Posted in Budgeting for Everyone, Building Wealth, Financial Freedom, Quick Guide to Insurance, Winning with Your Money, You and Your Money

6 Types of Mandatory Insurance

health-insurance

In today’s insurance world, there are hundreds of types of insurances available.  This can be overwhelming at times – trying to decide what you should have and what is just a gimmick.  With so many gimmick insurances out there that sound good, I want to help you sort through them so that you have everything you need in case “life” happens to you.  Today, I want to share the 6 types of insurance policies everyone should have.

  1. Home/Renters – If you live on your own, you need some type of insurance to cover your belongings.  Home insurance is obvious and is required by mortgage companies to have.  But renters insurance is just as important.  If you are renting, you don’t need to replace the actual home/unit you live in.  However, your stuff is valuable and you would want something in place to cover if anything happens to it.  Renters insurance is extremely inexpensive.  Just like all insurance, don’t overbuy.  A $10,000 policy is enough in most cases.  Take an inventory and make sure you have enough to cover your valuables.
  2. Auto – Auto insurance is another mandatory insurance if you own a vehicle.  Make sure you have enough to cover the car you own and that you have the right coverage for the age of the vehicle.  Make sure your deductible is in line with your emergency fund.  If you have a good emergency fund, raise your deductible in order to save money.  Going from $500 to $1000 can save you hundreds a year.
  3. Health – At the moment health insurance is mandatory with a penalty if you don’t have it.  But many Americans have chosen to pay the penalty over having the insurance.  I know health insurance is crazy right now, but not having it can cost you way more than having it.  You may be young and healthy, but that can change in a moment.  Our son had his appendix removed a few years ago and without insurance it would have cost over $50,000.  Without some form of health insurance he would have been responsible for that and most 26 year olds don’t have that kind of cash laying around.  Shop around and find some form of health insurance even if the deductible is a little high.  $5,000 is easier to pay off than $50,000.
  4. Life – If you have a spouse, kids, a house, debt, you must have life insurance.  When you die, you don’t want to leave a burden for your spouse or family.  At the very least, get a term policy to cover your income and debt.  Ideal is to get 10 times your income and I highly recommend this, but so many people get no insurance because they think they can’t afford the ideal.  Start somewhere and add to it as you can.  Term is always better than life, but something is better than nothing.
  5. Long Term Care – If you are 60 or older, you need long term care insurance.  People are living longer and the price of elderly care is rising.  The younger you are when you get long term care insurance, the less expensive it is.  And if you all the sudden are diagnosed with something, you may not be able to get it.  Remember, this doesn’t just cover a nursing home – it covers in home care and many other items that health insurance won’t cover.
  6. Long Term Disability – What would happen to your finances if you were disabled or had a long term health condition?  This insurance will help relieve the stress of an already stressful situation.  Again, this is a relatively inexpensive insurance, but can change your world if needed.

There are a few other that may be good to have in your situation – umbrella policy, identity theft insurance, etc.  But you need to understand that many policies seem like a good idea, but are really just gimmick insurances.  2 examples come to mind right away – pet insurance and cancer insurance.  An emergency fund will cover any pet costs and your health insurance and long term disability will cover cancer cost.  If you run the numbers on this policies, you would see that if you take what the policy costs and save it, you will be covered if the emergency happens.

So now that you are ready to get your insurance portfolio up to date, where do you go?  I always recommend an independent agent who can shop the best policy and company for you among hundreds.  Your goal is to get exactly what you need at the best possible price.  You may be saying “I can’t afford all this insurance” but can you really afford to not have it?  Shop around and set a goal to have all six in place as soon as you can.  You won’t regret it!

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Posted in Budgeting for Everyone, Building Wealth, Debt Free, Financial Freedom, Saving for Your Future, Winning with Your Money, You and Your Money

The Biggest Myth About Needs

dd_01_filetWould you describe this steak as a need or a want?  Okay, that one was easy (it’s a want).  But what about a pair of jeans or shoes?  Or even a washing machine?  Or, the best one, a cell phone?

Each of the items listed above is a want.  Yes, a want.  A need is something that you must have to live, to survive.  And nothing I listed above falls under that description.  We actually only need a few things in life.  We need a roof over our head.  We need food in our bellies.  We need clothes on our back.  However, we don’t need a 2,000 square foot home with granite countertops.  We don’t need steak.  And we definitely don’t need multiple pairs of shoes, jeans or tops.

I had trouble with this one.  I would convince myself that I needed everything that I had – that I just couldn’t survive without them.  God taught me this lesson in the form of a washing machine.  One day my washing machine broke down and I had no way to fix it or replace it.  I was just starting my debt free journey so I didn’t have the cash to pay for a new one – or even a used one – and I wasn’t going to use a credit card.  So what was the answer to my conundrum?  I didn’t need a washing machine.  I knew this because my grandmother didn’t have one for many years and she survived just fine.  (She was my example on my journey)  So I hand washed my clothes for several months until I could save up for a new washing machine.  Was it easy?  No.  Was it annoying?  Yes.  But it was worth not mortgaging my future for something I didn’t need.

