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As we ring in the New Year, financial resolutions top our to-do lists, from saving more to finding a new, better-paying job and getting out of debt once and for all.
As you map out your next money move, take heed of some of these top market and economic predictions for added guidance.
Higher Borrowing Costs
Looking to open a new credit card or apply for a mortgage this year? It may be wise to act sooner than later.
With the broader economy improving since the financial crisis (e.g. the national unemployment rate is hovering at 5%, down from nearly 10% in 2009), economists, including Janet Yellen, chairwoman of the Federal Reserve, believe it’s time for a tightening of monetary policy (translation: boost interest rates to curb inflation.)
Fortune Magazine’s “Crystal Ball,” says we can expect a three-quarter-point increase by next Thanksgiving to 1.25%.
When the Fed raises the overnight bank-lending rate (aka the Fed Funds rate) that typically has a domino effect on interest rates for other mainly short-term financial products like credit cards and car loans.
What this means for us? If you’re in the market to borrow money, I recommend reviewing your credit ahead of any applications to see what improvements (if any) are necessary. The higher your credit score, the better chances you have of achieving the lowest interest rates on the market.
If you’re seeking to refinance or buy a home this year, also aim to lock in a rate as soon as possible. While an increase in the Fed Funds rate isn’t necessarily a precursor to higher mortgage rates, we’re already seeing an uptick on 30-year home loans to above 4%. And Fannie Mae’s National Housing Survey shows that more than 50% of consumers think mortgage rates will continue to elevate over the next year.
Finally, for those of us with adjustable rate loans (e.g. some student loans and mortgages) we may want to pay off our debt more aggressively or refinance to a fixed-rate loan to put a lid on rising monthly payments down the road.
Less Sticker Shock in Housing
With home loan rates expected to track north, home values may see some cooling in 2017. That’s because when mortgage rates jump, demand for housing tends to slowdown, placing pressure on sale prices.
Not to mention, after riding a hot streak in recent years with prices across the country hitting near pre-recession levels, real estate experts at Zillow.com now predict a “normalizing” market with more moderate price growth of 3.6% across the country in 2017, compared to 4.8% last year.
Prepare for more affordability in areas that have experienced the steepest gains. In Los Angeles, for example, home prices have trended considerably higher in recent times (up 7.3% over the past year, alone). In 2017, though, the city can expect a tempering of home values to a growth of just 1.7%, according to real estate website Zillow.com.
As for rentals, after double-digit surges, rents in many large metro areas will also see slower growth in 2017, per Zillow. Rents across the country are expected to rise approximately 1.7 percent this year to about $1,429 per month, down from a 6% appreciation reported last year.
Partly to blame for the cool down in rent is a glut in inventory. Builders were very busy over the last few years, but the demand for new units in some hot neighborhoods like Brooklyn, N.Y. is failing short of supply.
As a result, some landlords at higher end luxury apartment buildings in that borough have been striking sweet deals with renters since last summer, The New York Times reports. For example, at 7 DeKalb, a new high rise in Brooklyn, “the landlord is offering two months of free rent with a 14-month lease, and use of the building’s fitness center and other amenities for a year without charge.”
That’s a good reminder to prospective renters everywhere that it can never hurt to negotiate, especially this year!
Have a question for Farnoosh? You can submit your questions via Twitter @Farnoosh, Facebook or email at [email protected] (please note “Mint Blog” in the subject line).
Farnoosh Torabi is America’s leading personal finance authority hooked on helping Americans live their richest, happiest lives. From her early days reporting for Money Magazine to now hosting a primetime series on CNBC and writing monthly for O, The Oprah Magazine, she’s become our favorite go-to money expert and friend.
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While we don’t yet have flying cars that collapse to the size of a suitcase, pneumatic tubes that transport us from room to room or machines that automatically bathe and clothe us in the morning, every day we’re getting closer to living in a Jetsons-esque future. Thanks to today’s technology, it’s easier than ever to put mundane aspects of your life on autopilot, so you can spend less time stressing out about your tasks and more time doing what you love.
Here are a few easy ways to free up your schedule and start living in the future by having your tasks take care of themselves.
Cook Up Tech Recipes
In a world where many of us carry computers in our pockets and have accounts with dozens of online services, it only makes sense to have these different technologies talk to each other. That’s where IFTTT comes in. An abbreviation for “if this, then that,” IFTTT is a free, easy-to-use service that lets users create “recipes” involving different digital triggers (“this”) and outcomes (“that”). IFTTT supports more than 300 channels (think Instagram, Spotify, Gmail, etc.) and can be used in millions of ways to make life easier. Here are some examples of recipes you can create:
Instantly save your “Liked” Instagram photos to a Dropbox folder.
Receive a text message whenever your favorite sports team scores.
Trigger your air conditioner to turn on when the outside temperature hits 80 degrees, or make your lamp emit purple light when it starts to rain. (RIP, Prince.)
This is just the tip of the iceberg. Spend some time playing around with IFTTT and you’ll be amazed by how you can automate your life.
