What
and why
In dealing with people and their finances I
not only teach them what to do with their money, but we have to understand why
they got to this place financially. Everyone usually starts out thinking that
they are broke because they don’t make enough or that one certain circumstance
caused them to get behind and stay there.
Some times this is true, but not always.
If a person can add and subtract they have the head knowledge to know
when to stop spending. If financial
problems were just a math issue we would never spend more than we have. Personal finance is more behavior than head
knowledge. There is usually a behavioral
reason as to why we spend more than we make other than just not paying
attention or bad luck. Although paying attention is part of it, we also may be trying
to cover up an inward problem or a possible addiction. We try to treat the problem with spending
money to make us feel good. Financial problems show up, a lot of the
times, just a symptom of the real problem. Our financial problems can point to
the real issue when we unpack everything.
Bankruptcy attorneys tell us that filing bankruptcy will solve our
problems. Bankruptcy just treats the symptoms
and never changes the spending habits we have developed that cause the
problems. Once you determine why you are having
financial problems, and why you want to get out, you can determine what to do
to fix the problem. Money, or the lack
of it, can get your emotions in high gear.
We are created to use our mind as well as our emotions to get our
finances under control. It takes head
knowledge and emotional passion to change your life to go in the direction you
want it to go. Can you imagine your life
being debt free and having 3-6 months of living expenses in an emergency
savings account? If this sounds good to
you, start to change your life by finding out- why you are where you are at
financially,- and why you need to change.
These answers will tell you what you need to do. Let
me know if I can help you with your plan!
Tim West
Life Insurance: What do I need and how much?
Insurance is that thing you spend money on every month and see no results, until there is an accident! The only time we appreciate insurance is when they do what they are designed to do, protect us from risk. Insurance transfers the financial risk from you to the insurance company. Proper insurance is very important. If you do not have proper insurance you might have a huge bill that will cause you financial difficulty or even bankruptcy. I will discuss different types of insurance in several blogs. Today we will talk about life insurance. Life insurance is one of those things we put off until we realize we will die one day. It is not as pressing as automobile and home insurance because you are not required by law to have life insurance. We need to view life insurance as taking care of our family or loved ones, financially, after we are gone. The goal of life insurance is to replace you financially when you die. There are two types of life insurance, term-life and whole life, also called cash value or universal life. Term life is for a specified amount of time, it is cheaper and it has no savings plan built into it like whole life. Now, whole life, cash value, or universal gives you a payout when you die but it also has a savings plan built in to it as well. It costs more monthly because you are saving in the process. I never recommend whole life, universal, or cash value unless you cannot get any term life. Insurance sales people will tell you that you can convert it so you can have permanent life insurance. You don’t need permanent life insurance if you have a solid financial plan and save and invest through good mutual funds and Roth IRA’s and not cash value insurance. You should be able to self-insure if you save and invest throughout your life. The reason why so many insurance sales people push whole life is because it pays them quite well or they don’t understand what they are selling. I prefer using term life. The goal with term life is to buy it for 10, 20, or even 30 year term. You should get 8-10 times your annual income. The reason for 8-10 times is because you can invest that whole amount and get a 10% annual return and replace your income. Example- if you make 50,000.00 a year you would get 500,000.00 in term life insurance. If you were to die your loved ones would get the 500,000 and invest it at 10% annual return, which would be 50,000 a year. You would have replaced your income if you were to die and your family would be able to financially continue on. A 35-40 year old can get 500,000 for 30-40 dollars a month. Most people will tell you that you cannot get 10% returns on an investment, but the average return for the stock market is almost 12% over the last 75 years. You have to take some time and make an effort to get the results you want. You may ask why not whole life if they can make 12%? The returns are historically low on cash value insurance. They have a lot of hidden fees and costs. That’s why it’s a good deal for them when you buy it. They may make the 12% but you get only get 3- 5%. If you have cash value insurance when you die, and let’s say it is a 50000.00 policy; when you die lets say you have built up 65,000 in the account, you get 50,000.00 they get the rest. Not a bad deal for them. They use your money to make money for them. Like I said the only time to get whole life is if you cannot get term. I recommend buying only term for you and your spouse. If you have children only get enough to cover funeral costs. Let me know if you have any questions. Also be sure you buy from an agent who can fully explain the product you are buying so you fully understand it.
Let me know if I can help!
Tim West
Go West Coaching
