It represents a transition from student to adult for millions of people. But leaving university and joining the workforce can be intimidating. Looking for a job, paying bills, commuting, and living independently are often uncharted territory for recent grads.
Here are a few tips for fresh graduates trying to get on their feet financially.
Figure out what you want
It’s one thing to leave college with an idea of what career you want to pursue. It’s something else entirely to ask yourself what kind of life you want. It’s one of those big issues that can be difficult even to wrap your head around!
However, it’s something that’s important to grapple with. It will help you answer questions like “What kind of lifestyle do I want to live” and “how much will it cost to do the things I want?” You might even find that you don’t really need some of the things that you thought were necessities, and that happiness comes from places you might not have expected.
Come up with a budget
Let’s say you’ve got a ballpark idea of your financial and lifestyle goals. It’s time to come up with a strategy. There are plenty of resources on starting a budget on this blog and the internet on the whole, but the barebones of budgeting are pretty simple. First, figure out how much you make, how much you have to spend, how much you actually spend, then subtract your total spending from how much you make. Get a positive number? Awesome! Use that leftover cash to start saving for retirement (it’s never too early!) or build up an emergency fund. Negative number? Look for places in your unnecessary spending to cut back and maybe consider a side hustle to make more money.
Looking at your spending habits can be difficult. But owning up to mistakes you might be making and coming up with a solid strategy can be far easier than the agony that spending blindly may bring. That’s why starting a budget is a post-graduation must!
Meet with a financial professional
Find a qualified and licensed financial professional and schedule an appointment. Don’t let the idea of meeting with a professional intimidate you. Afterall, you trust your health, car, and legal representation to properly trained experts. Why wouldn’t you do the same with your financial future?
Being scared of starting a new chapter of life is natural. There are a lot of new experiences and unknowns to deal with that come along with leaving the familiarity of college. But the best way to overcome fear is to face it head on. These tips are a great way to start taking control of your future!
It’s not just a budget. In fact, a solid financial strategy is not entirely based on numbers at all. Rather, it’s a roadmap for your family’s financial future. It’s a journey on which you’ll need to consider daily needs as well as big-picture items. Having a strategy makes it possible to set aside money now for future goals, and help ensure your family is both comfortable in the present and prepared in the future.
Financial Strategy, Big Picture
A good financial strategy covers pretty much everything related to your family’s finances. In addition to a snapshot of your current income, assets, and debt, a strategy should include your savings and goals, a time frame for paying down debt, retirement savings targets, ways to cover taxes and insurance, and in all likelihood some form of end-of-life preparations. How much of your strategy is devoted to each will depend on your age, marital or family status, whether you own your home, and other factors.
Financial Preparation, Financial Independence
How do these items factor into your daily budget? Well, having a financial strategy doesn’t necessarily mean sticking to an oppressive budget. In fact, it may actually provide you with more “freedom” to spend. If you’re allocating the right amount of money each month toward both regular and retirement savings, and staying aware of how much you have to spend in any given time frame, you may find you have less daily stress over your dollars and feel better about buying the things you need (and some of the things you want).
Remember Your Goals
It can also be helpful to keep the purpose of your hard-earned money in mind. For example, a basic financial strategy may include the amount of savings you need each month to retire at a certain age, but with your family’s lifestyle and circumstances in mind. It might be a little easier to skip dinner out and cook at home instead when you know the reward may eventually be a dinner out in Paris!
Always Meet with a Financial Professional
There are many schools of thought as to the best ways to save and invest. Some financial professionals may recommend paying off all debt (except your home mortgage) before saving anything. Others recommend that clients pay off debt while simultaneously saving for retirement, devoting a certain percentage of income to each until the debt is gone and retirement savings can be increased. If you’re just getting started, meet with a qualified and licensed financial professional who can help you figure out which option is for you.
But it doesn’t have to be like this. The morning hours can be times of relaxation, focus, and self-improvement. Here are a few practical habits that can take your mornings from pointless to productive!
Go to bed early
Stayed up too late watching just one more episode of your favorite show? Don’t expect to wake up feeling motivated. A productive morning starts the night before. Try to stay away from screens before going to bed (at least one hour) and make sure you turn in at a reasonable time. You may also want to dial back when you wake up. Having a quiet hour or two before everyone else wakes up is a great way of freeing up time to invest in things you care about. Just remember that your new sleep schedule will take some time to adjust to!
