5 Things Every Millennial Should Know About Life Insurance

A few weeks ago, a company called HealthIQ that celebrates health-conscious people with social and financial rewards, contacted me to create a quiz about millennials and life insurance. Yes, I can now add professional quiz writer to my resume! Since then, I have been reflecting on what happens to our loved ones financially when we pass on. This also came around the time a classmate of mine from high school passed away suddenly from a random heart complication leaving his fiancé and young daughter to pick up the pieces. One day you are living life and YOLOing and the next moment….well, you know how that goes. I am no longer in the headspace of thinking I am invincible, which means it is time for me to get a plan for my family in case the worst happens. Apparently, that means I’m growing up. While doing my research for my quiz, which you can take here, I realized there are several benefits to buying life insurance at an early age and right now millennials are in the best position to take advantage. While it is not a cheerful conversation to have, it is a necessary one and one that can protect those who depend on you and your income should the worst-case scenario happen. Since many millennials are delaying marriage and children, it is easy to say that there is no benefit of buying life insurance; however, that is not the case.  Other dependents such as parents who co-signed a loan or business partners for the millennial entrepreneurs out there also depend on you and your income and will be left with a great financial burden of debt, your funeral expenses, and trouble covering living expenses if proper measures are not in place.

5 Things Every Millennial Should Know About Life Insurance from Top Millennial Finance Blogger, Danielle YB Vason of She Makes Cents

What Is Life Insurance?

If you ask my new insurance agent, he would tell you that life insurance is a “love policy”. I, however, prefer the explanation from Fidelity, which explains that, a life insurance policy as “a contract with an insurance company. In exchange for premium payments, the insurance company provides a lump-sum payment, known as a death benefit, to beneficiaries upon the insured’s death”. To bring it to terms that we can all understand, it is what GoFundMe has become when loved ones pass. I have to say this, but GoFundMe should not be your go to plan to cover the funeral expenses of a loved one or to cover the financial burden that you may leave to your family.

Do Millennials Need Life Insurance?

Yes and yes. It will be easier to understand once you break things down by life stages. Millennials make up the awesome generation of people who are born between 1982-2002 which means that older millennials could be in the home buying, marriage, and kids stage while younger millennials are in the college life and first real job stage. So do all millennials need life insurance? The answer to that will depend on whom you ask. I believe everyone should have life insurance that at least covers one’s funeral expenses. Now in terms of a larger payout, known as a death benefit, I think that depends on who relies your income. To determine if you need life insurance, financial expert and writer, Suze Orman, presents this question for you to ask yourself: “If I were to die today (or if my spouse/partner were to die today), will those I/we support be able to take care of themselves? If the answer is no, then you need life insurance”. Let’s be honest here, the subject of life insurance is morbid, boring, and a bit off-putting, but it is a necessary conversation that needs to be had by all.

5 Things Every Millennial Should Know About Life Insurance

  1. If Your Parent Is a Cosigner On Your Student Loans. A few years back, I remembered hearing a story about a grieving father who was struggling to pay his dead son’s student loan debt. During the height of his grief and after paying for funeral expenses, debt collectors began to harass him regarding his son’s missed student loan payment. That was the first time I remember learning that your debts don’t always go away when you pass. I thought about that Dad and then I thought about my own. So what happens to your student loan debt if you pass away? If you have Federal student loans, your loans will be discharged and your family will not be responsible for your debt. Parents with Parent PLUS loan borrowers are also eligible loans to have their loans discharged in the event of the student’s death since it is also a Federal loan. To receive the discharge, the surviving cosigner must submit a copy of the death certificate to their loan provider. However, if you have private loans, your family may inherit your debt, which for the class of 2016 is an estimated $37,172 and growing. According to this article from CNBC, “Even if your spouse doesn’t co-sign for you, he or she can also be held liable for a private student loan if you borrow while married and you reside in a community property state”.

  2. If You Are a Single Parent.
    While millennials are delaying getting married, a recent poll from Gallup reveals that almost half of surveyed millennials age 34 have children although they have never been married. Because of their single status, many parents elect their minor children to receive the death benefit to financial protect their children if something were to happen. Making a minor a beneficiary will cause major problems since life insurance companies do not payouts to children under the age of 18 or their guardians. If you are a single parent, you should consider setting up a trust to benefit the child and naming that trust as the beneficiary. This way, you can avoid costly court fees and you can have things managed based on the directions you have left in your trust.

