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8 Situations Where You Should Buy Life Insurance

8 Situations Where You Should Buy Life Insurance

If you think life insurance is only for wealthy people, you’re in for a big surprise. Life insurance is so important because it protects people who depend on you financially, if you die. It pays one or more beneficiaries as soon as you pass away so that they can pay expenses and replace your lost income.

One of the top reasons people who need life insurance don’t buy it is because they think they can’t afford it. But here’s the rub: studies show that consumers actually overestimate how much they believe life insurance costs—by as much as three times!

Did you know that if you’re in your 30s or 40s, you can get a 10-year term life policy that pays $500,000 for around $20 to $25 per month? In my book, that’s a bargain!

When Should You Buy Life Insurance?

Here are eight instances in life where it’s time to step up and buy a life insurance policy:

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1. You’re the breadwinner.

If you’re the only person earning money to support your household, you need life insurance. Think about what would happen to your spouse or children if you weren’t alive. Would there be enough to pay for ongoing expenses like a mortgage, rent, or daycare?

2. You co-signed for debt.

If you have debt in your name only, no one is responsible to pay it except you—even after you die.[1] The money in your estate must be used to settle your debts and if there isn’t enough, creditors are generally out of luck.

But if you co-signed for debt with another person—such as a credit card, mortgage, or student loan—that’s another story. Anyone named on a joint account with you would be responsible for 100% of the debt if you die. So having life insurance to cover outstanding debt on joint accounts is very important.

Also, if you’re married and live in one of the nine community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin), your spouse may still be responsible to pay the debt acquired during your marriage, even if it’s in your name only.[2]

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3. You take care of aging parents. 

If you’re single and have financially dependent parents, then you need a life policy to keep them secure if you aren’t capable of being around to care for them.

4. You want your children to get a college education.

The cost of higher education rises every year and few students can graduate from college without going into debt. If you want to pay for a child’s private school or college education, life insurance is a surefire way to make sure it can happen, even if you’re not alive.

5. You want to leave cash to heirs.

If you have multiple heirs, leaving cash from a life insurance benefit, instead of assets (like houses or cars), is an easy way to distribute wealth in the proportions you want. For example, if two children inherit a house that’s paid for, one might want to keep it as a vacation home, but the other might need to sell it because he can’t afford the annual taxes and insurance.

6. You don’t want heirs to pay estate taxes and fees.

If you have a large estate, there will be taxes, as well as legal and administrative fees that must be paid. Sometimes heirs are forced to sell estate assets in order to afford these charges.

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You can use life insurance as an estate planning tool to fund your estate’s liability and make sure your heirs receive exactly what you want.

7. You have a family member with special needs. 

If you have a child or other family member with special needs, you may need permanent life insurance.[3] This is a type of policy that covers your life no matter when you die and has a savings component, in addition to a death benefit.

8. You want your funeral costs covered.

A traditional funeral that includes a burial can cost over $10,000. Consider what kind of funeral you want and whether your family could afford it if you didn’t have life insurance.

If you already have life insurance, review your coverage at least once every few years, or whenever you have a major change in income, expenses, or family status. The need for coverage changes as you enter a new stage of life and you may need more or less coverage than you did before.

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You can calculate the amount of coverage that’s right for you and compare rates at sites like insuranceQuotes.com and netQuote.com. Remember that life insurance isn’t a luxury—it’s a necessity that’s truly affordable for the vast majority of consumers who need it.

Featured photo credit: zimmytws via shutterstock.com

Reference

[1] Quick and Dirty Tips: The Truth About Debt and Death
[2] Wikipedia: Community property
[3] InsuranceQuotes: What is Permanent Life Insurance?

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Laura Adams

Personal Finance Expert & Analyst

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Last Updated on January 2, 2019

How Personal Finance Software Helps You Get More Out of Your Money

How Personal Finance Software Helps You Get More Out of Your Money

Do you know what mental health experts point to as the biggest cause of stress in the United States today? If you said “money,” then ding, ding, we have a winner!

Three out of four adults today report feeling stressed out about money at least part of the time. People are either worried about not having enough money or whether they’re putting the money they do have to use in the best possible way.

Your money is either in charge of you or you’re in charge of it, there’s no middle ground. Using some type of personal finance software can help alleviate some of that money stress and better allow you to manage your money effectively. Without it, you may just be setting yourself up for constant financial worry. Life is already tough enough and there’s no need to make it more difficult by simply hoping your money issues will all work out in your favor. Hint: they won’t.

This guide will help you to understand how personal finance software can better assist with both accomplishing long term financial goals and managing day-to-day aspects of life.

Whether it’s tracking the savings plan for your child’s college fund or making sure you won’t be in the red with the month’s grocery budget, personal finance software keeps all this information in one convenient place.

What Exactly is Personal Finance Software?

Think of it like the dashboard in your car. You have a speedometer to tell you how fast you’re going, an odometer to tell you how far you’ve traveled, and then other gauges to tell you things like how much gas is in the tank and your engine temperature. Personal finance software is essentially the same thing for your money.

When you install this software on your computer, tablet, or smartphone, it helps to track your money — how much is going in, how much is going out, and its growth. Most personal finance software programs will display your budget, spending, investments, bills, savings accounts, and even retirement plans, levels of debt, and credit score.

