When selecting life insurance you, or your agent, should spend some time researching the stability of the company. Life insurance companies are regulated at the state level and all states have an insurance division that is responsible for monitoring them and their products. Generally the companies have to conform to certain standards and maintain appropriate financial reserves to ensure they have funds to pay out claims to their customers. So the first step would be contact the state insurance division and do a little background check.

The next step is to do some basic research on the insurance company. How long have they been around, do they have a good reputation, is anybody making complaints about them? The internet can be very useful for this type of research.

Finally, check the ratings of the insurance company. There are 3rd party rating agencies that rate the financial stability of the insurance companies. In fact, just about every time you get a quote for life insurance you will see these ratings from companies like A.M. Best, S&P, Moody’s and Fitch. Next to the rating agencies name you will see letters like AAA, A+, BBB, B-, C, D etc. Every company uses a slightly different system but they are all very similar. Ratings with the letter A are rated higher then letters further down the alphabet (A > C). Multiple letters are rated higher than single letters (AAA > A). Finally the plus symbol is better than the negative symbol (+ > -). Of course just like anything in life it’s not a fool proof system but it is the best we have for evaluating and comparing life insurance companies.

Just like any major purchase in life you should do some due diligence to make sure you are getting a solid product. If you follow these recommendations you can develop more confidence that all the insurance company’s commitments will be fulfilled.

Paul Beckis is a CERTIFIED FINANCIAL PLANNER™ professional. Beckis Financial - Financial planning made simple and affordable.

Obtaining an individual life insurance policy is fairly easy to do and a good agent will walk you through the entire process. The process can take anywhere from a week to several months. Here is an overview of the steps in the life insurance application process to give you an idea of what to expect.

1. Get A Life Insurance Quote. Use any popular online site or email us for a recommendation.
2. Talk With Your Agent. Contact an insurance agent to go over your options and get your questions answered. Your agent will collect basic information from you at this point.
3. Complete An Application. After your agent collects basic information the insurance company will contact you to complete your application. The insurance company will ask more detailed information about your financial situation and health status. No need to worry about this step, just answer honestly and succinctly.
4. Have A Medical Exam. Within 24-48 hours of completing an application you will be contacted by a Paramedical company. They will schedule an appointment with you to do a medical exam. The exam will involve basic tests like blood pressure, height, weight and questions about your medical history. They will also take blood and urine samples. Be sure to speak with your agent to get a better idea of how to prepare for this test. Often times you will be required to fast before your test.
5. Wait For Insurance Underwriting. This can be the longest part of the process. During underwriting the insurance company will evaluate your insurance application. They may require additional documentation like medical records or statements from your doctors.
6. Finalize The Issuance Of Your Policy. After the insurance company completes the underwriting process they will set the final price of your coverage. Your agent will present the policy for final signatures and collect your initial premium payment. Once the insurance company receives your documents and payment your policy is in force. Congratulations your protected.

There you have the general process for obtaining an individual insurance policy. Individual policies take more time and effort to complete than you may be used to when getting group coverage through your employer. Work with your agent to get your questions answered and make the process as painless as possible.

Paul Beckis is a CERTIFIED FINANCIAL PLANNER™ professional. Beckis Financial - Financial planning made simple and affordable.

Can you save money on your car insurance?

• Deductible: The deductible is the amount you are required to pay out of pocket before your insurance company starts paying on any claim. The higher your deductible, the lower you insurance cost will be. If you are currently carrying a low deductible consider raising it to lower your insurance premiums. If might be prudent to consider this if you rarely make claims and you have sufficient funds in the bank to cover a higher deductible.
• Coverage Limits: How much coverage you carry is directly linked to how much you pay for insurance. Higher coverage limits carry higher premiums. Almost all states have minimum levels of required coverage that you must maintain. Many times people take out high levels of coverage without a specific need for that level of coverage. Over the years paying for higher levels of coverage than you need can get expensive. Consider lowering your coverage if you have relatively few assets.
• Collision Coverage: Collision coverage pays for damages caused to your car in the event of an accident. Often times when you buy a new car this coverage is desirable since an accident can be very expensive to repair. But over time as your car ages the value of this coverage may not be as important to you. If you are involved in an accident you may not be concerned about getting the car back to perfect condition as it may have deteriorated over time anyway. Consider dropping your collision coverage if your car is getting older and you are no longer concerned with fixing it to brand new condition.
• Shop Around: Finally the best advice to save money on car insurance is to shop around for less expensive coverage. Many times people take out insurance with a specific company and then never reevaluate it. Most companies offer online shopping tools that make it incredibly simple to compare prices among several insurance companies. Depending on your driving record, what type of car you drive and where you live you could save significant money just from switching companies. Consider this if you haven’t shopped around in several years, you bought a different car or you have changed locations.