Ditch Your Dining Decisions
Why worry about what to make for dinner, when there’s a free tool that suggests meals based on your unique dietary goals? Eat This Much is a mobile app and online service that provides users with customized meal plans to help them live healthier, happier lives. Simply punch in your desired caloric intake and how many meals you eat each day, and the service delivers a daily diet with step-by-step recipes that align with your eating aspirations. Here are some other perks:
The service can offer suggestions tailored for those with food allergies or who want to avoid eating meat or processed foods.
Eat This Much automatically generates shopping lists each week, so you know exactly what to pick up on your next trip to the store.
The app can be personalized to fit your budget.
In addition to keeping you from experiencing anxiety about what to eat, ETM also prevents you from making less-than-ideal decisions about your diet. Sign up for a free account and see what a difference it could make in your life.
Ship, Don’t Shop
Between driving to the supermarket, fighting for a parking spot, wandering aimlessly down aisles and standing in line to fork over your money, going to the grocery store can be a drag, right? This is especially true if you buy the same stuff month after month. Rather than wasting your time shopping for everyday household goods, eliminate this errand from your life by having consumables delivered to your home on your desired schedule. Amazon’s Subscribe & Save program can free up hours of your life by shipping vitamins, coffee, paper towels and hundreds of other items to your door on whatever day suits you best. Here are a few other perks:
Save 15% off Amazon’s already competitive prices.
Score free shipping on every Subscribe and Save order.
There’s no need to be an Amazon Prime member, and you can cancel at any time.
Setting up your monthly delivery is a breeze. Simply select the products you typically pick up at the store, enter the quantity you’d like delivered and choose the day that’s best for you. Give it a shot and you’ll wonder how you ever lived without it.
Automate Your Life and Say “So Long” to Stress
Life gets busy. With meetings, phone calls with clients and the roll of the dice that is traffic and red lights on the way home, getting to those everyday tasks can seem just a little much at the end of the day. But this is 2016. And it’s a brave new world of magical technology here to help us out!
As our technology grows increasingly sophisticated yet simpler to use, we can benefit from less stress and more peace of mind. And remember, when it comes to managing your money, Mint makes it easy to leave your worries behind by allowing you to manage your finances wherever you are. Our tools not only save you time, but by ensuring that you never miss a payment, you’ll save on late fees, too. Download our free app today, and start living your best life.
Save more, spend smarter, and make your money go further
Save more, spend smarter, and make your money go further
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Each year as you await your tax refund, you face the same question – what to do with that money once it arrives? For some, the money immediately goes to cover basic needs, but for others, the money goes to far less-essential items.
According to a 2020 survey by Self Financial, 44% of respondents said not getting a tax refund this year would completely derail their budget for the rest of the year.
So how do you use your tax refund to plan ahead, build your wealth, financial health, and ultimately, your credit?
Here are 5 ways to put your tax refund to work to build your credit.
But first…
Why use your tax refund for credit-building?
Maybe you’re itching to spend your tax refund to treat yourself. While there’s nothing wrong with using a bit of that money for fun, tax refunds are a great opportunity to get ahead with your finances too.
But why, of all things, focus on your credit?
First, bad credit could cost you thousands of dollars more over your lifetime, since you often get charged higher interest rates (if you can get approved at all). Your credit can also impact your ability to rent an apartment, qualify for certain jobs, or even get a cell phone.
Good credit, however, creates a financial safety net to fall back on if you need it. If you have good credit, you may have an easier time qualifying for personal loans, credit cards, or other credit products if you need to borrow money, often at a lower rate.
If you don’t have an emergency savings fund, credit may be your only other option to lean on if you face job loss, an unexpected medical emergency, etc.
You have to build credit before you need it though. Otherwise, you might not be able to access it when you actually do need it.
5 ways to build credit using your tax refund
Once you have your tax refund in hand, here are some ways you can put it to work to help your financial health.
1. Pay down debt
While paying down your mortgage or other personal loans may help your credit score, it may be a good idea to focus on higher-interest, more expensive consumer debt (like credit card debt) first.
Not only could paying down this higher-interest debt save you the most money in the long run, but it could also have a bigger impact on your credit score. That’s because credit usage, or how much of your available credit you use at any given time, counts for 30% of your FICO® credit score.
While installment loan usage (like personal loans, car loans, or home loans) does count somewhat towards this factor in your credit score, revolving account balances (like credit cards or HELOCs) count more, according to credit bureau expert Barry Paperno.
That doesn’t mean you have to pay your credit card debt off completely to see benefits to your credit score. Even paying your balance down 5-10% may have a positive impact.
According to credit scoring agency FICO, people with the highest credit scores tend to have credit utilization between 6-10% on their revolving credit accounts. While that’s a great goal to aim for, start with paying down what you can, no matter how small that amount may seem at first. Small wins can add up to big ones over time.
Aside from credit utilization, the only other factor that impacts your credit score more is your payment history. Which brings me to my next point…
2. Get your current accounts in good standing
If you have late payments or missed payments on your current credit accounts, make up those payments if you can. While many lenders report a late payment to the credit bureaus if it’s more than 15 days late, how late your payments are can impact your credit score in different ways. A payment that is 30 days late affects your score differently than one that is 90 days late.
