Creating your Household Budget

So you made the New Years resolution of setting up a household budget and sticking to it. But where to start? We created our basic household budget worksheet that is easy to follow without a whole lot of graph’s and complicated data entry.

To get things started you will need to pull together all your recurring bills and your latest bank statement. We found by simply looking at our last bank statement our budget was totally wacky because we never realized how much we spent on “Miscellaneous” expenses. Our regular recurring expenses like mortgage, car payments, insurance and utilities were always they only bills that came to mind.

Some liberties we made as we created the worksheet we assumed everyone gets paid bi-weekly so there are three pay periods to address an additional pay cycle during that odd month. The worksheet also uses the principle of paying yourself first so the very first expense you pay is into your savings to build an Emergency fund. Your emergency fund should equal 3-6 months of your month income to provide funds in the case of an unexpected illness, job loss or other large expense such as the transmission going out in your car. Most feel a credit card is an emergency fund and end up pay enormous amounts in interest.

Download Template Here

Next is your ongoing household expense that include your Mortgage / Rent, utilities and home maintenance. Notice we did not include revolving debt such as credit cards and student loans. These are categorized in the miscellaneous category because our goal is to become debt free.

Transportation is the next category followed by daily living expenses to provide categories to isolate each expense. All the data entry is fairly straightforward to created a method to track your expenses and give every dollar a name. At the end of each month the ending balance will carry over automatically into the next month.

Last category is the miscellaneous expenses and this is where most waste our hard earned money. The goal is to have this category with a $0.00’s because this is where you can start to build long-term wealth.

We hope this annual budget worksheet is helpful as you pursue financial independence and become the money manager for your family. Download Template Here

Thanks,

Shane

February 22, 2017March 3, 2017

Setting your Financial Goals

Developing your Financial Goals but where to Start?

First and foremost congratulations for taking control of your financial future. Too many families are stuck in between paychecks and are relying too much on credit cards to make ends meet. Do you see a endless stream of money going out and not enough coming in? As you starting to think about setting your Financial goals but not sure where to start? Download our Financial Goals worksheet and follow the steps outlined below. Are you ready to make the exploration into your financial security? Is it time to take control of your families financial future? Lets get started!

First is to really think about your short and long term financial goals. In our file Financial Goals Worksheet we breakdown the elements to consider when developing you long term financial plan.

We created our Financial goals worksheet file as a memory jogger to help walk your through the process of creating the framework for your financial plan. As you go through each category set your goals without limiting yourself within your current budget. Our Financial goals worksheet has six exercise's:

Financial Goals worksheet

Savings Goals worksheet

Daily Expenditures worksheet

Asset worksheet

Income worksheet

Expenses worksheet

Here is a example of the Financial Goals worksheet

Our first two worksheets are designed to provide the framework of your goals of what you want to achieve and to create a vision. Saving goals worksheet focuses of setting up your short term and long term savings goals. Some short term savings goals can be setting up a Emergency fund, buying a home, a car or setting up a college fund for your children. Do you have a plan for that unexpected car or home repair? How about the unexpected dental or medical expense?

When you start thinking about your Long Term Saving goals that are really focusing on your retirement savings and the income it will produce and for how long. Do you know how much income you will need? Do you expect expenses to go up or down? Will your dollar still have the same buying power?

The balance of the Financial Goals worksheet really focuses on Cash Flow Management because without managing your cash flow no matter what goals you establish they may never be achievable.

