Your Financial Checklist: Life Insurance

 

Personal Finance for Artists & Freelancers

 

Lesson Info

Your Financial Checklist: Life Insurance

And golly out we are going to start with some questions great on divorce who okay bring it on. All right first one is from bunny I've been a freelance editor often on a few years but since I was married I never focused on my career after twelve years of marriage I'm going through a divorce I've not had a day job in fifteen years I've ever been my editing now I'm finding myself trying to support myself full time I'm going back to school and I'm getting a lump sum of his four oh one k my question is are the student loans okay to support us and what do we do with the four oh one k as I have none of my own first of all thank you for sharing very often when people get divorced and I know I grew up the daughter of a single mom I've got a lot of friends who are going through divorce is that when you are going through divorce you don't look at your money because you're just really dealing with the emotional part so good for you bunny for just taking charge so with the four oh one k the questio...

n is how are you getting the four oh one k is it now in your name and are you going is very is it being cashed out? Did you have to pay taxes on it or is it still in an ira so these are some questions to ask from what I've seen with a four oh, one k ind of course, they usually are able to get that in an ira. It's actually split up. So now it's in an ira in your name. So if that's the case that's a great situation, but it's like an old four. Oh, one k you can roll it over and transferred anywhere you like. So you can put a finality vanguard with a money manager, whatever you like. So it's, just like that same option that you just got some money. Choose the investments. There's. No. Better time for you to really learn about these investments. Are the student loans enough for you to live on? I would just try and borrow his little is possible. So, really, this is where you take, you know, pen to paper and excel spreadsheet work. The financial planner say okay, I hope to start earning money in twelve months, so I need to live on this dollar amount over the next twelve months. Let me borrow as little as possible. So I'm really not setting myself off with that disadvantage. Just a quick story. I recall, I worked with the couple wonderful couple who decided to go back to ministry school they were becoming ah, think unitarian ministers, and so they had come to see me to just really map out the savings over the twelve year, twelve months, and they got the student loan package and what we actually sat down with the numbers we realised was more money than they needed, but the student loan just as well you need expert tuition, expert, student, expert, living expenses I said, you know, you're going to borrow thirty five thousand dollars each. I don't remember the dollar amount. Urine have seventy thousand dollars to pay back as we've all gotten, student loans are a lot of us, you just sort of use the money, right? Don't borrow it, don't borrow the seventy thousand, borrow sixty thousand borrow fifty thousand, borrow as little as you can from it because you don't have to pay it back, so if you are disciplined enough to keep it in the bank and put it in savings, or see if you could just take out a little bit less. So if you're borrowing that money bunny, try and borrow as little as possible great and then ninety nine per center what happens in case of divorce with ira accounts in particular, what happens if you get divorced and there's an imbalance in the ira accounts? Saying, for instance, yesterday where your freelancer client used the iphone four oh, one k to save a lot of money using the cash that is hiring salaried spouse made for day to day. So since he's aaron individual accounts, how do you split, right? I mean, that's, that's probably not a money question and that's more of a legal question with the divorce and that's really just on a big picture? How are the assets being split? Because on the whole you're looking to I'm not a lawyer, I don't wantto really give an answer that's incorrect, but I think that they're going to be really looking at all the assets and one pot in splitting them accordingly. So, yeah, it is a risk that you take, but hopefully if you're in a relationship, you're having those conversations about your money so that if they invent that if you do get divorced or you do get separated, at least you really know what you're what you did in terms of your money. We have one other one that sort of carry across from yesterday, but it might segway into your next dali many years ago, I worked for a company and left their owning a small four oh one k, I don't get the company's still in business is that money still somewhere for me? That's a great question so this is I mean I'm sorry this is happening to you but thank you for pointing out this example because this is a good reason why you need to roll over your old four oh one case you know legally even if the company is not in business that four oh one k money should be held in escrow in your name it's going to be really challenging to find it so if they have truly dissolved there might be a if they've gone into bankruptcy there's a bankruptcy attorney if they have sold their assets I mean you just have to start getting the paper trail and really calling the hr department calling the legal attorneys who are around but you might want to also start if you have a statement of where the money was held while it was a forty one came with the company it's always held with a third party financial institution a clearinghouse whether its I n g fidelity I mean gosh there's so many so if you do have a statement that's your best bet if not to start calling the hr department the legal department it was like that that's it's tough though and I'm sorry and I hope you find the money and I think you will but this is a reason why you shouldn't leave your money with it a foreman came because I've heard this story so many times great let's get started so I feel like I could keep talking