Financial Education: 3 Important Check Ups to Do in an Hour
January 10, 2011There are 8760 hours in a year – 730 in a month with about 240 of them spent sleeping. That leaves about 490 hours to do what we want. We spend quite a few of those at work and it probably seems like we spend the rest of them waiting in line or being on hold. We can put a few of those hours to good use with some actions that might not be very urgent but are very important none the less. Here are a couple of important insurance check-ups to do this week that take about an hour each.
1. Check and see if you have enough life insurance coverage. There are two ways financial planners determine life insurance coverage amounts – human life value and needs analysis. To determine your human life value, you simply multiply your salary times the number of years until retirement. For example, a 45 year old would use 20 times their salary to determine their human life value. This amount would provide for their loved ones an amount similar to what they would have earned during their lifetime (not including raises).
The needs analysis takes a variety of factors into account including your income needs, amount of debt that needs to be paid off, anticipated future expenses, current retirement savings, savings and investing assets, and anticipated end of life expenses. The best way to determine this is to use a calculator such as one from lifehappens.org.
2. Check to make sure you have the correct beneficiaries. I remember giving a worksite retirement workshop in Sacramento, Ca and we talked about updating beneficiaries. A woman in the audience raised her hand and told the group that her ex-husband (they’d been divorced for years) had her listed as the primary beneficiary on his IRA and when he passed away, she got a big check that she thinks he probably didn’t realize would go to her. This happens more often than you would think! Check to make sure you have the right person on your life insurance, retirement plans, bank and brokerage accounts and anything else that allows a beneficiary.
3. Check your policies and do a little clean up. How frustrating would it be for your beneficiaries when they find out you cancelled your million dollar life insurance policy but kept the old policy in your file cabinet. The jumping up and down and dancing would stop immediately. Seriously though it is very confusing to go through someone’s paperwork and have a pile of policies with some current and some old. You obviously love someone if you are purchasing insurance to take care of them when you can’t, go through and shred old dated policies and organize the current ones.
Now that still leaves you 487 hours this month to do whatever you want and hopefully it won’t be standing in line.