Exercise first thing
One of the best habits to fill your new-found morning hours is exercise. It’s a great way to get your blood flowing and boost your energy. Plus, the feeling that you’ve accomplished something can help carry you through the day and boost your confidence.
Prioritize your tasks
But let’s say you’ve started getting up an hour and a half earlier and you work out for 30 minutes. How are you going to spend the next hour before you start getting ready for work? One great habit is to start planning out your day and prioritizing your tasks. Write down what specifically you want to accomplish and when. You might be amazed by how empowering it is to make a plan and to see your goals on a piece of paper. Start off with your biggest task. The morning is when you’re at your peak brain power, so commit your best efforts to the hardest work. The feeling of accomplishment from knocking out the task will carry you through the smaller things!
Mornings don’t have to be rough. Incorporating these tips and habits into your daily routine can help make the first hours of the day a time you look forward to. Start inching your alarm closer towards sunrise and use that extra time to absolutely crush your day!
Not a penny withheld. No taxes to file. No stress about saving a “million dollars” for retirement. As a kid, doing household chores or helping out your friends and neighbors for a little spending money was vastly different from your grown up reality – writing checks for all those bills, paying your taxes, and buying all the things that children seem to need these days, all while trying to save as much as you can for your retirement. When you were a kid, did those concepts feel so far away that they might as well have been camped out on Easter Island?
What happened to the carefree attitude surrounding our finances? It’s simple: we got older. More opportunities. More responsibilities. More choices. As the years go by, finances get more complicated. So knowing where your money is going and whether or not it’s working for you when it gets there is something you need to determine sooner rather than later – even before your source of income switches from mowing lawns and babysitting to your first internship at that marketing firm downtown.
A great way to get a better idea of where your money is going and what it’s doing when it gets there? A financial plan.
A sound strategy for your money is essential, starting as soon as possible is better than waiting, and talking to a financial professional is a solid way to get going. No message in a bottle sent from a more-prepared version of your future self is going to drift your way from Easter Island. But sitting down with me is a great place to start. Contact me any time.
By comparison, that amount might be enough for a down payment on a first home or for a well-equipped, late-model minivan to shuttle around your 1.6 to 2 kids – assuming your family has an average number of children as a result of your newly wedded bliss.²
Having cold feet about shelling out that much cash for one day’s festivities? Or even worse, going into debt to pay for it? Here are a few ideas on how you can make your wedding day a special day to remember while still saving some of that money for other things (like a minivan).
Invite Close Friends and Family
Many soon-to-be newlyweds dream of a massive wedding with hundreds of people in attendance to honor their big day. But at some point during any large wedding, the bride or the groom – or maybe both – look around the well-dressed guests and ask themselves, “Who are all of these people, anyway?”
You can cut the cost of your wedding dramatically by simply trimming the guest list to a more manageable size. Ask yourself, “Do I really need to invite that kid who used to live next door to our family when I was 6 years old?” Small weddings are a growing trend, with many couples choosing to limit the guest list to just close friends and immediate family. That doesn’t mean you have to have your wedding in the backyard while the neighbor’s dog barks during your vows – although you certainly can. It just means fewer people to provide refreshments for and perhaps a less palatial venue to rent.
Budget According to Priorities
Your wedding is special and you want everything to be perfect. You’ve dreamed of this day your entire life, right? However, by prioritizing your wish list, there’s a better chance to get exactly what you want for certain parts of your wedding, by choosing less expensive – but still acceptable – options for the things that may not matter to you so much. If it’s all about the reception party atmosphere for you, try putting more of your budget toward entertainment and decorations and less toward the food. Maybe you don’t really need a seven-course gourmet dinner with full service when a selection of simpler, buffet-style dishes provided by your favorite restaurant will do.
Incorporate More Wallet-Friendly Wedding Ideas
A combination of small changes in your plan can add up to big savings, allowing you to have a memorable wedding day and still have enough money left over to enjoy your newfound bliss.
There’s a happy medium between a royal wedding and drive-thru nuptials in Vegas. If you’re looking for a memorable day that won’t break the bank, try out some of the tips above to keep things classy, cool – and within your budget.
¹ Seaver, Maggie. “The National Average Cost of a Wedding Is $33,391.” the knot, 2018, https://bit.ly/2FycQmH.
² Russell, Andrew. “Here’s why Canadians are having fewer children.” Global News, 5.7.2017, https://bit.ly/2C1fPii.