The biggest myth about needs is what actually defines a need.  You see, you can have anything you want, but you must meet your needs first and then go after your wants.  If you are homeless, you shouldn’t have a cell phone.  If you are behind on your mortgage, you shouldn’t be eating out.  When you understand the concept of needs versus wants, you will prioritize differently and make better financial decisions knowing that you can live without something for a while.  And a side benefit to embracing this new understanding is you will realize how truly blessed you are.  You not only have your needs met, but you have most of your wants as well.  And if you are on your wealth and financial freedom journey now, it will motivate you to make choices that will move you forward even faster.

You can have anything you want, but you can’t have everything.  Life is about priorities and choices.  Make sure your true needs are always met (they are for most of us) and then prioritize your wants based on your finances and future goals and dreams.  And please don’t misunderstand me or the point of this article – I have a cell phone, a washing machine, a nice home, and I eat steak.  But I have also gone through times in my life where I didn’t have those things and I lived just fine.  Never mortgage your present or your future to obtain or do things that fall in the want category.  It’s not worth it.

Have a blessed and prosperous week!  ~Debbi

http://www.debbiking.com

Check out Debbi’s award winning books on Amazon and Barnes and Noble

Posted in Budgeting for Everyone, Credit Cards, Debt Free, Financial Freedom, Saving for Your Future, Winning with Your Money, You and Your Money

The Credit Score Game – Part 2

lg_understanding-credit-score

Your credit score is your financial reputation.  It is the only accurate picture the world – and you – has of how you handle your money.  And we all know a picture is worth a thousand words.  We should never become obsessed about our score, but we should all understand what it means so that we can make good financial decisions that will move us forward and not backwards in the area of our finances.

Last week, we talked about the biggest part of the pie – your payment history which makes up 35% of your score.  Today’s factor makes up 30% – which means that just these two things make up almost 2/3 of your score.  In my mind, that means that they are pretty important.  These two things show us very quickly how we handle our finances.  The first factor shows whether we honor our commitments and use tools such as budgets and spending journals to make sure we can follow through on our promises.  It also shows whether we are prepared for emergencies when they arise.  The next factor shows us how much we rely on debt in our finances.  Let’s take a look at factor number two!

Part 2 – 30% of your score is your credit utilization.  This is the percentage of your credit limits you use.  For example, if a credit card has a limit of $5000 and you have a balance of $1000, your utilization is 20%.  Here is a huge factor when it comes to the utilization percentage – it is the balance as of the statement date.  This means that even if you pay your cards in full every month, your utilization can be high.  In a minute, I will share a tip on how to avoid this.

The ideal percentage to keep a good score is 30% and below.  However, if you stay below 10%, your score will get a boost as that is considered excellent.  If you are a person who relies on debt to buy stuff, it may take a while to get this into a good position.  The only way to do this is to pay off your debt.  Unlike part one where you could start today and see results pretty quickly, this will take a little longer based on where you are and how much credit you have access to.  If you owe $400 on a $500 limit, you can knock that 80% down in one month.  But if you owe $5000 on a $10,000 limit, it may take months to get that 50% down.  This factor isn’t about timing so much as it is about the math.  And depending on where you are getting your score from, your percentage can be based on each individual account or can be an overall average of accounts.

There are two keys to helping this as soon as possible – one if you are a pay in full person and one if you are a debt person.  If you pay your card in full every month, the key is to make sure that your payment post before the statement date.  Paying it off then can be the difference in an 80% utilization and a 0% utilization.  Big difference!  If you are a debt person, the best thing you can do is start attacking your debt smallest to largest.  This will start to show zero percentages on cards and will lower your average utilization.  This will weigh heavy on the positive side especially the more you pay down.

The one thing you need to know about all of the parts of your credit score is that what is done is done.  You can’t go back and change it.  However, you can make better decisions going forward which will begin to outweigh the bad ones.  Trying to do it all can seem very overwhelming which is why I wanted to talk about the top 3 factors so that you can begin there.  You may not be able to start paying everything on time immediately if you have struggled with this for a while, but there is no better time than today to sit down, list out all of your bills with their minimums, set up a budget and begin to make it happen.  Doing this will automatically improve your utilization – lower debt = lower utilization.  You can do it!  I was $200,000 in debt making just $10,000/year with a 560 credit score when I started the process.  And look at me now – debt free, making way more than 10 grand, and my score is over 800.  It is not impossible and I hope that these small tips that I will be sharing will help you to start the journey now.

Credit is a part of life – we need it for things other than debt in today’s world.  It is your financial reputation.  And it’s okay if your reputation is scared a little right now.  Just make the decision to start over – start today making one better financial decision, pay one bill on time, pay one debt off, anything!  Today is your day!