All posts by Elle Martinez

Elle Martinez shares money tips and reviews on My Financial Reviews.

How to Talk About Life Insurance as a Couple

This is a guest post from my friend Eric Rosenberg, a personal finance blogger and podcaster at Personal Profitability in partnership with Mason Finance. He writes about personal finance, credit cards, entrepreneurship, and technology.

“Till death do us part.” This line has been read at countless weddings, and rightfully so we focus on the life part of our relationship, not the death. But that does not mean it is never going to happen. And as part of life as a couple, it is important to discuss the financial realities of death.

When planning for the long-term, life insurance is an important pieces of the financial security puzzle. Coupled with other savings, including retirement, it can create a safety net that covers your family for many years to come. Let’s take a look at why life insurance matters and how to discuss it as a couple.

Intro to life insurance

If you are new to life insurance, let’s do a quick primer to get you up to speed. There are a few key facts to know about life insurance before you start doing any research.

First, there are several types of life insurance. The most popular is called term life insurance because it is good for a period of time known as a term. Term life insurance is popular because it offer the biggest benefit for the lowest monthly cost.

The younger and healthier you are when you get life insurance, the less you’ll pay. Longer terms increase the price, as does a risky lifestyle that includes activities the insurance companies call “risky,” like rock climbing, skydiving, and flying small aircraft.

If the insured passes away before the end of the term, the policy beneficiaries get a payout. If the insured outlives the term, the policy expires for practical purposes.

Okay, there you go. We have the basics covered!

Figuring out your life insurance need

If you think life insurance makes sense in your situation (and it probably does), the next step is to figure out how much you need. Because life insurance policies are often priced in a cost per thousand dollars, getting too much life insurance may cost too much. But on the other hand, you don’t want to be underinsured and leave your family at risk.

To calculate what you need for life insurance, try the following formula:

[monthly expenses] x 120 + [big future expenses] = minimum life insurance need

Breaking it down, you are covering 10 years of expenses plus any major future expenses, like college costs or a mortgage payoff, which ensures your family has a long runway without worrying about going hungry.

Another way to find your policy value is using the popular 4% rule. This rule says you can safely withdraw 4% per year from an investment in perpetuity without ever running out of funds. For this calculation, use the following formula:

[(monthly expenses)*12]/.04 = minimum life insurance need

Using this method, a family with $3,000 per month in expenses, or $36,000 per year, would need $900,000 in life insurance.

Discussing life insurance with the significant other

No one ever walked into a room smiling and said, “honey, let’s talk about financial planning for me dying someday.” It is not always a fun conversation, but it is so important to talk about life insurance and other long-term financial planning needs.

In my experience, the best way to approach this is just being blunt, honest, and focusing on the facts. While you are probably not going anywhere anytime soon, it is good to be prepared just in case. That’s what insurance is for, after all, the “just in case” scenarios.

If you can go into the conversation prepared, it makes it smoother and easier. With that information in hand, you can discuss your needs and a plan to find and apply for the right life insurance policy.

What to do if you over insured

If you already have life insurance, this section if for you. Even when you have life insurance, it is a good idea to do an annual check-in to see how you are standing compared to your needs.

Because you are a smart saver and putting money away each month, you should see your savings balances grow and grow over time. Eventually, that savings level may grow beyond the point of needing life insurance.

For example, in the scenario above, a family with $3,000 in monthly expenses needs a $900,000 life insurance policy to ensure all costs are covered. But if you can save $900,000 or more, you don’t need that life insurance anymore at all!

If that sounds like you, check out this policy estimator to find out what your policy may be worth if you decide you no longer need it. Don’t let a policy simply lapse or you could be leaving money on the table.

Protecting your family is important

Your family’s long-term financial security is too important to gamble on. Instead of risking it all on a hope that nothing bad will ever happen, life insurance can help you hedge against that terrible “what if.”

Go head and have the conversation, even if it makes you a little uncomfortable. By planning for the future, you know you can rest easy in the present with your family protected by the right level of insurance.

Ask The Expert: Which Is Better? Bank Or Credit Union?

Question: My boyfriend and I are talking about marriage. We’ve taken your advice and had several very honest conversations about money, since we know finances are a big cause of fights. We’ve settled a lot of things, but we have this weird sticking point: My boyfriend insists I get rid of my Bank of America account and sign up with his credit union.

