Can You Afford a Baby? 5 Expenses Associated With Being a Parent

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Spoiler alert: Kids are expensive.

The most recent estimate from the U.S. Department of Agriculture puts the average cost of raising a child to adulthood at $233,610, and $284,570 factoring in inflation. That doesn’t include college education, if you plan to help your kids pay for college.

But these numbers are just averages. How much you actually spend to raise a child depends on factors ranging from where you live to your health insurance to just how much you plan to spoil your children. Keep the following broad expenses in mind, and remember that you have more control over most of them than you probably assume. 

Can You Afford a Baby? – 5 Expenses to Consider

My wife and I waited until relatively late in life to have our first child, partially out of fear of the cost. But our daughter hasn’t cost us as much as we feared. It helps that we have good health insurance, which covers most medical costs. But we bought a secondhand crib and changing table, and we spend little on clothing and extra food. The wave of extra costs just hasn’t hit us the way we worried. 

The cost of raising a child does spread out over 18 years, plus nine months of pregnancy. And much of it depends on where you live — which you do control, even if you don’t necessarily want to move for a more affordable cost of living. 

Still, having a child can seem financially overwhelming. The expenses break down broadly as follows.

1. Pregnancy & Delivery Costs

Pregnancy involves more doctor’s appointments than you ever wanted to have in your life. All leading toward the dramatic climax of giving birth. 

Plan on monthly checkups with your obstetrician, but the costs don’t end there. You’ll also have a battery of lab tests and ultrasounds, all of which cost money. 

Insurance Coverage for Pregnancy, Delivery, and Neonatal Care

Your out-of-pocket costs depend heavily on your health insurance coverage. Your health insurance plan may cover nearly all pregnancy-related expenses or it may require you to cover most expenses until you reach your deductible.

Federal law does require insurance companies to include delivery, prenatal, and maternity care as essential medical services, but your deductible, copays, and co-insurance costs can still vary based on your policy. 

If you’re an expecting mother under 26 and remain on your parents’ health insurance policy, different federal rules apply. Your insurer must still cover pregnancy and maternity care, but they’re not necessarily required to cover delivery or neonatal care. And they won’t cover your child once they’re born. Read more about these rules at the Kaiser Family Foundation if you’re still covered under your parents’ plan. 

If you don’t have health insurance, look for ways to enroll before getting pregnant. Explore your options for getting health insurance without employer coverage, and you can even look into part-time jobs that offer health insurance. Depending on your income, you may also qualify for Affordable Care Act premium subsidies or Medicaid coverage. 

As for delivery, nationwide it costs an average of around $15,000 before insurance. But it varies wildly by state: New Jersey hospitals charge an average of $29,048, more than three times Nebraska’s average of $8,805. Consider it your first taste of how where you live affects the cost of raising a child. 

What portion of the hospital bill you pay depends, of course, on your insurance. 

Fertility Treatments & Adoption

Remember that fertility treatments add another slew of expenses. If you plan on medical help to get pregnant, look into ways to reduce the costs of fertility treatments. 

Adoption doesn’t necessarily cost less than having a child yourself, either. Do your homework on adoption costs and how to reduce them if you’re considering that route. 

2. First-Year Costs

After your family adds a new member, the costs just keep accumulating. 

You’ll need a certain amount of basic supplies, including:

  • Crib
  • Car seat
  • Stroller
  • Baby blankets & bedding
  • Bottles
  • Diaper changing pad
  • Onesies and other clothes
  • Breastfeeding supplies such as a pump, nipple pads, and nursing bras

That says nothing of disposables like diapers, wipes, and baby formula. Or any of the optional-but-you’ll-feel-pressured-to-buy items like a diaper bag, changing table, rocking chair for nursing, baby books, and a hundred other things that The Joneses buy. 

You can save some money on these items, by using family hand-me-downs and buying used. Since babies outgrow their clothes, furniture, and other necessities so quickly, buying used usually makes sense, as baby items tend to have plenty of usable life left in them. Read up on ways to save money on newborn expenses before going on a shopping spree. 

In their uncertainty and anxiety, new parents tend to overspend. But the more you know going in, the better you can judge what you absolutely need and what you can skip. Do your homework on how much it costs to have a baby, and as importantly, how to prepare financially for kids. 

3. Child Care

Many new parents find that their largest cost isn’t in material supplies or even medical bills, but in childcare. 

That could mean paying for daycare or a nanny, once maternity leave ends. Or it could mean one parent ceasing to work for years, until the child reaches school age. Either way, it can cost your family thousands of dollars each month. 

Nationally, childcare averages $216 per week for an infant, according to an analysis by Move.org. That comes to 17.1% of the median U.S. income. But like every other expense in the US, it varies enormously by location. In Washington DC, families pay an average of $21,678 per year, while in Alabama, they pay roughly a quarter of that at $5,593. 

Daycare tends to cost less than hiring a nanny or au pair, but if you have multiple children, a single nanny can watch several children. They may charge more for a second child, but not double the cost of watching a single child. That “economy of scale” might make sense once Number 2 comes along. 

It certainly helps if you have extended family who can watch your children. But beware of moving across the country solely for more affordable childcare. You might trade in one set of costs for higher housing costs and other boosts to your cost of living. 

If you’re thinking about becoming a single-income family, don’t ignore the cost to your career. Leaving your career for several years doesn’t just hit the pause button — it can lead to permanent damage to your earning potential. While there’s little solid research on the subject, a 2018 study in the UK found that people who took a five year hiatus from their career went on to earn $12,894 less per year on average. 

Start exploring ways to save on childcare costs long before you actually need to make a decision about where Junior will spend their days. 

4. Ongoing Costs

As expensive as it is, at least childcare only costs you money for a few years. 

Many other costs of raising a child keep nipping your wallet at every turn however. Costs like larger housing, larger cars, food for more mouths, and clothing for more backs.

