There are alternate methods of funding "permanent" needs rather than insurance, as suggested by jbtimberman. I didn't mention it but I assume that there is a high incentive (commission) to sell whole life or perhaps a disincentive to sell term. The main thing I wanted to propose is that if a consumer is not given a choice or derided for wanting term, then he/she should look elsewhere for an agent and/or advisor.
Marisa, I had a single friend who had no debt and no dependents and some investments plus a government pension; she wondered if she needed life insurance but I couldn't think of a reason why except to pay for burial expenses. There may be other reasons. Still, there are lots of insurance calculators online that can indicate what you might need insurance for, if you need it. Here's one, for example: http://moneycentral.msn.com/investor/calcs/n_life/main.asp
I understand the distinction, but what difference does it make? My debt repayment has to go into my monthly budget; it's a check that I write each month at the same time as paying my bills; if I don't pay it then I get assessed late fees - so is there something wrong with keeping it simple and calling it an expense? I expect that there are few people who are tracking their household finances with double-entry accounting like a business would.
Ed - what a surprise, I never expected to find a post on Wisebread with some local flavour! I live in the Eastern Suburbs of Sydney and frequent all the suburbs you mentioned, and am a big fan of the Farmers Markets at Fox Studios (I've never had better apples than from the grower there...). Thank you for the post and for the reminder that what many of us do every day, which is drink, eat, shop and support local, is actually a pretty special thing to be able to do.
Okay, I work in retail in the SF bay area and can tell you that this is one of the ways rich people stay rich. But after hearing it from almost 2/3 of our customers I can tell you it gets OLD fast. It's not a flea market and it's so annoying to have people ask for random discounts on everything. If you can't afford to pay for it- DON'T BUY IT! When people tell me that they found a similar item for less money at another store I always tell them that they should have bought it there. One of the things my store is known for is its liberal return policy and people like that they can bring things back at any time for any reason but are not willing to pay a little extra for that convenience.
Well everyone wastes energy needlessly. For instance, right now I have the TV running however I do not watch it. The lights are on in the hall, but no one is going to be walking there anytime soon.
I don't know how many people actually realize how much energy they are wasting in their own homes.
I created this website to give out tips on how to reduce energy and water consumption and save money around the average home. Spartan Saving
It really depends on the persons comfort zone. I mean how many people really want to walk around in their house in the winter with a sweater just to save "some"(understatement) money?
I defaulted too and ended up with a ton of fees added to the principal.
I am making reduced payments but my loans are still in default.
I think the "income contingent" program didn't exist earlier because it was casually assumed that if you went to college you shouldn't have any problem repaying student loans - unless you were wildly overspending or something.
Defaulters like you and I were the pioneers who demonstrated to the student loan community and to Congress the reality of underemployed student loan borrowers and the necessity of an income contingent program.
Congress passed a student-aid bill recently which will make repayment even easier for low earners like me (and perhaps you) and I've been told that even defaulters can get into the new program. The details are to be worked out but it looks goos so far.
I find that my experiences here, in contrast to the (mostly) impersonal encounters I had with employees of franchises in NY, are strangely comforting; meaning, I'm still very aware of these encounters because, up until I moved here, I was simply not used to it.
It's like there's still a newness to it that I hope doesn't go away anytime soon.
I think with urban and suburban sprawl – giving rise to shopping centers, malls and huge supermarkets (among other outlets for purchases) – came an increased sense of disconnectedness between buyer and seller, as the relationship, however brief, was reduced to a fleeting engagement of simply moving a product from their shelf into your car.
A friend of a friend used to work in a dental office that specialized in whitening teeth. He said more often than not people would come in asking for the whitest white they could possibly get....he would reply that it's not even natural looking to have teeth that white! They would still insist and he would proceed to bleach the heck out of their poor teeth.
A little whitening never hurt anybody, but so white they're blue?!
Ah well, different strokes for different folks....
I heartily agree with you - I didnt realise that I had turned into a 'big chainstore' shopper until one day I decided to visit a smaller village shopping centre to get some items. When I walked into the fishmonger, he greeted me warmly and asked me how my parents were (my mum shops there all the time). We chatted for about 15 minutes. Then I went next door to the small shoe shop, and the guy there asked how my kids were, having remembered that my wife and I went there about a year ago to buy some shoes for my sons and myself.
It was the small things like this that really brought home to me the value of a personal connection with the people you deal with. That connection is SO important, and nowadays, I go out of my way to visit all the small, boutique shops around town instead of the big name stores.
