What You Need to Know About Life Insurance

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Many people have probably seen the Gerber baby commercial telling parents what a good “investment” their whole life policy for babies is. First of all, life insurance is not meant to be an investment, and secondly, why would a baby/child even need life insurance?

Life insurance is meant to replace the income of the insured person in case they die in order to take care of their family. A child does not provide any income to their family and therefore does not need to be insured. In the event of an untimely death of a child, there will be funeral expenses but parents should have adequate savings to pay for that.

You also do not need life insurance if you’re single and have no children or dependents relying on your income to survive. Once again, when you die, you will have funeral expenses but with no spouse or children left behind, there really is nobody to benefit from your insurance distribution.

The prime candidates for life insurance are young families. Both spouses should each have their own term life policy. To determine how long of a term, you need to plan on when you will have enough money to be self-insured and no longer need the policy.

An example is a husband and wife who are 30 years old and have 2 children. They save every year for retirement and know they will be able to have a large nest egg by the time they are 60. They should get a 30-year term life insurance policy. This means they will be covered for 30 years until they’re 60 years old, at which point they will have saved enough money to take care of their spouse in case one of them were to pass away. At this point, their policy will expire and they will no longer be covered by life insurance, which is fine since they have saved enough of their own money. What about their kids? You should only carry life insurance to cover your children as long as 1.) you aren’t self-insured yet and 2.) they are still living with you and can’t yet support themselves.  

Many people just buy life insurance without thinking about the real reason for it. Many insurance agents will try to get you to purchase whole-life, cash value, and universal life. These policies carry the highest commissions for the agents and the highest premiums for you, the customer. Despite how great they may seem, they really are not a good idea. Once again, the cheapest and best life insurance policy is term life.

If you’re considering one of the “no-no” policies mentioned above for investing and saving purposes, do not invest with an insurance company. Just get the term life and invest what you would have been paying in premiums on an expensive whole-life policy into a mutual fund or retirement account where you have control of your investments and money.

How I Did It: Overcoming the “Millennial Stereotype” and Achieving the American Dream

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A lot of people these days say that the American Dream is dead. When somebody says “American Dream” the first thing that often comes to mind is home ownership. Today’s world is much different from a few decades ago. Instead of settling down and buying a house and starting a family, young people today are burdened by their student debt, which often hinders them from saving up for and later purchasing a home. More and more college graduates return to their parent’s houses upon graduating because there’s not as many jobs as they thought there would be in women’s gender studies. A large group of today’s millennials simply just don’t want to settle down. They like living in the heart of a busy city where they will always have activities to do. I don’t fit into any of these “millennial” molds. I often think I was born in the wrong generation.

If you were to ask me “is the American dream still alive?” I would respond by saying, “it was never dead.”

I’m hoping to one day write a book about all my experiences and advice for success, however, I’m only 22 so I haven’t had much time yet to come up with enough material to fill an entire book. This article will provide you with what little amount I can squeeze out of my short time in the world thus far.

What’s the Secret?

There is none. Just good old-fashioned principles of life.

#1 Discipline Your Children

“Whoever spares the rod hates his son, but he who loves him is diligent to discipline him.” – Proverbs 13:24

“Start children off the way they should go, and even when they are old they will not turn from it.” – Proverbs 22:6

I was very fortunate to be raised by very successful parents who tried to make me as well rounded a person as I would let them. Growing up, I always thought I had it so hard compared to my other classmates who got game boys in elementary school, cell phones in middle school, and stayed out late in high school. I begged and begged for a game boy in elementary school. Never got one. Begged and begged for a cell phone in middle school (and half of high school), never got one (until I was 16). Begged and begged to stay out late in high school, (curfew continued being 10:00). At the time, I felt like this was the worst punishment and so unfair. I couldn’t see that my parents were doing this so that later, I would become successful. Now that I’m past all that disciplining, I can see that they knew what they were doing and (I can’t believe I’m saying this), I’m glad they did it. Looking back, I would do so many things different in my childhood, but the strict rules from my parents, I would not change.