about investments and keep talking about mutual funds, and I know so many of you in the chat room have really given us your information, but since we only have a few short hours left, I know I'm sad about that. Do I want to get started and really finish up our whole financial checklist? So, you know, it's interesting khalili had said before that this is not like a boot camp, and I love that you said this because the boot camp feels like I'm gonna, you know, make it tough and kick your butt. It did it on and this isn't this is like, this is a marathon, this is a long and steady way to really continuously look at our finances. So a lot of this information, we have to look at it it's important, but you might not be ready to look at this right now, and so maybe this is okay. I'm gonna take it in and when I'm ready to will deal with it. So this is the continuation of your financial checklist. So in terms of your non investments, these air really some key areas to think about life insurance, wills, long term care, disability insurance and estate planning. And again I think what comes up is a lot of people think well, I don't need life insurance I don't have any money I don't need a state planning I don't have any money and that's absolutely not the case I would say that most of us needs something on this list at one time or another and what we're hopefully going to decipher for you is what do you need? How much do you need of this and where should you go get it? So let's start with life insurance was kind of cute picture, right? Not everyone needs life insurance so life insurance is it's an amazing industry and if you talk to someone who sells life insurance, I mean there's no question they're saying, uh, you need life insurance, you need life insurance but not everybody does. So what we're going to really focus on is do you need life insurance and who are you? And so if you're in the chat room and if you have a question, if your situation needs it, let us know because sometimes that's a great question but let's talk a little bit about who needs it and especially its it's not it doesn't have to be it's not necessarily a cheap product and so if you do need it, you really want to make sure you can afford it, so if you need life insurance if you have a dependent usually a child that's living with you or you the parent of younger than eighteen years old so if you have children that are close to eighteen close to going to college or becoming independent you don't necessarily need to get life insurance if you can't afford him they give god forbid something happened to you they're close to going to college or they're close to being independent and again if you can afford a great you need life insurance if you have a business that truly relies on you and so I see a lot of partnerships or if one of the partners wasn't there in the business we truly go out of business because one of the partners isn't there you should think about getting life insurance because the business relies on you and that might support other people's families so I have to clients that are freelancers there both of you because of tom atrous tsai was forget optometry ophthalmologist they such creative glasses they're beautiful, they're down in soho one of them does not is not the business that business will go out of business they're both very very dependent so they got life insurance on them with the business as a recipient or beneficiary so that's a very classic case of life insurance, so for those of you that might be listening that have a small business that could be something to think about if you truly have a spouse that cannot work, maybe because the spouse has taken care of young children or this passes disabled or the spouse doesn't have an education or the spouse just lots of and I'm not saying that if you know, okay, well, my spouse or partner can go backto work I'm not saying that they shouldn't get life insurance, but if you truly have a spouse, I cannot work because they don't maybe haven't gotten the education that might be something to say, okay, I need life insurance and then worked we're going to talk about is really understanding the difference between term life insurance and whole life insurance, so what I see are a lot of people are sold life insurance that are relatively young do not have a family and they're sold it as an investment product, and I know that I've been sold that or someone has tried to sell me that and probably a lot of you that are watching, saying, yep, I've got a life insurance person he's trying to tell me and I'm maybe you need to buy from them, but a lot of times really think about what I'm young, I'm single I don't have kids yet I don't know if this is something I need to buy right now or what I saw is also a lot of people that were in my seminars who didn't have children but said, oh, but my sister in north carolina, I really want to leave her money, and I'm like that's great, but you're not taking care of yourself. So why are you trying to take care of your sister in north carolina? Like you don't have enough in your rainy day fund? You don't own a home yet, so you do not need to buy life insurance policy for your sister and then there's also a lot of people who buy life insurance for burial purposes and that's definitely strong in some communities, you know, and that's such a personal decision. But I say, why not say that money in a rainy day fund? Because chances are you're not gonna need it for that. If you really get discipline, it can save the money in a rainy day fund, then that could be what you're saving the money for, but to buy life insurance policy where the money is tied up and you cannot have access to it very easily could be a decision that you might really regret there's also people who are sold life insurance if they're sold it on their young children. So if god forbid, something happens to that young child, so there's there's also people who buy life insurance is an investment for a child and that's a different story we're talking about like something god forbid happens that child because it's very, very cheap the two main