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A New Addition To The Family!!!

I’d like to take this moment to publicly welcome our latest addition to the family.  Jillian Alexis, born June 29, 2009 around 18:30 to Josh and Jean.  6lbs, 7oz of Joy.

Welcome to the family.

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Basics of Life Insurance

Howdy howdy. I know it’s been around a month since my last post and I promised this time would be different. Well, I’ve been busy saving families financial lives so this took a bit of a back seat. Anyways, on to the post!!!

This post will be about the bare bones basics. No frills. In later posts, I’ll get into the differences between specifics and will even include graphics demonstrating various concepts. Don’t laugh at them, I’m a programmer/money coach, not a designer.

When dealing with Life Insurance, there are so many different kinds that it becomes easy to get confused. The insurance companies LOVE it that way. The problem is, many of the agents also get confused. Lets see, we have Credit Life, Mortgage Life, Accidental Death and Dismemberment, Level Term, Whole Life, Variable Life, Universal Life, Variable Universal, Return Of Premium, Permanent, Annually Renewable, Decreasing, etc. Actually, I think that is all of them. If I missed one, put it in the comments.

When you break every single one of these down to the bare bones basics, they are all 1 of 2 kinds of policies. Annually Renewable Term or Decreasing Term. What a minute, we have 12 listed policy types and they are all varieties of 2 of them? Yup. So why are there so many different varieties, well, profits. In general, the more complex the policy, the greater the profits.

Annually Renewable Term

This is probably the most common type.  Usually found in group, level term, and most types of cash value policies.  Every year, the policy renews and the price increases based on a schedule in the policy.

Decreasing Term

The face amount of the policy decreases every year but the premium stays the same.  It is typically used as mortgage insurance and in whole life policies.

It’s important to know these 2 policy types since they are the basis for the rest.  I’ll go over the basics of them now and expand on them in later posts.

Credit Life, Mortgage Life, Accidental Death and Dismemberment

You should avoid these types of life policies.  They are pure profit makers for the insurance companies and don’t benefit your family one iota.  Credit Life is usually bought on a monthly basis by the lender (on your behalf, that you pay for) to cover the current balance.  The beneficiary, the lender. Mortgage Life is typically bought and paid for when you get the mortgage.  Many times, it is rolled INTO the note so you don’t have to pay for it out of pocket.  Several issues with this.

  1. It’s typically paid up for 30 years based on expected balance.
  2. If rolled into the note, you now pay INTEREST on the premium.
  3. If the note is paid off early, unless you make an effort for it, you typically don’t get your unearned premiums back.

AD&D is the worst of all.  Many policies have very strict conditions for their death benefits hence why it is the cheapest of all.  General scenario on how most pay out.  You get in a wreck, die BEFORE the paramedics get their, death by accident, policy pays.  If you are alive when the paramedics get there, you get in the ambulance/care flight and die either en route or at the hospital, it typically wont pay.  Why? Simple, you died due to COMPLICATIONS as a result of an accident, not DUE to the accident.  Splitting hairs right? Now you know why it’s so cheap.

Level Term, Return Of Premium

Both of these are variants of ART (annually renewable term).  Level term is exactly as it sounds, ART with a level period.  You die while policy is in force, it pays.  ROP (return of premium) is a variant of Level Term.  It’s a rider added on that allows you to get your premium back at the end of the term.  Typically the first 5 years, you would get $0 back.  After that, it’s a graduated percentage till the policy term is up.  And even then, you still may not get all of the premiums back.

Now, ROP sounds great doesn’t it? You make it to the end of the term and get all/most of your money back? What they don’t tell you is that you actually LOST money in the process.  How? Inflation.  The reality is in year 6 you start seeing a balance.  That balance grows interest.  But the interest and 5 year loss equals out to an actual interest of 0% and an effective interest of -4%!  Yea, that’s a great deal.

Permanent

This is a tricky one.  This can be virtually any kind of policy.  It can be a term policy that expires at age 95, it can also be a cash value type policy . This is now a more universal term than anything.  Basically, any policy that expires/matures between ages 80 and 120 can be technically be classified as one.

Whole Life

This is decreasing term with a savings account.  The policies are designed so that when they mature, the cash value that is built up equals the face amount.

Variable Life

This is an interesting policy.  It has a minimal death benefit, if you pay for it.  With this kind of policy, your face amount changes with the underlying investments.  Assuming you decide to use investments.  When the market is good, your face amount is usually great.  When the market is down (like as of this writing), your face amount is down.  You pay the same premium either way, and may get a rate hike if the cash value drops to $0.

