Homeowners Insurance, an Annual Review

While visiting with some friends last weekend one of our discussions centered around the cost of homeowners insurance. My friend has a significantly lower annual premium compared to ours premium so I decided to begin reviewing my policy and shopping to compare my rate.

In my research I found a website that caught my attention because it is to the point and the author seems very knowledgeable.

http://www.castlerockagency.com/how-much-should-i-insure-my-home-for.html

If you're like us, you probably rushed around to insure the property as part of the financing closing process and you may not have looked at your policy or the premium since then. We think that is a mistake and that we should review our policy as part of an annual review process.

We'll keep you posted on our findings and hopefully our savings!

Hard Times: Part Two - CEO to Pizza Delivery

In a prior article, Hard Times: Part One, we wrote about a story found on Yahoo.com about a Florida man who lost his CEO job and now delivers pizza. Here's a follow up article:

The man apparently used his house as equity when he tried to establish a hedge fund. Once the market soured he lost his business and in a domino effect he also lost his house. It sounds like the man did not have enough money saved to start a business nor did he properly plan for the business.

We also found it interesting that the man indicated on job interviews before his business collapsed he "probably" came across as a jerk because he wanted to see if the "firm was worthy" of him. What's interesting about this is that we believe every person being interviewed should also be interviewing the potential employer to ensure the job and the company are an appropriate fit. However in this case it sounds like the man was arrogant in prior job interviews so we wonder about this management style as well as his personality.

So what happened? ABC news ran a story about the man and shortly thereafter the station received emails and calls from people wanting to offer the man a job. A follow up story indicated that some of the offers were not much better than pizza delivery however some were executive positions with executive salaries. Amazing!

We knew something was clearly wrong with the story when we read it on Yahoo.com and wondered why he could not find a job that uses his skills and experience. It appears that the man did have another motive in mind: He used the power of the news, the press, and websites like ours, to market to thousands, perhaps millions, of potential opportunities. He bypassed other job candidates, and the interview process completely, with a compelling story and apparent humility.

So poor planning and past arrogance a side, mass marketing yielded him fantastic results. Sounds like the man was using some of his skills and experience after all!

Hard Times: Part One

Recently I came across an interesting article on Yahoo.com that shows a Florida man that went from "CEO to Delivering Pizza." The article states that at one point he made around $750,000 per year and now he's making $7.29 per hour.

Something is clearly wrong with this story. Why he can't find a job that uses some of his skills and experience? Seriously, your telling me a man with an MBA from UCLA can not land a management or consulting job? The economy in Florida is bad but it's not that bad.

It just doesn't add up. Has he given up? Is there another motive? I plan to follow this story to better understand it. I also plan to use the story as motivation to drive awareness for planning.

Life has challenges and we must face them head on to reach our goals and dreams. We can not let hard times keep us down and we must plan for these hard times. Plan to work and work the plan to be successful!

http://cosmos.bcst.yahoo.com/up/player/popup/?rn=3906861&cl=12582289&ch=4226720&src=news

Pay Yourself First

Our regular readers know we have a goal of reading 52 books in 52 weeks. The idea behind the goal is to identify ideas and implement them, or build upon them, in our Solid Planning approach to achieving our 2009 goals.

One item that clearly stands out in the books we have read so far is "pay yourself first".

This tip is huge if it is used properly in your planning process. If you have ever wondered what this really means please read on.....

Our approach to "pay yourself first" is to set up a separate savings account, we recommend ING Direct because the account can be linked to your existing accounts and the interest rate paid on the account is very attractive.

This separate account should have rules assigned to it such as "not to be touched in case of an emergency". Another rule we suggest is to "establish a target balance". The target balance allows us to set a definite end, or goal, that we can measure against and plan to achieve.

Now that the account is set up the pay yourself first approach can be implemented. You should determine an amount you can regularly pay to reach the target balance. This amount is a commitment, and you should carefully decide the figure you can realistically afford to pay every month. This payment should be treated just like a bill, a very important bill. Think of it like this, the payment of this bill impacts your future and it should receive respect as such. Due to the importance of this bill it should be the the first bill you pay each and every month.

If you use electronic banking or can set up automatic transfers we recommend you use one of these features. If you pay your bills by writing checks then you may need to create an invoice as a reminder.

It's that simple, you can now pay yourself first and you will have the security of knowing that you have an account as a safety net for emergencies.

