How To Figure Out What Amount Of Life Insurance You Need

August 15, 2017

Thinking about what would happen if you or your spouse were to pass away is tough — no one really wants to imagine the worst happening. The sad reality is that bad things sometimes happen to good people, so we need to be prepared, but you don’t want to spend too much on life insurance since there’s a strong chance you won’t need it. I encourage people to think of life insurance in terms of taking care of their loved ones rather than planning for something bad to happen.

Adequate life insurance can help your family maintain their home and lifestyle if you are not around. It could also give your kids a chance to graduate college without being saddled with thousands of dollars in student loans. But how much do you really need?

Choosing how much life insurance to buy can be confusing, but you want to know how much you need before you sit down with an agent so you can feel confident in your investment. Here are three of the more popular methods of figuring it out:

  1. Multipliers of income: This one is pretty simple – you decide how much coverage you need based on how much you actually make each year. Keep in mind that it does not take into account inflation or your current and future financial obligations, just what life is like today. Here’s the rule of thumb:
    – If you are single with no dependents: enough to cover your burial expenses.
    – If you are married & your spouse earns a similar income:     5x your annual income.
    – If you are the primary income earner in your family: 10x your annual income.
  2. Human life value: This method considers the fact that if you were to pass away, your family would lose the value of your income not only now, but your potential income in the future, then calculates what amount would be needed to replace that. There are calculators that can help determine what your amount may be based on your income and obligations, considering your after-tax pay while adjusting for expenses that would no longer exist if you passed away, such as a second car. Keep in mind, these amounts are typically high and may over-inflate how much you need. Think of this as the “Cadillac” value approach.
  3. Needs analysis: No two people are the same and neither are their life insurance needs. This method basically says you should have enough insurance to cover certain things you value, such as paying off your mortgage or covering your child(ren)’s complete college education — someone else may choose to only have enough to cover 50% of their kids’ education or to only pay the mortgage for one year after they pass. Basically, the needs-based approach takes into account your personal situation to determine your insurance needs.

One great resource are the calculators on LifeHappens.org — my spouse and I both did this and boy was it an eye opener! It turns out that we had very different ideas on what we thought life insurance should cover, so it helped us to get on the same page about how much we should have, along with clarifying our expectations of what the life insurance would cover should one of us pass.

Out of all of the approaches, I like the the needs-based approach best because it takes into account exactly what you want to cover in order to give you a better picture of your needs. If you find that your life insurance needs are more than you currently have in place, take advantage of open enrollment season to increase your coverage at typically low group rates. You may also want to research rates with your home or auto insurance provider (sometimes they offer life insurance), your bank or even online.

No matter what, if you have a family or anyone who is dependent upon your income to fund their lifestyle, you need to have life insurance in place. There are too many stories out there about young families who are not only dealing with the unthinkable loss of a young parent, but also having to deal with the financial fall-out from a lack of insurance as well.

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Why a Lower Paying Job May Still Be Worth More

April 05, 2017

When looking at job opportunities, it can be easy to be wooed by increases in salary. I learned the hard way that it’s not the only thing that matters when I took a new job many years ago for a couple thousand more per year, only to find that my actual take-home pay was lower because my new employer didn’t offer the premium benefits I’d enjoyed at my first job. But how do you know which benefits are better than others?

While you can’t put a price on things like “dress for your day” or bring your dog to work policies, you can figure out how much a lot of benefits are actually worth to you, personally, in actual dollar amounts. I’ll use my own benefits as an example since Financial Finesse is a well-recognized employer of choice. Obviously you’ll have to use your own numbers according to the benefits available to you and who would be covered in your family, but here’s a good framework to start with:

Health insurance – Definitely find out what your premium would be to factor that in, but don’t only look at that, especially if the employer covers your costs like they do at Financial Finesse. Is there a high-deductible option that comes with a health savings account and does the employer make a deposit into that account on your behalf? That’s also part of your compensation. If I were comparing offers, I’d also want to know the maximum I’d be on the hook for with each health plan since coverage levels matter as well. It’s all well and good if your employer covers your premium, but that could seem irrelevant if any costs incurred would require you to spend $5,000 of your own money to hit your deductible before any coverage kicks in.

