Saturday, July 20, 2013
Eliminate the Guesswork! By Chris Wallace
Trusting your finances to chance? Take the time to plan for your financial future – and reap the benefits.
Budget. Do you know what you spend? A shocking 22 percent of adults don’t have a good idea how much they spend on housing, food and entertainment.1 If this ignorance-is-bliss approach sounds familiar, consider this: you could be cheating yourself out of a better life. A recent study found that those who stick to a budget have a higher net worth than those who don’t have a budget or don’t stick to one.2 So, if you haven’t already, start experimenting with a budget. Try reviewing your receipts or bank statements from the previous month to see where your money is actually going. Or, try going on a quick financial “fast:” Do your essential shopping, then try to go a week without spending anything extra. You may be surprised at what you don’t need.
Retirement. How much will you need? A shocking 42 percent of workers simply guess at what they need to save for retirement, rather than actually doing the calculation.3 Does this sound like you?
If so, you are selling yourself short: People who plan for retirement actually have five times the assets of those who don’t! 4 Also, workers who have performed a retirement needs calculation are more than twice as likely as those who have not to expect they will need to save $1 million or more for retirement.5
Emergencies. A healthy emergency fund is a great way to take the guesswork out of life’s unexpected expenses. Yet, more than half of Americans don’t have a six-month pot of money to tide them over in a financial emergency.6 Those working in a high-demand profession may be fine with a three-month stash, but if you work in an unstable industry or are 50 plus – which adds three months to the average job search – you should stash enough money to cover up to a year’s worth of expenses.7
Car Insurance. Are you paying the optimum rate for car insurance? How can you be sure? If your idea of staying on top of your car insurance is automatically renewing your policy – like 75 percent of insurers – you could charging yourself an extra $170 a year on average.8 Been with the same insurer for more than eight years? You’ll save about 19 percent by switching.9
Life Insurance: Are your loved ones properly protected in the event that tragedy strikes? How can you be sure? If you haven’t updated your life insurance coverage in a while – or have experienced a significant life change (such as marriage or the birth of a child) chances are you could need more coverage. Many financial experts recommend coverage of eight to 10 times your annual income, but that is just a shorthand calculation. Life insurance coverage is not a one-size-fits-all matter; every family situation is unique. “The truth is life insurance is a personal affair. Two couples may earn equal salaries, but it’s silly to say someone with four young children should have the same coverage as empty nesters with no mortgage and a substantial retirement fund.”11
Chris Wallace an independent representative of Primerica.
1 Kiplinger’s, February 2013 2 Money, July 2012 3 Money, December 2012 4 Money, August 2011 5 Employee Benefit Research Institute 6 Money,
January/February 2013 7 Ibid 8 Money, December 2012 9 Kiplinger’s, February 2013 10 Savings amount based on a survey of people who purchased insurance from Answer Financial and responded to the survey with their estimated savings statements during January 2012 to March 2012.
Average reported savings were $427 per year. 11 “How Much Life Insurance Do You Need?” Kiplinger.com, viewed January 16, 2013