Personal Financial Planning: Life Insurance

Couples and individuals buy life insurance as a way of saving money and if someone dies then the rest of the family will be, more or less, financially cared for...  80% of all couple and individuals who take out life insurance NEVER NEED it and end up cashing the policy in once they retire.  Unfortunately, those people who subscribe to life insurance, don't realize that in order to actually benefit from life insurance one must actually die as soon after the probationary period as possible in order for the life insurance policy to be cost effective.

A better solution since 80% of those who own life insurance policies never have to use them, is to take the money that you would have given to the life insurance company every month and invest that money in a mutual fund.

For example...

if you save $2.50 each day and at the end of the month invest that money into a mutual fund and do this every day and every month for 40 years...  then, at the end of that 40 year period, you would have roughly $500.000.  $2.50/day equals about $75/month based upon 30 day months...  so it could be a little higher...

Insurance companies do not tell you that...  and what they actually do is take your monthly premiums and invest those premiums into a mutual fund....

YOU ARE ONLY AS SMART AS YOU WANT TO BE...

Personal Financial Planning Considerations

When one decides to create a personal financial plan, one might want to consider these two ideas...

First...  one might want to consider trading up your house every 3 to 5 years, and if this sounds reasonable to you, then here are some ideas about which to think:

• Buy a house in a new development that anticipates growth
• Make improvements to kitchen and bathrooms only
• Maintain outside landscape
• Watch out for basements
• Watch out for homes on sloping ground or at bottom (water issues)
• Keep house 3-5 years before selling
• Always buy a more expensive house to shelter capital gains
• When retiring sell house and buy much cheaper home -   claim one time exception in capital gain
• Could create additional savings of $300,000 or more

Second...  buy the car you want and pay it off as quick as you can and when paid off, continue saving your monthly payments until you have saved enough money to buy a new car.  Don't buy NEW, but look into a year old car that has been leased (business lease preferred) and has low gas mileage...  you save thousands and car is like BRAND NEW...

Remember:  those who plan and actually implement their plan and make periodic corrections and/or adjustments are likely to be more successful than those who do not plan.

Personal Financial Planning

A financial plan is a comprehensive picture of your current finances, your financial goals and any strategies you've set to achieve those goals. Good financial planning should include details about your cash flow, savings, debt, investments, insurance and any other elements of your financial life.

The financial planning process is a logical, six-step procedure:

(1) determining your current financial situation
(2) developing financial goals
(3) identifying alternative courses of action
(4) evaluating alternatives
(5) creating and implementing a financial action plan 
(6) reevaluating and revising the plan

It seems to me that this approach is pretty straight forward...  and yet, 80-90% of Americans when questioned make the claim that they do not do any financial planning nor do they plan to do any financial planning.

The more detailed that one's personal plan is, the better the plan is and the easier it is to make specific changes if the plan needs to be tweaked.

My personal financial plan included the following:

1. retirement goal monthly income
2. the amount of money I wanted to have saved by the time I retired
3. number of employers anticipated
4. amount of education I needed
5. if I would relocate to another State
6. States I would not live in
7. annual salary and anticipated raises
8. estimated taxes to be paid
9. number of spouses
10. number of children
11. money for children's college tuition
12. number of vehicles owned (new or used)
13. number of houses owned
14. developing annual, monthly budgets (vacations and holidays)
15. maintaining cash flow requirements
16. maintaining financial statements (Balance Sheet, Income Expense Statement, Net Worth)
17. life insurance (home, life, vehicles)
18. preventive maintenance on health
19. plan to eat healthy and exercise
20. savings and investments (rental property)

My Goals were:

• $500,000 to $1,000,000 in the bank
• Social Security  - $2,500
• Social Security (spouse)  -  $1,000 - $1,500
• No life insurance
• One Child - will pay for college
• Mutual Fund investments - no individual stocks
• Buy used cars when needed (1 year old, leased, low mileage)
• Willing to relocate to NC, TN, SC
• Salary range:  $30,000 to $50,000 annually
• Will have college degree maybe more
• Willing to pursue technical education
• East healthy and exercise - maintain ideal weight or a little more
• Stop smoking cigarettes, - drink minimal alcohol
• Buy home (no renting) - change houses when necessary
• Retired monthly income:  $3,000 - $5,000
• Always save money 
• Use Credit Cards but pay off debt at end of month
• Plan to pay off all debt

Personal Financial Planning

HOW MANY OF YOU HAVE CALCULATED YOUR NET WORTH?

HOW MANY OF YOU KNOW YOUR RETIREMENT AGE?

HOW MANY OF YOU HAVE DETERMINED YOUR RETIREMENT INCOME AND NEEDS?

The average American has answered none of the above questions...

The average American has not thought about retirement...

The average American saves no money.

The average American has some sort of debt.

Retirement Questions:

1. What is your retirement age?
2. How much Social Security will you receive?
3. Do you have a 401K or other savings plan at work?
4. Do you have any investments?
5. Are you in good health and will you stay that way?
6. How many homes will you buy and sell?
7. How many vehicles will you buy and trade in?
8. How many children will you have?
9. Will you pay for their college education?
10. How many companies will you work at?
11. Will you relocate out-of-State?
12. How much Life insurance do you have?
13. How much car insurance?
14. How much home owner's insurance?
15. How much money do you save each year?
16. Is your debt increasing or decreasing?
17. Do you exercise and eat healthy?
18. How much alcohol do you drink?
19. Are you managing your stress?
20. Do you drive the speed limits?

Just Me and My Thoughts

My thoughts appear out of nowhere or that is what they seem to be doing and yet I know that these thoughts must come from somewhere.  The generation of these thoughts is better in the morning for some reason and so it is in the morning that I have trained myself to write and reflect.  Upon reflection, I formulate ideas and once the idea hatches, my mind begins to control my consciousness openly and I put pen to paper and write...  or, in this case, I put fingers to keyboard and type...  however, I can actually write faster than I type and errors are easily scratched out, whereas with the keyboard, one must find and use the backspace key that I use all the time...

Nonetheless, I write in a notebook with a pen in hand, usually black and usually fine point as medium points smear...  and I write on blogs using a computer...  actually a laptop since the keyboard on a tablet is too small for my fat fingers.

And... mornings are the best for me as I drink coffee but also in the afternoons do I write my thoughts as I really have nothing else to do with my life now that I am retired...  although, I have taught some evening college classes in the past and have agreed to teach another one in the spring of 2021...  this class I taught many times before so I just need to update my syllabus a little and I am good to go...  Personal Financial Planning changes very little over the years...  and, as I think about it, I will be adding BITCOIN and CRYPTO CURRENCY to my list of topics.