Higher Housing Costs

Of these, larger housing puts the deepest dent in your pocketbook. A one-bedroom apartment sets you back an average of $1,670 in the US, according to Apartment Guide. A two-bedroom unit costs nearly $300 more per month at $1,951. In other words, that extra bedroom costs you $3,372 per year on average. 

Once again, your location matters. For example, in Long Beach, CA, you can expect to pay an average of $965 more for a two-bedroom apartment than a one-bedroom. That’s an annual cost difference of $11,580. 

The same economics apply to homeowners. In 2018, homebuyers paid nearly $70,000 more on average for a two-bedroom home than a three-bedroom, according to RealtyHop. If you put down 20%, that means a higher down payment of almost $14,000, which can delay your dreams of homeownership.

Education Costs

Then there are education costs, which location also impacts. Some school districts come with phenomenal public education for your tax dollars, while the quality of education is so poor in others that every family with means sends their children to private or parochial schools. 

My hometown of Baltimore offers an example of the latter, where high local taxes and close to the highest per-student spending in the nation continue to produce atrocious schools. Middle- and upper-middle class families strain their budgets to spend upwards of $30,000 per year in tuition in Baltimore and its surrounding counties, on top of their high tax bills already funding public schools. 

Of course, you can move into a school district with better public schools. But you’ll pay for them in dramatically higher housing costs. 

If you choose to help your kids with college costs, you could spend up to hundreds of thousands more on education. Some parents handle this by contributing a certain amount each month to a 529 plan or ESA, and telling their children that they’re on their own above the amount in the account once they reach college age. You may qualify for tax benefits on your contributions; read up on 529 plans and Coverdell ESAs for details. 

Entertainment & Travel Costs

Then come the higher entertainment and travel costs for a family with children. When you go out to dinner, you buy three meals instead of two. When you go out to the movies, you buy three tickets — and more popcorn and drinks. And when you book travel, you pay for another airline ticket and eventually another hotel room. 

My wife and I live abroad with our daughter, and we travel internationally several times a year. When my daughter turned two, our airfares jumped by 50% as most airlines charge full adult fares for two-year-olds. 

Of course, you can and should get scrappy in the fight to find savings, even as you add more mouths to feed and backs to clothe. Start simple in your search for money saving ideas for families, but don’t be afraid to seek larger savings through tactics like house hacking. 

5. Health Insurance

Larger families pay larger health insurance premiums, as the policy must cover more people. 

One the simplest level, health insurers offer individual plans and family plans. A married couple, or a single parent with one child, or a family of ten, all require a family plan. The distinction matters because most health insurance companies charge double the deductible and out-of-pocket maximums for family plans compared to individual plans. 

However insurance companies charge monthly premiums based on the number of covered family members. So when your family of two becomes a family of three, your premium goes up accordingly. 

That said, many health care policies cap the premium at a certain number of children under 21. For example, Blue Cross Blue Shield caps premium pricing at three children under 21 in a family plan, so having a fourth child wouldn’t raise your premiums — you’d still pay for five people despite having six on the policy. 

Moderate-income families may qualify for the Children’s Health Insurance Program (CHIP) as well. As the name suggests, CHIP provides low-cost health coverage for children, in families that earn too much to qualify for Medicaid but which fall below specified income limits. 


Final Word

Financial stability helps relieve the stress of bringing home a new baby. A stable job, a stable domestic partnership, and stable health insurance all make the transition easier. 

You don’t need to wait until 40 before becoming a parent, like I did. But beware of rushing into it before you’re financially ready. 

You won’t hear any motivational speakers say it, but there’s an ideal window for becoming a parent. This window arrives after you’ve achieved a foothold in your career and gained a measure of financial stability. It begins to close as fertility risks take off exponentially.  

That doesn’t mean you have to pay off every cent of student loan debt or buy a house or reach some arbitrary net worth. Just start practicing good personal finance habits: paying down debt steadily each month, building an emergency fund in an FDIC-insured savings account, and saving and investing money automatically. Do that, and you’re already ahead of the average would-be parent on the planet. 

Besides, having kids isn’t all financial doom and gloom. You get to claim an ever-expanding child tax credit, and you get a backup retirement caregiver in case you run out of money in retirement!

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G. Brian Davis is a real estate investor, personal finance writer, and travel addict mildly obsessed with FIRE. He spends nine months of the year in Abu Dhabi, and splits the rest of the year between his hometown of Baltimore and traveling the world.

Source: moneycrashers.com

You can now order four free…

You can now order four free at-home COVID tests from the federal government, regardless of whether you have health insurance. A new website, covidtests.gov, went live on Tuesday, Jan. 18, one day ahead of schedule.

The website allows every home in the U.S. to order four free rapid antigen tests that deliver results in 30 minutes. PCR tests aren’t available. Tests are expected to ship within seven to 12 days, according to the website.

How to Get 4 Free COVID Tests

Signing up for your free tests is incredibly simple. All you need to do is go to covidtests.gov and provide your name and address, plus an email address if you want shipping notifications. And that’s it.

The U.S. Postal Service will deliver the tests. Currently, the website limits you to four free tests for each residential address, no matter how many household members you have.

Technically as of Tuesday, the website was in beta mode, which means it’s being tested for possible hiccups. Though there have been concerns that the website could crash upon launch due to high demand for tests, the site appeared to be functioning early Tuesday afternoon. A staff writer for The Penny Hoarder placed an order for testing kits without issue.

A health worker grabs two at-home COVID tests
Youngstown City Health Department worker Faith Terreri grabs two at-home COVID-19 test kits to be handed out during a distribution event, Dec. 30, 2021, in Youngstown, Ohio. David Dermer/AP

What About the 8 Free Tests Insurers Have to Provide?

As of Jan. 15, health insurance companies are required to pay for eight home tests per month for each person covered by the plan. However, many people are still finding that they need to pay out of pocket for the tests and submit a receipt for reimbursement.

You can access four free tests for your household using the federal government’s website regardless of whether you have health insurance. The website doesn’t ask for insurance information, and no upfront payment is required. For now, the four free tests are a one-time only offer.