Addendum: The reason for my visit to the shoe store was to buy replacement shoes for the ones I had bought there a year ago. I fully intended to buy a new pair, but when the owner saw the cracks that had developed on the soles of the original shoes, he insisted on taking them back and giving me a new (better) pair, only charging me for the difference in price. How about that - after one whole year of me walking around on them, he still effectively refunded me 100%. I will never buy shoes for anywhere else now!
Having been on the "insurance agent's" side of the table, I can assure you there are agents out there who do promote term. The trick is what you need the insurance for, and the integrity of the advisor.
A really easy way to look at term vs whole life insurance is this: Term insurance is for temporary needs, such as a mortgage (which will eventually be paid off), kids' education (which will no longer be a need once they're through school), or debt coverage (which again, will hopefully be paid off sometime)!
Whole Life is for the person wanting to cover off more permanent insurance needs like inevitable estate taxes, leaving a legacy for family, and the investment component - which can provide a tax-free income in your retirement years if you structure it properly.
Marisa: it doesn't sound like you have a pressing need for insurance, as long as you know that neither of you would fall into financial hardship if one of you were to disappear tomorrow.
I don't specifically know much about Bud Hibbs, but when I did a search on him, for almost every credible site I found, another one was claiming him as a rip off.
Anything that seems too good to be true probably has a catch in there somewhere. Go ahead and check it out, but triple check the fine print and watch your back.
If you do decide to see what it's all about, write back and let us know what you found!
My husband and I are both in our early 30s; we don't have children, nor do we intend to. And we both make enough that either of us could completely carry all of our bills and regular spending. One of my friends found out recently that we don't have life insurance and was appalled.
Are we missing the boat here? Without my husband's income, I would need to downsize somewhat in order to keep contributing to my retirement accounts and savings, but probably wouldn't need two cars or a large(ish) house for just me anyway. Is there a compelling reason that we *should* have life insurance?
As with credit card policies, you're not going to find me supporting the policies our government has on trying to get blood from a turnip.
One thing to look into, though (and I'm no expert, so do talk to one--and in 18 years the rules will no doubt change anyway), is if you're insolvent at the time the loan is forgiven, I think the IRS doesn't treat the amount forgiven as taxable income.
"As for me, I spoke with three agents before I found one who was willing to sell me a term policy."
Thats because life insurance agents are typically in the business of selling whole life or group whole life policies. They're not going to recommend a product that makes them stupid amounts of money.
My financial advisor is Dave Ramsey, and he only recommends 15 or 20 level term insurance. Longer isn't necessary because if you follow his plan; you should be self insured through investments in 15 to 20 years. His recommendation is to get a face amount equal to 10 times the insured's annual salary, and about 400,000 for stay-at-home moms. Dave endorses Zander Insurance for Life, Disability and Identity Theft Protection Insurances. http://www.zanderins.com/
The author of this post is not affiliated with Dave Ramsey, the Dave Ramsey Show, or the Lampo Group, nor Zander Insurance.
As a mostly polite southerner, I will appreciate any comments that indicate that you were so sweet that you kindly and correctly persuaded the store manager, call center representative, owner, etc. of your rights. Of course, any other comments of your consumer advocacy efforts are welcome.
I worked at Target last year over the holidays, and everyone wanted to haggle prices. Target's policy is if a guest says an item is at a lower price, than the sticker, then they get it at that price as long as the item isn't over $20, and the price difference is reasonable.
Also if there's an item without a price tag, and another one can't be found, then they'll usually have the cashiers ask the customer what they think a reasonable price is, and give it to them at that price. They also give a 10% discount on damaged merchandise.
At the See.Spot.Save area (aka dollar area at the front of the store) most of the stuff that they're selling for $1 or $2 will be marked down to either 50 or 75% within 1-2 weeks.
I'm not saying it wouldn't work, but come on! I think being frugal is great, but maybe you ought to consider some other substance for your face. I also wouldn't put it in my fridge. It's just the thought of it - I know it is clean, but I think that baking soda is cheap enough that I will stick with that.
My own student loan difficulties are similarly a nightmare. I started with $33,000 borrowed, got into trouble, defaulted, and had a TON O' FEES added to the principal. Then in 2000 I got into the William D. Ford program, and signed up for the income contingency plan. Don't ask me why the government didn't have this option available before, back when I was patiently explaining to all the rude collectors I couldn't satisfy the minimum monthly amount, leave alone the back payments they seemed intent upon receiving. Anyway, I rehabilitated the loan, landed a fairly decent job making about $30,000, and been duly paying ever since. As I write, the payoff amount is over $200,000 and climbing. When my 25-year plan ends in 18 more years the balance to be discharged, and thereafter treated as taxable income by the IRS, may well exceed over half a million dollars.