  • HSA deposit to my account for individual coverage: $1,500 (This also happens to be my deductible. If I had to pay a premium, I would subtract that amount from this to arrive at the net increase to my compensation.)

Retirement plan – Any match your employer gives you should be considered additional compensation, so definitely take that into account. Some employers even make discretionary deposits regardless of your own level of contribution, which should absolutely be accounted for when considering total pay. Financial Finesse basically matches me 4% as long as I contribute 5%, which is a no-brainer. Contributing less than 5% is the same as saying, “No thanks. I don’t want that extra bit of pay.”

  • Annual employer match: 4% of my eligible pay = over $3,000

Financial wellness benefit – Offering a workplace financial wellness benefit is becoming an increasingly common (and smart, if you ask me) way for employers to demonstrate their commitment to employee wellness. In fact, it can be a great resource in helping you to make the most of all your other benefits! How you quantify this benefit will depend on what’s offered. At Financial Finesse, all employees have access to calling our Financial Helpline, which is the equivalent of having a CERTIFIED FINANCIAL PLANNERTM professional on retainer. When I was an independent financial coach working with the general public, I charged clients $300 per quarter for a similar service. That meant they had unlimited access to call, email or meet with me as long as they paid that fee, similar to the Financial Helpline that many of our clients offer to their employees. If the offer you’re looking at includes an unlimited benefit like Financial Finesse, that’s the best way I know how to quantify it.

  • Annual savings by not having to hire a financial coach: $300 x 4 quarters = $1,200 (Note that this has nothing to do with what employers actually pay for their employees to have access to financial wellness but instead is what you’d have to pay if you sought an equivalent service on your own.)
  • Not included in this number: The financial benefit of using a financial wellness program to pay off debt, create a budget, increase savings for the future or invest appropriately along with reduced financial stress. Value: priceless

Professional development support – This depends heavily on your career field and any credentials you have to maintain but can be a real differentiator. I have three professional credentials that aren’t cheap to maintain on an annual basis. Financial Finesse supports all of them, but my last employer only supported part of them, which is a big difference to my wallet. Beyond that, each employee at Financial Finesse also has a $250 per year personal professional development budget to be spent on things related to enhancing their job function such as books, classes, conferences, and even role-specific consultants. For mine, I add up all my credential licensing fees, professional association dues, cost of continuing education and the professional development fund.

  • Annual savings by having my professional expenses reimbursed: about $1,750

Life insurance – Most employers offer employees automatic coverage of at least a year’s salary should the employee pass away while they are employed. The differentiator is when they cover more than that. Quantifying that truly depends on your personal situation. For some people, one times their annual salary is enough so additional coverage might not factor in as applicable compensation to consider. If you would need more coverage than the employer offers, you can figure out the savings based on what you pay for any additional policies you have outside of work.

  • Annual savings by having a portion of my needed life insurance covered: $50

To add it all up, I’m actually receiving at least $7,500 in benefits beyond my salary and insurance coverage – not too shabby!

There are plenty of other benefits to consider as well, depending on your personal situation and what you need. For example, your employer may offer discounted pet insurance, but that’s only applicable in your calculation if you’d switch your pet insurance over and get a discount. Another example would be pre-paid legal assistance, a benefit that’s really handy for people who need to draft estate planning documents or own rental property and need a little real estate legal advice but not as useful if you’re all set it those areas. This also doesn’t include the more typical benefits that the majority of employers provide like disability insurance, an EAP and obviously unemployment insurance. Since you’re likely to have those benefits at any place you work, they won’t really help in making a decision even though they are useful and important benefits to have and appreciate.

 

Kelley Long is a resident financial planner with Financial Finesse, the leading provider of unbiased workplace financial wellness programs in the US. For more posts by Kelley or to sign up to have her weekly post delivered to your inbox each Wednesday, please visit the main blog page and sign up today.