For example, according to one FICO score simulation, if you have a 793 credit score and miss a payment by 30 days, your score could drop 60-80 points. In that same situation, if you missed a payment by 90 days, your score could drop 100 points or more.
So the sooner you catch up on a late payment, the better. Besides, making those payments could keep more late fees from adding up.
While catching up on payments may not undo the damage of a late or missed payment on your credit (it can take years for just one late payment to fall off your credit report), it could prevent any more damage from being done.
If the late payments were on property, or loans that were secured by property, like a home loan or car loan, catching up on payments could also prevent you from losing your home or car.
3. Open a Credit Builder Account
This next one is for people who either have no credit history, a limited credit history, or need to rebuild credit after financial hardship such as bankruptcy, foreclosure, or identity theft, to name a few examples.
Unlike a traditional personal loan, credit builder loans don’t give you the money upfront.
Instead, the lender holds the loan amount in a bank account. Each month, you pay into this account and the lender reports your payment history to the credit bureaus, which helps you build credit history.
Once you pay off the loan amount, the money inside the account comes back to you, minus the interest charged on the loan. In other words, these loans give you the opportunity to put some money away for savings while you build your credit.
If you have trouble gaining access to other credit products or want to build credit while you build some savings, a Credit Builder Account could be the right option for you.
4. Use it as a deposit on a secured card
For many, a secured credit card may be a good entry point for accessing credit cards. A secured card works just like a regular credit card, except you put down a security deposit that is usually equal to your credit limit.
For example, you may have a secured card with a $100 credit limit and a $100 security deposit. Like a deposit for utilities, a secured card deposit is used to cover your bill if you don’t pay back what you owe.
Some companies (like Self Financial) provide an option for you to build your way slowly towards a secured card through a Credit Builder Account, no extra deposit or hard inquiry needed. Bonus: Self doesn’t deny you if you have a history of bankruptcy or foreclosure, unlike some other credit card issuers.
There are many different secured credit cards to choose from, so shop around to decide which one is right for you.
5. Work with a credit counselor
Not sure where to start when it comes to your credit? Or what product might work best for you? You may want to use some of your tax refund to hire a qualified professional to help you come up with a credit action plan.
Here are a few reputable places to start searching for a credit or financial counselor:
National Foundation for Credit Counseling (NFCC). This nonprofit provides financial counseling services through their member organizations across the US. Visit their website to connect with free or low-cost help in your area.
Association for Financial Counseling and Planning Education (AFCPE). AFCPE has over 3,200 certified financial counselors, planners, educators, and researchers around the world. You can find local or virtual financial counseling through their online tool.
Operation Hope. Operation Hope is a national nonprofit that provides financial coaches to help people “develop customized action plans around building their own businesses, raising their credit scores, buying homes, or simply making better decisions with the money they have.” Their website also has tons of free resources about financial basics.
These organizations provide access to qualified financial counselors who can help you create plans that align with your financial goals, whether that means building your credit, paying down debt, budgeting, or working towards buying a house, to name a few examples.
Depending on your current income and situation, you may also qualify for no-cost or low-cost help, since many financial counselors offer a sliding scale based on financial need.
Be careful when browsing for professional help with your credit though, especially if you search for credit repair. While there are some good players in the space, you have to be really careful to pick the right one. The Federal Trade Commission provides some guidelines to help you find legitimate credit repair help, which you can view here.
Bonus: Build an emergency savings
Okay, so this one isn’t exactly credit-specific, but having an emergency savings fund could help reduce the amount you need to borrow if you ever did need to lean on credit during times of financial hardship.
Research from SaverLife shows that even just $100-$200 in savings could mean the difference between keeping your housing during hard times or having your utilities cut off.
According to the IRS, the average tax refund in 2020 was $2,741, which for people who make about $30,000 is roughly one month’s salary – a pretty healthy cushion if you lose your job and need time to find something new.
The good news is, there are tools that could help you build both your credit and some savings at the same time.
Bottom line
While credit may not usually be top-of-mind when you get a sudden rush of cash, it’s a key building block for your financial health, and can help open doors to your future.
So if you have a little extra money, whether it’s thanks to a tax refund, stimulus check, bonus, raise, inheritance, or even just finding $20 in an old pair of pants, put that money to work for your future self.
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Making your money work for you is an important step on the road to financial security and independence. Earning money by trading your time is important, but it’s just as important to find a way to make money without having to be actively involved. While you might dream of being able to make money while you sleep, there are plenty of steps you can take that will help put your money to work.
Pay Down Your Debt
The most important thing that you can do to make your money work for you is to pay down and eliminate your high-interest debt. This includes things like credit card payments, some auto loans, and other types of consumer debt. You may be paying up to 20% or more in interest — which means that when you put money towards paying off that debt you’re getting a 20% return on your investment. It’s hard to beat that kind of guaranteed return.
Start a budget, figure out your income and expenses and start paying down that debt. The exact debt repayment strategy that you use is less important. What is important is that you make a plan and start sooner rather than later. Once you have eliminated your high-interest debt, you can start with the other suggestions in this article.