#2 Spend Time Teaching Your Children What They Didn’t Learn at School

So far this article sounds like a parenting book but a large part of my achievement was due to the way I was raised. I believe a large part of a child’s education is from what they learn at home. I have always loved to read. I believe this is because my family would read books to me all the time. My very first sentence was “Read the book”. We used to have a tradition that on Super Bowl Sunday my dad would watch the game and since my mom didn’t like football she renamed the evening “Super Book Sunday”. This was one of my favorite days. I would spread a blanket out in front of our book shelf and throw nearly every book onto the blanket, fold up the ends and carry them all downstairs so my mom could read them to my sister and I. All this reading made me so excited to start kindergarten that I actually asked for homework on my 4th birthday! Shopping was another learning opportunity. If something was on sale for 20% off I got a lesson on percentages (without a calculator). At a grocery store I learned how to calculate the price per ounce to find the cheapest item. One time, my aunt had me balancing her checkbook when I was just 7 years old! Aside from all of these extra out of the classroom lessons, you also need to spend time helping your kids with their homework. I took college chemistry in 11th grade and it was the hardest class I have ever taken. I came home after my first day and started to cry because I didn’t know how to do the homework. My mom had taken a lot of chemistry for vet school so she read the entire chapter in the textbook, watched a professor teaching the lesson on YouTube, then did all of the homework problems herself and then redid the problems again but this time, showing me how to do them. This is the only reason that I passed that chemistry class.

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My family and I at my high school graduation (standing under my dad’s retired football number)

#3 Participate in as Many Extra-Curricular Activities as You Can

This is another thing I have to thank my parents for is their dedication to signing me up for every activity they thought would be good for me and then driving me to and from all of the practices and events. I can only imagine how boring a kindergarten soccer game would be. In addition to playing a lot of sports, my parents also got me involved in 4-H, livestock judging, horse judging, cattle showing, and horse showing. If I could go back in time, I would have put more effort into these activities but I’m glad that my parents made me stick with it and although it may not have seemed like it at the time, I actually did enjoy it. Being involved in all of these activities makes you so much more interesting than just the average person. It also really makes you look good on college applications.

#4 Show Up to Class

My number one advice for college students would be to just show up to all of your classes. It’s that simple. I took a lot of classes that seemed like a waste of time but I stuck with it and just showed up and took notes. After freshman year, I hardly ever bought any of the textbooks once I realized the professor was usually the author and wanted you to buy the newest most expensive edition. I would usually ask the professor if the book was absolutely necessary and most of the time they would say you could get all you needed from the lecture. If I did happen to need the book on occasion I would find someone else who had the book or find a very old edition and buy it for like $5 online.

It’s amazing how different a classroom looks on a typical lecture day versus test day. The room magically fills up with not a seat to be spared on test day, while on a normal day it looks like an apocalypse just happened. You can bet I was always there, through snow storms and downpours, I always showed up. I stress this “showing up” because it worked for me. I hardly ever studied for anything. An exam would be coming up and all those people who never came to class would be bragging about the all-nighter they spent in the library or the hundreds of flash cards they had made. What did I do to prepare for an exam? I would read over my notes the night before the exam but go to bed at a reasonable hour. So I probably spent maybe an hour doing leisurely studying. Before the exam I just hoped that what had been sinking into my head during all those lectures would come back to me, and it usually did. Using this strategy, I made the Dean’s list several times and ended up with a 3.49 GPA. Looking back, I could have tried just a little bit harder, but I don’t think it would have had a major effect on the outcome of my life.

#5 Graduate Early and Get a Job

Since I went to governor’s school in high school, I was able to graduate from college a year early. I could have lightened up my course load and taken some fun classes but I decided it would be best for me to finish as soon as possible so that I could start a career. Before graduating, I happened to get an internship at a great bank. They were not advertising any internship at all, but my dad told me to just go and ask about one. I didn’t really want to because if it’s not advertised then it’s impossible to do, right? Well, once again, he was right as always and I got an internship. A semester before I graduated, the same bank offered me a full-time position which I graciously accepted. Another thing that I owe my parents gratitude for. Sometimes it pays to just ask.

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My parents and I after my graduation from Virginia Tech

#6 Don’t Stop Learning

Just because you finish school doesn’t mean you stop learning. You should constantly be trying to learn something new and trying to make yourself more valuable to your company. The key to earning is continual learning. If you don’t keep trying to grow, everyone else will bypass you and you’ll be left in the dust.

Listen to podcasts or audiobooks in the car instead of music. Read a book in the evening instead of that reality television show. I try to read about a book per week which gives me the drive and motivation to achieve my goals.

#7 Set Your Goal and Stick With It

In 2014 I wrote out some of my 10-year goals on a sheet of paper and hung it on my wall. Included on this list was “purchase a home”. Every day I had to look at this paper. I couldn’t let myself down. An ultimate goal, such as buying your first home, doesn’t just happen automatically. There were a lot of small things that had to occur first. Everything I’ve mentioned previously about the discipline from my parents, getting good grades in school, landing a successful career, were all building to set me up to achieve this dream of being a homeowner. Upon getting their first adult job, most people would probably increase their lifestyle from how they lived in college. I was the opposite. I actually decreased my lifestyle and any excess spending. Every time I thought of buying something I didn’t really need I would say to myself, “this could be used to save for the down payment on my house”. I probably said this to myself a million times. I didn’t go out to eat, didn’t go on trips or vacations, nothing. This may sound extreme but I really really really wanted to buy a home!