  3. If You Have Life Insurance Through Your Employer.
    Congratulations, you have a real job with real benefits! I am so proud of you. Now it is time to go through and fully understand the scope of your benefits package. Many employers offer life insurance as a part of their benefits package, but is that enough? Something else, I would like you to consider is how long you plan to stay with your current company. According to a Gallup report, 21% of millennials have changed jobs within the past year.  Employee life insurance is provided as a group life plan and when you leave your job, you are no longer a member of the “group”.  Your former employer is no longer obligated to pay the premium; therefore, your coverage is terminated unless you convert your policy to an individual plan, often at a higher rate. Your best bet is to get an individual term policy in addition to your employer-based policy so that you will be covered.
  4. If You Think Life Insurance is a Financial Investment.
    Life insurance is NOT a financial investment. Let me say that again. Life insurance is NOT a financial investment But what about cash value life insurance, you ask?
    That’s not what your agent told you, is it? The good folks over at
    Investopedia define cash life insurance as “a type of life insurance policy that pays out upon the policyholder’s death, and also accumulates value during the policyholder’s lifetime”. Sounds good, right?
    Well not so fast… The idea of investing is appealing… even sexy to most millennials (or is that just me?) but insurance as an investment is a terrible idea that yields a very low return. If you are looking to invest your money or save your money, there are much better options out there like mutual funds, Roth IRAs, stocks, and bonds. Suze Orman maintains, “Under no circumstances do you want ‘cash-value insurance’ no matter how fabulous the agent makes it sound”. My financial guru, Dave Ramsey, agrees. Ramsey argues, “It is a horrible product that makes insurance companies the most money, which means insurance salespeople get the best commission on this trash”. I am inclined to agree with them both. Insurance is insurance and your investments are investments. Does life insurance provide financial protection for your family? Yes. Is the “investment” component of a cash life policy, also referred to as whole life, universal life, and variable life, a good investment? Absolutely not. If you have this type of policy, you should cancel it and thank me later.
  5. If You Don’t Know Where to Start.
    Many people know the importance of life insurance but have not taken the plunge. For the millennials out there, you will never be as young as you are right now in this moment.  Why not take advantage of the financial benefits of buying life insurance while you are young and in presumably good health. Millennials with a clean bill of health will find qualifying for coverage easier and more affordable, think less than $300.00 for the year for a $500,000 policy. So what type of policy do you recommend? Millennials looking to buy into a life insurance policy should consider a term insurance policy because the policy length can be tailored to your needs, it’s affordable, and you can lock in your rate while you are young. The maximum term for a life insurance policy is generally 30 years.  Since premiums never get cheaper, millennials can get an upper hand on their finances by locking in a lower rate for the maximum term.

I recently read something from Dave Ramsey that completely changed how I think of all of this… adulting. “The death rate for human beings is 100 percent. You are going to dies someday! None of us know when that’s going to happen, but that doesn’t mean it should catch us totally unprepared”. Yes, you can still enjoy your youth while protecting your future. That’s why I have recently jumped on the life insurance bandwagon. Last week the Mr. and I met our agent in person to talk about our options and I encourage you to do the same.

Do you have life insurance questions or want to tell me about your experience with life insurance, please comment below or leave me a message via Twitter or Facebook.

She Makes Cents | Money, Career, & Lifestyle Blog for Goal Setting Millennial Women

How Lifestyle Inflation Is Keeping You From Getting Rich

lifestyle-inflation

Rapper Notorious B.I.G. wasn’t lying when he said “mo money, mo problems”.  That because of something called Lifestyle Inflation where your “lifestyle” needs increase as your income increases; thus, keeping you in the same financial situation.  This reality creeps up when people have debt, don’t save, don’t invest.  They don’t keep up with the Joneses, they are the Joneses.  By no means do I believe that one doesn’t deserve nice things.  In fact, I believe no one should have to sacrifice a quality lifestyle because of lack of resources.   A quality lifestyle comes at a price but let’s try to not dig ourselves into a money pit to experience the finer things in life.