Open a High-Yield Savings Account
One place to start can be to open up a high-yield savings account that is separate from your checking account where you keep the money to pay your regular monthly expenses. This is important for two reasons. The first is that keeping your savings separate from the money you use for your regular savings helps keep you from raiding your savings to pay your bills.
The second reason is that a savings account may offer slightly higher interest rates than a checking account. Currently, interest rates are at historical lows. That is great for refinancing or taking out a mortgage, but not great for savings accounts. Still, a high-yield savings account is a great place to put your emergency fund money. For anything more than that, you’ll want to look at investments that offer higher returns.
Grow Your Wealth Through Investing
If inflation hovers around 2-3% every year, any investments you have should make at least that much. Otherwise, while you may have more money, that money will be worth less than it was the year before. If all of your money is in a savings account earning 1% interest or less, then you are actually LOSING money to inflation each year. There are many ways to earn residual income, and you’ll want to pick the one that makes the most sense for you. As one example, Investing in the stock market has historically returned around 7% per year.
Take Advantage of Credit Card Rewards
Another way to make your money work for you is to take advantage of credit card rewards. Many credit cards offer rewards of up to 5% back or more in certain spending categories. There are also several cards that offer initial welcome bonuses that are worth $1000 or more. Taking the time to strategically use credit cards can be a worthwhile investment. Check out our list of the best rewards credit cards to see if one of them might make sense for you.
Start a Passive Income Stream
The holy grail of financial independence is passive income. Passive income is income that continues to make money with little to no day-to-day involvement on your part. There are many different ways to generate passive income. A few passive income ideas might be creating and selling crafts, writing a guide or book, starting a blog, or investing in the stock market.
Investing time and money in real estate can also be a way to earn (relatively) passive income. While rental real estate is not without complications, when it is all working, each month you earn rental income. That helps pay down your mortgage balance, hopefully with some extra left over each month. If you think that becoming a landlord is not for you, another way to invest in real estate is through a Real Estate Investment Trust (REIT). REITs combine some of the best parts of real estate and investing in the stock market.
The Bottom Line
There is an important difference between earning money and having your money work for you. While earning money through a job is important, the real key to financial security is earning passive income. Pay down your debt, start investing and watch the returns come in. You may not make money while you sleep, but following these tips will help set you on the right financial path.
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Dan Miller is a freelance writer and founder of PointsWithACrew.com, a site that helps families to travel for free / cheap. His home base is in Cincinnati, but he tries to travel the world as much as possible with his wife and 6 kids. More from Dan Miller
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Besides shedding those holiday pounds, what other goals top your New Year to-do list? (Personally, I’m pregnant and due in early March, so that means I’ll attempt to burn off those Christmas cookies in three, four months – or later.)
If you’re focused this year on saving more, investing wisely, buying something major or just becoming financially savvier, then you’ve come to the right place. I’ll continue to cater my blog here to helping you accomplish that and more. Got a money question for me? Remember you can always send me email.
Also, big announcement: the Mint team and I are dedicating the entire month of January to our top financial goals on Instagram. We want to help you make a stronger commitment to your bottom line and improve your money habits.
To that end, the kind folks here have allowed me to take over their Instagram feed (@mintapp) and their InstaStory feed to help inspire, motivate and drive all of us to accomplish our biggest money hopes and dreams in 2017. We think sharing our visuals on Instagram can be quite powerful.
We’re calling the campaign #SoMinty and we’d love for you to participate.
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What is #SoMinty?
It’s a four-week campaign with each week representing a new theme. I’ll be posting @mintapp daily and each week we’ll highlight some of our favorite posts from Mint’s Instagram followers.
Here’s what we’re planning:
Week 1
Theme: Establish Your Goal What is the #1 financial shift or goal you want to make in 2017? Share it with us on Instagram and use #SoMinty in your post so we can find and possibly share it with our followers.
Week 2
Theme: Establish Intention What is Fueling Your Goal? Again, show us! Maybe it’s a snap of your old car that needs replacing, your dream home, the inspiration for your new business and all the things that drive your desire to be #SoMinty.
Week 3
Theme: Establish Accountability What are the apps, tools, people that will help you stay accountable and true to your goal? Instagram it! And use #SoMinty.
Week 4
Theme: Celebrate Your 1st Victory
Okay, we’re nearly a month in. What improvements or changes have you made towards achieving your goal? What baby steps have you taken? Do tell! And, as always, use #SoMinty in your post.
We hope you’ll join and share in the fun. Wishing you a #SoMinty year!
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Do you remember what it’s like being a kid with no financial responsibilities? Neither do I. It seems like we have been adulting forever. If life insurance isn’t quintessential adulthood, I don’t know what is. As you are reading and researching life insurance, one of the biggest questions you ask yourself is “Do I even need life insurance?”
Ask yourself this question: Does someone rely on me financially? If the answer is yes, then you likely need life insurance. Let’s discuss a few different types of people and their need for life insurance.
Single? You probably don’t need it.