³ Mackey, Jaimie. “What Are the Most Affordable Months to Book a Wedding Venue?.” Brides, 9.10.2017, https://bit.ly/2ry6wSt.
Sometimes, a lot of money. They have the potential to throw a monkey wrench into your savings strategy, especially if you have to resort to using credit to get through an emergency. In many households, a budget covers everyday spending, including clothes, eating out, groceries, utilities, electronics, online games, and a myriad of odds and ends we need.
Sometimes, though, there may be something on the horizon that you want to purchase (like that all-inclusive trip to Cancun for your second honeymoon), or something you may need to purchase (like that 10-years-overdue bathroom remodel).
How do you get there if you have a budget for the everyday things you need, you’re setting aside money in your emergency fund, and you’re saving for retirement?
Make a goal
The way to get there is to make a plan. Let’s say you’ve got a teenager who’s going to be driving soon. Maybe you’d like to purchase a new (to him) car for his 16th birthday. You’ve done the math and decided you can put $3,000 towards the best vehicle you can find for the price (at least it will get him to his job and around town, right?). You have 1 year to save but the planning starts now.
There are 52 weeks in a year, which makes the math simple. As an estimate, you’ll need to put aside about $60 per week. (The actual number is $57.69 – $3,000 divided by 52). If you get paid weekly, put this amount aside before you buy that $6 latte or spend the $10 for extra lives in that new phone game. The last thing you want to do is create debt with small things piling up, while you’re trying to save for something bigger.
Make your savings goal realistic
You might surprise yourself by how much you can save when you have a goal in mind. Saving isn’t a magic trick, however, it’s based on discipline and math. There may be goals that seem out of reach – at least in the short-term – so you may have to adjust your goal. Let’s say you decide you want to spend a little more on the car, maybe $4,000, since your son has been working hard and making good grades. You’ve crunched the numbers but all you can really spare is the original $60 per week. You’d need to find only another $17 per week to make the more expensive car happen. If you don’t want to add to your debt, you might need to put that purchase off unless you can find a way to raise more money, like having a garage sale or picking up some overtime hours.
Hide the money from yourself
It might sound silly but it works. Money “saved” in your regular savings or checking account may be in harm’s way. Unless you’re extremely careful, it’s almost guaranteed to disappear – but not like what happens in a magic show, where the magician can always bring the volunteer back. Instead, find a safe place for your savings – a place where it can’t be spent “accidentally”, whether it’s a cookie jar or a special savings account you open specifically to fund your goal.
Pay yourself first
When you get paid, fund your savings account set up for your goal purchase first. After you’ve put this money aside, go ahead and pay some bills and buy yourself that latte if you really want to, although you may have to get by with a small rather than an extra large.
Saving up instead of piling on more credit card debt may be a much less costly way (by avoiding credit card interest) to enjoy the things you want, even if it means you’ll have to wait a bit.
It’s simply the stake you have in something that is being insured – and that the amount of insurance coverage for whatever is being insured is not more than your potential loss.
To say things could become a bit awkward might be an understatement if your insurable interest isn’t considered before you’re deep into the planning phase of a project or before you’ve signed some papers, like a title or a loan.
It’s better for your sanity to understand insurable interest beforehand. Where the issue of insurable interest often arises is in auto insurance. Let’s look at an example.
Let’s say you have a car that’s worth $5,000. $5,000 is the maximum amount of money you would lose if the car is stolen or damaged – and $5,000 would be the most you could insure the car for. $5,000 is your insurable interest.
In the above example, you own the car, so you have an insurable interest in it. By the same token, you can’t insure your neighbor’s car. If your neighbor’s car was stolen or damaged, you wouldn’t suffer any financial loss because it wasn’t your car.
Here’s where it might get a little tricky and why it’s important to understand insurable interest. Let’s say you have a young driver in the house, a teenager, and it’s time for him to get mobile. He’s been saving up his lawn-mowing money for two years and finally bought the (used) car of his dreams.
You might have considered adding your son’s car to your auto policy to save money – you’ve heard how much it can cost for a teen driver to buy their own policy. Sounds like a good plan, right? However, the problem with this strategy is that you don’t have an insurable interest in your son’s car. He bought it, and it’s registered to him.