CONFESSION OF A  LIFESTYLE INFLATING MILLENNIAL

I remember being at my job out of college and making around an entry level salary. I owned my car outright, had my student loans paid a year in advance, and was on my way to buying my first house. Back then, you couldn’t tell me I wasn’t living a rich life. I wasn’t rich from a financial standpoint but it was the first time where I was “adulting” and was able to fund my lifestyle by myself.  This was a big deal considering a year and a half before that, I was a senior at Spelman College eating pizza at 1:00 am while pulling all-nighters.   As time passed, income changed, and lifestyle needs matured, I found myself “needing” more.  I had to get another car after mine was totaled in an accident but I couldn’t bear the idea of not driving a luxury German car (thanks Dad for that addiction).  I spent money on home decor so I could have a  “magazine ready” home.  I upgraded my wardrobe.  I was making a little money and working with people whose hourly rate was a luxury car note.  I wanted to show my family and friends that I had it all together….that I belonged in my new life.  That all changed when I left a promising career in one field to follow other dreams for another field.  It was in the transition that I started to place a serious effort in saving money and making smarter financial moves.  I had to.  It was my new reality, we were in a recession, and I was no longer constantly surrounded by the Joneses.  I took the time to invest in my own financial literacy so I could better understand how to stretch my money.  This was also around the time she makes cents was born.

BALLIN’ & BROKE

As you vibrate higher so will your expectations of people, experiences,  and things around you. The good thing is there are ways around lifestyle inflation where you can enhance your life without feeling broke. Lifestyle inflation keeps you in a constant state of financial paralysis because your need for “things” is keeping pace with your increasing lifestyle.  That’s how a millennial couple with no kids can feel financially stretched in a $100,000+ income household. Stay tuned as we dive deeper into the topics of lifestyle inflating from a millennial perspective and explore opportunities to elevate your life without the elevated price tag.shemakescents-com-1

{Millennials Guide to Money} What Is A 403(b)?

403b-moneyPeople are living longer nowadays, which means that it is more important than ever to get aggressive about saving for the future. While everyone’s vision for retirement varies, there is still an underlying need for basic expenditures. The cost of living is steadily increasing and as most people approach retirement, they are stunned when their new normal is a reduced fixed income. Not saving now could cost you peace of mind in the future. So let’s get our financial Zen on, together!

When most people hear the words “retirement plan”, their minds immediately go to a 401k plan. While it is the most talked about, it certainly is not the only option for retirement. Today, I’d like to introduce you to the 403(b) plan. A 403(b) plan is a retirement plan offered to employees of tax-exempt organizations that fall under the code 501(c)(3), like schools, churches, and hospitals. If you are eligible to participate, I would highly recommend that you do.

Formal Education vs Self Education

ADVANTAGES of a 403(b) Plan

1. Your contributions toward your 403(b) are pre-taxed. Meaning your contribution reduces your current income and the amount you owe in current income taxes.

2. All contributions and earnings are tax deferred, which presents you with tax savings since most people are in a lower tax bracket at the time of retirement. This is another instance where time is on your side because the sooner you start to make contributions, the faster your money will grow.

3. Similar to a 401k, employers are able to match contributions. 403(b) contributions must be made through a salary reduction agreement with an employer, even though your company does not directly administer them.

4. Hardship withdrawals can be made. While hardship withdrawals can be made, I would highly recommend this as a last resort option. You must prove that you are experiencing extreme financial distress and the money must be used to cover expenses such as medical bills, tuition fees, or in the event of an eviction or foreclosure. Just remember that you are only allowed to withdraw the exact amount needed and that the money will be taxed as income.

People who are eligible for this type of retirement plan are ones who make a living being of service to others. If you qualify for a 403(b), be of service to yourself and your financial future, by getting serious about your plans for retirement. They say the older you get, the faster time passes. Don’t miss out on your opportunity to make time and youth work for you.

This article was originally posted on the Feex Blog

cropped-logo-twitter2014.jpg  Visit SMC on Facebook  Visit SMC on Twitter  Visit SMC on Twitter  Visit SMC  Email SMC

shemakescents{at}gmail {dot}com |  Instagram  @shemakescents 

{2015 Week 11 Update} 52 Week Money Challenge

I believe that through knowledge and discipline, financial peace is possible for all of us.      -Dave Ramsey

52 Week Challenge

I’ve been contacted by quite a few of you asking for a copy of the 52 Week Money Challenge, which shows me that I am not the only one looking to save money.  While you won’t save a MAJOR windfall doing this challenge, you will gain financial discipline.  It’s harder than you think to get in the habit of saving but once up pick up the skill, it’s well worth the effort.  If you are new to She Makes Cents, I am happy to report that I paid off my credit card doing this challenge as additional payments over the minimum.  I am now adding this extra money to my wedding savings account after I see how much I have left from doing a zero based budget…aka, my saving grace!

cropped-logo-twitter2014.jpg

How Are You Going Use Your $1300+ ?