 

What to Do If You Have a Life Insurance Claim

March 06, 2017

When someone you love passes away, the last thing you want to deal with is paperwork and bureaucracy. At a planner meeting recently, my fellow planner Cyrus Purnell, CFP®, MBA and I were discussing the guidance we would offer on how to navigate the process of settling a life insurance claim. Here’s what we had to say.

Are you a beneficiary?

In the event of the death of a loved one, it is necessary to determine if you are the beneficiary of any insurance policies. If you are named as a beneficiary, collecting the funds can occur in a timely manner but you have to be proactive in order to get your payout.

Find the life insurance company or insurance agent’s name

The policy can be looked up if you know the name of the company. If you are not sure of the name of the insurance company, you may be able to track it down by locating the agent.

Supply the death certificate

You will need to supply either an original death certificate or a certified copy when you submit your claim.

Complete the claim paperwork

Contact the insurer to get the proper paperwork. If the policy was purchased from an agent, they may be able to help you with the paperwork. Typical claim forms ask for basic details about you and the deceased person and how you would like to be paid.

Choose how to receive your benefit

You can choose to receive your benefit in the form of a lump sum if you have specific goals for the money or if you want total investment control. You can also receive the benefit in installments over time if you prefer a check coming in on a regular basis. There are generally four methods in which the installments can be paid.

  • Fixed period: The insurer makes regular payments on the principal and interest for a designated period of time.
  • Fixed amount: The insurer pays a defined amount at regular intervals until the principal and interest are exhausted.
  • Life income: The payout gets converted into an annuity that provides regular payments for the rest of your life.
  • Interest payments: The insurer pays you regular interest on the balance. The principal may then go to your estate upon your death. Rules on your ability to withdraw the principal may vary so check with your insurance company.

Submit the paperwork

Insurers generally pay life insurance claims within a week or two of receiving the paperwork.

Make Sure There Are No Other Life Insurance Polices Outstanding

There are millions of dollars of unclaimed life insurance benefits. One reason is coverage can go unnoticed. If a spouse or family member passes away, take the time to look for coverage from the following areas:

Individually owned life insurance policies- If you know that your spouse or family member owned an individual policy and you can’t find it, call his or her insurance agent or company to check. It may be wise to review canceled checks to see if you can locate any premium payments to insurance companies.

Group life insurance policies- Group insurance policies may be issued through an employer, bank, credit agency, or other professional or social organizations. Because the group holds the actual policy, the insured person receives a certificate of insurance as proof that he or she is insured. Look for these certificates in your spouse’s or family member’s personal papers, files, and safe-deposit box.

Employer-based group life insurance- In addition to group life insurance from the employer, the deceased may have purchased voluntary coverage. You should check his or her pay stubs and call his or her employer.

Accidental death and dismemberment policy- These policies pay benefits if an insured individual dies accidentally. If your spouse or family member died accidentally, look for such a policy in his or her files or contact his or her employer, bank, credit card issuer, or insurance company.

Mortgage life and credit insurance- Banks and finance companies routinely offer credit life insurance when insurance will pay off the outstanding balance of a loan or account if the insured individual dies. Check with credit card companies, banks, or any other lenders to whom your family member owed money at the time of his or her death.

Social Security benefits– Spouses, former spouses, and minor or disabled children of a deceased person may also be entitled to survivor benefits from the Social Security Administration.

A death in the family can be traumatic, both emotionally and financially. While it won’t solve everything, don’t leave money on the table. Make sure you get what you’re owed.

 

Do you have a question you’d like answered on the blog? Please email me at [email protected]. You can follow me on the blog by signing up here, and on Twitter @cynthiameyer_FF.

 

Do You Have a Taxable Estate?

November 10, 2016

To keep pace with inflation, the IRS recently announced a higher estate tax exemption for next year of $5.49 million. For most people, this estate tax exemption means they don’t have to worry about the estate tax because it only applies to the value of estates above that amount. However, there are several main reasons why your estate may be more likely to be taxable than you think:

The estate tax applies to non-financial assets too. It’s easy to see the value of your retirement, investment, and bank accounts, but don’t forget any real estate or business interests you may have. The IRS may also value them higher than you expect.