You might find an insurance sales rep who will write the policy. But there’s a risk the policy won’t make it through underwriting and – more importantly – if there’s a claim with that car, the claim might not be covered because you didn’t have an insurable interest in it. If you want to put that car on your auto insurance policy, the car needs to be registered to the named insured on the policy – you.
Insurable Interest And Lenders
If you have a mortgage or an auto loan, your lender is probably listed on your policy. Both you and the lender have an insurable interest in the house or the car. Over time, as the loan is paid down, you’ll have a greater insurable interest and the lender’s insurable interest will become smaller. (Hint: When your loan is paid off, ask your agent to remove the lender from the policy to avoid any confusion or delays if you have a claim someday.)
Does Ownership Create Insurable Interest?
Good question. It might seem like ownership and insurable interest are equivalent – they often occur simultaneously. But there are times when you can have an insurable interest in something without being an owner.
Life insurance is a great example of having an insurable interest without ownership. You can’t own a person – but if a person dies, you may experience a financial loss. However, just as you can’t insure your neighbor’s car, you can’t purchase a life insurance policy on your neighbor, either. You’d have to be able to demonstrate your potential loss if your neighbor passed away. And no it doesn’t count if they never returned those hedge clippers they borrowed from you last spring.
So now you know all about insurable interest. While insurable interest requirements may seem inconvenient at times, the rules are there to protect you and to help keep rates lower for everyone. Without insurable interest requirements, the door is open to fraud, speculation, or even malicious behavior. A little inconvenience seems like a much better option.
You may not have thought much about that type of insurance before, or even knew it existed. But joint policies, especially survivorship policies, are important to consider because they can provide for heirs, settle estates, and pay for final expenses after both spouses have passed.
Most joint life insurance policies are what’s known as “first to die” policies. As the unambiguous nickname suggests, a first to die policy is designed to provide for the remaining spouse after the first passes.
A joint life insurance policy is a time-tested way of providing for a remaining spouse. But without careful planning, a typical joint life policy might leave a burden for surviving children or other family members.
A survivorship life insurance policy works differently than a first to die policy. Also called a “last to die” policy, a survivorship policy provides a death benefit only when both insured spouses have passed. A survivorship policy doesn’t pay a death benefit to either spouse but rather to a separate named beneficiary.
You’ll find survivorship life insurance referred to as:
Survivorship life insurance policies are sometimes referred to by different names, but the structure is the same in that the policy only pays a benefit after both people insured by the policy have died.
Reasons to Buy Survivorship Life Insurance
We all have our reasons for buying a life insurance policy, and often have someone in mind who we want to protect and provide for. Those reasons often dictate the best type of policy – or the best combination of policies – that can meet our goals.
A survivorship policy is well-suited to any of the following considerations, perhaps in combination with other policies:
It’s also most common for a survivorship life insurance policy to be a permanent life insurance policy. This is because the reasons for using a survivorship policy, including transfer of wealth, are usually better served by a permanent life policy than by a term insurance policy. (A term life insurance policy is only in force for a limited time and doesn’t build any cash value.)
Benefits of Survivorship Life Insurance
The good news is that life insurance rates are more affordable now than in the past. That’s great! But keep in mind, your life insurance policy – of any type – will probably cost less now than if you wait for another birthday to pass for either spouse insured by the policy.
World Financial Group, Inc., its affiliated companies and its independent associates do not offer tax and legal advice. Please consult with your personal tax and/or legal professional for further guidance.
Starting your first job babysitting or mowing lawns? Probably a good idea to begin saving some of those earnings. Need to pay for college? You’ll want to apply for scholarships. Have a friend who’s asking you to invest in his latest business scheme? Maybe you’ll pass.
As for life insurance, there are certain events that herald when it’s an appropriate time to think about purchasing a policy.
Following are a few of those key times…
Tying the knot or taking the plunge
Whatever you call it, if you’re getting ready to walk down the aisle, now is a good time to think about life insurance. A life insurance policy will protect your spouse by replacing your income if something were to happen to you. Many couples rely on two incomes to sustain their lifestyle. It’s important to make sure your spouse can continue to pay the bills, make a mortgage payment, and provide for any children you might have, etc.
Buying a home
If you’re in the market for a home, life insurance should also be a consideration. There are particular types of life insurance policies that will pay off the remaining mortgage if something happens to you. This type of life insurance can help provide a safety net for you and your spouse if you are planning on taking on a mortgage.
