Doing Life Right: Insurance

I know what you are thinking. Isn’t there something more exciting we could discuss? Insurance is the most boring of all things in our money maze.

At first glance Insurance seems to be something that you just pour money into with no return on investment at all. That is right up until you need it!

What should I insure? You are all aware of vehicle insurance. It is the most common of all insurances. But how many of you have heard of or thought about Life insurance? Renters insurance? House insurance? Loss of Income insurance? If you can afford it you can also insure your arm like baseball players, legs like actresses or voice box like singers. Pretty well if you can think of it there is someone out there who will insure you if you have the money to afford it.

So why insure anything? You have worked hard for the things you have and heaven forbid you lose those possessions through disaster or theft. With adequate insurance you will be able to replace your lost possessions. The other purpose of insurance is to ensure you have coverage if someone attempts to sue you in case of accident.

What types of insurance should you have? Vehicle insurance is a must. So is either house insurance or rental insurance depending on whether or not you own your house. And life insurance. Credit card insurance, loan insurance and mortgage insurance are all much more expensive than life insurance and they are only payable upon death. With adequate life insurance you can avoid these costly insurance payments.

Regardless of which way you decide to go insurance wise it is necessary to protect yourself from potential future disasters or to protect your loved ones from covering your expenses in the case of your death.

I know! I know! No one likes to talk about disasters or death but it is better to be prepared than caught with your pants down!

Doing Life Right! Credit

Credit: The Necessary Evil!

What is credit? The most important thing to remember is that credit is not your money! Credit is someone else’s money that you are just borrowing hopefully very temporarily. Unfortunately in order to build a good credit rating that will allow you to buy larger items like a car or a house you must utilize different types of credit. By developing a history of paying back the money that you borrow on credit quickly you are demonstrating you can be trusted with other peoples money.

Types of Credit:  Credit comes in many different forms. It may be a credit card or a student loan. Paying your car insurance monthly or making payments on furniture. All of these payments and more are reported to credit bureaus which track and record your credit rating. Other lenders then view these ratings to determine how likely you are to repay them.

Cost of Credit:  When you borrow money on credit you are charged something called an interest rate. Interest is what businesses charge you for using their money. This rate varies depending on who you borrow the money from and the amount of money you have borrowed. The rate could be as high as 25% for some credit cards and as low as 2.5% on a house mortgage.

Repaying your credit: In most cases the amount you pay and how long it will take you to you to repay your loans is set. However in the case of credit cards there is no set date for repaying them. There is a minimum payment required but it is so low that it would take a long time to pay it off and you would likely pay more money back then you originally borrowed. Never put more money on your credit cards then you can pay off before the end of the month. Miss even a single payment and your interest rate climbs quickly making it even harder to repay the money on your credit card.

Credit is a necessary evil. Used properly it is a tool that allows you to buy items you could not afford any other way. Used in the wrong way it can be a weight that eventually drowns you.

Doing Life Right! Budgeting

Why do we need to budget?

If we do not know where we are at with our money then we do not know how to survive.

Knowing our starting point helps us know what direction to take so that we can plan for the future. Buying a house, having a family and retiring are things we all dream of.  With a current accurate budget, you can make sure that not only are you prepared for these events but also that you are set up for the next milestones in your life.  

So where do you start? The first thing you need to do is figure out how much money you make in a month and what your expenses are. Just moved to a new city or moved out on your own? No idea what the costs? Google “Living Expenses” followed by the name of the city you live in. You can use these numbers to start your budget. As you learn what your actual costs are, you can personalize your budget to paint a more accurate picture of your financial position.

Remember: Your budget is ever changing and requires updating on a monthly basis. You also need to add to your budget a line for savings. I know saving is very tough when you move out on your own and are just starting out.   Make it your goal to put 10% of your income away every month.

Now that we have figured out where we are we have a fighting chance at surviving the money maze!

Doing Life Right!

Why do we learn Shakespeare but not how to budget? We can do algebra but not maintain our vehicle. We know how to dissect a frog but not how maintain a household. These are all skills that parents and the school system have failed in teaching the next generation. The purpose of my blogs are to help young adults learn some real life skills. The first series of blogs will provide you financial skills necessary to get through life. We will discuss budgeting, investing, insurance, credit, renting vs owning, and the importance of having a will. We will also look at the cost of borrowing money to make purchases versus saving up to buy the items you want. Armed with this knowledge you will be able to make smart financial skills