The tax is on your gross estate. If you own a $1.5 million home with a $1 million mortgage,  you may think only your $500k of equity is part of your estate, but the entire $1.5 million is actually included. The same is true for any other property you have with secured debt.

Your estate includes life insurance proceeds. Even though you don’t see a dime of it, life insurance death benefits are included in your estate. This alone could be several million dollars for many people.

Your state may have a lower estate tax exemption. In addition to the federal estate tax, a handful of states impose their own estate tax with rates as high as 20% (Washington) and their exemptions are often lower than the federal one. For example, New Jersey’s state estate tax exemption is only $675k.

The estate tax will likely change. The tax code is constantly changing and the estate tax is no different. Depending on the outcome of future elections, we could see a higher estate tax or even no estate tax at all. Given the rising national debt and the fact that taxing upper-income people is one of the few deficit-reducing policy proposals that polls well, the former may be more likely.

Chances are, you still won’t have to worry about paying the estate tax even with all these caveats. However, if it turns out that you do have a taxable estate, you’ll want to speak with an estate planning attorney about what options you have to minimize the tax burden on your heirs. It’s a good problem to have but a problem nonetheless and one you’ll want to know about before it’s too late.

 

Don’t Let Open Enrollment Go to Waste

October 21, 2016

It seems like when I start hearing people talk about pumpkin spice lattes, open enrollment season is right around the corner.  And in the last several weeks, I’ve talked to a lot of people going through the process of selecting benefits. Here are some quick thoughts regarding open enrollment that you may want to consider as you select your benefits:

Contribution rate escalator: This is a great time to sign up for the rate escalator feature of your 401(k).  If you increase your contributions by 1% per year, you will be building ever increasing momentum toward a financially secure future.

Automatic re-balancing: While you’re in your 401(k) to enroll in the rate escalator, it makes sense to sign up for the re-balancing feature as well. There are lots of studies that indicate that re-balancing your portfolio can increase your rate of return anywhere from ¼% to 1% per year. I prefer it as a risk management tool, rather than a growth tool. By never allowing one asset class to run wild and dominate your portfolio, you stand a lower risk of getting devastated if the markets in that asset class collapse.

Life insurance: Most companies allow an increase of 1x salary without evidence of insurability. I’ve talked to a number of people who have developed some health issues that make purchasing life insurance either impossible or very cost prohibitive. It may take a number of years, but if you have any issues with securing life insurance, use every annual open enrollment to increase your company-sponsored insurance benefit by 1x salary.

Disability insurance: Disability insurance is, in my opinion, the single most important insurance coverage anyone can have. At each open enrollment, make sure that you have the absolute maximum disability insurance coverage allowed.

Pre-paid legal benefits. I’ve seen articles saying that between 50% and 75% of adults don’t have a will and advance healthcare directives in place. Pre-paid legal plans are becoming more common in benefits packages and for usually under $20/month, you can get coverage that would allow you to draft these important documents.  If you sign up for one year and get your documents drafted, you will experience a tremendous return on the money spent for that benefit.

Your benefits are a key part of your total compensation. Open enrollment season is a great opportunity to make sure you’re taking advantage of them and getting your financial ducks in a row. Don’t waste it.

 

 

Don’t Make This Mistake That Ended in Family Tragedy

September 29, 2016

We’re all going to die someday…and many of us sooner than we think. It’s not pleasant to think about, but the consequences of not thinking about it can be much worse. For example,  I recently heard about a family friend whose wife unexpectedly passed away, leaving him alone to care for their three children.

To make matters worse, she had just left a job and didn’t take the employer’s life insurance policy with her. It was the only one she had, and two of the kids are in college and too old to be eligible for Social Security survivor benefits. The third will only be eligible for another year or so. The father doesn’t earn enough to pay the bills but still too much to qualify for social services. Here’s how to avoid this mistake and ensure your loved ones are protected:

Make sure you have enough life insurance. Life insurance through your job generally only pays about 1 times your salary. If you have anyone dependent on your income, that’s likely not enough. You can use this life insurance calculator to estimate how much life insurance you need.