What if I Can’t Wait for My Test?

The earliest you can expect to receive your test through the federal website is late January. If you need a test before then and you have private insurance, you can pay for a home test and then get reimbursed for any upfront payment. The challenge, of course, is finding a home testing kit.

You can also access free and low-cost tests through a community testing center. To find a site, use HHS.gov’s testing center locator.

Robin Hartill is a certified financial planner and a senior writer at The Penny Hoarder. She writes the Dear Penny personal finance advice column. Send your tricky money questions to [email protected]

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Source: thepennyhoarder.com

What Assets Should Be Included in Your Trust?

One of the largest financial planning misconceptions people hold is that having a will ensures their property will transfer quickly to their heirs. The truth is, whether you have a will or not, your assets will go through the probate process when you die.

Probate can be a rather lengthy and costly process for your heirs. The procedure can extend from a couple of months for a simple estate, to a couple of years for a more complex estate. For most people, ensuring their property is preserved and passed on at the lowest possible cost is essential to a comprehensive estate plan.

Advantages of Revocable Living Trusts

A revocable living trust is an instrument created for the purpose of protecting your assets during your lifetime. It also creates an avenue to pass your assets with ease after your death. There are several benefits of creating a trust. The chief advantage is to avoid probate. Placing your important assets in a trust can offer you the peace of mind of knowing assets will be passed onto the beneficiary you designate, under the conditions you choose, and without first undergoing a drawn-out legal process. A trust can also provide you with some level of privacy as to the information shared about your estate. Another feature is that placing your assets in a trust will help protect them should you become incapacitated.

Can I Avoid Probate with a Trust?

It is important to note that there is no way to completely bypass probate. While your most important assets may be transferred as part of your trust, there are some assets that will not fund your trust for a variety of reasons. These other assets will still go through the probate process. Though setting up a trust can be costly and complex, it can make the inheritance process easier on your beneficiaries. To ensure your trust performs as it was intended, timely and proper funding is vital.

What Type of Assets Go into a Trust?

Many people assume that once they sign the trust documents at their attorney’s office, they are ready to roll. Setting up a trust, however, is only half of the solution. For a revocable living trust to take effect, it should be funded by transferring certain assets into the trust. Often people fund a living trust with real estate, financial accounts, life insurance, annuity certificates, personal property, business interests and other assets. The most notable types are outlined below:

Real Estate: Many people wonder whether it is a good idea to place their house in a trust. Considering that your home is potentially one of your largest assets, living trusts can be especially beneficial as they can transfer real estate quickly. Additionally, they help avoid the hassle of separate probate proceedings for land, commercial properties and homes that are owned out of state or held in different counties. Any property with a mortgage, however, would require refinancing into the name of the trust, and some lenders may be reluctant to do this.

Financial Accounts: There are several types of financial assets that can be owned by a trust, including:

  • Bonds and stock certificates
  • Shareholders stock from closely held corporations
  • Non-retirement brokerage and mutual fund accounts
  • Money market accounts, cash, checking and savings accounts
  • Annuities
  • Certificates of deposit (CD)
  • Safe deposit boxes

Funding your trust with bank and brokerage accounts generally requires new account paperwork in the name of the trust as well as signed authorization to retitle or transfer the asset. Likewise, physical bond and stock certificates require a change of ownership to be completed with the stock transfer agent or bond issuer. You may also wish to fund the trust with a checking or saving account, though it is important to carefully consider any implications if these accounts require regular withdrawals or activity. Additionally, while you may fund the trust with an annuity, these instruments already enjoy a preferential tax treatment, and transferring them may forfeit this benefit. With existing certificates of deposit, they are usually transferred to a trust by opening a new CD. When doing so, it is a good idea to see if your issuer will waive any penalties. Finally, safe deposit boxes may be issued to the trust, or ownership may be transferred for an existing box.

Life Insurance: Many people ask if it is a good idea to put life insurance in a trust. The benefits include protecting it from creditors and making it easier for your loved ones to access the money by avoiding probate. Naming the living trust as a beneficiary of your life insurance may come with some risks. If you are the trustee of your revocable living trust, all assets in the trust are considered your property. In this instance, life insurance proceeds are counted as part of your estate’s worth and could create a taxable situation should you reach the IRS threshold for taxable estates. In 2022, that amount is $12.06 million for an individual and $24.12 million for couples. Funding a trust with life insurance and annuity contracts generally requires a change of ownership form submitted to the contract issuer.

Valuable Personal Property: Personal items, such as jewelry, art, collectibles and furniture, including pianos or other important pieces, may be placed in a trust. Personal property without any legal certificate or title is commonly listed on an accompanying schedule that is kept with your trust documents. Those assets with certificates or legal title often require the owner to quitclaim their ownership interest to the trust.

Collectible Vehicles: Some cars retain their cash value for long periods of time and therefore may be worth transferring to your revocable living trust. It is worth considering the title transfers and taxes that may be imposed, so it is important to speak to a trusted financial adviser or lawyer before transferring such assets.

Can You Put a Business in a Living Trust?

There are a number of advantages of transferring your business interest into a revocable living trust. Benefits generally include providing relief to your family from carrying the burden of your business debts, as well as the potential to reduce the tax burden on your estate. Below are the effects of several types of business ownerships:

Sole Proprietorships: Transferring a small business during the probate process can present a challenge and may require your executor to keep the business running for months under court supervision. Often sole proprietors hold business assets in their own name, so transferring them to a trust would offer some protection for the family. For a sole proprietor, transfers to a trust behave generally the same as transferring any other type of personal assets you own, including your business name.

Partnerships: With partnerships, you may transfer your share in the partnership to a living trust. If you hold an ownership certificate, you will, however, need to have it modified to show the trust as the shareowner rather than yourself. It is important to note that some partnership agreements may prohibit transferring assets to living trusts, so you will want to consult a financial adviser or attorney.