It seems that the budget books and financial advisers are now calling credit card debt expenses because banks and credit companies (one in the same) want people to use their credit services and keep spending and not think about paying it off, because it will only cost them "x" dollars each month which the consumer can then simply fit into their monthly budget. Since people's (generalization) monthly payment toward their debt is their real outflow of cash they equate it as the expense instead of their acquisition of products and services.
I have seen debt-reduction advice indicating that debt should be thought of as a recurring fixed expense. I think this points to the discipline of making larger payments on debt, then snowballing as time progresses. But your distinction is right on, and consumers must know the interest on the debt and acting accordingly. One late payment on anything can cause credit card companies to jack you up to 32%. That can't get reasonably paid down.
In order to get out of credit card debt, I've traded out high interest credit cards for a 16% line of credit. Then I traded that for a tax-deductible equity loan, lowering my effective interest to about 5%. That gets paid down quicker than other debt by making larger monthly payments. It hasn't happened overnight, but debt reduction takes patience and discipline.
Your dentist can also fit you for trays and give you "professional strength" whitening trays to fill them with. They fit a lot better than the trays that aren't custom fit to your mouth. One problem with the professional strength whitening agent though is that it can really hurt, and not just your gums. I felt the pain in my teeth, and anti-sensitivity toothpaste was a must. That said it seemed to work fairly well.
@plonkee -- whether you get rich or not, you do it by starting where ever you are. So many people don't come to personal finance as a topic of interest until they're already in debt, that it's really necessary to cover the "getting out of debt" part of the process. I just wish they'd make it clear that "debt repayment" isn't an expense in its own right.
@Guest -- you're not going to find me supporting the sort of late fees that credit card companies charge these days. I suppose the credit card companies would claim that the fees bought you access to the credit market in the first place--if they couldn't charge those fees, they wouldn't lend to poorer credit risks at all. I think that's bogus. Probably what you bought was a new paint job for some credit card exec's Porsche.
There are alternate methods of funding "permanent" needs rather than insurance, as suggested by jbtimberman. I didn't mention it but I assume that there is a high incentive (commission) to sell whole life or perhaps a disincentive to sell term. The main thing I wanted to propose is that if a consumer is not given a choice or derided for wanting term, then he/she should look elsewhere for an agent and/or advisor.
Marisa, I had a single friend who had no debt and no dependents and some investments plus a government pension; she wondered if she needed life insurance but I couldn't think of a reason why except to pay for burial expenses. There may be other reasons. Still, there are lots of insurance calculators online that can indicate what you might need insurance for, if you need it. Here's one, for example: http://moneycentral.msn.com/investor/calcs/n_life/main.asp
I understand the distinction, but what difference does it make? My debt repayment has to go into my monthly budget; it's a check that I write each month at the same time as paying my bills; if I don't pay it then I get assessed late fees - so is there something wrong with keeping it simple and calling it an expense? I expect that there are few people who are tracking their household finances with double-entry accounting like a business would.
Ed - what a surprise, I never expected to find a post on Wisebread with some local flavour! I live in the Eastern Suburbs of Sydney and frequent all the suburbs you mentioned, and am a big fan of the Farmers Markets at Fox Studios (I've never had better apples than from the grower there...). Thank you for the post and for the reminder that what many of us do every day, which is drink, eat, shop and support local, is actually a pretty special thing to be able to do.
Okay, I work in retail in the SF bay area and can tell you that this is one of the ways rich people stay rich. But after hearing it from almost 2/3 of our customers I can tell you it gets OLD fast. It's not a flea market and it's so annoying to have people ask for random discounts on everything. If you can't afford to pay for it- DON'T BUY IT! When people tell me that they found a similar item for less money at another store I always tell them that they should have bought it there. One of the things my store is known for is its liberal return policy and people like that they can bring things back at any time for any reason but are not willing to pay a little extra for that convenience.
Well everyone wastes energy needlessly. For instance, right now I have the TV running however I do not watch it. The lights are on in the hall, but no one is going to be walking there anytime soon.
I don't know how many people actually realize how much energy they are wasting in their own homes.
I created this website to give out tips on how to reduce energy and water consumption and save money around the average home.
Spartan Saving
It really depends on the persons comfort zone. I mean how many people really want to walk around in their house in the winter with a sweater just to save "some"(understatement) money?
Re: Guest #8
I defaulted too and ended up with a ton of fees added to the principal.