components that make up how much life insurance costs is age and health, so if you're young clearly healthy, your life insurance is going to cost a lot, but if you're much older, not is healthy probably you're going to die soon so it's an expensive policy so think about really why in my bind this life insurance id if you're buying it as an investment, we'll talk about that because that can be a great tool but again, who really needs it? You got young kids at home, you got a business that relies on you you've got a spouse that cannot take care of themselves at this point that's probably the three medians everyone else I would first ask yourself these questions how's my rainy day fund do I own my home? Do I have a lot of money saved or enough money saved in an ira? Yes, I do. I have a great rainy day fund. I own my home I might have a mortgage but not a big mortgage. I have a lot of money in my I r a yes, yes and yes then I can think about life insurance is a investment and it could be a great investment but first get these questions answered and so if you don't have a rainy day fund, you don't own your home and you're renting and you don't have an ira you probably shouldn't be looking at life insurance as an investment, but if you have children you can look a term life insurance which can be really the tool to protect your family so that's to illustrate the same thing if you need life insurance so if you went back here you're like, yes, I've got young kids yeah if I if I die my business is going to go to pot and there's people relying on that or my spouse cannot work I do need life insurance but I don't have my rainy day savings I don't I haven't funded this fully and I don't own my home that I should stick to term life insurance so I realized I don't have a slight here in term in whole life but I am going to talk about it cause that's a question that comes up you have any questions yet our ok things like chatter there's a leslie love on fifty years old with credit card debt, no dependence and a photographer had no employees do I need life insurance? A rep told me to go term at seventy dollars a month but what do you think no she's fifty years old she has no children, right? No dependence now not at all. So if god forbid, she dies, who is she going to leave that money to write her sister in kentucky? I don't know, you know, but she's she's not taking care of herself in these areas yet she will start soon. Yeah. That's. Such a great question. Thank you for sharing that. Uh, andy says my uncle is a life insurance agent and sold me on a plan when I was twenty two. I'm now forty one it's four hundred fifty dollars, a year, and I feel like I should be investing that money elsewhere if I stop paying. Then is all that past money invested lost. So the question is, which I'll explain a little bit more, so I would ask you, is it a term life insurance plan? Our whole life plan? If it's a term life plan, it is lost. So the question is, does he need it? Does andy need the life insurance while he was sold it when he was young? It probably wasn't that expensive cause for fifty a year. I don't know what the benefit amount is at a million dollars, half a million dollars. I don't know what that is before fifty year isn't necessarily that much money, and if he truly needs the life insurance you should keep it like if he's got dependents or not, but if he doesn't need it and it's a term life plan, he has to think about him. I ready to give up all the, you know, the twenty plus years that I've paid into it, so if he wants to get back, it's not so when you hear about people who suddenly gets sick, they've been healed by suddenly gets sick and there are people out there that buy their life insurance and give them money, and lou, that would only be it couldn't be a term could it would have to be a whole life, I don't know, just like I don't know much about that, so I'm not sure. Um, well, now it might be a term because the term works as long as you're still paying for it. So the way life insurance works is you have the term which is anywhere from ten years to twenty years to thirty years. There's, obviously others, but that's really the most typical. So you buy the term, so if you're thirty years old, and if you die within the term, you get a benefit amount on benefit amount could be ten thousand dollars to a million dollars. And so based on how old you are and how healthy you are, so say you buy on average, most people buy one hundred thousand two hundred thousand half a million, a million these air sort of the typical numbers that I see. So what I'll see is that you'll get a quote, you'll say it's, a twenty year policy that pays one hundred thousand dollars if you die within the twenty years and for twenty thetford say, one hundred thousand dollars policy, it'll cost you fifty dollars a month. I am just making this up. I have no idea if that's what it costs so for fifty dollars a month, if you die within twenty years, you get one hundred thousand dollars that's an example. So the idea is that if you outlive that twenty years, how much is that policy worth? Nothing, but it only cost you fifty bucks a month, so that's just the very, very basic explanation of term life insurance. So again, you can get that because you don't have all these things checked off and you've got little kids, and so you're thinking, I really want to care for my little kids. I want to care for my business or my wife for my spouse, my husband or my boyfriend girlfriend. Fill in the blank fifty bucks a month is worth it for me and if you really need life insurance and you don't have a lot of money saved, I'd rather you get a little bit of fifty dollars a month I did not get anything because it cost too much so that's term, so in fact I was talking to some people at lunch today were like, well, do I need it? I'm like, yes, you do, you've got children, you need to get life insurance and even if you can't afford a lot didn't get one hundred thousand dollars policy it's better than nothing because one hundred thousand dollars policy tends to really not be a lot of money, we're probably talking twenty five