Do you know where your money is going? This is where the rubber hits the road so we created the Daily Expense worksheet to highlight your spending habits:

Now lets start the Asset worksheet to help you visualize all the money you have into a simple worksheet that breaks down where your money is deposited. First look at your money in taxable accounts that's typically Checking, Savings, CD's, Stocks and Bonds. Next we have tax deferred accounts such as your 401K IRA and annuities. And lastly the tax advantaged accounts such as your Roth IRA, cash value life insurance, 529 college plans and Municipal bonds. Here is an example of our asset worksheet:

Now lets look at your sources of income. Are you an employee or self employed? Our Income worksheet walks you through determining your net income and the source. For example you are a w-2 employee with taxes and other deductions withheld from your check. How are you paid weekly, bi-weekly or monthly? Enter the data from your paystub and the worksheet will auto calculate your estimated net income. here is an example:

This is where the moment of no return happens as we examine your expenses. The question "Do you know where your money is going"? will rear it's ugly head. It's meant to create the question "Do I need every cable channel under the sun" or "Do we need eat out 4 times a week". Our goal with this worksheet is for you to examine where your are spending money and where you can save money. It's meant to create the process of finding more cash flow within your own household budget. Here is an example:

We feel the goal for analyzing your debt is to begin the process of becoming debt free but what debt should tackle first? Things to consider is the amount and the interest rate. To create a winning attitude tackle the smaller debts first and as each is paid off roll that total payment to the next debt. It will take time, patience and determination but you can't accumulate assets until you are debt free.

Lastly is the Financial Summary worksheet of your goals in numbers to visualize your financial future and what needs to be addressed to meet your goals.

One of the most important item's to address is your family prepared for the unexpected loss of income? What would happen if you could not work? Do you have the financial protection to insure your families dreams are not lost in the event of loss of income? We do not insure life's but we do insure your families dreams.

February 22, 2017December 17, 2017

Building a Strong Financial Foundation

What do I mean by Building a strong Financial Foundation? Just like when you build a house you need a strong foundation anchored to the ground your financial foundation is built on proper protection.

Proper Protection protects you and your family’s hard earned savings for unexpected health issues or premature death. One of the most critical aspects of proper protection should include Long Term Care. A very cost effective way to include Long Term Care protection is to add a rider to you life insurance policy.

The next critical item is the need to address your debt liability and eliminate your debt. If you do not address your debt you will never be able to start to build your long-term savings.

When we talk about creating an Emergency fund you should set aside 3 to 6 months of your income to manage the unexpected expenses such as repairs to your home or car. With today’s economy it’s even more critical to have an emergency fund to address the unexpected loss of income due to job loss.

Once you have the foundation built you can its time to create your portfolio of long-term savings for retirement. Things to consider are how much income will I need during retirement. Some variables to consider are inflation and taxes. Do you feel the dollar will have the same buying power as today? Do you think taxes are going to go up or down? You may ask how much should I save? It really depends on how you want to live in your retirement years. Do you want to watch your dreams on TV? or Do you want to live your dreams? A rough average number is between 15-20% if you want to continue to live the life style and with the same comparable income during your retirement years.

Now lets look at how a lot of families are trying to save for retirement. They save what’s left after paying their expenses or invest a few percent into there 401k. But when an emergency hits they take a loan against there 401k.

This scenario unfortunately is basically the norm for many families today. They are living paycheck-to-paycheck just trying to make ends meet. Most are straddled with huge amounts of consumer debt and try to save what’s left over. When an emergency hits such as the car needing a new $2000.00 transmission they rely on credit cards. Its like a spinning top that barely keeping it’s balance.

Having proper protection and debt management are the foundation to build financial freedom. Ask yourself “Do I control my money or does money control me”? If it’s the latter its time to take control of your financial future. A good place to start is our Financial Goals worksheet down load it here. Here is a link to our post Setting your Financial Goals its a great starting point to begin taking control of your financial future.

Good Luck and Happy Saving!!

February 22, 2017

What to expect when you apply for life insurance

So you are in the market to secure life insurance but are hesitant and confused about what to expect. The first step in the life insurance purchase process starts with finding an independent life insurance agent. Why an independent agent? Independent agents do not represent a company but rather are brokers that have access to a wide number of insurance companies and they represent you not the insurance company.

When your interviewing to select your agent here are some key questions to ask:

Are you an Independent or Captive Insurance agent?
Are you Life and health Licensed?
What insurance providers are you appointed with?
What types of Life insurance do you recommend? Term, Whole life, Universal Life, Indexed Universal Life.