If you are single and have no children, you probably don’t need life insurance. However, if you’re an ultra-planner or want to have a family sooner rather than later, locking in those low rates while you’re young and healthy can be a wise move.
Here are a few situations in which buying life insurance would be recommended even if you’re single:
Co-signed loans
Maybe your grandparents are co-signers on your private student loans or your parents co-signed on your mortgage. If you die before the balance is paid, the creditors can go after your co-signers. Life insurance can pay for these debts.
Caring for relatives
If you are caring for siblings or aging relatives you should consider life insurance to ensure that your loved ones are still provided for even if you are no longer around.
Have dependent children? You definitely need it.
Those with children have the greatest need for life insurance. Children rely on you for food, clothing, shelter, medicine, and everything else. If you die, life insurance can continue to fund these things, and it can also pay for hopes and dreams such as college tuition or a wedding.
Let’s take a closer look at specific parental situations:
Dual income families
If your household has two incomes contributing to standard of living, the sudden loss of a parent can cause financial upheaval if there is no life insurance to replace the lost income. One parent is now responsible to provide what two incomes previously did. For example, the proceeds from a life insurance policy can pay off the mortgage ensuring the children do not have to be uprooted from their home or school district.
Single parents
Let’s face it, the loss of a single parent to a child would be devastating. When married couples purchase life insurance, they often plan with the possibility that one spouse will remain to care for the children. Single parents do not have this luxury and absolutely need life insurance.
Stay-at-home parents
When you think of life insurance, you may only think a breadwinner needs coverage and not a stay-at-home parent – this could not be further from the truth. Imagine everything a stay-at-home parent does: babysits, cleans, cooks, transports, grocery shops… the list goes on. According to Salary.com, a stay-at-home mom is worth approximately $112,962. If the stay-at-home parent were to die unexpectedly, life insurance can pay for someone to help with these tasks.
Married? You most likely need it.
You don’t need to have children to rely on your significant other’s income. You’re building a life together and doing so requires money. You are likely both contributing to rent or a mortgage, car payments, utilities, and credit card bills. What happens if one of you were to die prematurely? The death benefit from a term life insurance policy can help pay for those expenses and cover the cost of a funeral.
It’s not uncommon today for couples to be in a committed relationship but postpone marriage. While it’s a little easier to own life insurance on your significant other if you are married, non-married couples can still purchase life insurance on one another as long as they can prove insurable interest.
Insurable interest is when a person can expect to suffer financial loss upon the death of another specific person. Having both names on a mortgage loan, both named on a lease, or owning a business together are just a few examples of how you can prove insurable interest.
The two types of life insurance
There are two main types of life insurance: term life insurance and permanent life insurance.
Term insurance:
Basic, inexpensive life insurance
Temporary – lasts a certain length of time (typically 10, 20, or 30 years)
Ideal for most people
Permanent insurance:
Lasts a lifetime
Accumulates cash value
Much more costly than term insurance
Not necessary for most people
For most individuals, term life insurance is suitable coverage. It is designed to last only during the years in which you have the greatest need for it. Permanent life insurance can be beneficial for more complicated situations such as managing wealth for large estates.
The key benefits
Buying life insurance means you hand over some of your hard earned dollars to an insurance company – so what do you get in return?
Your life insurance policy will provide significant funds to your loved ones when they need it most, allowing them to grieve without the added financial stress.
The death benefit is typically considerably greater than the premiums you paid.
The proceeds are generally safe from creditors. Even if you die with debt, creditors cannot go after the life insurance proceeds paid.
Life insurance proceeds are typically not taxed by the federal government.
Peace of mind in knowing your loved ones will be financially protected if you are taken from them too soon.
Natasha Cornelius is the content manager and editor for Quotacy. She has worked in the life insurance industry since 2010 and has been making life insurance easier to understand with her writing since 2014. A long-time Mint user, Natasha lives in Bozeman, Montana where she loves to garden, DIY anything she can, and explore beautiful Big Sky country. Connect with her on LinkedIn.
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How Do I Fit Life Insurance into My Budget?
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Budgeting for life insurance might not be as exciting as budgeting for a new car or a fun trip, but it is much easier. Many people think about life insurance, but then decide to put it on the back burner because they think it’s expensive. Well guess what? Life insurance is actually very affordable.
Life insurance is really about protecting your loved ones from financial disaster if you should pass away. Think of it as income replacement.
Plan for what you need
Most people overestimate the cost of life insurance by 3-4 times. Life insurance is less expensive than you think. On average, you can get a $500,000 policy for $50 per month! We recommend getting coverage that is at least 5-10 times your income, but most importantly you should buy what you can comfortably afford. Having $100,000 in coverage is a million times better than having nothing at all.
Here’s what you need to cover:
Personal debt (car, student loans, credit cards)
Mortgage
Funeral expenses
Monthly income your family will need (future college tuition for children, groceries, monthly bills)
How to save money on life insurance
There is no such thing as a coupon for discounts on life insurance, but there are other ways you can save money.
Buy term. Term life insurance is the most affordable coverage you can own. Permanent insurance can cost 10 times more than term life insurance.
