Do Millennials Need Life Insurance?

As usual, it depends.

When you hear the word “insurance,” think protection.  You have auto and homeowners insurance to protect yourself from major damages to those assets.  You have liability insurance to protect yourself from getting sued.  So what is life insurance protecting you from?  Dying?  Of course not, since all of us will die eventually.

The purpose of life insurance is to protect your family from being financially burdened if you were to die all of a sudden.  Here are some examples of when you might need life insurance:

  • If you bought a house with someone and the mortgage payment is heavily dependent on BOTH your incomes.  If one of you were to die unexpectedly, the other person would most likely have to sell the house because they wouldn’t be able to make the payments on their own.
  • If you have dependents (young children, parents who you support financially, etc.).
  • If you have any debts you want to have paid off when you die so you don’t burden anyone else with it.

If you’re in one of the situations listed above and decide you need life insurance, there are several different types of life insurance policies you can buy ranging from Term Life (the cheapest) to Whole Life (the most expensive).  All of them have pros and cons so it’s important do your research and select the best policy for your specific situation{Beware!  Most life insurance agents will try to push Whole Life policies on you because they get the biggest commission from it!}

Callan Periodic Table of Investment Returns

Earlier this year, my colleague send me this Periodic Table:

Callan Periodic Table of Investment Returns 2013_Page_1

Here’s what it says at the bottom:

The Callan Periodic Table of Investment Returns conveys the strong case for diversification across asset classes (stocks vs. bonds), investment styles (growth vs. value), capitalizations (large vs. small), and equity markets (U.S. vs. international). The Table highlights the uncertainty inherent in all capital markets. Rankings change every year. Also noteworthy is the difference between absolute and relative performance, as returns for the top-performing asset class span a wide range over the past 20 years.

Key takeaway: it is more important to diversify your investments than to try to pick the next “Apple stock.”

Should I Max Out My 401k?

My friend asked me this past weekend if he should be maxing out his 401k because a lot of people are telling him to do so.  My answer to him?  It depends.

The max you can put into your 401k this year is $17,500, which is $1,458 a month.  If you’re making under 6 figures, saving $1,458 a month for retirement might be unrealistic or put a lot of strain on your cash flow (income – expenses).  But if your expenses are minimal or if you like living on a really tight budget, then of course, it’s still possible.

So I told my friend the most important thing was that he was putting money into his 401k consistently and that he was contributing at least up to his employer match, which he was.  Beyond that, I told him to consider his cash flow and short-term financial goals.  If he had a lot of money left over each month after expenses and savings and he wasn’t planning on needing the cash anytime soon for any major purchases (wedding, car, house, etc.) then he could go ahead and contribute more.

Ask and You Shall Receive

You can get a lot of money back just by asking.  Allow me to demonstrate:

Case 1 – Overdraft fee waived

A while back, I wrote checks to different people from my church to support them on their overseas mission trip.  The checks were written over a period of several weeks.  The church collected the checks and deposited them all at once about a month later, after I had totally forgotten about them.  I didn’t have enough cash in my checking account to cover all those checks at once so I got hit with a thirty something overdraft fee.  When I realized this, I used their Live Chat service to speak with a rep and got the fee waived.

Case 2 – Accidentally signed up for Amazon’s Professional Seller Service

I signed up for an Amazon Seller account with the intention of using their Fulfillment By Amazon feature.  Fulfillment By Amazon is a service that allows you to send your items to Amazon for them to sell the items for you.  You only have to pay them a small commission after each sale that gets completed.  During the sign-up process, I accidentally signed up for the Professional Seller service, which is $39.99 a month.  When I saw the charge a month later on my statement, I spoke with one of their reps (also via Live Chat) and they refunded me the money.

Case 3 – Tricked into paying for extra insurance at Enterprise

The place that I get my car serviced provides it’s customers free car rentals.  The last time I got my car serviced, the Enterprise guy asked me to sign this sheet of paper before giving me the keys for the rental car.  He mumbled really fast something about “$14.99…charged only if something were to happen…”  I figured it was a security deposit of some sort and didn’t think too much of it.  Later, I realized he was selling me extra insurance but tried to play it off like it was just part of the rental process.  I emailed my service rep about what happened and he asked Enterprise to give me a refund.

Just by talking to these 3 reps, I saved almost $100.  And each conversation took me only 10 minutes or less.  So the next time you find yourself thinking “is it worth the hassle?”, it probably is!  Especially since Live Chat and email make it super easy these days.

Planned Splurges

As much as I’ve curbed my urge to shop these last few years, I still have a never-ending list of things I want to buy.  I think most of it has to do with the fact that my overall style has shifted from cheap & pretty to quality & classic looking.  So most of my “to-buys” are to replace items that no longer reflect my taste (i.e. replacing my hot pink side-table with this one).

To keep my spending in check, I limit myself to one major purchase (any item about $100 or more) a month, max.  I also count shopping sprees as major purchases.  For instance, my July splurge consists of the 3 items I bought from Nordstrom.  (Fyi their anniversary sale is going on until August 4th!)  

I’ve found that by planning out my splurges, I am able to purchase the pricier things I want at a sustainable rate without any buyers remorse.  Knowing that I can buy (almost) everything I want eventually helps keep my spending willpower in check.  It’s just like eating healthy.  If you intentionally allow yourself to indulge a little, you’re a lot less likely to randomly binge eat junk food.

Good Personal Finance Reads

Should you raid your retirement savings to slash debt? (CNN Money) – An article about when it’s a good idea to borrow from your 401k to pay down debt and what you should consider before doing so.

The Difference Between a Good and Bad Credit Score (MintLife) – A good summary of what credit score you will probably need to get a good rate on financing your car or home.

The Way Millionaires View Money Is Different From Everyone Else (Business Insider) – Very informative and, in my opinion, accurate summary of how the rich versus the middle class think about money.

10 Things Millennials Won’t Shell Out For (Time) – Pretty entertaining list of what we don’t spend money on.  Most of it is actually not true for me (I invest aggressively and definitely trust products recommended by friends & family most).  How about you?

37 Products With Crazy High Markups (Business Insider) – Extremely eye-opening chart!  Some of the markups we already know about (i.e. coffee from coffee shops).  But others come as a total surprise (i.e. text messages)!

I Made $15 Million Before I Was 30, And It Wasn’t As Awesome As You’d Think (Business Insider) – Well written and insightful.  My favorite line: If you’re not happy now, you won’t be happy because of money.”

Preferred Provider Organization

If you have a Preferred Provider Organization (PPO) health plan, you can see a doctor inside or outside of your PPO network.  But if you choose a doctor outside of your network, you will most likely have to pay more.  The good thing about PPOs is that you do not need to see a primary care doctor before seeing a specialist.  So, for instance, if your chest has been hurting, you can go straight to a cardiologist instead of having to see your primary doctor first to get referred to a cardiologist.

The bad thing about PPOs is that you usually have a deductible on top of a copayment.  And even after you’ve met the deductible, you might still have to pay a coinsurance.  Plus, some doctors require you to pay them upfront and file a claim afterwards with your provider to get reimbursed.

Even with these extra costs, if money isn’t tight, most people still prefer a PPO plan over a HMO plan for the flexibility.


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