Limited Liability Companies (LLC): Depending upon your operating agreement, LLC business owners often need approval from the majority of owners before they can transfer the interests in the company to their living trust. Once transferred, the voting ability remains with you, but your ownership share will fall to the trust.

What Assets Cannot Be Placed in a Trust?

There are a variety of assets that you cannot or should not place in a living trust. These include:

Retirement Accounts: Accounts such as a 401(k), IRA, 403(b) and certain qualified annuities should not be transferred into your living trust. Doing so would require a withdrawal and likely trigger income tax. In this instance, it is possible to name the trust as the primary or secondary beneficiary of the account, which would ensure the funds transfer to the trust upon your death.

Health Savings Accounts or Medical Savings Accounts:  Since these accounts already allow you to use the money tax-free for allowable medical expenses, they cannot be transferred to a living trust. Like retirement accounts, however, you can name the trust as the primary or secondary beneficiary.

Active Financial Accounts: It is not advisable to transfer accounts you use to actively pay your monthly bills unless you are the trustee and granted full control of the trust assets. For many people, it is simply easier to keep these accounts out of the trust.

Vehicles: Generally, everyday vehicles like cars, boats, trucks, motorcycles, airplanes or even mules or snowmobiles are not placed in a trust because they often do not go through probate, and unlike collectible vehicles, they are not appreciable assets. Additionally, many states impose a tax when the vehicles are retitled, and some do not allow vehicle owners to name a beneficiary after death.

A Word About Irrevocable Trusts

While the assets placed in an irrevocable trust are no longer vulnerable to creditors or subject to an estate tax, you forfeit ownership of the assets. Careful consideration should be made when using an irrevocable trust, and it is highly advised that you first consult your financial adviser or attorney.

While creating a living trust may be costly and require a lot of legwork to fund, there are many benefits to using it as an instrument to protect your assets. The flexibility these trusts offer helps to ensure that your assets are protected during your lifetime and pass easily to heirs after your death.

Estate laws vary from state to state. This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult a tax preparer, professional tax adviser or lawyer.
Kris Maksimovich is a financial adviser located at Global Wealth Advisors 4400 State Hwy 121, Ste. 200, Lewisville, TX 75056. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. Financial planning offered through Global Wealth Advisors are separate and unrelated to Commonwealth. He can be reached at (972) 930-1238 or at [email protected]
© 2022 Global Wealth Advisors

President and Founder, Global Wealth Advisors

Kris Maksimovich, AIF®, CRPC®, CRC®, is president of Global Wealth Advisors in Lewisville, Texas. Since it was formed in 2008, GWA continues to expand with offices around the country. Securities and advisory services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. Financial planning services offered through Global Wealth Advisors are separate and unrelated to Commonwealth.

Source: kiplinger.com

Here’s the Best Way to Get Cash Back on eBay Purchases

If you shop on eBay, you know it can be a great place to find a bargain. But if you’re like most eBay shoppers, you’re probably not getting any cash back on your eBay purchases.

What’s that? you ask. I could be getting cash back on eBay?

Yes, although it’s getting trickier now that eBay is shutting down its own cash-back program.

“Enrollment in the eBay Bucks Rewards Program is currently closed,” eBay’s website says. “After careful and thorough consideration, we decided to retire the 1% earning as we look to continuously optimize our offerings.”

That’s OK, though! Getting eBay cashback is still easier than you might think.

Just make sure you’re using a reputable cash-back platform so you’re not getting ripped off. There are plenty of shady outfits out there that’ll promise you the moon while gouging you with some kind of costly subscription service. You don’t want that.

To help out, we’ve got a list of cash-back websites that’ll get you rebates on eBay purchases:

1. Rebaid

Rebaid helps shoppers find freebies, rebates and discounts on scores of shopping sites, such as Amazon, Walmart, Target, Etsy — and eBay cash back. In some cases, it offers up to 100% cash back!

It’s free to sign up, and it’s easy to use. You start at the Rebaid website, where you browse through offers or search for specific offers. Once you choose an available offer, it’ll take you to the retailer’s website to buy your item.

Once you’ve made your purchase, you copy your order number and go back to Rebaid to claim your rebate. Discounts typically vary from 25% to 100%. Most rebates arrive in your mailbox via a check, but some are done via direct deposit.

You can also get direct discounts where you enter a code at checkout and get savings right away.

It’s that simple. That’s all there is to it.

2. Swagbucks

If you use the free rewards website known as Swagbucks next time you shop online, you can save on purchases at some of your favorite sites like Amazon, Target and Old Navy. It also features eBay cashback offers and eBay coupons.

Swagbucks’ eBay rewards offers continually change, so you have to check. On any particular day, Swagbucks might offer something like a $10 off coupon on select jewelry purchases of $40 or more. Or 10% off Under Armour apparel. Just look at each coupon code and decide if it’s right for you.

It just varies from day to day.

3. MyPoints

MyPoints is another cash-back portal that lets you earn rewards by shopping online and printing coupons. It’s connected to thousands of stores, including favorites like Walmart, Amazon, Target — and eBay. You earn points by purchasing from stores through the MyPoints portal, and you can eventually convert the points into cash.

4. Ibotta

Ibotta is mostly known for grocery rebates. It’s best known for paying you cash back for buying hundreds of different brands at the supermarket.

In the past, the Ibotta platform offered cash back on various eBay purchases, but that’s not currently the case. Ibotta used to have an eBay page, but it no longer exists.

5. Rakuten

Rakuten is a browser extension that used to be known as Ebates. It helps you find coupons, cash back and other deals when you shop at thousands of stores including Target, Walmart, Macy’s and Kohl’s.

It offers eBay coupons, promo codes and up to 1% cash back on various purchases from eBay if you shop through Rakuten’s browser extension. Cash back is only available for certain departments on eBay, though.

First you have to install the browser extension. You can use it with Chrome, Firefox, Safari or Microsoft Edge.