Pay annually. Insurance companies add fees for the extra administrative work needed to provide you that convenience of paying monthly or quarterly. Paying annually typically saves you around 5%.
Compare quotes. Life insurance pricing isn’t the same across the board with insurance companies. Different carriers evaluate your application on their specific guidelines, so you may save money by choosing a company that is more lenient toward your health situation. When you compare quotes using a tool like Quotacy, you are provided with competitive prices from all the top life insurance carriers.
Take another look. You may be overpaying especially if you purchased life insurance directly through an agent that only represents one insurance company. Chances are you may be able to get a lower rate just by comparison shopping different companies.
Unbundle your coverage. Bundling your life insurance with home and auto insurance is typically more expensive.
Put the cost of life insurance into perspective
We insure our health, cars, home, valuables, and even our phones, but most of us don’t realize that life insurance is cheaper to insure than most of these. In life we face financial challenges. We budget for daycare, student loans, phone bills, car payments and much more. Life insurance may not feel like a necessity when we are on a tight budget, but when you realize that you can get your family covered for pennies on the dollar, it’s easy to make that decision. If you feel the financial struggle now, what happens to your family if you die? Make sure your family is protected.
Fitting life insurance into a budget
Let’s look at three easy changes that you can make to fit life insurance into your budget. I’ve even made them myself!
1: Practice BYO (Bring Your Own)
Do you go through the Starbucks drive-thru or out to lunch on a daily basis? What about those happy hours and brunching on the weekend? I get it. It may take baby steps to start making your own coffee, packing your own lunch, and cutting back on eating out in general. But you’ll be surprised at how quickly the savings adds up.
My girlfriends and I alternate between throwing our own happy hours or brunches on the weekends. There’s no pressure to get all dolled up, and we make it easy by having everyone pitch in and bring their favorite drink or dish. Sure, I still go out and have fun, I just do it a little less often.
2: Conduct a subscription audit
These days with all the apps we have our fingertips and that fine line between need and want, it’s easy to let the number of subscriptions we have get out of hand. So many of these subscriptions are auto withdrawn, so when you look at your bank account it’s hard to decipher what you are even paying for anymore. Chances are you don’t need to pay for Hulu, cable, and Netflix, or Pandora, Spotify, and iTunes Radio. Give up a few and your bank account will thank you.
I’m the queen of subscriptions. But after my budget boyfriend became my budget husband, I was encouraged to give up a few subscriptions in order to save for our future. I thought $10 per month was no big deal, but when I added everything up, it became a real chunk of change. I encourage you to go through your subscriptions and decide what you really need.
3: Get creative with date nights
Going out for a date night gets expensive. Even if you just go out for dinner and a movie, that night adds up quickly. A dinner for two can quickly reach $50 or more, especially when you add in drinks. Have you been to a movie lately? Evening tickets are averaging $12-$14 each! And of course you want that delicious, buttery popcorn to go along with that show. It’s easy to spend $100 for a simple night out.
I’m a lover of date nights, but when my husband and I made it a weekly thing, it became a large monthly expense. While we enjoy a dinner and a movie, sometimes we make it a daytime activity. A lunch and a matinee can cost almost half the price of an evening out. Or, we choose a movie on Netflix and make a dinner at home.
We also decided to spice things up by finding activities we both enjoy and took up tennis lessons. Now we love taking our dates to the tennis court and loser has to make dinner at home. Fortunately my game is better than his, so I rarely have to cook. Not only do we save money by not going out, we also get a good sweat session in.
How to shop around for life insurance coverage
Admittedly, you’ll be shopping for the lowest price. Make sure the prices you see are from well-known brands with high financial strength ratings (A rated or better). These companies have been around a century or more and will be here for a long time to come.
Let’s say you’re looking for a $500,000, 20 year term policy. To stay competitive, insurance companies all have around the same price for the same policy, maybe just within a few cents of each other, so at first look they all appear to be about the same. Starting prices are based on your gender, your age, what state you live in, and whether or not you smoke cigarettes.
From there, pricing starts to change based on specific niches that insurance carriers have created for certain medical conditions and lifestyle habits. For instance, if you enjoy an occasional cigar during your monthly golf game, many carriers will consider you to be a smoker at a higher price, while a few companies see that as less of a big deal and will classify you a non-smoker at lower prices.
Here’s another example. Even if you are the epitome of health, but one of your parents wasn’t, prices can be higher because of the genetic risk they passed onto you. Let’s say your father died of cancer before we was 50. Your low rate won’t be affected with one or two carriers, but with all the rest your price will be higher.
A good place to start your shopping is at Quotacy. When you use Quotacy’s life insurance quoting tool you’ll see how easy it is to find and compare prices between the top carriers. You’ll be able to find the right price for you.
Jeanna Simonson is a writer and the Ambassador of Buzz at Quotacy. She has been researching and writing educational articles on the importance of life insurance since 2015. When not writing for Quotacy, you can find her scoping out the newest fitness and beauty trends for her own personal blog, traveling and spending time with her husband and fur babies. Connect with her on LinkedIn.