My list of completed goals


Finally, 2 years after writing down the goal of purchasing a home, my dream became a reality! It is such a huge sense of accomplishment to know that you accomplished your ultimate goal.
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My first home!

 

#8 Don’t Quit

Just because you achieved your goal doesn’t mean you’re finished! You need to set an even higher goal and work to achieve that one. And then another. And then another. Since I achieved my goal of home ownership, my next goal is to be a landlord and purchase rental properties. This will give me passive income which will eventually allow me to retire early so that I can travel the world and spend as much time as I want to with family. That’s my ultimate life goal, and of course I have written it down.

Follow These Steps to Be Able to “Live Like No One Else”

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What does a perfect day look like to you? Are you sitting on a beach somewhere reading a book? Are you having a fun-filled day spent with family? Or are you on a mission trip in a third world country?

The first step to setting a goal of what you want in life is to envision what exactly your perfect day looks like. This will be your motivating factor while you work toward this goal.

My vision of a perfect day is a traveling the world with my family. This won’t happen without any effort or work. In a perfect world it would, but some work has to be done to achieve this dream. To reuse one of my favorite Dave Ramsey quotes “Live like no one else so that later you can live like no one else.”

There are 3 ways you can get to have your perfect day every day.

  1. Increase your income
  2. Decrease your expenses
  3. Both

Increasing Your Income

To increase your income you will need to get a raise at your current job, obtain a second job, or get involved in some type of passive investing.

For me, I’ve chosen to get involved in real estate.

Decreasing Your Expenses

To decrease your expenses, as I’ve written before, set up a budget, pay off your credit cards, and buy your vehicles with cash. If you can’t afford to pay for it with cash then you can’t afford it. Don’t take out a huge car loan just because driving a fancy car will make you feel good. Stop trying to impress people you don’t even know or like. The people who matter don’t care what you drive and the people who care what you drive don’t matter. Your financial freedom is more important than what model car you drive.

Identify your wants vs. needs. Do you really need the iPhone 7 when you already have the 6? Do you need the 60-inch television when you already have a 50-inch?

Practice frugality. Here are some examples of what I do to be frugal:

  • Be content with what you have. When you think about buying something, think to yourself, will this purchase affect/change my life. Most of the time, the answer is no. No, buying new artwork for your living room will not affect your life.
  • Pack your lunch. Lunches out can add up quickly. Packing is cheaper and also healthier.
  • Store brand food. I’ve discovered the generic or store brand food tastes just as good as or better than the name brand. The only outlier I’ve discovered is canned green beans. In that case, get the name brand.
  • No bottled water or pre-packaged foods. Water out of a water fountain or sink is free. Instead of buying those single-serving size bags of crackers or chips or carrots, just get the big bag and portion it out into smaller snack bags yourself.
  • I reuse plastic sandwich bags as long as whatever I had in it was not messy. Ex. On Sunday’s I’ll make waffles, put the leftovers in a Ziploc bag and put in the freezer. Once I finish the leftover waffles, I’ll just turn the bags inside out, wash out the inside, let it dry, and then reuse it for next week. This may seem tedious but I don’t mind the extra work and it does save money.
  • 1-ply toilet paper. Some people are very picky about their toilet paper and require the expensive Charmin kind that feels like a luxury hotel pillow. I could care less what toilet paper I use. I want to spend as little money as possible on it because you are literally flushing your money down the toilet.

Successful People Have Routines

There is a lot of research showing that some of the world’s most successful people had some sort of routine that they did every day.

Benjamin Franklin:

A page from Ben Franklin’s journal states that every morning he would get up at 5AM “The morning question, ‘what good shall I do today?’ Rise, wash, and address Powerful Goodness; contrive day’s business and take the resolution of the day; prosecute the present study; and breakfast” This is what he did from 5AM to 8AM every day.

Thomas Jefferson:

“Whether I retire to bed early or late, I rise with the sun.” Each morning, the first thing Mr. Jefferson would do was check the temperature and wind speed. He recorded all of his observations in a small notebook. Every morning, he would host a large breakfast that consisted of tea, coffee, muffins, hot wheat and corn bread, cold ham, and butter. After breakfast, he spent the rest of the morning writing letters. He sent over 20,000 letters to friends, family, and colleagues over his lifetime.

Bill Gates

As soon as he gets out of bed, Bill Gates gets on the treadmill and runs while watching instructional videos from the Teaching Company.