6. RebatesMe

The RebatesMe Cash Back Button lets you earn money and score savings when shopping at your favorite online retailers, including Overstock and eBay. When you check out, this browser extension will show you coupon codes, and it’ll alert you if the site you’re visiting has any cash-back offers.

7. But Wait, There’s More!

There’s a whole slew of other cash-back websites, browser extensions and shopping portals out there, including BeFrugal, Better Sidebar, Extrabux, Giving Assistant, Kiindly, Slickdeals and Yazing.

You can also buy discounted eBay gift cards or eBay branded gift cards.

In other words, there’s no shortage of options available to you.

So how do you choose which one to use?

We’re actually partial to Rebaid, and here’s why:

Why Rebaid is Our Choice

There’s a lot of public skepticism about rebate sites, because so many of them have gone out of business, or because they fail to actually pay the promised cash back.

Rebaid is an established, U.S.-based company, and its members consistently get their rebate checks.

That’s why it has a high rating of 4.7 out of 5 on Trustpilot, based on hundreds of positive customer reviews. It’s simply better than a lot of the other sites.

If you’re looking for eBay deals, don’t neglect this easy extra step to save money.

It may be one of the world’s largest online marketplaces, but a lot of eBay shoppers aren’t accustomed to getting cash back on their eBay purchases. But if you’re getting cash back at the gas pump or getting cash back from your credit card, there’s no reason you should have to pay full price on eBay.

Mike Brassfield ([email protected]) is a senior writer at The Penny Hoarder.

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Source: thepennyhoarder.com

8 Popular Types of Life Insurance for Any Age

No matter what your age, it’s probably a good time (and not too late!) to think about getting life insurance. It’s a key step in financial planning, so let’s get to know the two main types – term and permanent – so you can understand which is the right option to protect your loved ones.

First, a crash course in what insurance is: When you purchase a life insurance policy, you make recurring premium payments. Should you die while covered, your policy will pay a lump sum that you’ve selected to the beneficiaries you have designated. It’s an important way to know that if you weren’t around, working hard, your loved ones’ expenses (housing, food, medical care, tuition, etc.) would be covered. Granted, no one wants to imagine leaving this earth, but buying life insurance can give you tremendous peace of mind.

Types of Life Insurance

Now that the basic concept is clear, let’s take a closer look at the two types of life insurance policies: term and permanent. Term life insurance offers coverage for a certain amount of time, while permanent life insurance provides coverage for the policyholder’s whole life as long as premiums are paid. (These policies come in a variety of options. We’ll break those down for you in a moment.) There’s no right or wrong type; only a policy that is right for you and your needs. Figuring out which one will be easier once you understand the eight different kinds of life insurance and the needs they were designed to satisfy.

1. Term Life Insurance

Term life insurance, as the name suggests, protects a policyholder for a set amount of time. It pays a death benefit to beneficiaries if the insured person dies within that time frame. Term life insurance coverage usually ranges from 5 to 30 years. Typically, all payments and death benefits are fixed.

There are several reasons why a term life insurance policy might be right for you. Perhaps there is a specific, finite expense that you need to know is covered. For instance, if covering the years of a mortgage or college expenses for loved ones is a priority, term life insurance may make the most sense. These policies can be helpful for young people too. If, say, you took out hefty student loans that are coming due and your parents co-signed, you might want to buy a life insurance policy. The lump sum could cover that debt in a worst-case scenario.

Another reason to consider term life insurance: It tends to be more affordable. If you don’t need lifelong coverage, a term policy might be an excellent choice that’s easier on your budget.

A few variables to be aware of:

•   Term life insurance may be renewable, meaning its term can be extended. This is true “even if the health of the insured (or other factors) would cause him or her to be rejected if he or she applied for a new life insurance policy,” according to the Insurance Information Institute. Renewal of a term policy will probably trigger a premium increase, so it’s important to do the math if you’re buying term insurance while thinking, “I’ll just extend it when it ends.”

•   If you would be comfortable with your coverage declining over time (that is, the lump sum lowering), look into the option known as decreasing term insurance.

2. Whole Life Insurance

Whole life insurance is the most common type of permanent life insurance, which protects policyholders for the duration of their lives.

As long as the premiums are paid, whole life insurance offers a guaranteed death benefit whenever the policyholder passes. In addition to this extended covered versus term life insurance, whole life policies have a cash value component that can grow over the policy’s life.

Here’s how this works: As a policyholder pays the premiums (these are typically fixed), a portion goes toward the cash value, which accumulates over time. We know the terminology used in explaining insurance can get a little complicated at times, so note there’s another way this may be described. You may hear this referred to as your insurance company paying dividends into your cash value account.

This cash value accrues on a tax-deferred basis, meaning you, the policyholder, won’t owe taxes on the earnings as long as the policy stays active. Also worth noting: If you buy this kind of life insurance and need cash, you can take out a loan (with interest being charged) against the policy or withdraw funds. If a loan is unpaid at the time of death, it will lower the death benefit for beneficiaries.

The cash value component and lifelong coverage of this type of life insurance can be pretty darn appealing. And it may be perfect for funding a trust or supporting a loved one with a disability. However, buying a whole life policy is pricey; it can be many multiples of the cost of term insurance. It’s definitely a balancing act to determine the coverage you’d like and the price you can pay.

For those who are not hurting in the area of finances, whole life can have another use. A policy can also be used to pay estate taxes for the wealthy. For individuals who have estates that exceed the current estate tax exemption (IRS guideline for 2021) of nearly $11.7 million , the policy can pay the estate taxes when the policyholder dies.

3. Universal Life Insurance

Who doesn’t love having freedom of choice? If you like the kind of protection that a permanent policy offers, there are still more varieties to consider. Let’s zoom in on universal life insurance, which may provide more flexibility than a whole life policy. The cash account that’s connected to your policy typically earns interest, similar to that of a money market. While that may not be a huge plus at this moment, you will probably have your life insurance for a long time, and that interest could really kick in. What’s more, as the cash value ratchets up, you may be able to alter your premiums. You can put some of the moolah in your cash account towards your monthly payments, which in some situations can really come in handy.