fifty, seventy five dollars a month now the way whole life works his whole life is the same idea in the sense that you have a term, but instead of fifty dollars a month, it'll be three hundred fifty dollars a month, but you get a savings so that's a hundred thousand dollars after twenty years you have again I'm just generalizing you have one hundred thousand dollars. So while you have been spending three fifty a month instead of fifty, you now have a savings so it's a great investment tool but over that ten, twenty, thirty years on the whole, you can't touch it and it's a good investment life insurance policies or gray investment. So the reason I'm saying don't buy this unless you have these checked us because you can't really touch it, you can't touch it for the rainy day, you can't touch it for the down payment, and so you might need access. But now you're stuck with a three fifty a month payment, which you can't afford, so I've I spoke with a couple, probably a year ago that was looking at life insurance. They were doing really well, they own their ho I mean, they did have a mortgage, but they had a lot of cash in the bank they were saving in iras and they had little kids, and I said, you know what? Why don't you look a whole life policy? That could be a great investment option because they're great options there? Very safe, they're about seven to eight percent a year. You get the life insurance aspect, if god forbid you die young or in that term, but then if you don't, if you outlive in most people do outlive their insurance policy, you've got a nice pot of savings there. So if I'm actually for those of you and and I, you know, let me know if I offend anybody but sort of the financial planning idea that I had, which I didn't come up with this, someone told me about and I thought it was a great tool is if your state home mom or if your state home parent and you don't have any income, but yet you want to provide for your kids or you want to provide. So maybe you're just getting your creative business up and you do have some income at home, you could buy a whole life life insurance policy, like if you can't afford it, but you don't necessarily have the income. So the benefit is of, god forbid you die, you leave some money to your children, which is something that might be important to you, but more importantly, you're probably not going to die in that period of time. And then you've got a nice little savings for retirement in twenty thirty years. So it's, I like looking at whole life policies for maybe a parent that's home, and there is some income and is just like another tool for that parent to have on themselves. But it's also a way for that parent to feel like they're helping their children, so just kind of a little side there. Um uh ninety nine per center is asking instead of whole life why wouldn't you get term and put the difference in the monthly premium into some sort of other type of that's exactly what I say so if you don't sell life insurance most people say bye termine invest the rest but with that being said if you have got all this and you're just gosh having extra thousand dollars a month and I don't know what to do with it and there are people out there it is another great investment so if you don't mind tying up three fifty a month, my point is you can't go wrong with it I just don't want you to tide up if you can't afford it and that's what I see because by the way, if I'm selling life insurance guess what I get paid a lot higher commission on what do you think term versus whole life no, you get beat up, you get being a lot more to saul whole life plan think about you're selling a plan that's you're getting three fifty a month is that of fifty so I mean we're all in business so I think the life insurance agents who are great and I bought my life insurance from a life insurance agent so nothing against it but we're also in business were incentivized to make more of you by whole life is three fifty a month until you die yeah, and I'm making up the number. Well, so for example, it's a payment until you die? Yes and no. At some point you're going to build up what's called cash value that you have, you know, you're going to have saved so much that you're gonna actually have saved into the value of the plan. So no it's, not until you die it's for but it's definitely for twenty to thirty years. Absolutely. And there are benefits like you can actually borrow against the cash value of a life insurance plan, which is a great option, and I love that option, but what if I don't have my reading day fund like I've just committed and bought a product that I can work around? So that's, my biggest issue if I need life insurance, so where I've seen it bought as children is that sometimes, you know, I'll admit this is definitely more for, like high net worth or wealthier people that are looking to buy an investment for their child so they'll buy a whole life plan on their childlike in there, ten years old, fifteen years old, twenty years old. The idea is that they don't mind paying the three fifty a month to the child how's life insurance, and then they also a huge cash value when they're thirty, forty years old. So I had worked with a few clients who were artists who had had a policy that their parents had bought for them so it's just you know I mean that's a wonderful thing to get so that's something where you could buy for your kids jimmy asks with whole life insurance if you die after the term, does the money still go to your beneficiary when you die or do you have access to it to use in however you might need it you can use it, right? Right? So I mean, the benefit of whole life is that if you can afford the payments and you live throughout the twenty thirty year of the payments, you get a nice pot of gold you know, literally give it to you at the end yeah lord, yes, I mean they if you are buying a whole life plan they're they're really showing you the schedule there saying in ten years that's worth this twenty years it's worth this the benefit of buying a whole life plan is if you need life insurance because you've got young kids or a business