Warren Buffet

Warren Buffet starts every morning by reading several newspapers. He estimates that he spends around 80% of his day reading. His key to success, “Read 500 pages (of books) every day. That’s how knowledge works. It builds up, like compound interest. All of you can do it, but I guarantee not many of you will do it.”

I think the best time for a routine is in the morning. As you can see from the above examples, these people weren’t dashing around the house in a mad rush to make it out the door on time. They calmly checked the weather and wind speed, had time to run on the treadmill, ate a hearty breakfast, set daily goals, and read. Which sounds less stressful and a better platform for success to you?

The schedule below is what I do every morning. I look forward to it every day because it helps me stay focused and on task to complete my goals and dreams.

  • 5:10am – Wake up
  • 5:15-5:45am – Yoga
  • 5:45-6:00am – Breakfast (2 eggs, toast, coffee)& watch news
  • 6:00-6:30am – Read Bible
  • 6:30-7:00am – Write in journal/read book
  • 7:00-7:45am – Get ready for work and pack lunch

In just 2 hours, I’ve packed so much into my morning, all before even arriving to work!

  • Exercise
  • Meditation
  • Healthy Breakfast
  • News Headlines
  • Spirituality
  • Visualization
  • Reflection
  • Learning

Anybody can do this! All you have to do is set your alarm and actually get up, willingly. To me, the worst morning ever would be rushing to get ready and grabbing a granola bar on my way out the door for breakfast. Such a hectic and stressful morning trying to make it to work on time will bleed through onto your entire day. Just start out by getting up 15 minutes earlier than usual. It could change your life!

I will conclude by tying this all back into the main theme of this passage: What it takes to “Live like no one else” and have the ability to achieve your vision of a perfect day, every day.

  • Envision what your perfect day, or goal, is.
  • Increase Income
  • Decrease Expenses
  • Start a routine to allow you to stay focused on your task to complete your long-term goal

 

My Journey to Passive Income

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One of my many life goals is to earn passive income through rental properties. My passion for this began when I was at the beach this year for the 4th of July holiday and read “Rich Dad Poor Dad”.  The book really emphasizes how successful real estate can make you (if you know what you’re doing)

I’ve spent countless hours analyzing hundreds of houses on the MLS, reading books, listening to podcasts, and researching on the internet.

Every morning and every evening I would check my real estate app to see if anything new had come on the market.

A few weeks ago I noticed a nice house that seemed like a great deal. $54,900 for a 3 bedroom, 1 bath on a dead-end street just a couple of miles from my house. It was listed as a foreclosure with a tax value of $87,000.

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View from the front yard. Very quiet neighborhood.

I called up my realtor and we went to take a look at it. Everything seemed in pretty good condition. Hardwood floors, a garage, fenced yard. The only work it would need is paint and some kitchen remodeling.

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Living room. Beautiful fireplace. Red paint has to go.

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Master bedroom. Black walls?? Yuck

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Bedroom. Impressed with the spongebob painting.

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Will need to replace the kitchen floor and buy appliances.

The next day, I put in my offer of $45,000. It took two weeks to hear back. There were apparently 3 other offers so the bank wanted everyone to give their highest and best offer. Since I knew what a great deal this house was, I offered $100 above asking which was $55,000. A week later I finally heard back and I had won!

I just signed the contract this morning which is contingent on a home inspection, so I need to get that lined up within the next ten days along with a termite inspection and an appraisal.

Once I get it fixed up and ready for a tenant, I think I’ll be able to get $650-$700/month in rent from it.

I’ll leave the complicated math off of this post but summarize some of the analysis results.

26.23% Return on Investment (ROI)

11.21% Capitalization Rate

21.8% Cash-on-Cash Return

More details to come as my closing date gets nearer!

 

Wedding on a Budget

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My fiancé and I got engaged almost 7 months ago and have 5 months left until our wedding in April. As everyone probably already knows, weddings can be a gigantic expense and very easily spiral out of control and go overboard. For Mike and I, this will not be the case. I’ll be creating a series of “Wedding on a Budget” posts that will allow you to follow along with me on my journey to becoming Mrs. Jones.

According to weddingstats.org, in 2015 the average cost of a wedding was $30,000. This does not even include the honeymoon! According to theknot.com, in a survey of couples’ wedding budgets, $70,000 was the highest average budget and $13,000 was the lowest average budget.

You may be thinking, “So what’s your budget?”

$5,000

Many peoples reasoning for spending an astronomical amount of money on their wedding are things such as “it’s a once in a lifetime day”, “it’s the happiest day of your life”, etc. I agree with these phrases but that doesn’t mean I have to spend tens of thousands of dollars on it. I’m going to be just as married as the person who has a 3 course meal at a country club.