This kind of policy is also sometimes called adjustable life insurance, because you can decide to raise the benefit (the lump sum that goes to your beneficiaries) down the road, provided you pass a medical exam.

4. Variable Life Insurance

Do you have an interest in finance and watch the market pretty closely? We hear you. Variable life insurance could be the right kind of permanent policy for you. In this case, the cash value account can be invested in stocks, bonds, and money market funds. That gives you a good, broad selection and plenty of opportunity to grow your funds more quickly. However, you are going to have more risk this way; if you put your money in a stock that fizzles, you’re going to feel it, and not in a good way. Some policies may guarantee a minimum death benefit, even if the investments are not performing well.

This volatility can play out in other ways. If your investments are performing really well, you can direct some of the proceeds to pay the premiums. But if they are slumping, you might have to increase your premium payment amounts to ensure that the policy’s cash value portion doesn’t fall below the minimum.**

This kind of variable life insurance policy really suits a person who wants a broader range of investment options for the policy’s cash value component. While returns are not guaranteed, the greater range of investments may yield better long-term returns than a whole life insurance policy will.

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5. Variable Universal Life Insurance

Variable universal life insurance is another type of a permanent policy, but it’s as flexible as an acrobat. If you like to tinker and tweak things, this may be ideal. Just as the name suggests, it merges some of the most desirable features of variable and universal plans. How precisely does that shake out for you, the potential policyholder? For the cash account aspect of your policy, you have all the rewards (and possible risks) of a variable life insurance policy that you just learned about above. You have a wide array of ways to grow your money, which puts you in control.

The features that are borrowed from the universal life model are the ability to potentially change the death benefit amount. You can also adjust the premium payments. If your cash account is soaring, you can use that money towards your monthly costs…sweet! It’s a nice bonus, especially if funds are tight.

6. Indexed Universal Life Insurance

This is another type of permanent life insurance with a death benefit for your beneficiaries as well as a cash account. You may see it called “IUL.” In this instance, the cash account earns interest based on how a stock-market index performs. For instance, the money that accrues might be linked to the S&P (Standard & Poor’s) 500 composite price index, which follows the shifts of the 500 biggest companies in America. These policies may offer a minimum guaranteed rate of return, which can be reassuring. On the other hand, there may be a cap on how high the returns can go. A IUL insurance plan may be a good fit if you are comfortable with more risk than a fixed universal life policy, but don’t want the risk of a variable universal life insurance product.

7. Guaranteed or Simplified Issue Life Insurance

With most life insurance policies, some form of medical underwriting is required. “Underwriting” can be one of those mysterious insurance terms that is often used without explanation. Here’s one aspect of this that you should know about. Part of the approval process for underwritten policies involves using information from exams, blood tests, and medical history to determine the applicant’s health status, which in turn contributes to the calculated monthly costs of a policy. Underwriting serves an important purpose: It helps policyholders pay premiums that coincide with their health status. If you work hard at staying in excellent health, you are likely to be rewarded for that with lower monthly payments.

However, sometimes insurance buyers don’t want to go through that process. Maybe they have health issues. Or perhaps they don’t want to wait the 45 or 60 days that underwriting often requires before a policy can be issued. With guaranteed or simplified issue life insurance, the steps are streamlined. Applicants may not have to take a medical exam to qualify and approvals come faster.

These policies tend to have lower death benefits (think $10,000, $50,000, or perhaps $250,000 at the very high end) than the other types of life insurance we’ve described. Less medical underwriting also means policies tend to be more expensive. Who might be interested in this kind of insurance? It may be a good option for someone who is older (say, 45-plus), has an underlying medical condition that would usually mean higher insurance rates, or has been rejected for another form of insurance. The coverage may suit the needs of someone looking for insurance really quickly, like the uninsured people who, during the COVID-19 pandemic, wanted to sign up ASAP.

One point to be aware of: Many of these policies have what’s called a graded benefit or a waiting period. This usually means that the beneficiaries only receive the full value of the policy if the insured has had it for over two years. If the policyholder were to die before that time, the payout would be less; perhaps just the value of the premiums that had been paid.

Of the two kinds we’ve mentioned, guaranteed is usually the easiest to qualify for (as the name suggests) but costs somewhat more than the simplified issue variety, which tends to have a few more constraints. You might be deemed past the age they insure or a medical condition might disqualify you.

Worth noting: You may hear these life insurance policies are known as final expense life insurance or burial insurance. As with any simplified issue or guaranteed issue life insurance policies, no medical exam is required. These plans typically have a small death benefit (up to $50,000 in many cases) that is designed to cover funeral costs, medical bills, and perhaps credit card debt at the end of life.

8. Group Life Insurance

Group life insurance is often not something you go out and buy. Typically, it’s a policy that’s offered to you as a benefit by an employer, a trade union, or other organization. If it’s not free, it is usually offered at a low cost (deducted from your payroll), and a higher amount may be available at an affordable rate. Since an employer or entity is buying the coverage for many people at once, there are savings that are passed along to you.

That said, the amount of coverage is likely to be low, perhaps between $20,000 and $50,000, or one or two times your annual salary. Medical exams are usually not required, and the group life insurance will probably be a term rather than permanent policy,

A couple of additional points to note:

•   There may be a waiting period before you are eligible for the insurance. For instance, your employer might stipulate that you have to be a member of the team for a number of months before you can access this benefit.

•   If you leave your job or the group providing coverage, your policy is likely to expire. You may have the option to convert it to an individual plan at a higher premium, if you desire.

Deciding Which Life Insurance Is Best for You

So many factors go into creating that “Eureka!” moment in which you land on the right life insurance policy for you. Your age, health, budget, and particular needs play into that decision.