What’s the difference between an Independent and Captive insurance agent? Lets start with a captive agent’s; they represent an insurance company and can only offer the suite of products the company provides. On the other hand independent agents have access to multiple insurance companies so they can shop around and find the best fit for your individual needs.

Why is it important for your agent to be life and health licensed? With the wide array of riders available some require they agent have a health license such as Long Term Care Riders. Long-term care riders provide a very cost effective coverage to address long term care life events.

Knowing what providers a agent is appointed with can help you research the carrier ratings and help you with the decision on the value of the policy. Will the carrier still be in business when you need them the most?

Life insurance is not a one solution fits all scenario. Having an agent that provides you with choices insures your best interests are at heart. An agent that pushes only one solution only has his commission in mind not the security for your family.

Now that you have selected an agent they will have a conversation with you to help determine what coverage and type of insurance would fulfill your needs. Here is an illustration of the most common method:

There are other methods that can be more in-depth and address your entire financial situation that help establish your future financial goals such as retirement savings, long term care, estate planning to build a long term financial plan. It’s my belief a hybrid of the two is needed to establish a financial foundation.

When your coverage is calculated: ( assumptions: husband wife with two children)

Debt $25000

Income $75000 x 10=$750000

Mortgage $350000

Education $50000 x 2= $100000

__________________________________

Coverage needed $1,225,000.00

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You may think that’s way too much but let me ask you a question; will your dollar have the same buying power in 10 years? 20 years? 30 years? Most likely the answer is “no” this is the time to really understand why coverage is needed and who it protects.

Now that we have the coverage it’s time to take a look at some of the available riders such Return of Premium, accidental death, Child term riders and Long-Term Care to name a few. Of these riders I feel the most important is Long-Term Care because life events such as a heart attack or stroke are now survivable through the advances in medical science. Here is a link to an article we wrote about long-term care solutions you can read it here.

You will need to provide some basic information such as Age, Gender, Weight, Smoker Non-Smoker, Income, Occupation, hobbies such as scuba diving, sky diving and other risky hobbies. Now that you have filled out your application some providers provide temporary coverage while underwriting reviews your application.

Too get the most affordable rates you will need to take a paramedical examination. The Paramedical examiner will collect a blood and urine sample, record your vitals such as pulse and blood pressure readings and ask a series of health related questions. Underwriting uses this information to help establish the rate for your premium. The bottom line is your health determines the premium. If you have health challenges let you agent know upfront so he can shop around for insurance companies that have favorable rates for your certain health issues.

The most common rate classes are Non tobacco Preferred Plus, Non tobacco Preferred, Non tobacco Standard, Tobacco Preferred, standard tobacco. If you have health challenges the next risk classes are table rated that are as follows Table B through Table P. as you go down in the table ratings your premium will increase and at times drastically.

I have had numerous applicants get better ratings after underwriting reviewed their paramedical examination data reducing their initial premium. On the other hand when applicants try to hide their health challenges they can lower ratings and some even get table rated. Take a hard look at the report from underwriting and review with your agent. At times you can have additional medical tests or request a second review. But in a lot of cases if they give you an approval with health challenges my advice is to accept the coverage because if your carrier table rates you others will also.

Once your approved your agent will schedule a meeting with your to review and deliver your policy. The approval timeline through underwriting varies depending on the information in your medical history and the face value of your policy.

Congrats! Now you have built the first stage of your Financial Foundation. Want more info about building your financial foundation review our article here

Remember as life events happen such as a child being born or buying a new home you should review your life insurance needs with your agent as your coverage may need to be adjusted to cover additional needs.

February 22, 2017February 22, 2017

Life Insurance with Long Term Care Riders

Are you asking “Why would I need to add a Long Term Care coverage rider on my life insurance I am still young and healthy”.

The short answer is “It’s because you are young and healthy”

Now onto the long answer, we never know when a long-term care event will happen and at what age. Lets back up a bit and talk about what a Life Insurance Long Term Care rider is and the benefits it can provide.