Just knowing the different variables involved can help you make better decisions on your car insurance coverage. Take a few moments to look in to it and you may find you can save yourself some money.

Paul Beckis is a CERTIFIED FINANCIAL PLANNER™ professional. Beckis Financial - Financial planning made simple and affordable.

Update your beneficiary.

“What! Your kidding me. I don’t want them to get any of my money!”

A beneficiary is the person you list on your insurance and financial accounts who will receive the proceeds should you pass away. You can select anyone: your spouse, a family member, a friend or even a charity. If you don’t select a beneficiary the money will go to your estate and a court will decide where the money goes.

You don’t just have to list one person either, you can list as many people as you want. You can also list contingent beneficiaries as well. A contingent beneficiary is the person who is next in line should your primary beneficiary predecease you.

Often times people setup their insurance or accounts and list the person who is most appropriate at the time. As the years go by this person might not be suitable any longer or additional people come into your life that need to be added.

You want to make sure your money goes where you intend it should something happen to you. So take a few minutes to review who you have listed as the beneficiary on your insurance and financial accounts.

Paul Beckis is a CERTIFIED FINANCIAL PLANNER™ professional. Beckis Financial - Financial planning made simple and affordable.

The popularity of these Target Date mutual funds has risen in recent years and they are available in almost all of your investment accounts. You will see them by different names depending on the mutual fund company who provides them: Schwab calls them Target Funds, Fidelity calls them Freedom Funds, Vanguard calls them Target Retirement funds, American Century calls them Livestrong Portfolios and in the Microsoft 401k plan they are called LifePath Funds. The names are different but the concept is the same.

The other thing you will notice is a year associated with them: 2020, 2030, 2040, etc. The year represents your target retirement date.

All of these funds follow an investment philosophy called asset allocation. Asset allocation is just a fancy term used to describe how the investments in your account are spread around. I wrote a blog post titled “Asset Allocation: What is it?” if you want to learn more about this strategy.

Asset allocation mutual funds have been around for years. The only difference is that with target date mutual funds the asset allocation percentages change over time. In the early years a higher percentage is allocated to stocks. As the fund approaches the target date it shifts and allocates more to bonds and cash.

This shift is what is referred to as the “glide path.” See the picture below to get an example how the percentages change over time.

An Example of a Target Fund Glide Path.

The reason the allocation percentages change over time is that as you approach retirement you want to become more conservative. As you near retirement you want less exposure to stocks which tend to be more volatile than bonds and cash.

You may want to consider them for your retirement accounts if you don’t have the time, knowledge or desire to select your own mutual funds. Instead of having to select multiple funds to fulfill you asset allocation strategy, you simply select one fund that is closest to your estimated retirement date.

Inside this one fund it will distribute your money to the various types of investments and it will automatically shift to be more conservative as you approach your retirement date. It is a simple way to make sure you are not putting all your eggs in one basket (or put another way: it is a simple way to make sure you are well diversified).

If you do an internet search on these target date funds you will encounter some negative news like: high fees, poor performance, you can’t tailor the asset allocation to your personal circumstances and the list goes on. Keep in mind that many of these arguments can also apply to your other mutual fund choices as well, they are not unique to target date funds. In addition, if you want to target a specific allocation for yourself you can just select a different target date. An earlier date will have less exposure to stocks (i.e. more conservative) and a later date will have more exposure to stocks (i.e. more aggressive).

I like to make things simple for my clients because I feel the simpler I can make things, the more likely you are to commit to positive changes in your financial life. Take a look at these target date mutual funds because they truly are the simplest way to invest without having to go through the difficult process of selecting your own mutual funds. “One and done” as I like to say.

Paul Beckis is a CERTIFIED FINANCIAL PLANNER™ professional. Beckis Financial - Financial planning made simple and affordable.

1. Start Early

   I wrote a previous post entitled “The One Legged Stool Retirement Plan” where I talk about the 3 traditional sources of retirement savings and how 2 of those sources might not be as reliable in the future.

   Parents of Gen X and Y have more resources to fall back on if their own retirement savings fall short. Many have access to pensions and feel more secure about their ability to draw on Social Security for a regular paycheck. Now days pensions have become almost obsolete for most people and many are questioning the viability of Social Security.