If you need life insurance only for a certain amount of time, you may want to select a term life insurance policy that dovetails with your needs. Covering a child’s college and postgraduate years is a common scenario. Another is taking out a policy that lasts until your mortgage is paid off, to know your partner would be protected.

A term life insurance policy may also be a good fit for someone who has a limited budget but needs a substantial amount of coverage. Since term policies have a specific coverage window, they are the more affordable option.

For someone who needs coverage for life and wants a cash accumulation feature, a permanent policy such as whole life insurance might be worth considering. Not only will this policy stay in place for life (as long as the premiums are paid), but the cash value element allows use of the funds to pay premiums or any other purpose. Permanent life insurance lets you know that, whenever you pass on, funds will be there for your dependents. It can be a great option if you have, say, a loved one who can’t live independently, and you want to know they will have financial coverage. Whole life insurance is more expensive than term life insurance, but the premium remains the same for the insured’s life.

In terms of when to buy life insurance, here are a few points to keep in mind:

•   It’s best to apply when you’re young and healthy so you can receive the best rate available.

•   Typically, major life events signal people to buy life insurance. These are moments when you realize someone else is depending on your (and, not to sound crass, your income). It could be when you marry or have a child. It could be when you realize a relative will need long-term caregiving.

•   Even if you are older or have underlying health conditions, there are options available to you. They may not give as high an amount of coverage as other life insurance policies, but they can offer a moderate benefit amount and give you a degree of peace of mind.

The Takeaway

Picking out the right life insurance policy can seem complicated, but in truth, the number of choices just reflects how easy it is to get the right coverage for your needs. There’s truly something for everyone, regardless of your age or budget. Whether you opt for term, permanent, group, or guaranteed issue, you’ll get the peace of mind and protection that all insurance plans bring.

Taking the Next Step

Are you among the millions of people who learn about life insurance and say, “A term policy is right for me!”? If that’s the way you want to protect your loved ones, we have good news: You can apply for a policy in a matter of minutes online. It’s a simple, straightforward way to tailor a policy to your needs without a lot of meetings or endless phone calls with an agent.

SoFi teamed up with Ladder to offer term life insurance that’s affordable and easy to understand. Get started today.


Ladder policies are issued in New York by Allianz Life Insurance Company of New York, New York, NY (Policy form # MN-26) and in all other states and DC by Allianz Life Insurance Company of North America, Minneapolis, MN (Policy form # ICC20P-AZ100 and # P-AZ100). Only Allianz Life Insurance Company of New York is authorized to offer life insurance in the state of New York. Coverage and pricing is subject to eligibility and underwriting criteria. SoFi Agency and its affiliates do not guarantee the services of any insurance company. The California license number for SoFi Agency is 0L13077 and for Ladder is OK22568. Ladder, SoFi and SoFi Agency are separate, independent entities and are not responsible for the financial condition, business, or legal obligations of the other. Social Finance, Inc. (SoFi) and Social Finance Life Insurance Agency, LLC (SoFi Agency) do not issue, underwrite insurance or pay claims under LadderLifeTM policies. SoFi is compensated by Ladder for each issued term life policy. SoFi offers customers the opportunity to reach Ladder Insurance Services, LLC to obtain information about estate planning documents such as wills. Social Finance, Inc. (“SoFi”) will be paid a marketing fee by Ladder when customers make a purchase through this link. All services from Ladder Insurance Services, LLC are their own. Once you reach Ladder, SoFi is not involved and has no control over the products or services involved. The Ladder service is limited to documents and does not provide legal advice. Individual circumstances are unique and using documents provided is not a substitute for obtaining legal advice.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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Source: sofi.com

Huge Retention Offers On American Express Business Platinum Cards

Update 1/17/22: Reports of generous retention offers again, including $595 and $695 statement credit offers.

In May we reported that American Express was offering some juicy retention offers on most credit cards. In the last week there has been some reports of a huge retention offer on the American Express Business Platinum card. Some cardholders are being offered 30,000 Membership Rewards points on renewal and then an additional 50,000 Membership Rewards points after $40,000 in spend within three months. Obviously the spend requirement of $40,000 will be difficult for a lot of people to meet.

Keep in mind this card is also offering a $200 appreciation credit on renewal currently as well. The American Express Business Platinum card also offers a $20 per month credit for both wireless and shipping purchases until December 31, 2020 as well. Obviously there is no guarantee you’ll get such an offer, but it is worth making the call.

Source: doctorofcredit.com

Does your income affect your credit score?

The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

No, your income doesn’t directly impact your credit score. But your income does play a role in the loan approval process, so you should understand why your income matters to help you prepare for your next loan application. 

What affects your credit score?

Your credit score is based on your credit report. So, naturally, only the things on your credit report can—and should—affect your credit score. And income isn’t one of the things included on a credit report. Additionally, other factors, such as your marital status, race, employment status and how much you have in savings, aren’t included in your credit report. Your credit report is only supposed to summarize your past behavior when borrowing credit, so factors like income and savings aren’t applicable.  

The credit bureaus collect consumer data from lenders and creditors. This data is run through a credit scoring model, such as the FICO® or VantageScore® models, to give each individual a credit score. Your credit score tells creditors how risky you are as a borrower based on your past patterns with other lenders. The higher your credit score, the more reliable a borrower you probably are. 

So, if your credit score doesn’t look at income, what exactly does it look at? Your credit score is made up of five factors that are weighted differently in importance:

  • Payment history (35 percent): Your payment history is a record of whether payments are made on time and in full. This is the most significant factor in your credit score, so making even one late payment or missing a payment can drop your score by several points. On the other hand, a good track record of paying lenders on time can improve your overall credit.  
  • Amounts owed (30 percent): Amounts owed represents your credit usage, also known as your credit utilization ratio. This ratio is the amount of credit available to you versus the amount you spend every month. If you have a single credit card with a limit of $10,000 and spend $1,500 monthly, your ratio is 15 percent. A credit utilization above 30 percent is more likely to negatively affect your credit score. 
  • Credit history length (15 percent): Your credit age is the average age of all your credit accounts. This will naturally improve with time as your accounts get older. However, you can keep your credit age as high as possible by not closing your oldest account. 
  • Credit mix (10 percent): Your credit mix is all the different types of credit that make up your profile. Having a diverse credit portfolio shows that you can be responsible with all sorts of lenders. A combination of installment loans (car loans, student loans, mortgage) and revolving accounts (credit cards) is optimal. 
  • New credit (10 percent): The number of new credit accounts you’ve opened recently—and the associated hard inquiries—can impact your score. It’s not recommended that you open several new accounts in a short period, as it can significantly lower your credit score. 