I also chose to stick to this economical budget because my fiancé and I wanted to do what makes us happy. We decided we would rather take what we would have spent on a fancy dinner and dj and instead spend it on our honeymoon and buy rental property instead. Neither of us are extravagant spenders; we’re very plain and frugal, so to us, having a huge fancy wedding was not a priority.

Lesson: Do what makes YOU happy, not other people. (on your wedding day).

Now, I’ll get into the details on what I’ve planned so far.

Venue:

  • Location: Local Church
  • Cost: Donation
  • I decided to use the church I grew up in as the ceremony and reception location. The cost is free but a donation to the church is customary.

Dress:

  • This is a category that would be very easy to overspend in. If anyone has ever watched “Say Yes to the Dress”, you know what I’m talking about. Since I’m so small, I was having a very hard time finding anything that would somewhat fit. After going to 6 stores and trying on over 20 dresses, I finally found one on sale at a store called “The Glass Slipper”. It will need some alterations, so more on that later.
  • Cost: $400 + tax

Photographer:

  • This is another category where after doing some research, I couldn’t believe the enormous expense people were charging for weddings. On multiple photographers’ websites they would list reasonable prices for engagement photos or family photos and then the wedding category seemed out of control on the pricing in relation to their other prices. The “wedding packages” usually included up to 8 hours of photography. My wedding is definitely not going to last that long. I didn’t want the getting ready photos or many reception photos since it will be a short afternoon event. After doing some research, I found a local photographer and told her I only wanted about 3 hours of photos and asked for her normal hourly rate.
  • Cost: $400

Cake

  • One of my mother’s former co-workers has a cake business that she does outside of her normal job. I was assured by several people that her cakes were delicious and looked great, so I decided to go with her for the wedding cake.
  • Cost: $2/slice ($200)

So far these are the only categories that I have finalized and have finalized prices for. The top 3 I have listed are often the 3 largest prices of a wedding and I have secured them for around $1,000 total.

The wedding is going to be around 2:00pm with the reception around 3:00. This way, guests will not expect a full meal. We will have cake, heavy hors d’oeuvres and various drinks such as punch, soda, and tea. Not having a full meal or alcohol will drastically cut down on the reception costs.

Stay tuned for the next article in my “Wedding on a Budget” series.

 

 

Car Loan Crisis

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If you have been listening to any of the headlines recently then you have most likely heard about the “student loan crisis”. I think there is another underlying issue here, and that is a car loan crisis. Keep reading for my theory on how the two are inter-related.

According to Experian Automotive, the average monthly car loan payment is $482 with an interest rate of 4.56% financed over 5.5 years. A whopping 84% of new vehicles are purchased using financing.

Here’s a solution to the student loan crisis. What if you, as a parent, did not have the latest and greatest vehicle with the touch screen navigation and air-conditioned seats? That’s right, I am suggesting that you use what you would have put as a down payment on that new $30,000 car and buy an entire vehicle with the down payment. There are plenty of cars for under $5,000 and they will get you to work and activities just as well as the new car.

Now for some fun math:

Since you now have no money going toward a car payment, you can open up a 529 college savings plan or a Coverdell Education Savings Account (ESA) for your child. These college savings accounts work a lot like a health savings account or a Roth IRA. Let’s assume you do this around the time that they are born, which is an excellent idea. Also, the money in these accounts is tax-free if used for education purposes.

Okay, you are going to take that $482 per month would be car payment and put it into your child’s college savings account.

If you do this for 18 years, instead of having a car payment, assuming an interest rate of 7%, your child would have $196,650 saved for college!

“But 7% is an unrealistic return”, you may say. Okay what about 5%? They would still have $162,717. Plenty of money to go to 4 years of college at a reasonably priced school.

This does not even take into consideration if both parents have a car loan, which most usually do.

Pay for your cars in cash! Start out with something that you can afford and month by month save up so that you can upgrade later, but with CASH. You won’t look back and say “I’m so glad I drove that new car for a few years and now have nothing to show for it”. NOW you could have the opportunity one day to look back and say “I’m so glad I had the knowledge to invest and save so that my child could go to college DEBT FREE!”

Parents, I urge you to think ahead about the future of your child! This could possibly be the greatest gift you can ever give them. Graduating with a college degree, debt free.

So which would you choose, nearly $200,000 to go toward your child’s education or the latest and greatest vehicle that just lost the majority of its value as soon as you drove it off the lot?

As Dave Ramsey would say, “I hope you liked the car!”