Decide where to buy any additional insurance you need. If your health disqualifies you from purchasing an individual policy, purchasing a supplemental policy through work might be your only choice. Otherwise, compare the cost at work with purchasing on your own. Just make sure you can convert any insurance policy you get at work to an individual policy when you leave and be aware that the premiums might increase quite a bit if you do.

You can search for low cost individual term policies at Term4Sale. (Term policies are much cheaper than permanent policies and are what most people typically need.) I like the site because they include companies that sell insurance policies direct since they don’t sell insurance themselves, despite the name.

Make sure you’re covered if you leave your job. This was the mistake of the woman above. See if you can convert your policy to an individual one or purchase an individual policy before you leave.

Buying life insurance may not be the most enjoyable part of financial planning, and it may not feel urgent. You never know when your loved ones will need it though, and by then, it will be too late. Don’t delay.

 

 

The Father’s Day Gift That Keeps On Giving

June 16, 2016

Are you looking for a last minute gift for Father’s Day? Instead of another necktie that he probably doesn’t need, why not a gift that keeps on giving: financial wellness? Of course, none of us can actually give someone financial wellness, but the next best thing would be our CEO’s new book What Your Financial Advisor Isn’t Telling You.

Don’t worry. If your dad is like mine and acts as his own financial advisor, this book could still apply because much of it covers essential personal finance information that financial advisors typically don’t tell their clients like how to build wealth in the first place. (Advisors generally won’t work with you unless you already have some wealth for them to manage.) If your dad does have an advisor, the book discusses how to best work with an advisor, how to know if he has the right advisor, and how to find a new one if necessary. Specifically, here are some topics that would be particularly useful for dads:

Life Insurance and Estate Planning. These are important topics for dads because they’re still typically the primary breadwinners in their families, and men generally don’t live as long as women. To really see the value of estate planning for dads and what specific steps they can take, see this blog post by my colleague Greg Ward.

Basic Money Management:Money is often cited as a top source of stress and an issue that couples fight about. It can be particularly difficult for new parents. Among all the other challenges are the additional expenses and possibly a loss of income if one parent takes some time off work. Having a better understanding of money management can lead to lower stress and more marital bliss for both mom and dad alike.

Investing. In my experience working with couples, the husband usually manages the family’s investments. However, it turns out that most would probably be better off letting their wives handle this since research has found that on average, women are better investors than men. This is because hormones like testosterone and cortisol can contribute to more overconfidence and less patience in men, which leads them to invest more in things they don’t fully understand, take bigger risks, and trade more frequently (which costs more money). Learning more about investing from an unbiased source can help them overcome their biology and become better investors.

What Your Financial Advisor Isn’t Telling You or a similar personal finance book can be a great Father’s Day gift that benefits the whole family. At the very least, it will be sure to cost you much less than the $116 average that people spend on a Father’s Day gift. You can always use those savings to buy him a nicer tie next year.

 

 

Can Life Insurance Be a Retirement Plan?

March 28, 2016

Listen to the radio these days and you’re likely to hear a commercial promising tax-free retirement income with no stock market risk. If you call a toll-free number or sign up on a website, you will probably get a follow up contact from a life insurance agent who wants to show you how you can use whole life or universal life insurance for tax-free retirement income. Doesn’t that sound too good to be true? Can permanent life insurance really be a retirement plan?

Be very, very cautious. Life insurance is not designed for retirement savings. Permanent life insurance is primarily designed to protect people in your family who rely on your income to maintain their standard of living. The “permanent” aspect means that this insurance protection stays with you for your life, as long as you pay the premiums.

Both major types of permanent insurance — whole life or universal life — include a death benefit component and a savings component. The savings component consists of a policy cash value, the amount of accumulated policy value which would be paid out to the insured if the policy were surrendered early. The “life insurance as retirement cash flow” strategies are based on the insured person borrowing against the cash value of their policy. While it is correct that you may borrow against the cash value in some circumstances without taxes, and that invested premiums grow tax deferred, there are some significant disadvantages.