if you die in ten years so you bought a million dollar policy in ten years, your beneficiaries get a million dollars if you don't die in that term in thirty years, you get a million dollars you've paid into it though so it's not like it's for free right now jammies question wass you know you're alive and the term is either so you get that you get back yeah, no it's a great great savings tool if you could afford the payments and they don't hold you back from that and so there's lots of options like one of the things that we did personally is we bought term and whole life so you know, just for an example and we bought a million dollar term and again I'm just making this up, but we bought a million dollar terms and one hundred thousand dollars whole life policy because we had little kids and we're like if god forbid we die we really need those kids to have their rent and mortgage paid for the next ten years fifteen years and their clothing so we wanted the term to salt to really be sufficient, but then we thought, you know what? It is a good investment it's another diversification so let's buy a smaller hole life policy that will hopefully outlive. So what we're not doing three fifty monthly we're doing hundred fifty month I don't remember what the exact payments are but then in twenty thirty years I've got a hundred thousand dollars so you khun there's so many things you can play around with, but again, if you just understand it you know what you need you know what's good for you the second thing you could do which is a little more expensive but you can by what's called a term toe whole life to that converts so what that would be so if the term is fifty dollars a month and the whole life of say, three fifty a month and again these numbers are dependent on your age and your health so I'm making up the numbers but it's really however old you are and how healthy you are so if the term is is fifty in the whole life is three fifty you could buy a term that gives you in a year to an option to convert toe whole life and that might be one hundred a month so you're like, ok, I can afford a hundred and maybe in a year two are making more money and I want to have the option to convert the whole life and so that's something that we actually bought and we decided not to convert it because I just felt more comfortable investing my money the way I wanted invested so but that I think that's a nice option if you feel like you know what I'm going to start to make more money and I do see this is a good investment tool it's again it's diversification assassin allocations another tool tohave there's lots of other policies this thes air the two basic policies of term in whole life on the whole, you do have to buy them through an agent it's really hard to buy it on the internet there's a great website called ac you quote, I think it's a ccu quote qu ot dot com on dh that's, a website that just does term life insurance and so you could get quotes from there at the end of the day, you still got to talk to an agent? Um, but if you're really clear on your needs on the homework you've done over the last two days on how much you can afford and what you need to save you could be really clear on what you need to buy so that's just having more clarity around that. The other thing that I'll say to my clients because socially from dealing with couples that have young children and need life insurance and I'll say, just get the quotes, just call the agent say, all right, give me a quote on one hundred thousand two hundred thousand five hundred thousand, fifteen year, ten year, thirty year and let's see what I could afford, what does that cost me? So I declined who did that? He just had his first little baby, this is the couple on the two men who own the I'm optometry store, so what they did is they he got me the quotes, and we realize that I think he could afford the fifteen year policy, so he kind of wanted a lot of money because he just said if I'm going to go, I want them to be safe and so he got a fifteen year term that was a million dollars and so he said, ok, maybe my kids will be fifteen sixteen hopefully my partner, my wife can go backto work by then she'll have a little more money, but at least we'll have a million dollars within fifteen years the kids will be fifteen sixteen by then he goes rather than give them less money if I die within twenty that's a personal decision there's no right or wrong decision but I thought that was an interesting way to look at it, but again, once he got all the quotes he could see you know what? I can afford this payment? I'd rather than get a million dollars then get period money. The other thing is when we talked about the financial calculators, the beginning on bankrate calculators and how much life insurance did I need to run the calculator I mean the rough rule of thumb and it's always going to say you need more than you could afford because they cannot have gone through those numbers but it's really you know how much does your family live on an annual basis until they're eighteen you do the math

Class Description

Surviving and thriving as a freelancer or working artist requires strong financial management skills, but getting there can seem stressful and overwhelming. Join financial expert and Fordham University MBA holder Galia Gichon for an introduction to a painless, seven-step plan for taking control of your personal finances.

In this course, you’ll set financial goals, create a budget that works for you, and establish the habits that lead to financial health. You’ll learn how to make financial planning less time-consuming by spending 30 minutes a week directly focused on your budget, spending, savings, and investments. You’ll also learn how to create immediate growth in your savings and investment accounts. Galia will also share key techniques for taking the stress and uncertainty out of planning for retirement.

By the end of this course, you’ll be able to confidently and successfully manage your personal finances, and have more time (and money!) to do the work you love.

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