Universal Life/Variable Universal Life

A universal life policy is an evolution of whole life.  Instead of being DT (decreasing term), it’s ART.  You get a minimal death benefit with a cash account that is invested in the market.  You have the flexibility to decide the premiums and the coverage while the policy is in place.  A variable version adds the ability to determine a wider variety of investments for the cash account.  On both of these, you typically have 2 options.  Option A and option B.  Option A, your beneficiaries get the face amount ONLY.  Option B, you pay MORE so your survivors can have both the face amount and the cash.

This is just a rough overview.  I’ll spend more time on each one individually here in the coming days/weeks/months/years.

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The Sack Lunches

Before I get back to my regularly unscheduled postings, I thought I would share this.

My cousin sent me this as an email.  Normally  I just file them in either my Personal folder or the Trash depending on what it is.  I don’t know if this really happened or not.  It is still a god story.

I put my carry-on in the luggage compartment and sat down in my assigned seat. It was going to be a long flight. ’I’m glad I have a good book to read. Perhaps I will get a short nap,‘ I thought.

Just before take-off, a line of soldiers came down the aisle and filled all the vacant seats, totally surrounding me. I decided to start a conversation.. ‘Where are you headed?‘ I asked the soldier seated nearest to me.

Petawawa. We’ll be there for two weeks for special training, and then we’re being deployed to Afghanistan.

After flying for about an hour, an announcement was made that sack lunches were available for five dollars. It would be several hours before we reached the east, and I quickly decided a lunch would help pass the time.

As I reached for my wallet, I overheard soldier ask his buddy if he planned to buy lunch.

No, that seems like a lot of money for just a sack lunch. Probably wouldn’t be worth five bucks. I’ll wait till we get to base.

His friend agreed.

I looked around at the other soldiers. None were buying lunch. I walked to the back of the plane and handed the flight attendant a fifty dollar bill. ‘Take a lunch to all those soldiers.‘ She grabbed my arms and squeezed tightly. Her eyes wet with tears, she thanked me. ‘My son was a soldier in Iraq; it’s almost like you are doing it for him.

Picking up ten sacks, she headed up the aisle to where the soldiers were seated. She stopped at my seat and asked, ’Which do you like best – beef or chicken?‘  ’Chicken,‘ I replied, wondering why she asked. She turned and went to the front of plane, returning a minute later with a dinner plate from first class.

This is your thanks.

After we finished eating, I went again to the back of the plane, heading for the rest room. A man stopped me.

I saw what you did. I want to be part of it. Here, take this.‘ He handed me twenty-five dollars.

Soon after I returned to my seat, I saw the Flight Captain coming down the aisle, looking at the aisle numbers as he walked, I hoped he was not looking for me, but noticed he was looking at the numbers only on my side of the plane. When he got to my row he stopped, smiled, held out his hand, an said, ‘I want to shake your hand.

Quickly unfastening my seatbelt I stood and took the Captain’s hand. With a booming voice he said, ‘I was a soldier and I was a military pilot. Once, someone bought me a lunch. It was an act of kindness I never forgot.‘ I was embarrassed when applause was heard from all of the passengers.

Later I walked to the front of the plane so I could stretch my legs. A man who was seated about six rows in front of me reached out his hand, wanting to shake mine. He left another twenty-five dollars in my palm.

When we landed I gathered my belongings and started to deplane. Waiting just inside the airplane door was a man who stopped me, put something in my shirt pocket, turned, and walked away without saying a word. Another twenty-five dollars!

Upon entering the terminal, I saw the soldiers gathering for their trip to the base. I walked over to them and handed them seventy-five dollars. ‘It will take you some time to reach the base. It will be about time for a sandwich. God Bless You.’

Ten young men left that flight feeling the love and respect of their fellow travelers. As I walked briskly to my car, I whispered a prayer for their safe return. These soldiers were giving their all for our country. I could only give them a couple of meals.

It seemed so little…

A veteran is someone who, at one point in his life, wrote a blank check made payable to ‘United States of America‘ for an amount of ‘up to and including my life.

That is Honor, and there are way too many people in this country who no longer understand it.

Pass this link on to your friends and family.  If you see a solider or know a veteran, make sure you thank them.  You probably wouldn’t be here if not for the Men and Women protecting this country and our way of life.  Freedom isn’t free, and these people are paying for it for us.

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CarMax – Just Another Dealership?

This post is about the recent experience my wife and I have had at the CarMax on Eastchase in Arlington/Ft. Worth.  The names and facts have NOT been changes to allow throwing stones at the guilty.

This story started end of March.  March 27th, 2009.  A few days before our old ‘89 Buick Skylark bit the dust.  Brakes failed, stearing became a problem, and the oncoming traffic didn’t help matters either.  We looked around online at CarMax and a few other local dealerships wanting to stay below the $10k mark.  Their site made it easy to search about the 5 or 6 dealerships within a 300 mile radius.  That being said, they had about 15 cars below that mark.  All and all, we settled on a 99 Dodge Grand Caravan Sport.  As an added bonus, it only had 63k miles on.  A 99 with 63k miles, for $8200, would you turn that down?