FACEBOOK, TWITTER, PINTEREST, RSS Feed,

Email SMC: shemakescents@gmail.com

A Key Benefit of Parents Funding Their Children’s College Expenses

I remember I asked the question on the SMC Facebook page, “Should parents help fund their children’s college expenses?”  The responses ranged from, “Oh, hell no” to “If I have the means, why not give back to the next generation”.  My Dad helped me and because of that, I graduated with about $25,000 in student loan debt, as opposed to $125,000+/ for a top-tier private college. According to USA Today, “in all but one state, the average graduate owed more than $20,000 in 2013, and in six states, the average student debt was more than $30,000.”  So what does this all mean post graduation?  It means that a generation is starting their adult lives in the red. When it’s time to make major financial decisions, such as buying a house, like our parent’s generation was able to do, the road to home ownership and financial freedom seems non-existent.

Stebo 008

A Key Benefit of Parents Funding Their Children’s College Expenses

I bought my house for my 24th birthday on a whim.  In fact, my story of how I purchased a home for my 24th birthday was nothing more than a beautiful blessing.  I had not saved one dime specifically for a purchase of this type.  In fact, I was simply praying for a way to get out of my parent’s house after moving back from college.  At this time in my life, Sallie Mae and I were close friends because I had my student loans paid a year in advance even with the recession picking up steam.  For about two weeks, I was looking on the internet for apartments when I recalled a financial seminar I attended in college where one of the panelists made the point that “renting was paying for something you would never own”.  I wondered could I afford to own.  With a strong push from my friend Jason, I took a leap of faith, that some would call a poor financial decision, and I made an offer on a property, without looking at other properties.  That was just four days after of my 24th birthday.

Read the full story here: Why I Think Parents Should Their Kids’ College Expenses

How Was I Able to Make Such A Big Financial Decision in Just 4 days?  Found out in the full story:

cropped-logo-twitter2014.jpg

 FACEBOOK, TWITTER, PINTEREST, RSS Feed,

Email SMC: shemakescents@gmail.com

Food For Thought: Finances & Job Security

Truth- There is nothing secure about job security. In fact, the emotional and physical stress that people experience over worry of losing a job and not being able to keep up a lifestyle or provide for a family is all too common. According to this article from the Wall Street Journal, “As many as two-thirds of people in the U.S. don’t have the recommended six months of expenses saved. The percentage of people with savings enough to cover at least three months shrank to 40 % in 2014, compared with 45%, a year earlier.”

save-money-after-job-lose-lay-off

So when do you make a plan for the worst? Well, it’s better to have one in place before you need it…and I hope you will never need it. Having the recommended six months of expenses is just that- a recommendation. You have to figure out what amount works best for you and if you are like me, having a goal and a plan to get more than the recommended amount would put my mind at ease, since it can still take more than six months to secure a new place on your career path. The good news is, it is never too late to start protecting yourself financially.  Are you saving enough? If not, don’t undercut yourself by saving a little this week and skipping next week.  Get in the habit of paying yourself first!  You owe it to yourself and those you support to be financially secure in a world where job security isn’t secure.

Companies are downsizing, departments are being eliminated, and employers are trimming the fat. If you lost your job today, how long would you be able to survive financially?

cropped-logo-twitter2014.jpg

FACEBOOK, TWITTER, PINTEREST, RSS Feed,

Email SMC: shemakescents@gmail.com

Beginner’s Guide to: Understanding Financial Terms

As a millennial woman, I know many of my peers shy away from conversations about money and becoming financially fit for fear of looking dumb for not knowing the basics. Financial terms are spoken and we hear Charlie Brown’s teacher and stop listening. I want to help break down self-imposed barriers that could be keeping us from confidently making smart money moves. In an interview for Mint, I was asked off the record if I thought that women view money management differently than men. While some people believe women are not confident in making big financial decisions, I’m inclined to disagree.

When armed with the proper tools to make sound financial choices, women prove to be confident, powerful, and commanding in their financial choices.

Every week, She Makes Cents will introduce a financial term with hopes to empower you to expand your financial literacy. For some this is a refresher and for others, it may be the first time that you understand, what these terms mean and how they affect YOUR money. Either way, you are arming yourself to take the lead in your own financial situation and achieve the goal of living the fabulous life while being financially savvy!

If there is a financial term you want explained, shoot us an email and we will answer it on the site. Stay tuned tomorrow when we talk investments and returns.

Let’s Get Social!

FACEBOOK, TWITTER, PINTEREST, RSS Feed,

Email SMC: shemakescents@gmail.com