In October of 2009 The Long Term Insurance Act was drafted to establish standards for Long Term Care Insurance. ( http://www.naic.org/store/free/MDL-640.pdf ) Life Insurance Long Term Care Riders can provide access up to 2% of the life insurance face value for a maximum of $340 per day Per HIPPAA 2016 regulations. For example, you have a life insurance policy with a face value of $500,000 with a long-term care rider.

Face Value $500,000
Max Daily $340
Max Monthly $10,000

With this example you would receive $10,000 to help offset medical expenses and help replace some of your income. Depending on the type of Life Insurance Long Term Care Rider you have such as reimbursement you may need to submit receipts of invoices. With indemnity policies a check will be issues to you regardless of the actual expenses.

But what triggers a Long Term Care Event and when would you be able to file for benefits you may ask. A Long Term Care event is when you can no longer perform two of the six Activities Of Daily Living and they are: eating, bathing, dressing, toileting, transferring (walking) and continence. After the 90 day elimination period your benefits would begin.

There is a huge difference in the elimination period with insurance providers some refer to service days while others use a calendar days. Let me explain what a service day is, it’s when a medical provider comes and provides services. Services are not the nurse that stops in and helps you eat, use the toilet, brings your medication. It’s when an actual service is provided such as physical therapy. This could be 2 maybe three times a week. Start calculating when your benefits will actually begin if your service days are 3 times a week that’s only 12 service days a month so in could potentially take seven months for your benefits to begin.

I like to refer to Life Insurance with long term care riders as a living benefits policy because it can provide benefits that help provide the services to help you recover from a major medical event such as a heart attack, stroke, cancer, a major accident such as breaking a hip while slipping on a icy sidewalk. With the advances of medical science we no longer pass away from a major medical incident we normally survive to live on for many years.

Life insurance with long-term care riders can continue to provide benefits until the face value of the policy is exhausted but will reserve a portion to provide an actual death benefit. Using the example from above the policy would reserve $25,000 for the death benefit and use $475,000 for the long-term care benefit. That provides long term care benefits for nearly 4 years!

Now lets talk about what happens when you do not have long term care coverage when you have a major medical event. Did you know 66% of all bankruptcies filed are due to medical expenses incurred by a major medical event; medical insurance only pays a portion of costs leaving you to pay the balance. Another impact is to your family 33% of households lose income because they can no longer work as they care for you. Not to mention the emotional pressures as your family makes decisions on who will provide your care.

Let me explain why I am such an advocate for life insurance with long-term care riders because it has impacted my extended family dramatically. My niece was diagnosed with a brain tumor at the age of 18 she is now 21 years old. She has undergone five or six procedures that required for the doctors to open her scull to try to remove as much of the tumor as possible. Not to mention the dozens of other procedures. Cancer does not have an age limit and is relentless. Her parents are now her full-time care providers and to see the emotional stress and financial impact it has had on them is devastating. Their only option is to file bankruptcy but the medical bills are still piling up with little hope they will end anytime soon.

If that was not enough my brother in-law had a major stroke and he will likely never leave the long-term care facility. He had a successful business that they launched little over a year and a half ago but without him they have no business or income. They have lost everything and the medical bills will continue to pile up with no end in sight. The worst part is they had life insurance with long-term care but let it lapse. When I sold them the policy I explained the benefits and such but when push came to shove all they saw was it was just another bill. Discovery of the policy lapse was at his bedside in the ICU much too late for any hope of a reinstatement for the long-term care coverage.

The message I want to leave you with is we never know when or what life event is going to occur but we all will pass on leaving the question is are you prepared with proper protection for your family. Long-term care is an essential part of your estate protection plan. My recommendation to my clients is to purchase a Life Insurance policy that includes a long-term care rider that incorporates a 90-day calendar elimination period with indemnity payout. I also recommend depending on age an increasing value life insurance value.