   The lesson here is to start early. Don’t rely on unpredictable sources for your retirement, they might not be a reliable as you think.

2. Be Diversified

   Gen X and Y have seen a lot of volatility in the stock market, especially in the past 10 years. This trend is likely to continue in the future.

   Companies are constantly changing leadership, going out of business or being sold off. Gone are the days of investing in one company for the long haul and getting a handsome payoff. You must own many different companies to stay diversified.

   The time period from 2000 to 2010 is being referred to as the “lost decade.” The stock market was essentially flat during that time period. Owning other assets, like bonds, helped put you in positive territory and kept your money growing.

3. Keep It Simple

   Today’s environment is more complicated that it was for prior generations. The introduction of 401k plans, Roth IRA accounts and the complexity of investing has made decisions more difficult than in the past.

   Don’t let this complexity overwhelm you by sticking to the basics. I have said it before and I will say it again, “Spending and savings habits are the key to success.” Controlling your spending and saving habits is fundamental and puts you way ahead of the game.

   Finally use technology to your advantage. Often times the internet can overwhelm you with too much information. However, there are some great tools out there to help you do the basics and save you time. Utilize online banking to check your spending daily, employ sites like Mint.com to organize your finances or simply keep up on the latest financial news.

If you start early, stay diversified and keep it simple you will have a much greater chance of reaching your financial goals. It’s great to take advice from prior generations but realize things have changed and you need to adapt your strategy to keep up with the times. Turn the challenges for Generation X and Y in to opportunities to save for your retirement.

Paul Beckis is a CERTIFIED FINANCIAL PLANNER™ professional. Beckis Financial - Financial planning made simple and affordable.

Asset allocation is just a fancy term used to describe how the investments in your account are spread around. Sometimes you will hear it used to describe how diversified your account is. I like to say it helps you make sure all your eggs are not in one basket.

An Example of an Asset Allocation

The word asset in asset allocation refers to the various types of asset classes you can invest in. The 3 major types of asset classes are: stocks, bonds and cash. You are probably most familiar with cash investments. Cash is like the money in your checking or savings account. It is very safe; you generally don’t lose any money while invested in cash. The trade off is that you don’t earn very much while your money is invested in cash.

Bonds are just like an IOU. You loan money to some entity and in return they pay you a regular interest rate while they borrow the money. At some point in time in the future the loan matures and they give you your money back. Bonds can be issued by corporations, municipalities and the US government. Bonds are not as safe as cash but they tend to earn better interest over time.

Finally most people are familiar with stocks. A stock just represents ownership in a company and the profits it generates. Over time stocks have performed better than both bonds and cash. However, stocks are the most risky and there returns can fluctuate significantly from year to year.

The word allocation in asset allocation refers to how your money is allocated between these major asset classes. You will almost always see it represented as percentages. You have x percentage in stocks, y percentage in bonds and z percentage in cash.

It is worth mentioning that the asset classes can be broker down even further. When we start looking at stocks for example you will find there are domestic stocks and international stocks. There are also large-cap, mid-cap and small-cap stocks. Bonds can be further classified as long term, intermediate term and short term. For this article I just want you to recognize the major asset classes but keep in mind you may see these additional classifications when looking at your portfolio’s allocation.

Your asset allocation should be important to you because it can give you a quick gauge on how conservative or aggressive your portfolio is. The higher allocation you have to stocks the more aggressive your portfolio is. The higher your allocation to bonds and cash the more conservative your portfolio is. It has been said that the biggest contributing factor to your portfolio’s performance is due to the asset allocation.

Investment terms don’t have to be complicated or intimidating. Asset allocation simply refers to how your investments are distributed within you account. So when you hear about your portfolio’s asset allocation it is simply a way for you to quickly determine how conservative or aggressive you are investing.

Paul Beckis is a CERTIFIED FINANCIAL PLANNER™ professional. Beckis Financial - Financial planning made simple and affordable.

In the course of my financial planning business I get the opportunity to meet with a lot of “Joneses.” I often use comparisons when speaking with clients because it helps them put things into perspective. If they are doing relatively well I use it as an opportunity to congratulate them, to give them a pat on the back. If they are doing relatively poorly I use it as an opportunity to show them they may have fallen behind a little, to give them some extra motivation to correct it.

I typcially talk about the “slices of pie” when I refer to the asset allocation of an investment account. The “slices of pie” represent the various asset classes (stocks, bond, cash, etc.) that the account is invested in. In this case however, I want to talk about your “slice of the pie.”

