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Tag: Life Insurance

Don’t Make These 6 Expensive Financial Mistakes

Written by support@seostats.com on . Posted in Budgeting & Money, Cash Flow, Financial Planning, Goals, Insurance.

What if I told you the world of providing financial advice has greatly evolved in the last decade? Do you know how it has changed and if you’re still taking an “old-school” approach to planning your finances?

It used to be that financial planning was an “add-on” service for wealthier clients with enough assets to be professionally managed. The emphasis was on the return of the assets and not much else. Meanwhile, the average person, especially one starting out in a career, had little to no opportunity to receive any planning advice.

However, some of today’s financial advisors haven taken a new approach—they fully focus on you and your goals, instead of just looking at your investments. Called the fee-for-service model or fee-only , this new model allows financial advisors to weigh in on anyone’s financial life at any income level. Now someone in their early 30’s (which I believe is the most critical time in your financial planning life), who may not yet have accumulated many assets, can receive direction, and start on the best path forward.

When you engage with a fee-for-service financial advisor early, you can avoid costly mistakes and understand your options. Here are a few of the mistakes working with an advisor in your 30’s can help you avoid.

 

Mistake #1: Focus too much on budgeting instead of cash flow planning

 Stop focusing so much on budgeting. Yes, really. Instead, focus on cash flow planning. Budgeting is important, but it implies a scarcity mindset, while cash flow planning looks at the bigger picture—both short-term and long-term goals. Reframing the process of spending as allocating toward your goals instead of cutting costs helps improve your chances of success.

The result becomes the foundation of your financial plan and helps you decide where to make spending changes. Understanding and detailing your cash flow allows you to make sure you are allocating enough for your future goals, like retirement, traveling, education, or purchasing a second home.

 

Mistake #2: Not saving for your kids’ college

Many professionals at the mid-stage of their career still have young children and haven’t yet thought about their college education. Let me be the first to tell you—it’s a major mistake to put off saving for later.

If you haven’t put away funds yet, start now. The sooner you start saving for your children’s higher education, the better. If you can, we recommend funding a 529 plan with up to $32,000 per year ($16k for each parent). This plan type will still qualify you for an annual gift tax exclusion. If you want to get a big head start on your child’s education you can also look to Superfund, or contribute up to 5 years all at once.

Think your children will attend private school? Good news—your 529 fund can help pay for K-12 expenses too.

 

Mistake #3: Putting off buying life insurance

You’re relatively young now, so it may be hard to think about the end of your life. But here’s the hard truth: anything can happen at any time. That’s why buying life insurance is critical to keep your family’s lifestyle and goals on track.

For most people, a term life policy offers the ability to cost effectively replace your salary during your prime earning years. Remember, this is not just income replacement. It’s also intended to cover major liabilities, like your mortgage, student loans, and college costs.

 

Mistake #4: Not saving after-tax funds for retirement

Maxing out your 401(k) or employer retirement plan should be your #1 retirement priority.  This is money that’s saved pre-tax, meaning you don’t have to pay taxes on it until you withdraw the funds after age 59 ½. However, paying taxes on those funds when you eventually withdraw them means that $1 million in your account isn’t really $1 million.

That’s why it’s also important to start saving money after-tax. Open a taxable brokerage account to put in after-tax funds. This is especially critical if you plan on retiring before age 59 ½.


Mistake #5: Not having a “sunny day” fund

You have a rainy-day fund in place (also known as your emergency fund). But do you have a fund for your dreams and goals? I like to call this your “sunny-day fund.”

Once you have an emergency fund with enough to cover 3 to 6 months of expenses, and you’ve maxed out your retirement fund, you can invest for other things. For example, you may want to buy a vacation home one day, or a boat, or take time off of work to travel. Don’t forget to put money aside to invest in life’s opportunities.

 

Mistake #6: Forgetting about tax planning when making financial decisions

When making financial decisions, aim to reduce the amount of taxes you pay this year, and try to reduce the amount of taxes you pay over your lifetime.

While we don’t want taxes to drive our decisions, a strong financial planner should be mindful of how tactical maneuvers can lower your taxes now and in the future. Roth conversions, tax loss harvesting, tax location, and tax-free income saving are just some of the tactics that should be considered as part of your plan.

 

Above all, remember this…

You now have the opportunity to access planning for you and your family that wasn’t available 20 to 30 years ago. We believe your 30’s are the most critical time in your life for setting yourself up for financial success. The right fee-for-service financial planner can help you do this.

If you’re ready to talk to a financial planner, set up a call with us today. We’re here to help you make better financial decisions and build a path forward.