A Loan is Not Income

A policy loan uses the cash value of the policy as collateral, and the insurance company charges the borrower interest on the loan. The interest is paid to the insurance company, not back to you. The interest rate may be the same, higher or lower than the rate you are crediting on the growth of the policy cash value. Financial planning expert Michael Kitces aptly calls this borrowing strategy, “nothing more than personal loan from the life insurance company.” That’s not real income.

Policy Dividends Helpful But Not Guaranteed

What about dividends? While certain types of insurance companies pay dividends to policyholders (who hold a “participating” policy) when their annual results are good (those dividends can be applied towards future premium payments or used to purchase additional coverage), they aren’t always likely to make profits every year. You may or may not receive dividends.

Potential Tax Problems

If you are eligible to receive policy dividends from a participating policy, they are not taxable. However, strategies that recommend borrowing against cash value life insurance have potential tax problems.  Should you borrow enough of your cash value so that the basis in the policy goes down to zero, you would have to put in more cash or risk a lapse of the policy and having the total outstanding loans included in your taxable income.

No Free Lunch

Another disadvantage of using life insurance as retirement savings are the fees. You’re paying for the insurance component. If you died early, your beneficiaries would receive the full death benefit, so you’ll be charged underwriting costs and mortality charges, etc. Plus you are paying for the distribution of the policy, in other words, commissions.  Someone’s getting paid, and those fees and charges eat into the type of returns you might otherwise earn if you invested the money into buying and holding tax-efficient index funds.

The Bottom Line: Do You Need Permanent Life Insurance?

Consider a life insurance proposal primarily in the context of your estate plan, not your retirement plan. Lifehappens.org has an overview of insurance basics and a helpful calculator to figure out how much insurance you actually need. Does the proposed policy meet your needs of providing for your family should something happen to you? Are you comfortable with/interested in having insurance protection you can’t outlive? How do the costs of this policy compare to costs of policies from other companies with the same face value?

If the life insurance meets those needs on its own merits, then your ability to borrow from it later on is an extra bonus. If paying premiums on this kind of life insurance policy are preventing you from other, more effective types of retirement savings, such as maxing out your tax-deferred retirement plans like your 401(k) and IRA/Roth IRA, that could do serious damage to your financial wellness. If you are on track for retirement, have low/no debt and need permanent insurance, then there may not be any harm. Don’t think of it as a retirement income strategy, however. Think of it as life insurance with access to a personal loan.

Do Your Homework

If you are considering one of the currently popular life insurance cash flow strategies, here are some questions to ask the insurance agent about your proposal:

  • How do you get paid?
  • What are the other fees involved — mortality, underwriting, surrender charges, investment management, etc.  Where can I see them reflected on your proposal?
  • What is the interest rate I’d be charged if I borrowed against my cash value?
  • What is the rate I’ll be credited on my cash value?
  • If I borrow from my cash value, can I repay that at any time? Are interest payments deducted from the cash value, or do I write checks for them?
  • What happens to the policy if I borrow the entire cash value?
  • What is the actual return net of all fees?
  • What’s the worst case scenario? Are there any circumstances in which I could be taxed? Lose money?  Lose my insurance?

How about you? Do you have a personal finance question you’d like answered on the blog? Email me at [email protected] or follow me on Twitter @cynthiameyer_FF.

 

Do You Need Financial Earthquake Insurance?

March 07, 2016

Think of a financial shock that could totally knock you off your feet. That’s a financial earthquake. Unemployment, an illness, divorce, the death of a spouse, the loss of a home or a business – a financial earthquake is unexpected, unpleasant and unwelcome.   Continue reading “Do You Need Financial Earthquake Insurance?”

Financial Rules of Thumb: How Much Life Insurance Do You Need?

November 18, 2015

One of the less fun areas of financial planning is also one of the most important parts: protecting yourself against financial disasters with insurance. Life insurance is even more of a downer to consider because in order to have it pay off, someone has to actually die. Ugh.

Continue reading “Financial Rules of Thumb: How Much Life Insurance Do You Need?”