I am making reduced payments but my loans are still in default.
I think the "income contingent" program didn't exist earlier because it was casually assumed that if you went to college you shouldn't have any problem repaying student loans - unless you were wildly overspending or something.
Defaulters like you and I were the pioneers who demonstrated to the student loan community and to Congress the reality of underemployed student loan borrowers and the necessity of an income contingent program.
Congress passed a student-aid bill recently which will make repayment even easier for low earners like me (and perhaps you) and I've been told that even defaulters can get into the new program. The details are to be worked out but it looks goos so far.
I find that my experiences here, in contrast to the (mostly) impersonal encounters I had with employees of franchises in NY, are strangely comforting; meaning, I'm still very aware of these encounters because, up until I moved here, I was simply not used to it.
It's like there's still a newness to it that I hope doesn't go away anytime soon.
I think with urban and suburban sprawl – giving rise to shopping centers, malls and huge supermarkets (among other outlets for purchases) – came an increased sense of disconnectedness between buyer and seller, as the relationship, however brief, was reduced to a fleeting engagement of simply moving a product from their shelf into your car.
A friend of a friend used to work in a dental office that specialized in whitening teeth. He said more often than not people would come in asking for the whitest white they could possibly get....he would reply that it's not even natural looking to have teeth that white! They would still insist and he would proceed to bleach the heck out of their poor teeth.
A little whitening never hurt anybody, but so white they're blue?!
Ah well, different strokes for different folks....
Ed,
I heartily agree with you - I didnt realise that I had turned into a 'big chainstore' shopper until one day I decided to visit a smaller village shopping centre to get some items. When I walked into the fishmonger, he greeted me warmly and asked me how my parents were (my mum shops there all the time). We chatted for about 15 minutes. Then I went next door to the small shoe shop, and the guy there asked how my kids were, having remembered that my wife and I went there about a year ago to buy some shoes for my sons and myself.
It was the small things like this that really brought home to me the value of a personal connection with the people you deal with. That connection is SO important, and nowadays, I go out of my way to visit all the small, boutique shops around town instead of the big name stores.
Addendum: The reason for my visit to the shoe store was to buy replacement shoes for the ones I had bought there a year ago. I fully intended to buy a new pair, but when the owner saw the cracks that had developed on the soles of the original shoes, he insisted on taking them back and giving me a new (better) pair, only charging me for the difference in price. How about that - after one whole year of me walking around on them, he still effectively refunded me 100%. I will never buy shoes for anywhere else now!
Great post, Julie!
Having been on the "insurance agent's" side of the table, I can assure you there are agents out there who do promote term. The trick is what you need the insurance for, and the integrity of the advisor.
A really easy way to look at term vs whole life insurance is this: Term insurance is for temporary needs, such as a mortgage (which will eventually be paid off), kids' education (which will no longer be a need once they're through school), or debt coverage (which again, will hopefully be paid off sometime)!
Whole Life is for the person wanting to cover off more permanent insurance needs like inevitable estate taxes, leaving a legacy for family, and the investment component - which can provide a tax-free income in your retirement years if you structure it properly.
Marisa: it doesn't sound like you have a pressing need for insurance, as long as you know that neither of you would fall into financial hardship if one of you were to disappear tomorrow.
I don't specifically know much about Bud Hibbs, but when I did a search on him, for almost every credible site I found, another one was claiming him as a rip off.
Anything that seems too good to be true probably has a catch in there somewhere. Go ahead and check it out, but triple check the fine print and watch your back.
If you do decide to see what it's all about, write back and let us know what you found!
My husband and I are both in our early 30s; we don't have children, nor do we intend to. And we both make enough that either of us could completely carry all of our bills and regular spending. One of my friends found out recently that we don't have life insurance and was appalled.
Are we missing the boat here? Without my husband's income, I would need to downsize somewhat in order to keep contributing to my retirement accounts and savings, but probably wouldn't need two cars or a large(ish) house for just me anyway. Is there a compelling reason that we *should* have life insurance?
Thanks very much.
As with credit card policies, you're not going to find me supporting the policies our government has on trying to get blood from a turnip.
One thing to look into, though (and I'm no expert, so do talk to one--and in 18 years the rules will no doubt change anyway), is if you're insolvent at the time the loan is forgiven, I think the IRS doesn't treat the amount forgiven as taxable income.
"As for me, I spoke with three agents before I found one who was willing to sell me a term policy."
Thats because life insurance agents are typically in the business of selling whole life or group whole life policies. They're not going to recommend a product that makes them stupid amounts of money.
