Monday, June 1, 2009

Planning for the unexpected

Job loss, short term illness, long term illness, these are a few of the unexpected things that life throws at you. You might see the job loss coming but then again you might not. Sure the company is in a rough time and maybe they have laid off a few people, but I’ll be okay. My health is pretty good. I eat right and exercise, what could happen? Illnesses can come out of the blue and can be devastating emotionally and financially. Are you prepared for them?

Let’s hope so. If you don’t think that you are, don’t feel bad I ‘m sure that a lot of people are in the same boat. It’s time to get out of that boat.

It is always a trauma when you lose a job no matter if you saw it coming or not. Fear and despair set in, you self-esteem drops like a rock. And you worry about the money or lack of it. That is why it is so important to start an emergency fund right now. The rule of thumb says that you need to have about 6 months of money to cover your bills till you find another job. If you can save more then do it. Make sure to keep the money in an account that you can easily get to. Don’t invest it in stocks or mutual funds. Having the money put away will help ease off that stress.

Illnesses can strike at any time. If your company has short term disability that’s great because they will usually pay you a percentage of your salary for a short period of time. If they don’t you might want to consider investing in a policy. That also goes for long term disability insurance. Many companies will allow you to take a little out of your salary every paycheck to pay for a higher percentage long term disability. You should take advantage of that. It might mean the difference in taking home 70 percent of your salary versus 40 percent.

Remember it is always good to be prepared.

Friday, May 29, 2009

Should you buy mutual funds now?

In the past year the mutual fund market like the stock market in general has taken quite a hit. 401ks that many people depend on have been crushed due to the slump in mutual funds. This time it hasn’t been just the high risk high return funds that have suffered; the low and moderate funds have also lost value. With all that said do you really want to put your money in a mutual fund?

That depends on your expectations. Do you need the money 6 months from now or a year from now? Forget about the mutual funds go to the bank and open a CD or open your mattress up. But if you are talking about long term investments, how ever you define that, then mutual funds might be for you.

It used to be that the old investment crowd would tell you to put the money in safe, dividend drawing stocks or mutual funds that have a track record of making money slowly. That point of view has come under scrutiny in the last 6 months. The argument is that nothing is guaranteed, which is true, and safe stocks and funds can go down precisely when you need them. Become more of a trader.

So what should you do? Stuff the mattress or open another CD. No, you need to keep an eye on your investments and diversify. I know that the word diversify has been used a million times when discussing stocks and mutual funds, but it’s true. Is it safe proof? No, nothing is but in the long run, it will be worth it.

Wednesday, May 27, 2009

2 types of Life Insurance

There are 2 types of life insurance, term and whole life.

Term life only pays when the death happens during the life of the term, which can be anywhere from one year to 30 years. And term is broken down into level and decreasing term. Level pays the same amount through out the time of the policy whereas decreasing term goes down as the term gets closer to ending.

The advantage of term life is that it is cheap. The disadvantage is when the term is up you will have to sign up for insurance again. The older you get the harder and more expensive it is get life insurance.

Whole life pays no matter how old you are. Whole life insurance is broken down into three types: traditional, universal and variable.

Traditional life covers the same payment no matter what age is reached. Usually premiums are kept up so the insurance companies can use that money as an investment to cover the cost of the policy. The insurance holder has the right to cash in the amount if they decide to cancel the policy

Universal life is based on cash value. The money that is collected is invested in some type of financial index. Variable life also is based on cash value but can be invested different types of investment accounts. If the account rises in value then the payout while be greater when collected.

The advantage of whole life is that it is permanent. The disadvantage of whole life is it is more expensive.

Sunday, May 24, 2009

Go safely into retirement

Hopefully you have thought about retirement for many years. You have made plans and made adjustments along the way. You have diversified your money so the recent downfall of the market didn’t hurt you as bad. Of course the recent downfall hurt everyone who has any money in the stock market but you are okay? Aren’t you?

If you aren’t, there are things that you can do to make your situation better.

The first thing is to leave your 401k alone. I know that a lot of people are suggesting taking the money out. If you do that then you will be facing a hefty tax fine for early withdrawal. You may think that the market will never recover but it will eventually. You could also move it into a low risk fund that will gain very little but won’t lose that much.

Putting cash in the bank has been seen as a losing prospect in the past few decades. But now it doesn’t seem to be that bad of an idea. It is always good to have some cash that is easy to get to in a rough economy.

Start now to become a thriftier consumer. When you do retire you wouldn’t have as much money coming in so you will have to make up the difference somewhere. Start now so it wouldn’t be such a shock later. And definitely cut back using the credit card.

Thursday, May 21, 2009

Repairing your credit

If you feel that your credit is wrongly being damaged, there are things that you can do to correct this.

The first thing not to do is go to one of those companies that you see that advertises quick fixes to your credit problems. They can’t correct your credit report because it is illegal to remove legitimate information from your credit report.

However if you are disputing some of the claims on your report you can challenge them.

How do I get a credit report? All three consumer reporting companies are required to give a free copy of your credit report every 12 months if they are asked to. The online form is found at annualcreditreport.com or send a request at:

Annual Credit Report Request
ServiceP.O. Box 105281
Atlanta, GA 30348-5281

Send all the information that you think is applicable to your case. The consumer reporting companies have 30 days to investigate. If the dispute isn’t settled in your favor you can ask the consumer reporting company to make note of the dispute on your record.

The consumer reporting companies can keep negative information on your record for 7 years and for bankruptcy for 10 years.

If you have a problem the reporting companies you can contact your state’s consumer affair’s office or the state Attorney General.

The consumer reporting companies are:

Equifax www.equifax.com
TransUnion www.transunion.com
Experian www.Experian.com