Your income can indirectly affect your credit score

As we’ve illustrated, your income isn’t one of the factors considered for your credit score.  But your income can impact your ability to make your payments on time and in full, and payment history is the largest factor of your credit score. 

But perhaps more importantly, your income will typically have a direct effect on your loan approval odds. For example, when applying for a mortgage, both your income and credit score will be used to evaluate you as a borrower. How much you make combined with your credit score will determine how much you’re approved to borrow and at what loan terms. 

Lenders often ask you to list your income on loan applications so they can understand how much you can afford to borrow. If you don’t have enough income to pay for or handle the credit you’re applying for, that can prevent you from being approved. 

Understand your debt-to-income ratio

Your debt-to-income (DTI) ratio will be examined when you apply for credit and will play a role in your approval or denial. The debt-to-income ratio is how much of your income goes to debt versus how much you have left over. So, if you have a monthly income of $4,000 and spend $1,200 on your monthly bills, your debt-to-income ratio is 30 percent. 

If your debt-to-income ratio is very high, it indicates that you probably don’t have the income room to take on new, additional debt. Generally speaking, lenders want to see a debt-to-income ratio of less than 36 percent to give approval for new credit or loans, with a DTI maximum of 43 percent for mortgages.

Note that it’s your income—not your salary—used in the DTI ratio. Your salary is the annual amount of money you receive from an employer. In comparison, your income includes your salary and any additional monetary sources, such as rental payments, stock profits, alimony and more. Income is the criteria used when you’re applying for a loan or credit product because all these additional sources of revenue can help you pay your debts. 

Work to improve your DTI ratio and credit 

You might not be able to drastically improve your income right away, but you can try to focus on your DTI. Start by determining what your current debt-to-income ratio is. Next, do what you can to lower it. Pay off existing debts and reduce your monthly spending where possible. 

Additionally, focus on the main credit factors so you can improve your overall credit. Make all your payments on time by signing up for auto-payments. Keep your credit utilization low, minimize hard inquiries and keep old accounts open. If you have a strong credit score and a healthy DTI, it’s entirely possible to qualify for a good loan with excellent terms on a modest income. 

If you think you’ve made a misstep with your credit and you’re not sure how to fix it, consider working with a professional credit repair service. The credit repair consultants at Lexington Law Firm will review your credit reports with you and offer credit education resources. You don’t have to go through this complicated process on your own—get help today. 


Reviewed by Anna Grozdanov, Associate Attorney at Lexington Law Firm. Written by Lexington Law.

Anna Grozdanov was born in Sofia, Bulgaria, but moved to Arizona with her family. Ms. Grozdanov grew up in Arizona and went on to graduate Magna Cum Laude from the University of Arizona with a B.A. in both Philosophy and Psychology. Ms. Grozdanov finished her first year of law school at Pepperdine University School of Law in California, but returned to Arizona where she graduated from the Sandra Day O’Connor College of Law. Since graduating from law school, Ms. Grozdanov has worked in Estate Planning, Estate Administration, Probate, and Personal Injury. She has extensive experience advising and working closely with clients and applies these skills at Lexington by helping clients achieve their credit repair goals. Ms. Grozdanov is licensed to practice law in Arizona. She is located in the Phoenix office.

Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.

Source: lexingtonlaw.com

Chase Freedom Flex & Unlimited: $200 Bonus + 5% Back On Gas First Year (Up To $6k Spend)

The Offer

Direct link to offer

Chase is offering an additional bonus on the Chase Freedom Flex and Chase Freedom Unlimited cards:

  • Get the standard $200 sign up bonus after $500 in spend; in addition, the card will earn 5% cashback on Gas purchases in the first year, up to $6,000 in spend.

Card Details

Freedom Flex

  • No annual fee
  • Card earns the following points rates:
    • 5% on rotating Quarterly Categories on up to $1,500 in total purchases (e.g. Q4 2020 will be PayPal and Walmart)
    • 5% on Travel purchased through Chase Ultimate Rewards
    • 3% on Dining 
    • 3% on Drugstore 
    • 5% on Lyft through March 2022
    • 1% unlimited cash back 

Freedom Unlimited

  • No annual fee
  • Card earns 1.5% cash back on all purchases

Our Verdict

Keep in mind while these cards talk about cash back you actually earn Chase Ultimate Rewards points. This means if you have an annual fee card such as Chase Sapphire Preferred, Chase Sapphire Reserve, Chase Ink Plus or Chase Ink Preferred then you can transfer these points to travel partners. You could also use these points for the Chase Pay Yourself back feature to make them worth 1.5¢ each.

As noted, the standard bonus on these cards is $200, and the 5% back on Gas is an additional bonus. Until recently there was a similar offer for 5x back on Grocery Stores (up to $12,000), but that has now been discontinued. We mentioned this Gas offer version floating around in the past, and it now looks to be the standard new offer on Chase and on referral links so I thought it worth a dedicated post. There’s also an alternate offer for the Freedom Unlimited card, specifically, to get an extra 1.5x per dollar spent anywhere during the first year, up to $20,000 in spend. Which offer you choose will depend on your spend patterns and on what other cards you have.

Unfortunately a lot of readers won’t be eligible for these cards/bonus due to the Chase 5/24 rule. We will still be adding this to our list of the best credit card bonuses.

Source: doctorofcredit.com