Someone becomes dependent on you financially
Another life event that signals a need for life insurance is if someone were to become dependent upon you financially. We might think our only dependents would be our children, but there are other situations to consider. Do you have a relative that depends on you for support? It could be a sibling, parent, elderly aunt. It’s prudent to help protect them with a life insurance policy.
You’ve got a business partner
Life insurance can be invaluable if you’re starting a business and have a business partner. A life insurance policy on your partner or the key leaders in your company can help protect the business if something happens to one of the main players. While the payout on a life insurance policy won’t replace the individual, it can help see the company through financial repercussions from the loss.
You have debt that you don’t want to leave behind
If you’re like most Americans – you probably have some debt. There are two problems with carrying debt. One, it costs you money and isn’t good for your financial health. Second, it can be a problem for your loved ones if you pass away unexpectedly. A life insurance policy is helpful to those who are left behind and are taking on the responsibility of your debt and estate.
You have become aware of “the someday”
Sooner or later we all have to consider our last stage of life. A life insurance policy can help you plan for those last days. A life insurance policy can help cover funeral costs and medical bills or other debts you may have at the end of your life. The payout can also help your beneficiary with any final expenses while settling your estate.
You fell in love with a cause
If you are attached to a certain charity or cause, consider a life insurance policy that can offer a payout as a charitable gift when you pass away. If you are unattached or don’t have any children, naming a charity as your life insurance beneficiary is a great way to leave a legacy.
You just got your first “grown-up” job
Cutting your teeth on your first “grown-up” job is a great time to consider your life insurance options. If you have an employer, they may offer you a small life insurance policy as a perk. But you likely will need more coverage than that. Consider purchasing a life insurance policy now. The younger you are, the less you may pay for it.
Life gives us clues about financial moves
If we know what to look for, life seems to give us clues about when to make certain financial moves. If you’re going through any of these times of life, it’s time to consider purchasing a life insurance policy.
In the years when there was an abundance of crops, it was wise to store up as much as possible in preparation for the years of famine. However, if instead of saving you ate it all up during the 7 years of abundance, the result would be starvation for you and your family during the 7 lean years. This might be an extreme example in our modern, First World society, but are you “eating it all up” now and not storing enough away for your retirement?
The definition of retirement we’ll be using is: “An indefinite period in which one is no longer actively producing income but rather relies on income generated from pensions and/or personal savings.”
According to this definition, the “years of plenty” would be the years that you are still working and generating income. While you still have regular income, you can set aside a portion of it to save for retirement. This amount is called the “Personal Savings Rate.”
According to the latest statistics, the personal savings rate for Americans is approximately 2.4% annually.* If you compare that with the average during the 1970’s of a 10% annual savings rate, you’ll see it has decreased significantly. This should set off some alarms concerning the impact on your retirement savings.
Suppose you’re looking to retire for at least 10 years (e.g., from 65 years old to 75 years old). Even if you’re planning to live on only half of the income that you were making prior to retirement, you would need to save up 5 years worth of income to last for the 10 years of your retirement. But if you’re currently saving only 2.5% of your income per year, it would take 200 years to save up 5 years of income replacement!
So unless you’ve found the elixir of everlasting life, we’re going to need to do some serious “saving” of the personal savings rate. Is there a solution to this dilemma? Yes. If you’re looking for possible ways to store up and prepare for your retirement, I’d be happy to have that conversation with you today.
U.S. Bureau of Economic Analysis. “Personal Saving Rate.” Federal Reserve Bank of St. Louis*, 3.5.2018, http://bit.ly/2qSGrR3.
For example, how much would you spend on a meal at a restaurant before it moves into lifestyles-of-the-rich-and-famous territory? $100? $50? $20? To some, enjoying a daily made-to-order burrito might be par for the course, but to others, spending $10 every day on a tortilla, a scoop of chicken, and a dollop of guacamole might seem extravagant. Chances are, there may be some areas where you’re more in line with the average person and some areas where you’re atypical – but don’t let that worry you. Read on…
In case you were wondering, the top 3 things that Americans spend their money on in a year are housing ($18,186), transportation ($9,049), and food ($7,203).*
Those top 3 expenses might very well be about the same as your top 3, but everything else after that is a mixed bag. Your lifestyle and the unique things that make you, well you greatly influence where you spend your money and how you should budget.