My boyfriend really really hate “big banks,” although it’s not like any of these banks did anything to him — he’s been with his credit union forever. (His dad was in the Army, so he’s with PenFed.) I don’t mind opening another account, but I like that Bank of America has ATMs and branches everywhere. While this won’t break us up, it really is the biggest fight we’ve ever had. What do I do?

— Katey in Arizona

Howard Dvorkin CPA answers…

In my 20-plus years as a CPA and financial counselor, I’ve met with many couples whose relationships were stretched thin by money fights. I must admit, however, I’ve never seen a couple argue over Bank of America.

First, let me acknowledge you both make some excellent points…

  • PenFed is an excellent credit union. In fact, it offers one of the nation’s best credit cards. Earlier this year, Debt.com called it “the credit card for people who hate credit cards,” since it imposes no fees whatsoever.
  • Bank of America isn’t an evil empire. I know many people who are quite happy with big banks. Debt.com editor Michael Koretzky has his mortgage there because it actually worked out to be the best deal at that moment.

With that said, your boyfriend needs to learn how to compromise.

In matters of love and money, I’ve learned this from counseling more couples than I can even count: It’s not about complete agreement on the details, it’s about philosophical agreement on how to save and spend.

Your boyfriend is doing you a favor by encouraging you to join his excellent credit union. Just the other day, I was reading a new study called the Credit Union Satisfaction Index 2015. The biggest finding: 90 percent of credit union customers are satisfied with the overall service. That’s high for any industry, but it’s actually up one point from 2014.

Meanwhile, banks rated only a 782 out of 1,000, according to JD Power. That translates into just over 78 percent.

Still, pressuring you to leave Bank of America isn’t a sound decision financially or emotionally. If you’re in the 78 percent, and if you’re not paying fees to Bank of America to keep your account there, this episode is a good lesson in more than money. It reveals how your relationship will proceed on all kinds of issues where you two differ.

You’re offering a healthy compromise by moving some of your money into PenFed. If your boyfriend wants to convince you to move the rest, the best way to do that is to put your money where his mouth is:

Prove over the course of a year just how much money you saved and made by making the switch. If that adds up, you sound like a smart enough women, Katy, to make an objective decision.

This article by Howard Dvorkin first appeared on www.debt.com and was distributed by the Personal Finance Syndication Network.

Source

Best Budget App to Make The Most of Every Dollar

Looking for a solution that can guide you through getting out of debt, saving more, and taking care of retirement? EveryDollar could be the perfect budget app for you!

There’s a free version you can check out or you can try their plus version for two weeks.

What’s Every Dollar About?

EveryDollar is a budgeting and financial goal tracking desktop tool and app from personal finance guru Dave Ramsey and author of best-selling book The Total Money Makeover.

everydollar budget app
Credit: Ramsey Solutions

In fact, EveryDollar is designed around the baby steps, making it easy for you to get started with a starter emergency fund, pay off your debts, and grow your net worth.

If you haven’t read the book (you really should!), there’s a tab on the left side of your budget to give you the basics of the plan.

With Every Dollar, you give every dollar a purpose at the start.This system helps you account for every dollar each pay period.

Once the income and expenses are cleared, you have an accurate idea of where your budgets needs an adjustment – either with improving expense estimates or plugging a money leak.

Should I Get the Paid or Free Version?

While the free tool works fine for me, you may want to unlock more. You can upgrade your account so your checking and savings synch up with EveryDollar, helping you stick to your goals easier.

You can try EveryDollar Plus out for 15 days to see if it is a good fit for you. It’s only $99/year.

Resources to Building Better Budgets

I know that starting (or restarting) a budget can seem overwhelming. Here are some wonderful sites, books, and apps to help you build a budget that fits your needs:

4 Car-Buying Add-ons You Should Watch Out For

Negotiating a car price can be exhausting. And just when you think you’re all done, you may discover — thanks to add-on costs — the price you’ve agreed on isn’t the one you’ll actually pay. In fact, you may even be told you can’t get out of it, because the add-on has already been added to all the cars on the lot.