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How It Leads to Financial Improvement

It shouldn’t come as a surprise, but people who regularly monitor their finances end up wealthier than those who don’t. When you were a kid, keeping track of all of your money in a porcelain piggy bank was pretty easy. As we get older, though, our money becomes spread out across things like car payments, mortgages, retirement funds, taxes, and other investments and debts. All of these things make keeping track of our money a lot more complicated.

Some types of personal finance software can help make things a little less complicated, setting you up to meet financial goals and taking away some of the stress associated with money.

Even if you already have a Certified Financial Planner (CFP) some type of personal finance software can be of great benefit. Whereas CFPs focus on the big picture of your money, they don’t handle the day-to-day aspects that determine your overall financial health.

It’s also not nearly as complicated as you might think and can take out a lot of the tedium that comes with doing everything on an Excel spreadsheet or with a pad and pencil.

Types of Personal Finance Software

When it comes to personal finance software, it generally fits into two categories: tax preparation and money management.

Tax preparation software such as Turbo Tax and H&R Block’s software can help with everything from filing income taxes to IRS rules and regulations and even estate plans. Plus, there’s the benefit of filing online and getting your refund check a lot faster than if you were to mail off your forms after waiting in line at the post office.

For the purpose of this article, however, will be focusing more on the personal finance software that aids with money management.

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Money management personal finance software will help you to see the health of your cash flow, pay down debt, forecast for expenses and savings, track investments, pay bills, and do a host of other things that 30 years ago would have practically required a team of accountants.

When to Use Personal Finance Software

So far we’ve gone over what exactly personal finance software is and how it can be a benefit to your money. The next logical step in this whole equation is determining when it should be used and how is the best way to go about getting started using it.

Below are four of the most common and practical ways to use personal finance software. If all or any of these apply to you and your money, then downloading some type of personal finance software is going to be a smart move.

1. You Have Multiple Accounts

There’s a good chance that when it comes to your money, it’s in more than one place. Sure, you probably have a checking account, but you may also have a savings account, money market account, and retirement accounts such as an IRA or 401k.

If you’re like the average American, you probably have two to three credit cards as well. Fifty percent of Americans also don’t have loyalty to just one bank and spread their money across multiple banks.

Rather than spending hours typing in every detail of every account you have into a spreadsheet, many programs allow you to easily import your account information. This will help to eliminate any mistakes and give you a bird’s eye view of everything at once.

2. You Want to Automate Some or All of Your Payments

Please don’t say that you’re still writing out paper checks and dropping each bill in the mailbox. While it’s noble that you’re doing your part to keep postal workers employed, we’re 18 years into the 21st century and you can literally pay every bill online now.

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There’s no need to log into every account you have and type in your routing number either.

With personal finance software you can schedule automatic payments and transfers between all of your imported accounts. Automatic transfers will help to make sure you have the necessary funds in the right account to ensure all bills are paid on the appropriate date. Late fees are annoying and do nothing but cost you money. It’s time that you said goodbye to them once and for all.

3. You Need to Streamline Your Budget

Perhaps the best feature of personal finance software is that it allows you track everything going in and out of your virtual wallet.

Nearly every brand of personal finance software out there has easy-to-read graphs and charts that allow you track every cent you spend or earn, should you choose. You might be pretty amazed when you see just how much you spent on eating out last month or if you splurged a little more than you should have on Christmas gifts last year.

Every successful business on the planet has a budget and using personal finance software can help you trim the fat on your spending in ways that affect your everyday life.

4. You Have Specific Goals to Meet

Maybe it’s paying off debt or saving for up something like a European vacation. Whatever your financial goal is, whether it’s long-term or short-term, personal finance software programs are one of the savviest ways to go about reaching those goals.

You can do everything from set spending alerts to notify you when you’re over budget to automating what percentage of your paycheck goes to things like retirement investments. The personal finance software that you choose should show you exactly how close you are to hitting those goals at any given time.

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How to Get Started

From AceMoney to Mint and Quicken, there ’s no shortage of personal finance software apps out there. Many of these programs are free to download and will allow you to pay bills, invest, monitor your net worth and credit profile, and even get a loan with the swipe of a finger.

Other programs may only offer you limited services and will require a one-time fee or subscription to unlock all that they offer. These fees can often vary from as little as two dollars to 50 bucks a month.

It’s best to start off with the free version and then gauge whether you’re able to accomplish everything you’d like or if it’s worth exploring one of the paid options. Often times the subscription programs come with assistance from financial planning and investment experts — so that can be a real benefit.

When deciding which personal finance software program to use, it’s also important to look at how many accounts you wish to monitor. Certain programs limit the number of accounts you can add. Be sure that if you have checking, credit card, and investment accounts to monitor, that you choose a service that can monitor them all.

Finally, when looking around for the right personal finance software that meets your needs, make sure that you’re comfortable with the program’s interface. It shouldn’t be expected that you recognize every single feature instantly, but if the features don’t seem readable and manageable to you, then you’re not as likely to use it and get the full benefits.

Final Thoughts

Personal finance software can go a long way in helping you to take control of your money and meeting your financial goals. It’s important to note, however, that some focus more on budgeting and expense tracking while others prioritize investing portfolios and income taxes. Explore several different programs and read reviews to find the one that’s right for you.

In this day and age, managing one’s personal finances in a secure manner that allows the user to have a real-time visual representation of their money is easier than ever before. With the numerous applications that are out there — both free and subscription-based — there’s no reason that every person can’t take control of their money and ensure they’re making smart money moves.

Featured photo credit: rawpixel via unsplash.com

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