The following week, we sold the Buick to them.  Got $100 for it.  Double what I was expecting.  So far at this point, it has been a good experience.  Bill Dearman (the sales rep that helped us) was curtious the entire time and let us take our time.  He earned our repeat business AND my recommendation.  Both things I don’t take lightly.

Well, fast forward about 33 days.  Fuel pump goes out.  I’m no machanic, but for a 10 year old car, the fuel pump probably should have been replaced just due to old age.  At least those are my thoughts.  I call up Bill and asked his opinion.  He said to call the service center and ask up the chain until I got the top dog or the answer I wanted.  That was my first mistake, I should have listend and done just that.  Instead, I called one, and the rep on the other end (don’t recall the name), was very rude about the 30 day warrenty.  I understand that 30 days was it and they have no obligation to do anything after that period.  But in the same token, this is a major repair shortly after warrenty period.  It’s just good customer service to take care of.  Now, 10 days? 15 days? 30 days after expiry, I wouldn’t have even bothered to try to get it for free or even discounted.

I made a few complaints on Twitter about the bill we got from Pepboys ($730).  That was my second mistake, I took it to Pepboys.  They insisted that more work needed to be done than was required.  Some services they were suggesting were completed not but 2k miles before.  On top of that, had I just went back to CarMax anyways, even paying for it, would have saved between $200 and $300 off the repair!  Well, @CarMaxChris spoke up and suggested I call the Customer Service Center (Executive Response Team) to see if they can fix this.

Called them and spoke with a women named Paige.  She asked for some details about what happened and said she’ll make a call to the same store and see what the Service Manager could do (His name was also Bill.  Don’t ask for his last name because frankly, I’d buther it).  He called about 5 mins later and asked a few more questions.  By the time he called though, the tank was already dropped at Pepboys so he couldn’t tow it over.  When all was said and done, he confirmed what Bill Dearman said.  Had I gone straight to him in the first place, it would have been towed and repaired at no cost.  30 Days is the rule, but most are handled on a case by case basis.  In cases like mine, they let it slide.  It was just a few days out of warrenty and good customer service to just do it.

Needless to say, they have earned a repeat customer.

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Weight Loss Update And Other Personal Things…

I know everone is just DYING to know about this (it’s nice to dream right?), but I’ve been keeping tabs on my weight since starting at 24 Hour Fitness.  Almost daily actually.  Since Mar 16th I have lost 13 lbs.  And it shows.  I look slimer, I feel better, have more energy, and my love handles don’t bounce as much when I run (more of a jog really).

Wife and I also started on a 90 day sprint.  Might post up weekely updates on that as well.

Also began work on Arlington’s 4th of July website.  It needs MASSIVE work.  The current incarnation is NOT of my creation, but it slowly turning into one.  The Google Maps screenshots have been turned into real GMaps, the search on the main page has turned into Google Custom Search, and Google Analytics has also been added to all pages.  BTW, Google, you can send those endorsement checks to my creditors, they are hurting so bad without my payments that they could really use the help.  Why else would they be raising rates right? They wouldn’t do such a decietfull thing as raise rates just because they can right?

I’ve also been having a good talk with Larry Wiedel this week.  Made me realize that I really need to not work so hard.  What’s the point of working 30 hour days for your family, if you never spend time with them?  For that sir, I thank you.

Anyways, I better get back to catching up so I can spend quality time with my daughter and wife today.  And I’m glad I did make time this week just to spend with them.

See you in the next post!

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Ways To Kill Debt

This is the first post in a series of posts dealing with debt, insurance, investments, etc.    This is slow going due to all my other responsibilities, but more will be on the way.  On to the meat of the article now!

There are several methods of eliminating debt.  Debt consolidation is NOT among them.  That’s a band-aid and as we all know, band-aids only SLOW the bleeding, not STOP it.  Ask a doctor about the best way to stop a bleeding wound, from the inside out.  The first step in doing this is to make a decision.  Decide to get out of debt, that’s the easy part.  Below, you will find several methods of doing this and a few suggestions on how to make it happen.

For the next few definitions, we are going to use the following example.  These are by no means accurate and are just used for demonstration purposes.

  • Credit Card – 12% Interest – $3,000 Balance – $40/mo
  • Auto Loan – 5% Interest – $15,000 Balance – $500/mo
  • 1st Mortgage – 6.5% Interest – $200,000 Balance – $1200/mo
  • Credit Card 2 – 25% Interest – $2,000 Balance – $50/mo

Lowest Balance First

This method is for those that need immediate gratification.  You pay all you can on the lowest balance debt you have while still paying your minimal on everything else.  It works, but is not efficient.