My financial advisor is Dave Ramsey, and he only recommends 15 or 20 level term insurance. Longer isn't necessary because if you follow his plan; you should be self insured through investments in 15 to 20 years. His recommendation is to get a face amount equal to 10 times the insured's annual salary, and about 400,000 for stay-at-home moms. Dave endorses Zander Insurance for Life, Disability and Identity Theft Protection Insurances. http://www.zanderins.com/
The author of this post is not affiliated with Dave Ramsey, the Dave Ramsey Show, or the Lampo Group, nor Zander Insurance.
As a mostly polite southerner, I will appreciate any comments that indicate that you were so sweet that you kindly and correctly persuaded the store manager, call center representative, owner, etc. of your rights. Of course, any other comments of your consumer advocacy efforts are welcome.
I worked at Target last year over the holidays, and everyone wanted to haggle prices. Target's policy is if a guest says an item is at a lower price, than the sticker, then they get it at that price as long as the item isn't over $20, and the price difference is reasonable.
Also if there's an item without a price tag, and another one can't be found, then they'll usually have the cashiers ask the customer what they think a reasonable price is, and give it to them at that price. They also give a 10% discount on damaged merchandise.
At the See.Spot.Save area (aka dollar area at the front of the store) most of the stuff that they're selling for $1 or $2 will be marked down to either 50 or 75% within 1-2 weeks.
I'm not saying it wouldn't work, but come on! I think being frugal is great, but maybe you ought to consider some other substance for your face. I also wouldn't put it in my fridge. It's just the thought of it - I know it is clean, but I think that baking soda is cheap enough that I will stick with that.
Just called Citibank....within 3 mins they lowered my 32.24% down to 8.25%!!! No questions asked!!
My own student loan difficulties are similarly a nightmare. I started with $33,000 borrowed, got into trouble, defaulted, and had a TON O' FEES added to the principal. Then in 2000 I got into the William D. Ford program, and signed up for the income contingency plan. Don't ask me why the government didn't have this option available before, back when I was patiently explaining to all the rude collectors I couldn't satisfy the minimum monthly amount, leave alone the back payments they seemed intent upon receiving. Anyway, I rehabilitated the loan, landed a fairly decent job making about $30,000, and been duly paying ever since. As I write, the payoff amount is over $200,000 and climbing. When my 25-year plan ends in 18 more years the balance to be discharged, and thereafter treated as taxable income by the IRS, may well exceed over half a million dollars.
It seems that the budget books and financial advisers are now calling credit card debt expenses because banks and credit companies (one in the same) want people to use their credit services and keep spending and not think about paying it off, because it will only cost them "x" dollars each month which the consumer can then simply fit into their monthly budget. Since people's (generalization) monthly payment toward their debt is their real outflow of cash they equate it as the expense instead of their acquisition of products and services.
Great post! It definitely gave me a different perspective on viewing debt :)
I have seen debt-reduction advice indicating that debt should be thought of as a recurring fixed expense. I think this points to the discipline of making larger payments on debt, then snowballing as time progresses. But your distinction is right on, and consumers must know the interest on the debt and acting accordingly. One late payment on anything can cause credit card companies to jack you up to 32%. That can't get reasonably paid down.
In order to get out of credit card debt, I've traded out high interest credit cards for a 16% line of credit. Then I traded that for a tax-deductible equity loan, lowering my effective interest to about 5%. That gets paid down quicker than other debt by making larger monthly payments. It hasn't happened overnight, but debt reduction takes patience and discipline.
I am bookmarking your comments. They make sense!
Your dentist can also fit you for trays and give you "professional strength" whitening trays to fill them with. They fit a lot better than the trays that aren't custom fit to your mouth. One problem with the professional strength whitening agent though is that it can really hurt, and not just your gums. I felt the pain in my teeth, and anti-sensitivity toothpaste was a must. That said it seemed to work fairly well.
Mine has been 9.9% for years!
@plonkee -- whether you get rich or not, you do it by starting where ever you are. So many people don't come to personal finance as a topic of interest until they're already in debt, that it's really necessary to cover the "getting out of debt" part of the process. I just wish they'd make it clear that "debt repayment" isn't an expense in its own right.
@Guest -- you're not going to find me supporting the sort of late fees that credit card companies charge these days. I suppose the credit card companies would claim that the fees bought you access to the credit market in the first place--if they couldn't charge those fees, they wouldn't lend to poorer credit risks at all. I think that's bogus. Probably what you bought was a new paint job for some credit card exec's Porsche.