The Best Place To Find Financial Products And Services

November 10, 2015

My cousin is the ultimate bargain hunter. If you are looking for that amazing combination of value and quality, she is your woman. She can find the $5,000 vacation for $1,000 or the $500 coat for $69.99. She came to me excited because she found an amazing deal on life insurance. She has been searching for months with no luck and finally went to a financial advisor who gave her the cheapest quote she had gotten so far. Continue reading “The Best Place To Find Financial Products And Services”

Don’t Leave Any Money On The Way Out

October 06, 2015

I was recently talking to a dear friend of mine who just lost her job due to a layoff. She was shell-shocked, scared and not sure what to do. As I listened to her talk about her plan, I asked her about her workplace benefits and she said that she got the package, saw no value in anything she had and was getting ready to throw the package away. Continue reading “Don’t Leave Any Money On The Way Out”

How I Coped With My Husband’s Unexpected Death

July 31, 2015

It seems like yesterday but I know that’s just my mind playing tricks on me. I’m approaching the ten year anniversary of my husband’s death but at times it still seems like it happened yesterday. I’ve learned so much about myself, other people and life these past ten years. My hope is that this has not been in vain and my story can help someone else.

My husband was only 40 years old and seemingly in great health when he suddenly collapsed and died on a hot summer afternoon. In the blink of an eye, I was a young widow with two little kids. I was working part-time since we had recently moved for his new job, which required him to travel for long stretches of time.

Not only did I lose my best friend and father of my children, but also our source of income and health insurance. The following years were dark and extremely difficult. I felt lost and alone even though many good people were around me. Now however I can look back and see some of the lessons that I’ve learned.

Hope for the best but plan for the worst

We knew several families where one spouse died unexpectedly and left the family financially devastated so we were determined not to make that mistake. Soon after our twin daughters were born, we met with an insurance agent and bought term life insurance for both of us. As my husband’s career and income grew, he increased the amount of coverage through his employer.

This strategy was a cost-effective way to protect our family against the unlikely odds that he would die young. Thankfully, we had the discipline to do this. Now our family has the financial resources to maintain our lifestyle and meet our goals of paying for our daughters’ college education.

Lesson: It’s never fun to talk about death but it’s something we all need to prepare for. If you have someone dependent upon your ability to work, buy enough life insurance to replace your income. This calculator can help you determine how much is needed then check with your employer to determine how much supplemental insurance you can purchase there.  Most times, it is more cost-effective to buy a standalone policy and then supplement the rest with your employer’s group coverage.

Get help

I have an engineering degree and had been in the financial services industry for 4 years, but I struggled to help my daughters complete their 5th grade math homework after Larry died. I was unusually forgetful and felt like I was in a dense fog. It was clear that I needed professional help, emotionally and financially, so I found doctors to help me and my daughters deal with our tragedy. Fortunately, I worked for some amazing financial planners and they helped me set up my finances for the long term.

Lesson: Don’t let pride stand in your way of recovery. We were never meant to do life alone. Sometimes we get hit with a curve ball and the smartest thing we can do is get assistance. Check with your HR department to learn about your employee assistance program. Most offer free initial counseling sessions and referrals to local professionals for longer term assistance.

Ask the local Salvation Army, Red Cross or large local churches for assistance with immediate financial needs. If you are overwhelmed with debt, contact a non-profit credit counseling service affiliated with the NFCC to help you develop a strategy for unloading that burden. And if you need financial advice, look for a fee-based CERTIFIED FINANCIAL PLANNER(TM) professional who has the credentials, training and experience to guide you towards your goals.

The journey begins with the first step

I didn’t want life to continue after my husband died. I couldn’t imagine how I’d make it through the week let alone Christmas, the kids’ birthdays and our anniversary. Those days were excruciating but I learned that it was better to face the situation than hide from it.

A friend suggested that I plan constructive activities on the tough days and create new, happy memories and so that’s what I did. My daughters and I choose to celebrate Larry’s birthday (and not his death) by baking a German Chocolate cake from scratch – his favorite. We then share the cake with friends and family and laugh the time away telling funny stories.

Lesson: Life can knock you flat on your back. Spend time there for a moment to gather your wits, then get up and take a step forward. If you are struggling with debt and cash flow, set up a budget using Mint or YNAB.  Then choose a debt repayment strategy such as the “debt snowball” method or paying the highest interest rate debt first. Even applying an extra $25 a month is a big step forward!