For example, let’s say the average expenditure on a pet is $600 annually, but that may lump in hamsters, guinea pigs, all the way to Siberian Huskies. As you can imagine, each could come with a very different yearly cost associated with keeping that type of pet healthy. So although the average might be $600, your actual cost could be well above $3,000 for the husky! That definitely wouldn’t be seen as ‘normal’ by any means. However, that’s okay!
What are we getting at here? It’s perfectly fine to be ‘abnormal’ in some areas of your spending. You don’t need to make your budget look exactly like other people’s budgets. What matters to them might not be the same as what matters to you.
So go ahead and buy that organic, gluten-free, grass-fed kibble for Fido – he deserves it (if he didn’t pee on the carpet while you were away, that is)! If Fido’s happiness makes you happy, then all the power to you. Just make sure that at the end of the day, Fido’s food bill won’t bust your budget.
Amoros, Raul. “How Americans spend their money.” Business Insider*, 9.15.2017, http://read.bi/2EGdjTG.
Here’s an historical fact that’s easy to remember. Millennials are the largest generation in the US. Ever. Even larger than the Baby Boomers. Those born between the years 1980 to 2000 number over 92M.¹ These numbers dwarf the generation before them: Generation X at 61M.
When you’re talking about nearly a third of the population of North America, it would seem that anything related to this group is going to have an effect on the rest of the population and the future.
Here are a few examples:
It’s interesting to speculate and predict what may occur in the future, but what effects are happening now? Well, for one, if you’re a Millennial, you may have noticed that companies have been shifting aggressively to meet your needs.² Simply put, if a company doesn’t have a website or an app that a Millennial can dig into, it’s probably not a company you’ll be investing any time or money in. This may be a driving force behind the technological advancements companies have made in the last decade – Millennials need, want, and use technology. All. The. Time. This means that whatever matters to you as a Millennial, companies may have no choice but to listen, take note, and innovate.
If you’re either in business for yourself or work for a company that’s planning to stay viable for the next 20-30 years, it might be a good idea to pay attention to the habits and interests of this massive group (if you’re not already). The Baby Boomers are already well into retirement, and the next wave of retirees will be Generation X, which will leave the Millennials as the majority of the workforce. There will come a time when this group will control most of the wealth in Canada and the US. This means that if you’re not offering what they need or want now, then there’s a chance that one day your product or service may not be needed or wanted by anyone. Perhaps it’s time to consider how your business can adapt and evolve.
Ultimately, this shift toward Millennials and what they’re looking for is an exciting time to gauge where our society will be moving in the next few decades, and what it’s going to mean for the financial industry.
¹ “Millennials: Coming of Age.” Goldman Sachs, 2018, http://www.goldmansachs.com/our-thinking/pages/millennials/.
² Ehlers, Kelly. “May We Have Your Attention: Marketing To Millennials.” Forbes, 6.27.2017, https://www.forbes.com/sites/yec/2017/06/27/may-we-have-your-attention-marketing-to-millennials/#409e42331d2f.
Maybe you’ve tried sorting your documents into this infamous trio: the Coffee Stains Assortment, the Crumpled-Up Masses, and the Definitely Missing a Page or Two Crew.
How has this system been working for you? Is that same stack of disorganized paper just getting shuffled from one corner of your desk to the top of your filing cabinet and back again? Why not give the following method a try instead? Based on the Financial Industry Regulatory Authority (FINRA)’s “Save or Shred” ideas, here’s a list of the shelf life of some key financial records to help you begin whittling that stack down to just what you need to keep. (And remember, when disposing of any financial records, shred them – don’t just toss them into the trash.)
1. Keep These Until They Die: Mortgages, Student Loans, Car Loans, Etc.
These records are the ones to hang on to until you’ve completely paid them off. However, keeping these records indefinitely (to be on the safe side) is a good idea. If any questions or disputes relating to the loan or payment of the loan come up, you’re covered. Label the records clearly, then feel free to put them at the back of your file cabinet. They can be out of sight, but make sure they’re still in your possession if that info needs to come to mind.
2. Seven Years in the Cabinet: Tax-Related Records.
These records include your tax returns and receipts/proof of anything you might claim as a deduction. You’ll need to keep your tax documents – including proof of deductions – for 7 years. Period. Why? In the US, if the IRS thinks you may have underreported your gross income by 25%, they have 6 whole years to challenge your return. Not to mention, they have 3 years to audit you if they think there might be any good faith errors on past returns. (Note: Check with your state tax office to learn how long you should keep your state tax records.) Also important to keep in mind: Some of the items included in your tax returns may also pull from other categories in this list, so be sure to examine your records carefully and hang on to anything you think you might need.