When I talk about your “slice of the pie” I am referring to how much you have in comparison to others in your similar situation. When we were kids we always wanted the slices to be evenly cut since the pie was a fixed size. If my brother got a bigger piece, that meant there was less left for me. When it comes to saving for your retirement this isn’t true. If you save more for yourself it doesn’t affect your neighbor’s ability to save for himself. The pie is ever expanding.

I modified the popular idiom for today’s post to “Save more than the Joneses.” I didn’t do this to suggest it’s a competition and you have to do better than the next person. I did it to suggest that this comparison can be healthy. It can motivate you to improve your situation.

I believe it’s a natural tendency for humans to compare things. It’s ok to do as long as it is positive and productive. So go out there an save more than the Joneses.

Paul Beckis is a CERTIFIED FINANCIAL PLANNER™ professional. Beckis Financial - Financial planning made simple and affordable.

There comes a time when you need specific expertise to accomplish a task. The internet is a wonderful resource when you need a recipe for dinner or help troubleshooting a computer problem. However, when issues arise that are very specific to your circumstances or require a great deal of knowledge you are better off hiring a professional. Financial planners have dedicated their entire careers to helping individuals with financial issues. They typically hold degrees in financial disciplines and many hold advanced certifications like the CERTIFIED FINANCIAL PLANNER™, which is widely recognized as the highest level of competency in the industry. Leveraging the expertise of a professional will save you time and help you avoid costly mistakes when it comes to planning your future.

In addition to expertise, you need to make sure everything works together in a comprehensive plan. The same way you follow a recipe to make sure that it comes out consistent every time, you need to follow a cohesive strategy when looking at your financial plan. There are many dependencies and related choices that need to be made and often times important things can get overlooked if there is no coordination within your plan.

• Are you better off putting extra money in your retirement account or in your child’s education savings plan?
• What is the difference in my retirement if I use a traditional IRA versus a Roth IRA?
• Is it more important to have an emergency savings account or proper insurance coverage?

A good financial planner will help you make these choices and ensure that they work together to help you reach your goals.

In my opinion the most beneficial aspect of hiring a financial planner is the motivation they provide. How many times do we have the greatest intentions of completing a project only to find it unfinished 12 months from now? Visiting with a financial planner should provide you with the motivation to get things taken care of. We tend to get things completed faster and are motivated when we have the assurance we are doing things correctly. You should get specific recommendations and action items to help you move forward confidently.

When it comes to the most important things in your life don’t rely on the internet or friend’s opinions to make sure you are take care of. Consulting with a financial planner will give you motivation, help you develop a comprehensive plan and provide you with expertise when you need it most. You could probably perform heart surgery by reading a medical book but if it came to your own life you would certainly hire an expert.

Paul Beckis is a CERTIFIED FINANCIAL PLANNER™ professional. Beckis Financial - Financial planning made simple and affordable.

Disabilities can occur because of an accident or sickness. You don’t hear much about disabling accidents or sicknesses in the US but they occur very frequently. In fact the risk of disability is greater than the risk that you suffer a premature death.

Just like term insurance, disability insurance can be provided as group coverage through your employer or issued individually. It also generally comes is 2 forms, short term disability and long term disability. Short term disability provides for disabilities that last for just a few weeks or months. Long term disability provides for disabilities that will continue for several months to several years.

There are several major factors that determine how much you will pay for disability insurance. Your occupation and income are 2 important ones that play into the cost. The higher your income is the more benefit you would expect to receive. Therefore higher incomes will increase the cost of your coverage. Disabilities occur at different rates depending on you occupation. If you are a construction worker you are more likely to experience a disability than someone who works in an office environment.

The next factor is called the elimination period. The elimination period is the time period from when you incur a disability to when the insurance begins paying you a benefit. The longer the elimination period the lower the cost will be.

One of the final factors to consider is the benefit period. The benefit period is the amount of time that the insurance will continue to pay you a benefit. As mentioned previously, short term disability insurance provides a benefit period from a few weeks to a few months. Long term disability can provided for a number of years or until a certain age.

This first thing you should do is check with your employer to see if they offer disability insurance as part of your benefits package. If your work does not offer it or you are self-employer, consider an individual policy. You probably insure you home, your car and your life. Make sure you have disability insurance to protect one of the most important assets you have: your income.

Paul Beckis is a CERTIFIED FINANCIAL PLANNER™ professional. Beckis Financial - Financial planning made simple and affordable.