Now where can you find such a policy? Your best source for life insurance with long-term care is a licensed health and life independent agent (ME). The reason to go to an independent agent is they are able to shop around for the best insurance providers and rates that fit your need. A captive agent (Not Me) only represents a specific provider with a limited number of choices for you; they can only sell what they have in their portfolio. In this scenario who has your best interest at heart? A independent agent is looking for a solution rather than giving you a sales pitch. So as you shop around for life insurance with long-term care here are some key things to consider:

· Who is the insurance provider and their rating
· What type of policy (Term, Indexed Universal Life, Whole life, Variable Universal Life)
· What form of elimination Period (Service or Calendar Day)
· What type of payout (Reimbursment, indemnity)
· What type of agent are you working with
· How are they calculating the face value of your policy
· How are they determining your rate class ( preferred plus, preferred, standard, etc)
· Smoker, Non-smoker

Remember your rate is determined by two main factors your age and your health. That’s the primary reason to obtain coverage when we are young and health. Put your agent to work and let them shop around so they can help find a affordable long term solution for your family.

Thanks for reading!

Get a quick quote here
Shane

February 22, 2017

Cost of Insurance (COI) and how it’s calculated

Many factors come into play when an insurance company determines the Cost of Insurance (COI) for a life insurance premium. When you purchase a life insurance policy your Cost of Insurance (COI) is per $1000.00 of coverage. In this example I will use simple numbers to illustrate the concept.

35 year old male non-smoker
COI = $1.00 per $1000 unit
Coverage $100,000 (100 units)

$1.00 x 100 = $100 annual premium

Your actual premium is calculated using multiple factors such as:

· Age
· Gender
· Smoker vs Non-Smoker
· Health Condition
· Family History
· Hobby Risk factors such a Skydiving, Scuba diving

Each year that passes your cost of insurance increases because age is one of the most critical factors. When you purchase a life insurance policy your premium is average over the term of the policy. Most term policies have maximum duration of 30 years while permanent policies can have a maximum duration up to 120 years of age.

In general term insurance is meant to provide income replacement for a specific time frame in the unlikely life event while your still young. Term Insurance can be a cost effective way to provide coverage on a tight budget. The downside of term insurance is exactly that it’s temporary.

Permanent life insurance is meant to provide income replacement and with available riders provide living benefits for long term care needs and lets not forget with the ability to create cash value. Now the downside of permanent insurance is the increased cost of insurance due to the averaging over the period up to 120 years of age. But is it really more expensive? Let’s take a look at buying 20 year term policies vs a single permanent life insurance policy. For this example I am going to use a 25-year-old male in good health non smoker:

As you can see at 45 the 20-year term expires so he has to reapply for term insurance but now at his present age and health. Can you predict what your health will be in 20 years from now? Let assume he is still in good health and is approved for another 20-year term now at age 70 his second 20 year term expires and wants to reapply for another 20 year term policy, unfortunately a 20 year term is no longer available due to his age.

Now lets take a look at the Indexed Universal Life policy. The starting face value is the same at the start but because I included option 2 or increasing value the face value continues to increase as the policy ages. This example show’s how the Cost of insurance can rapidly increase in the later years and eventually diminish the cash value that has accumulated. It’s my believe the most valuable benefit this policy provides is the long-term care rider. With ability to access your living benefit to help offset the cost’s of long- term care it allows the protection of your assets such as your retirement savings. Health insurance typically only covers a portion of the medical costs associated when you have a major medical event such as a heart attack, stroke of cancer.

When you start the process of securing a life insurance policy things to consider are:

· Will I still have long term debt in 20 to 30 years from now
· Will I be debt free when ready to retire
· Will I be able to self insure myself to take care of final expenses
· Will I be able to have the assets to pay estate taxes
· If I am not self insured will my spouse be able to manage debt’s that are left behind

If you decide to select term life insurance do you have the financial plan in place to enable you to become self insured and debt free. Many retiree’s purchase a home when they down size creating additional long term debt. Life insurance is the foundation of a long term financial plan as it provides the estate needed when life events happen.

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Posts

Creating your Household Budget

Setting your Financial Goals