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Understanding your policy’s death benefit.
Q: How long does it take my beneficiaries to get my life insurance death benefit?
Once the death benefit claim form and a copy of the death certificate have been received by the carrier, beneficiaries typically receive the death benefit check in two weeks.
However, if the insured dies within the contest-ability period (which is typically two years) the death benefit may take longer because the life insurance company has the option to investigate the claim if they choose do to so.
Q: How do I know my beneficiaries will get paid the death benefit?
Life insurance companies are not in the business to rip people off. As long as your policy is inforce at the time of your death (in other words, the premiums were paid up-to-date) your beneficiaries will receive the death benefit payout. There are only a few exceptions to this, which we discuss in detail below.
Q: Are there any situations in which my life insurance policy won’t pay out?
There are three instances in which a life insurance company can choose to deny or reduce a term life insurance policy’s death benefit.
One: Contest-ability Period
Life insurance policies include what is called an Incontestability Clause. This clause states that the life insurance company has a specific period of time (typically two years) to dispute the validity of the insured’s statements made on an application. So, if you die within the contest-ability period, the life insurance company has the right to investigate the details of your medical history to ensure you did not misrepresent yourself on the application.
For example, stating that you did not smoke cigarettes when, in fact, you did up until the day you died. In a situation like this, insurance companies have the right to withhold some of the death benefit from your beneficiaries or even deny the claim altogether.
Two: Suicide Clause
Another situation in which the life insurance company has the right to deny a death benefit is if the insured commits suicide within a certain period of time, again typically within two years. In this situation, however, the life insurance company will return all premiums that have been paid to date to the family.
Three: Homicide
The last situation in which an insurance company may not pay a death benefit is if the insured was murdered. If the insured was murdered, the life insurance company will typically call the police department involved and inquire as to whether or not the beneficiary of the policy is a suspect.
If the beneficiary is a suspect, the life insurance company will hold payment until the charges are dropped or the beneficiary is deemed not guilty of the crime.
Q: Will my term life insurance death benefit payout be taxed?
Term life insurance is the least complicated type of life insurance and in most cases your beneficiaries will not have to pay federal or state income taxes on the death benefit they receive. Since the policy premiums are paid using after-tax dollars, Uncle Sam already got his cut.
There are two main exceptions to this rule:
Estate taxes
Gift taxes
If you own your own policy, the death benefit proceeds become part of your taxable estate. If your estate exceeds the exclusion amount, which is over $5 million dollars, it can get taxed. For most people, this isn’t an issue.
The second exception is what is known as “The Goodman Triangle.” If the policy owner, insured, and beneficiary are three different people, the death benefit could count as a taxable gift to the beneficiary.
Q: How can I be sure my policy’s life insurance carrier will still be around when I die?
All major life insurance companies have financial strength ratings. There are multiple agencies each with their own rating scales and standards that assess the long-term financial stability of these insurance companies. These ratings typically follow the school-like A through F scale. The higher the rating, the more stable the company is and the more likely the company will be able to pay future claims.
When you are looking to purchase life insurance, whatever means you are using to buy it through should tell you the insurance company’s rating. Any company with an A rating or better is considered financially stable and you should not worry about any future claims not being paid out.
Natasha Cornelius is the content manager and editor for Quotacy. She has worked in the life insurance industry since 2010 and has been making life insurance easier to understand with her writing since 2014. A long-time Mint user, Natasha lives in Bozeman, Montana where she loves to garden, DIY anything she can, and explore beautiful Big Sky country. Connect with her on LinkedIn.
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If you want to buy term life insurance, you’ve got a few options. You could work with an agent in your area if you’d prefer a face-to-face interaction, or you can buy online if you prefer the convenience of an electronic process.
However, not all online life insurance agencies are created equal. If you’re shopping around for term life quotes, it’s important to understand what to look for to help you get the best value.
What to expect when you’re applying for coverage
Anyone who has gone through a life insurance application in the past could tell you that life insurance carriers are some of the most thorough and careful companies in the world. This is because life insurance policies are priced based on the applicant’s risk of death.
However, the process of applying has come a long way, and it’s actually gotten pretty simple – especially online. Nowadays, most of the heavy lifting is done behind the scenes.
If you add a good agency into the mix, applying for life insurance is practically painless, since it will handle almost everything that doesn’t require your signature or further clarification from you.
Generally, buying a life insurance policy will take between two and six weeks, and the process tends to follow a consistent format.
Step 1: Submit an application
When you find a price you like, you can choose a carrier to submit a formal application with. Choosing a carrier to apply with isn’t a binding decision, and you’re always free to back out of an application to go a different direction.
Step 2: Take a medical exam
Life insurance carriers will require you to take a medical exam see how healthy you are. This is free for you and the examiner will even come to your home or office to make things convenient.
Step 3: Wait for your medical records
The carrier will order a copy of your medical records from your doctor, which could take anywhere between hours and weeks, depending on how well-organized your doctor keeps their records.