It can be tempting to throw in the towel and just agree, rather than face the prospect of doing this all over again at another dealership.

But what if some of the things they suggest sound tempting? Are they ever worth it? Some may be, if it’s something really important to you (say, pinstripes). Others (rustproofing, anybody?) may not be. If you’re buying a new car, it has already been treated; a supplemental treatment is likely not necessary. Here are some others you should consider carefully.

If you’re buying a new car, it has already been treated; a supplemental treatment is likely not necessary. Here are some others you should consider carefully.

Fabric Protection

Your car should already have upholstery that wipes up fairly easily. Car manufacturers know we spill things, and they design cars accordingly. If you want additional protection, you can buy a spray-on fabric protectant and apply it yourself.

Mike Quincy, auto content specialist at the Consumer Reports Auto Test Center in East Haddam, Conn., told Bankrate that new cars don’t need it, and that humans could actually do without the chemical exposure.

VIN Etching

VIN etching can be a good thing — and police and car insurance agencies recommend it. It may even save you money on car insurance. However, having the dealer do it can add more than $100 to your cost, according to the Consumer Law Group.

You can buy a kit and do it yourself for $20 to $30. Also, some police departments will do this for a small fee.

Extended Warranty

Particularly if you are buying a new car, you probably don’t need an extended warranty, and the money would be better spent getting all the regular maintenance done.

After all, problems caused by failure to do routine maintenance are not typically covered by a warranty, anyway. An exception may be if you are buying a car that is extremely expensive to repair.

In general, new cars tend to be reliable and Autotrader recommends against them, as veteran auto writer Doug DeMuro wrote recently.

Credit Insurance

What would happen if you became disabled, couldn’t work and couldn’t pay? Credit insurance might make sure that payments are made for a certain period of time or even that the vehicle is paid off. There are different kinds of insurance, with different conditions. All will increase your car payment. The Consumer Financial Protection Bureau suggests giving it some thought and checking to see if there are less expensive options available. You do not have to sign up the same day you purchase your vehicle.

The Consumer Financial Protection Bureau suggests giving it some thought and checking to see if there are less expensive options available. You do not have to sign up the same day you purchase your vehicle.

Also, beware of “menu-selling” at the finance office, where you are asked something like, “Which of these warranty options do you prefer?” and opting out is not among the choices. In many cases, you can opt out; it just isn’t in the document.

Ask.

Even if you do decide you want one of the options offered, you don’t have to buy it that day.

According to AutoTrader, you can buy an extended warranty for your car after you buy, and “any time before the car’s manufacturer warranty expires.” You may prefer to decide at your kitchen table, rather than at the dealership.

How to Get (Only) What You Want

It is important to go over every item listed on the invoice — and the “supplemental invoice,” which may contain dealer-added options, like paint protection or nitrogen-filled tires (neither of which is essential). Make sure you understand and agree with the charges.

It can be hard to walk away once you’ve invested so much time and energy. You may need new wheels, and have spent much of the afternoon test-driving, then negotiating… and be willing to fork over more than you planned just to have this whole ordeal be over, and who could blame you? You’re tired, and you just want to go home.

A possible alternative is to go in only to decide which models and which options most appeal to you — and then check with your insurance agent to see what they would cost to insure, particularly if a difference in cost would influence your decision about which to buy.

At that point, you can call or email dealerships and ask them for their “drive-out price,” including tax, title, delivery and any other charges, of the make and model you want with the options you want. Many dealers actually have an Internet department accustomed to working this way. That way, you know exactly what you’ll pay before you walk in.

You take a test drive, and if it’s as expected, go sign the paperwork. If you enjoy the “sport” of the haggle, this may not be for you. But if you like comparing prices without having to sit in multiple managers’ offices, this could save you time, and possibly money.

You could go a step further and get financing approved from your bank or credit union before you go to the dealership.

Getting your credit in top shape before you begin shopping is smart anyway; a good credit score will help you qualify for the best interest rates. If you’re not sure where you stand, there are many ways to get your credit scores for free, including through Credit.com.

And if you want add-ons, you can add them on later — and know exactly what they cost.

This article originally appeared on Credit.com.

This article by Gerri Detweiler was distributed by the Personal Finance Syndication Network.