Be open to new adventures

Three years later, I was presented with an opportunity to go back to school. I was intrigued but didn’t think it was the right time. A good friend told me, “In five years you will be five years older but what will you be able to say you accomplished? Might as well say that you did this!”

Well, I took her challenge, completed my studies and earned my CFP® designation. Along the way, I have met so many new people and find myself doing what I absolutely love here at Financial Finesse. I found my professional calling and wouldn’t have been here if it hadn’t been for my friend’s prompting and my willingness to go in a new direction.

Lesson: Try something new today. Join a book club. Go to that belly dancing class. Determine if your employer has a tuition assistance program and take a college course. Prioritize your savings so you can nurture your passions and do the things you’ve always wanted to do.

I would never volunteer for the pain my family experienced with Larry’s passing. However, I know we are stronger and more compassionate because of our journey. We’ll open a bottle of fine wine, toast the man we knew and loved, shed a few tears and then laugh the evening away with old stories and talk of new adventures. Happy anniversary!

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Your 4 Week Financial Check-Up Challenge: Week 4

June 15, 2015

This week is the last in the Financial Check-Up series and the final opportunity to enter your name in a random drawing for a personal financial planning consultation. Multiple entries are acceptable so be sure to like Financial Finesse on Facebook (or like this blog), tweet us on Twitter, or enter your comments below to enter your name for a professionally guided financial check-up. All entries received by Friday, June 19 at 11:59 PM will be entered into the drawing and the winner of the financial planning consultation will be announced next week. (If the winner prefers to “pay it forward” the consultation is transferable and may be gifted to a friend or family member.) Continue reading “Your 4 Week Financial Check-Up Challenge: Week 4”

Lessons From the 405

April 01, 2015

On a recent trip to Los Angeles, I was the passenger in a van that was traveling down the 405 late at night. Now if you are at all familiar with LA traffic then you probably can understand that most of the road construction the California DOT does in the LA area is done well…late at night.  On this particular occasion, they were doing work on the left shoulder, which is coincidentally next to the car pool lane—the lane in which we were traveling (at a pretty good pace, I might add).  Continue reading “Lessons From the 405”

Do You Need Life Insurance After You Retire?

February 04, 2015

As part of the financial education we provide on retirement decisions, we suggest a review of your insurance policies as a means of protecting your accumulated wealth.  This includes a review of your homeowners coverage, medical benefits, and long-term care insurance, but we also suggest a review of your need for life insurance. I’ve always taken the stance that life insurance protects against at least three types of risk: loss of income, insufficient liquidity, and high income taxes.  Let’s examine all three to see whether or not you need life insurance after retirement. Continue reading “Do You Need Life Insurance After You Retire?”

Do You Have The Right Life Insurance Coverage?

December 08, 2014

Yeah, I know what you’re probably thinking. This is not the most exciting topic to think about and other areas of the financial life planning process such as money management, paying off debt, and investing for retirement tend to get more of our attention. Still, it’s worth a quick review on why life insurance is necessary and who should buy it. In fact, this part of the discussion should come before getting to specific amounts that you should own. Continue reading “Do You Have The Right Life Insurance Coverage?”

When Planning Really Matters

November 25, 2014

Last week, a colleague of mine lost her best friend to cancer. She was one of those people whose presence made you feel at peace. She also was great at planning for the future. Continue reading “When Planning Really Matters”

Should You Buy Life Insurance as an Investment?

August 21, 2014

In response to this article we published on Forbes, we received this question on our Facebook page:

I recently read your article “Should You Use Life Insurance as an Investment?” on Forbes. I wanted to know how this article would apply to me. I just graduated and started my first job that pays pretty well. I don’t have any dependents so I didn’t think about life insurance until I meet with a financial advisor. He said starting insurance young is a better investment where I could keep safe dollars and be more risky in other parts. Would I be better off buying insurance now and benefiting from compound interest or use that money in other investments? Thanks! Continue reading “Should You Buy Life Insurance as an Investment?”