Your Savings Account?

Have you ever thought about what the term "Savings Account" implies?

Per Dictionary.com saving is defined as follows:
–adjective
1. tending or serving to save; rescuing; preserving.
2. compensating; redeeming: a saving sense of humor.
3. thrifty; economical: a saving housekeeper.
4. making a reservation: a saving clause.
–noun
5. a reduction or lessening of expenditure or outlay: a saving of 10 percent.
6. something that is saved.
7. savings, sums of money saved by economy and laid away.
8. Law. a reservation or exception.
–preposition
9. except: Nothing remains saving these ruins.
10. with all due respect to or for: saving your presence.
–conjunction
11. except; save.

We believe in today's economy that individuals should think of the term "Savings" in their Savings Account as an adjective. Particularly we stress the first definition: Tending or serving to save; rescuing; preserving.

If you agree with our thoughts we have one question for you. "Have you established an account to rescue and or preserve you and your family if an unexpected event happens"?

You should begin building your Savings now!

Planning 101

We believe setting goals without creating plans to accomplish them is similar to wishful thinking. Wishful thinking may make you feel good however it produces no fruitful outcome. For real results you need to create a plan, which is really a series of steps to perform. Creating a plan to reach your goals isn’t as daunting as you might think. To assist you we’ve listed an approach to creating a plan below:

1) Document your goals in writing. The process of collecting your thoughts and documenting them allows you to clarify your goals. The more specific your goals are the easier it is to create steps to achieve them.

2) After reviewing your goals, think about the steps can you take today, tomorrow, in the future, to make them a reality. Write down these steps and assign a date to them that you would like to see the step accomplished.

3) Review your documented goals and steps every morning and every evening. This reminds you of the importance of your goals and keeps them fresh in your mind. If you think of additional steps during your review write them down and assign them a date as well.

4) Perform the steps. Completing the steps you have written down is your plan to achieving your goals. Ask yourself, “What can I do today that will take me a step closer to my achieving goal?”

5) Share your goals and steps with others. Sharing your goals allows you to internalize them. It also allows people to help you achieve your goals as well as support and encourage you along the way.

6) Don’t give up! Your goals will not be achieved in one day. Goals are achieved by completing steps over a period of time. By completing each step along your plan you become closer and closer to achieving your goals.

What's Your Contingency Plan?

In prior articles we have focused on ways to save money, manage risk, reduce taxes, and maximize investments. However we missed a very important subject, Contingency Planning.

With the economy in trouble and layoffs becoming common place, individuals need to ask themselves what should, or what will, you do if your income and benefits are suddenly impacted? If you receive dreaded news, do you have a plan in place to adjust your expenses? Do you know how long can you maintain your lifestyle? Have you evaluated your expenses and listed out the things that can be or should be immediately reduced or cut? Do you know what options are available to you?

Our answers to many of these questions is NO. Therefore, we will be building our contingency plan over the next few weeks. Articles focused on building our contingency will be placed in a new category called "Contingency Planning."

It's our belief that contingency planning will allow us to sleep better at night because we have faced our fears and made a plan to manage them.

Do you have a contingency plan?

Flexible Spending Account

A Flexible Spending Account (FSA) allows an employee to set aside a portion of his or her earnings to pay for qualified expenses. The money deducted from the employee's pay is not subject to payroll taxes which results in a tax savings benefit for the employee. FSAs are typically used for medical expenses however they can also be used for dependent care expenses.

An important item to remember when determining your FSA contribution amount for the year is that you must use the entire amount during the plan year or you will forfeit the unused dollars. It has been estimated that more than five million employees and their families participate in FSA plans. These five million employees are forfeiting around $1 billion per year in unspent FSA dollars.

If your employment is terminated during the plan year your active participation in the FSA will also end and you will not be able to make additional contributions. Even though you can not make additional contributions you can submit qualified expenses incurred before your termination date up to the annual election amount you designated. This means you can be reimbursed more than you actually contributed during the plan year. Expenses for services rendered after your termination date are not eligible for reimbursement.

Manage Risk with Disability Insurance

Most individuals purchase insurance products to protect their home, health, car, and their life. However an often overlooked item is protecting your income. If you’re like most folks , you can’t afford to become disabled.