 

Lake Road Advisors, a Fee-Only, independent financial planning firm with offices in Corning, NY, Ithaca, NY and Portland, OR works with clients virtually all across the country. Paul Sydlansky, the founder of Lake Road Advisors LLC, has worked in the financial services industry for 20+ years. Prior to founding Lake Road Advisors, Paul worked at Morgan Stanley in Manhattan for 13 years. While at Morgan Stanley, Paul was a senior-level manager within the Institutional Equities Department. In 2018 he was named to Investopedia’s Top 100 Financial Advisors list. Paul received a Bachelor’s degree in Economics from Marist College and holds an MBA from New York University Leonard N. Stern School of Business. Paul is a CERTIFIED FINANCIAL PLANNER™ and a member of the National Association of Personal Financial Advisors (NAPFA) and the XY Planning Network (XYPN).

Do I Need Life Insurance? What to Think About Before You Decide

Written by support@seostats.com on . Posted in Insurance.

If you’re in your 30s, you’ve likely had someone — a friend, a person you met at a networking event, someone who cold called you out of the blue — try to sell you on life insurance.

They may use scare tactics to try and convince you to buy a policy, or they might have some arguments that make having life insurance seem like a responsible financial thing to do (which it may be!).

But how much insurance do you really need? And what if you don’t need it at all?

Let’s take a quick look to better understand life insurance, the real purpose of it, and whether or not you actually need it.

 

The Purpose of a Life Insurance Policy

Life insurance offers financial protection against you passing away early. If you were to die tomorrow, think about who would be financially impacted: your spouse, your children, and potentially other family members who may depend on some or all of your income.

Just like car insurance protects you against the financial liabilities that come with an accident and homeowners insurance against the pitfalls of owning a home, life insurance is a product that protects people who would suffer if your financial support suddenly went away.

What life insurance is not is an investment. (You wouldn’t call your car insurance an “investment,” would you? It’s similar with life insurance: it’s a product designed to do a specific job.) And, like with any policy, it’s something you might want to have… but hope you never have to actually use.

So how do you determine if it’s something you absolutely want to have? There are a few times when your need will be obvious.

Watch Episode 11 of The Build below to learn more about life insurance.

The Obvious Case for Life Insurance

Even if you’ve considered it before, getting an insurance policy — beyond the one you might have as part of your benefits package through your employer — is probably low on your priority list.

After all, life is busy and you have other things to deal with. Dying suddenly at a young age seems so unlikely; it’s easy to think that someone like you doesn’t need something like life insurance.

But if you have a young family or support your household financially in any way… you probably do need some coverage. Why? Consider what you’re insuring when you buy life insurance: you are making sure that the beneficiary of your policy would not face some kind of hardship if you were to pass away and no longer financially provided for them.

Knowing that this is the purpose of life insurance, it’s obvious that you need a policy if you have children. Minors under 18 certainly depend on your income, but even young adults who might be in college or looking to get on their own two feet that you still support might need to be beneficiaries on your insurance.

You may also want life insurance if you have a spouse or significant other. The death benefit can cover large liabilities like your mortgage, charitable donations, and general living expenses during a grieving period when life for the surviving spouse needs to be figured out.

 

Single with No Dependents? You Might Not Need a Policy

A good rule of thumb for life insurance is that if someone would struggle to get by in any kind of way if you (and your income) disappeared tomorrow, it’s time to consider getting a policy to protect that person (or people).

But what if you’re single, you have no dependents, and you don’t have any debts or liabilities that would pass on to anyone else should you pass away?

 In these cases, you might not need life insurance because there’s no financial hardship to insure against.

 

One Big Exception to the General Rule: Non-Working Spouses

There is somewhat of an exception here, though, and most people forget to consider it. Let’s say you’re married, but don’t work. Your spouse provides the household income. In this case, it’s obvious that your spouse would need a policy so that you would not face a financial hardship if they were to die.

But what about you? Do you need life insurance if you don’t work or earn an income?

Yes! Here’s why: the cost associated with replacing the care and work you provide in your household or to your children is huge. What would it cost to have a full-nanny replace your role as stay-at-home-parent? What about daycare, housekeeping, personal chef services, and so on?

Your working spouse would certainly face a hardship if something happened to you, and would need to replace your labor in some way. Even if you don’t earn a paycheck from an employer, you need life insurance so your spouse could use the death benefit to keep up with the additional expenses they’d likely face without you.

 

What to Do Next?

Once you evaluate your need for life insurance, you need to determine what kind of policy to get. (And of course, if you don’t need life insurance — you may be all set in this arena and don’t need to include this in your financial planning.)

Most people need term life insurance, not whole life or permanent life insurance. Term life insurance covers you for a set period of time, and you don’t have to pay premiums once that term expires. With whole or permanent life, on the other hand, you always pay premiums.

Look for a product from an independent insurance provider like LLIS. There are other independent companies out there, too, and you should feel free to work with one you feel most comfortable with. What you want to avoid are “captive” agencies, which only sell their own products. These include brands like Allstate, State Farm, and New York Life.

An independent provider can look at the entire marketplace and help you get the best deal, so that’s why you want to start your search with them. A good step to take is to request quotes and start comparing potential options to find the best one for you.