Step 4: Tie up loose ends
After the exam is completed, medical records have been received, and any other questions the carrier needs answered are out of the way, your application will be reviewed. Once you get the final OK from the carrier, your policy will be approved, and you’ll be on your way to getting coverage!
Let’s look at each of these steps in a little more detail.
Submitting your application
Starting your life insurance journey will often begin with getting a quote, which will show you prospective prices based on a few key factors, like the amount of coverage you’d need, how long you want it to last, and a few health and lifestyle questions.
Interested? Check out a few prices. Quotacy has an online quoting tool you can use – no commitment required.
Taking the medical exam
After applying for coverage, the life insurance carrier will require you to take a quick medical exam in order to be approved for coverage. Because life insurance pricing is based on your mortality risk, the carrier needs to verify your current medical situation.
The medical exam is a free mini-physical performed by an examiner and scheduled by the carrier. It can happen anywhere, even in your home or office, whenever you can spare half an hour.
Typical exams consist of:
A few questions about your medical history
A list of any medications you’re taking
Height and weight measurements
Pulse and blood pressure check
A urine sample
A blood sample
Preparing for your exam
The measurements that are taken during the exam are extremely important, and being prepared is your best bet to ensure a good outcome. In the time before your exam, you should remember to:
Fast for 6-8 hours – this will reduce your blood sugar. Scheduling your exam in the morning can make this easy if you skip breakfast.
Don’t smoke for at least one hour prior – smoking temporarily raises your blood pressure.
Don’t drink coffee for at least one hour prior – caffeine can increase your blood pressure and raise your pulse.
Avoid alcohol for 8 hours prior – it’s high in calories, and can raise your blood sugar and blood pressure.
Avoid overly salty and sugary foods for one day beforehand – both salt and sugar raise your blood pressure.
Drink lots of water – this hydrates you to help make the blood draw a lot easier and less painful.
No strenuous exercise the night before or the day of your exam – as your body repairs from exercise, your blood pressure and pulse rise slightly.
No sexual activity for one day beforehand (for men, at least) – gettin’ freaky lowers the PSA levels in your blood, which is one of the ways that carriers evaluate your prostate health.
Get a good night’s sleep – being well-rested lowers blood pressure. As an added bonus, if you’re afraid of needles, having a full eight hours can help your body negate the physical effects of your phobia.
Waiting for your medical records
Before your life insurance application is approved, insurance carriers order copies of your medical and driving records to help them get a better idea of any insurability risks you might have. Just like with the medical exam, the carrier orders these records behind the scenes on their own dime.
Because the laws protecting a patient’s medical records are extremely strict, you will need to sign a form authorizing your doctor to release your records to the insurance company and agency you’re working with.
At this point, all you’ll need to do is sit and wait for the records to arrive. Depending on how efficient your doctor is at sending them along, waiting for this step to be completed can either happen overnight or take a few weeks.
Answeringadditional questions
In addition to everything else that happens during your application, the carrier will sometimes have follow-up questions for you which will help them get to know you a bit better. These questions can be about anything from medical conditions to your hobbies to your travel plans.
A lot of the time, the questions a carrier asks can be pretty scary to someone trying to protect their family. Many clients see a questionnaire about their sleep apnea, or their diabetes, or their battle with cancer, and assume that the carrier will decline them on the spot.
It’s important to keep in mind that even though there are many factors that can affect your rate during this time, you’ll likely be able to get coverage. The whole reason that insurance carriers have flexible prices is because they want to offer coverage to as many people as possible, regardless of the circumstances.
Here’s a quick list of example questions you could see during an application, depending on your circumstances.
If you have a medical condition:
How severe is it?
How is it being treated?
Is the treatment effective?
If you have a risky hobby, like hang gliding or rock climbing:
What level of experience or certification do you have?
How often do you participate in your hobby?
How much time have you dedicated to your hobby?
This isn’t a comprehensive list, by any means, but hopefully it will give you an idea of what the carrier is looking for.
Waiting for approval
Once the carrier has everything they need, your application will enter the approval process. This is when the carrier’s underwriters will review everything they’ve collected as a whole, and evaluate where the final price of your insurance policy should be set.
If you’re approved for coverage, you’ll be sent a packet containing your policy itself as well as a few documents that you’ll need to sign and return so the carrier can finalize your coverage. This step is also when the carrier will collect your payment information so that they can set up your billing on their end.
Depending on the carrier you apply with, you will either be sent digital forms or a physical policy booklet. Regardless of the format, you should store your policy securely and have a plan in place to help your family find it in the event of your death, so they can claim your death benefit.
After a bit more processing by the carrier to wrap up any loose ends, you’ll receive a notification that your policy is inforce. That means that everything’s in place on the carrier’s end of things, and your coverage has been activated! All that’s left for you to do is make your premium payments according to your payment plan, and your family will be covered.
Eric Lindholm is a writer for Quotacy, and he’spersonally guided hundreds of people through their own life insurance journeys since joining in 2016. Eric lives in the Twin Cities, Minnesota, where he’s busy paying off his student loans and making the most of his time as a 20-something. You can connect with him and see what he’s up to at EricLindholm.biz.
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