We believe disability insurance is an important part of financial planning and risk planning. Per the Social Security Administration "nearly 3 out of 10 workers entering the workforce today will become disabled before retiring". Creating a solid financial plan includes managing risk associated with health, home, vehicles, protection of your assets and protection of your income.

If disability insurance is not currently part of your plan we recommend you contact an insurance provider right away.

Want to Reduce Risk? Shred It!

Research shows that more than 9.9 million Americans were victims of identity theft, a crime that cost them roughly $5 billion. One way we reduce our risk is by shredding documents that contain personal information. At a cost of $100.00 or less, you can significantly reduce your exposure to identity theft.

Frank Abagnale, a secure document consultant for Abagnale and Associates, recommends a crosscut shredder. These shredders cost a little more, but offer much more security. Mr. Abagnale states it would take about eight hours to put a document ran through a crosscut shredder back together. (Rest assured, Frank Abagnale knows what he is talking about. Ever hear of the movie: Catch Me if You Can?)

Catch Me If You Can (Widescreen Two-Disc Special Edition)

As mail or other documents containing personal information arrive we place them in a bin that is designated for the shredder. This allows us to incorporate the shredding process in with our free time.

We have placed a link to an example of a crosscut shredder at the bottom of this article.

Aurora 6-Sheet Crosscut/Credit Card Shredder with Metal Mesh Basket

Building Equity for Refinancing

The economy has really battered home prices in Florida. We purchased our home in March of 2005 right about the peak of the housing bubble. I had accepted a new job in Florida so we needed to find a home quickly. Don't get us wrong, we love living in Florida, and we love our house, so we'll do what we must to stay. (Go Rays!)

Now that mortgage rates are at an all time low we would like to refinance our home to lower our payments. However we are concerned that our equity has sunk along with economy. So here are our thoughts to boost our home equity.

1) We have found that a minor kitchen remodel is hands down the top choice in terms of the best return on investment. Statistics indicate that a well executed remodel will net an 88-percent ROI. Based on this ratio a remodel of $3,000 may increase our equity by $5,640.

2) A bathroom remodel is another great choice which reflects an 81-percent ROI. A $2,000 minor remodel should approximately yield an equity increase of $3,760.

3) An additional way to increase equity if you are close to the value you need is to make additional principal payments. Most loans have an option that allows you to make extra payments toward the principal in addition to the basic payment.

Using all three of these options we believe we can refinance our home to receive lower payments and enjoy our new kitchen and bath as well.

Estate Planning Protects You and Your Assets

Estate Planning can protect your hard earned assets. Your assets include your investments, retirement savings, insurance policies, and real estate or business interests. To begin planning you should ask yourself three questions:

1.) Who do you want to inherit your assets? The answer to this question belongs in your will.

2.) Who do you want handling your financial affairs if you're ever incapacitated? The answer to this question belongs in your power of attorney form.

3.) And, who do you want making medical decisions for you if you become unable to make them for yourself? The answer to this questions belongs in your health care or living care proxy.

Based upon your answers to these questions you can begin building these important parts of your Estate Plan. Do you really want someone else answering these questions for you?

Beneficiary Review

Every time you update your Will you should also conduct a Beneficiary Review of your assets. A recent study found that "80% of beneficiary forms on individual retirement accounts, defined benefit pension plans and insurance policies are either blank, outdated or not properly filled in".

A Beneficiary Review is simply a check on the beneficiary form for each of your assets to ensure mistakes were not made when designating beneficiaries. Many times these forms are filled out quickly when the account is new and they are never looked at again. Mistakes or blank forms can be very costly because they impair your ability to protect, preserve and pass on assets to your heirs.

Now is a perfect time to conduct a Beneficiary Review by contacting the respective financial institutions and/or visiting your Human Resources department.

Complete a Will

Everyone should complete a will to ensure that their wishes are carried out in case of illness or death. A will can ensure that your wishes are heard and that your heirs receive the proper inheritance without unnecessary delays. A will also enables you to name a guardian for your minor children and allows you to direct where your savings, investments, home, valuables and other assets will go once you die.

A Gallup Poll in 2005 found that seven in 10 (71%) respondents aged 50 and older have a will, compared with 37% of people under 50. With so many Web sites devoted to easy, do-it-yourself wills there is no excuse for not recording your final wishes in writing.

To assist our readers I am reviewing several sites and I will report our findings in a new post. If you have suggestions for our review please leave a comment.

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