2010
IMG_3570.jpg
Image by Additive Theory via Flickr

The third and final phase of the Credit Card Accountability Responsibility and Disclosure (CARD) Act kicked into action this month and the new rules also reign in fees on gift cards, which in the past lost value as they sat unused.

A huge money maker for the gift card issuer – sometimes called leakage.

Going forward, the law states that gift cards cannot expire for at least five years and cannot be subject to inactivity, dormancy or service fees, unless there has been no activity for one year.

The other fees on gift cards can still erode the value of the card, but it’s nice to know that not using the card will not be cause for a fee.

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Posted in CARD Act, Gift Card

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You don’t need a better mortgage rate

August 16th, 2010
An image of an elephant that I doctored poorly...
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Headlines abound, “The wasted 4.44% mortgage rate” or “Super-low mortgage rates haven’t stimulated home buying market” and nobody is talking about the elephant in the room. The Elephant is truth that mortgage interest rates are not the problem.

You don’t need a better mortgage rate; you need to spend less and if you have an income problem you need to earn more.

Yes, it’s nice to be able to get a low rate on a mortgage loan and rates have been low for years.  A quick look at historic mortgage interest rates over the last 10 years show the average to be about 6% with the high being about 8.5% and the low about 4.44%.

The problem with refinancing a mortgage is that you start all over again at 30 years, 15 if you opt for a little higher payment. Thus you keep moving your self back to start every time you refinance.  So who is getting ahead; you or the mortgage broker who makes a commission on your mortgage?

What should you do to get ahead?

  1. Make a budget and live by it.
  2. Cut up your credit cards and use cash for discretionary purchases.
  3. Sell anything that has a loan that will take you more than 18 months to pay off – except for your house.
  4. Consider selling your home if it is costing you more than 25 – 35% of your take-home pay.

Need some help jump starting the process?  Here are 10 ways to raise $300, plus there are an additional bonus 8 ways. Apply 1 way each month and for the next 18 months you’ll be on your way towards being debt-free.

This may sound extreme, but remember that if you get debt free and find that you don’t like it you can always go back into debt.

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Posted in Budgeting, Debt, Debt Free, Dreams, Financial Independence, Financial Stress, mortgage, mortgage interest

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Overdraft Privilege is banking speak for Bank Fee

August 13th, 2010
OAKLAND, CA - JANUARY 28: A pedestrian walks ...
Image by Getty Images via @daylife

Starting August 15, 2010 banks will have to decline customers’ withdrawal requests at ATM’s and point-of-sale unless they give express permission to banks to let them overdraw their accounts for a fee. This change is a result of a change in the Federal Reserve’s Regulation E policy.

In Durango, CO this fee is running between $27 and $40

Bank of the San Juans – $27.00 fee

Bank of Colorado - $28.00 fee

First National Bank of Durango – $35.00 fee

Wells Fargo Bank – $35.00 fee

Alpine Bank – $40.00 fee

I understand that motivation of the banks; they want to make a profit.  They market this service as a privilege.  And it’s relatively risk-free for the banks.  Most overdrafts are small, on average about $17, and most customers make good on their bad checks while banks earn fees.

This new regulation is all about banks being able to allow your debit card and ATM transactions to overdraw your account; then they cover the transaction and charge you a fee for the “privilege”.

I recommend that you don’t opt-in for your bank’s overdraft “privilege” and instead you take control of your personal finances and stop paying unnecessary bank fees.

3 steps for avoiding overdraft fees are:

  1. Create a budget and follow it.
  2. Use cash for all discretionary purchases.
  3. Balance your checkbook each month.
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Posted in Budgeting, Financial Independence, Financial Stress, Overdraft Fee, Overdraft Privilege

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