3. The Sixers: Property Records.
This one goes out to you homeowners. While you’re living in your home, keep any and all documents from the purchase of the home to remodeling or additions you make. After you sell the home, keep those documents for at least 6 more years.
4. The Annually Tossed: Brokerage Statements, Paycheck Stubs, Bank Records.
“Annually tossed” is used a bit lightly here, so please proceed with caution. What can be disposed of after an annual review are brokerage statements, paycheck stubs (if not enrolled in direct deposit), and bank records. Hoarding these types of documents may lead to a “keep it all” or “trash it all” attitude. Neither is beneficial. What should be kept is anything of long-term importance (see #2).
5. The Easy One: Rental Documents.
If you rent a property, keep all financial documents and rental agreements until you’ve moved out and gotten your security deposit back from the landlord. Use your deposit to buy a shredder and have at it – it’s easy and fun!
6. The Check-‘Em Againsts: Credit Card Receipts/Statements and Bills.
Check your credit card statement against your physical receipts and bank records from that month. Ideally, this should be done online daily, or at least weekly, to catch anything suspicious as quickly as possible. If everything checks out and there are no red flags, shred away! (Note: Planning to claim anything on your statement as a tax deduction? See #2.) As for bills, you’re in the clear to shred them as soon as your payment clears – with one caveat: Bills for any big-ticket items that you might need to make an insurance claim on later (think expensive sound system, diamond bracelet, all-leather sofa with built-in recliners) should be held on to indefinitely (or at least as long as you own the item).
So even if your kids released their inner Michelangelo on the shoebox of financial papers under your bed, some of them need to be kept – for more than just sentimental value. And it’s vital to keep the above information in mind when you’re considering what to keep and for how long.
But having a final expense strategy in place ahead of time may help alleviate the financial burden of that struggle so that you and your family can better navigate through those difficult times.
You may not have given this much thought up until now, but did you know that a traditional funeral can cost up to $10,000? If that number seems outrageous, look at how quickly some of the basic items and services can add up:
That’s already $6,400… and we haven’t even added in mortician’s services, use of the funeral home, the fee for the funeral director, the cost of flowers, and more details that you might not have thought about (until you’re in a position where you need to). These costs may vary by geographic location, but one thing you can count on is that the emotional cost you or your family experiences when losing a loved one could be compounded with a financial burden if you haven’t done a little planning now.
In the face of losing someone you love, your financial situation might be the last thing on your mind. With a solid final expense strategy in place, you have the potential to keep it that way.
… You’ll need help to meet your higher life insurance rate if you’re planning on lighting up a cigarette.
Health details and everyday habits that may seem small or insignificant can have a massive effect on your life insurance rate. You may have heard something about the underwriting process. The purpose of the underwriting process is to determine how risky a person will be to insure. And the riskier someone is to insure, the higher their rate is likely to be. That risk is calculated by how soon an insurer estimates an applicant will need the full payout of their life insurance policy.
Some factors that influence risk (like age and gender) are out of your control. But did you know that your habits can also send your life insurance rate up?
Here are 3 poor health habits that an underwriter will definitely uncover and will definitely affect your life insurance rate:
If you smoke cigarettes, expect a higher life insurance rate. Period. Even products like nicotine patches, gum, or lozenges can earn a life insurance applicant “smoker” status (depending on the provider). At this point, are there really any lingering questions about how cigarettes affect your overall health and projected longevity? Cigarettes contain thousands of chemicals and at least 70 known carcinogens.
A bit of good news? The longer it’s been since you quit smoking, the better things might look for you from an underwriting standpoint. For instance, some underwriters are only required to look back into your history as far as 12 months, so if you have quit cigarettes for a year, you may end up with a better classification – and a better classification potentially means a better life insurance rate.
2. Being Too Overweight
An underwriter will also assess your height-to-weight ratio. Your unique ratio will classify you according to a certain rate. Being overweight or obese increases health risks like stroke, type 2 diabetes, coronary heart disease, and high blood pressure, among others. So the more overweight you are, the riskier you are to insure. And what does that mean? You guessed it: your chances of a higher rate are significantly increased.