  • Credit Card 2
  • Credit Card 1
  • Auto Loan
  • 1st Mortgage

Highest Balance First

This is similar to above except in reverse.  This is even less efficient, but will work.  Granted when most people choose this method, they don’t include their house as the highest debt.

  • Auto Loan
  • Credit Card 1
  • Credit Card 2
  • 1st Mortgage

Lowest Interest Rate First

Take your card with the lowest rate, and pay all towards it.  Although it will help save on interest, your higher interest debts are increasing at an alarming rate.

  • Auto Loan
  • Credit Card 1
  • Credit Card 2
  • 1st Mortgage

Highest Interest Rate First

The reverse of above, but will reduce what you are paying on interest.  Most people focus on the rate which is not the best thing to do.

  • Credit Card 2
  • Credit Card 1
  • Auto Loan
  • 1st Mortgage

Debt Stacking / Snowballing / Debt Acceleration

This is usually used with a combination of the above.  What this does is, as you pay off your debts, takes that monthly payment and applies it to the next in line.  Using the Lowest Balance First method above, it might look something like this:

  • Credit Card 2 – $50/mo
  • Credit Card 1 – $90/mo
  • Auto Loan – $590/mo
  • 1st Mortgage – $1,90/mo

Those payments are based on the above then adding the previous one to it.  If you were to follow it, it would probably cut about 10 to 15 YEARS off of a 30 year mortgage.  So tell me, how long would it take you to pay off a $200k mortgage paying $1,790 a month?  That is the power of debt stacking!

Debt Snow-flaking

This one is interesting.  I only recently found it in a Dave Ramsey forum post.  Basically, it takes the above Debt Stacking method and applies what ever free change you have at the end of the month to which debt you are focusing on.  That’s a great idea, and one I teach and recommend to my clients.

The best method to use, is the one you will follow.  Mathematically speaking though, none of these are “efficient” by themselves, yet they all work to accomplish the same goal.  If you run the numbers out, sometimes it’s better to pay the highest interest, then the lowest balance, then the highest balance, then the lowest interest, etc.  To figure it out, you will need a spreadsheet program.  You can use Numbers on Mac, Excel on Windows, or use OpenOffice on those and Linux.  You can also use Google Docs.  There are a few formulas below that will help.

I could show you how to do this via a spreadsheet, but in my many attempts to write it down, it became PAINFULLY obvious that I could not put it into words.  Soooo, what I will do is work on an app for you all to use that will take the above methods and figure out the various ways and how much interest is expected to be paid/saved.  No promises on accuracy now.  I am only one man building and working 3 businesses.

In the upcoming posts, I expect to write a bit more on various types of loans, different methods of figuring interest, how sometimes paying twice a month is useless, etc.

Until then, good luck and keep an eye on my twitter page (link to the right) for future posts.

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Maxine – Bail ‘em Out?

Why bail them out when the feds can't run a brothel?

Normally I wouldn’t post something like this, but it made me laugh.  A friend of my wife’s sent this to her.

In other news, we just got back from Phoenix and I will have some more relevant posts up soon.  3 blogs and 3 businesses are a bit hard to run.

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Future plans and upcoming posts…

Alright guys and gals, all 6 of ya.  I’m about to head out of town to visit family I haven’t seen in almost a decade.  Gee, I hope I still remember who is who.  Anyways, this is just to let you know what I have planned in the next few weeks/months.

  • A bunch of personal posts about me, my wife, my girlfriend (same person), and my beautiful baby girl!
  • How to buy Insurance
  • How insurance works
  • Debt management
  • “Snow balling” debt
  • Why the interest rate on a loan is not the ONLY thing to look at when deciding (sometimes a higher rate is better, honest)
  • Differences between college savings plans
  • Different retirement accounts
  • and much much more

So stay tuned.  I will make this clear now and on every page.  Nothing on this site is a solicitation or a recommendation to ANYONE.  There is no offer to sell to anyone.  Any requests for work through this site, or any site linked from here, will not be accepted by me.  If you want me to do something for you, you have to track me down the old fashioned way.  Sorry, just legalities.  Although I am not a fan of ads, some will be placed to help offset some costs.  If you don’t like them, use Firefox with the AdBlock extension.

I will be back in a week and will start getting those posts in line.  I may through a few other suprises out there including situation and policy breakdowns.

See ya’ll later!

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I’m Back!

I’m Back!!!

Despite a short reprieve, I am back and ready to go.  I had to take the last site down due to a request from home office.  No biggie, no threats, just a request.  Since it was basically a “take it down” or “you’re fired” move, I decided my clients were more important.

I’ve changed the overall aspect of the site, look, feel, content, etc.  There will still be some finance related posts, just more generic.  There will be additional posts for my personal life as well as PR stunts related to my computer business.  I may even throw in some stuff about the little OS I’m working on.

Anyways, to make a short post shorter, I’m back with plenty of good stuff to come!

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