3. Drinking A LOT of Alcohol
Did reading about this poor health habit throw you off? After all, a few drinks isn’t that bad, right? Well, “a few drinks,” no, but drinking in excess can start to have adverse effects on your overall health. Excessive or “binge” drinking would be 5+ alcoholic drinks for men and 4+ alcoholic drinks for women at the same occasion or within a couple of hours of each other on at least 1 day in the past month. Chronic excessive drinking brings these common health risks: liver disease, pancreatitis, cancer, brain damage, and more.
How will an underwriter know if you’re drinking to excess? They’ll give you a questionnaire, you’ll be subject to a medical exam, and they’ll see your driving record. So If there is any evidence of drinking excessively and getting behind the wheel of a car, consider your life insurance rates raised.
Kicking these 3 habits can have great effect on your personal health and on your life insurance rate! With a little effort, time, and preparation, you can put yourself in a better position for a potentially more affordable rate. But don’t wait to get started! Remember: when you apply for life insurance, you may not get full credit for changes to these 3 poor health habits made in the 12 months prior to your application..
Every insurer’s rates are going to be a little bit different, and that’s why you have an advantage by working with me. We’ll shop around for the policy and rate that’s tailored to your unique needs.
So if you’ve been waiting for a sign to stop smoking, quit eating too much junk food, or cut back on drinking, consider this it!
American Cancer Society: “Harmful Chemicals in Tobacco Products.” 4.5.2017
Center for Disease Control: “The Health Effects of Overweight and Obesity.” 6.5.2015
National Institute on Alcohol Abuse and Alcoholism: “Drinking Levels Defined.”
Medical News Today: “10 health risks of chronic heavy drinking.” 12.8.2015
But solid financial “health” is harder to enjoy if your physical health is suffering. It’s like being all dressed up with no place to go!
In fact, 37% of US citizens surveyed said that their physical health was most essential to their financial future – even more essential than happiness (19%), security (19%), peace of mind (16%), and independence (9%).
Research in Canada has uncovered that people who are financially unwell are less likely to engage in physically healthy activities. Only 51% of the financially unwell claimed to be in good health. And to top it off, 60% of the financially unprepared delayed or even avoided medical help completely. But avoiding the doctor when you’re sick is never a good idea.
Many illnesses are easier to treat when they’re caught early – and this month is dedicated to spreading awareness about the most frequently diagnosed cancer in women around the world: breast cancer.
Somewhere in the world, a woman dies from breast cancer – Every. Single. Minute. That adds up to more than 1,400 women per day. And illnesses like cancer do not discriminate: While it’s rare, breast cancer does occur in men, too.
You can’t control all of your risk factors for breast cancer, but there are a few things you can do to reduce your risk:
Any of these can be started today! And don’t forget: Talking with your doctor about your personal risk factors as well can make a world of difference for you and your loved ones.
Transamerica: “New Transamerica Survey Shows Investors Identify Health as Key Component to Their Financial Planning and Security.” 10.6.2016
Manulife: “How your employees’ financial wellness affects your business.” 2016
The Susan G. Komen Breast Cancer Foundation: “Breast Cancer Fact Sheet.” 2.2017
CDC: “What Can I Do to Reduce My Risk of Breast Cancer?” 9.27.2017
7 out of 10 Americans over the age of 65 will need long term care at some point. And for Canadian couples over the age of 65, there’s a nearly 7 out of 10 chance that one spouse will need long-term care at some point.
In Canada, living in a long-term care facility can cost more than $5,000 per month – over $60,000 a year! And the US National Median cost of a private room in a nursing home is $7,698. That’s $92,376 a year!
When you factor in the cost of doctor visits, medical procedures, prescriptions, etc., that number is going to keeping climbing.
If your need for long-term care comes after you retire, that financial burden could fall onto your loved ones.
The right life insurance coverage has the potential to keep you living well and independently. Long-term care as a part of a tailored life insurance strategy is a great way to protect your retirement funds – and keep your loved ones’ finances protected, too.
I can help. Contact me today, and together we can explore your options for long-term care – and do what we can to help keep those Golden Years golden.
Nationwide: “Understanding and Planning for Long-term Care.”
Godfroy Financial Group: “Money to Ensure Your Care for as Long as You Need It.” 2016
Sun Life Financial: “5 things to know about long-term care insurance.” 2.23.2017
Genworth Financial: “Compare Long Term Care Costs Across the United States.” 6.22.2016