Because of some rather strange (and also quite bitter) circumstances, I got the shaft with regard to college scholarship money when I was in high school.  Adding to that fact, my father died while I was in college, and I worked while at college anyway (I was a cooperative student). It was not an altogether happy time for me, but I got through it and pressed on.

At that time, I needed some assistance, and not the least of it was provided by the Social Security Administration. Putting my personal politics aside, since many of you (if not ALL of you, with the exception of a few businesses or local governments around the U.S.A.) have contributed to Social Security all of your working life, I think those benefits should accrue to you if you need them. What is not fully understood by many Americans is that there are some minor but not unsubstantial benefits for survivors of YOUR death. For many of you, it may be the only chance to take advantage of them before Social Security goes bankrupt.

To find where a summary of survivor benefits are, click on this link from the Social Security Administration. There are basically four kinds of survivor benefits provided. They are:

1) A death benefit (that is virtually a nonsequitur, at $255)

2) Survivor benefits for spouse, which is set at $1000 a month, but which is scaled back based on the age lower than 65 that those benefits are received.

3) Benefits for minor children (under 18)

4) Benefits for college age children up to age 22.

How does one know what his or her survivor benefits are? Many of them are noted on the annual letter one gets from the Social Security Administration each year. However, to really know what they are at the time of death, one must apply for them at the Social Security Administration website located at the link above. One can, however, take a first cut at the amount of benefits one might receive using this calculator, provided by the Social Security Administration.

There are numerous factors that will determine how much of a benefit can be received. Those factors can include remarriage, in which case, one might lose all benefits for the spouse who remarries.  One needs to consider such factors when calculating the net benefit that would not need to be covered by purchased life insurance. There are even benefits for divorced spouses under certain circumstances. The important point to remember is that you should contact the Social Security Administration upon the death of a spouse to determine exactly for what amount of benefits the surviving spouse and his or her children may qualify.

What is most important to know is that these benefits can be obtained by virtually anyone who has paid into Social Security. It is a benefit that taxpayers often ignore or do not consider as a source of funds.  As stated previously, one should not "look a gift horse in the mouth" when it comes to benefits that you have paid into the system.

I am going to stop right here for now. The next installment should allow me to tie all the pieces together to determine the overall total life insurance need.  I may also have to cover the concept of level term versus declining and balanced term insurance. Needs will vary (and hopefully decrease) as one ages and builds wealth. There are several ways to handle those issues.

Thanks for sticking with DieBrokeBlog, and allowing this delay. I noticed that the Alexa numbers are rising, which means more of you out there are reading it. The StockTwits community needs to get involved in it also by adding their own ideas. If you have ideas or want to write, contact us at buffalotrader100@gmail.com. We do listen and we want your input.

See you this weekend.

Some people grow up very well-off, but still have money troubles. Why? Maybe they received mixed messages along the lines of, “Yes, we have plenty, but money is evil. The best thing you can do with it is give it away or spend it. Get it off your hands.” Is it any wonder that someone who sees his parents endorse such ideas feels shame, and becomes a spendthrift?

Some people grow up poor while seeing and hearing their parents’ constant envy of others’ possessions. Perhaps their parents also said that being poor means you’re a member of the working class and not the “selfish” upper classes, adding to the confusion. Perhaps they did whatever they could to accumulate more for themselves in ways illegal and/or immoral, and the child heard them brag to each other how they took advantage of a customer. Is it any wonder such a child would grow up with issues surrounding money?

I read once that money means different things to different people: survival, security/safety, pleasure, freedom, love, and so on. And what money means to you often comes from whatever money messages you received as a child. If you are having trouble modifying your spending habits, or keeping a budget, ask yourself the following questions and listen to the answers that bubble up from inside you:

• Did your parents fight over money or use it to control each other?

• Did your parents use money to show you love instead of showing real love (meaning, spending time doing things with you or talking with you)? I think most parents have done this at one time or another, but if it was a regular occurrence in your childhood, it probably affects your thinking about money.

• Do you feel grateful for the money you have earned/inherited, or resentful that you make or have “so little”? Or guilty over having so much?

• Do thoughts about money and your childhood bring up memories of abuse, or cause you significant anxiety?

• Do you have trouble donating money to charity? Or trouble giving too much away/”buying friendship”?

• What do you feel when you think about money’s role in your life?

Here’s how the process of thinking about money messages can go. Suppose your parents fought constantly over whatever was spent, no matter how small. The father might have berated the mother for spending “too much” on food, clothing, or other necessities. This situation might have caused the mother to buy things secretly, needed or not, while warning her children not to tell the father. If the father learned of the mother’s spending, he might have retaliated by conspicuously wasting money to “teach her a lesson”.

There’s a reason I chose this example—it mirrors how I grew up, and distorted my views on money for years. For some reason, shoes were often a bone of contention with my father, and I’m sure that’s where my shoe obsession comes from, though I don’t go crazy over shoes any more the way I used to.

My initial feelings about money when I became an adult were that money meant I could have all the pleasures I longed for (plenty of shoes and good times on the town) and prove that I was an adult (freedom, i.e., no one else controlled my spending). In my childhood, who controlled the money was central to the person’s freedom, so to this day I have trouble entering into any financial agreements or accounts with another person, including my spouse. For many years we kept separate bank accounts because I had a horror of fighting over money. (The horror is still there, but we do own a few things jointly now.)

Both seeing money as meaning pleasure and freedom kept me from spending wisely for many years. Who wants to keep a budget when it means too much control imposed, and not enough freedom? Who wants to limit their spending on things that make you feel good? No one, when money means pleasure.

A person’s money meanings can change over the years depending on your circumstances, and how well you’ve dealt with those mixed money messages from childhood. While to me, money still means pleasure and “no one can control me”, these days it also contains a large dollop of fears over security. That makes sense when you’re near retirement and neither of you has the fallback of a regular paycheck. These days, at times it feels as if we’ll never have enough.

And such feelings--"we'll never have enough"--can trigger hoarding behaviors which can be just as much a problem as spending too much, if it becomes hoarding for the sake of hoarding. This, too, can come from childhood, and can be dealt with. My father’s father was, from all accounts, a true miser, not even providing healthy food for his sons because of his need to hoard.

If you’ve had trouble restricting your spending, or with spending on things you truly needed (food, shelter, medical care, etc.), or if you’ve ever hidden anything you bought, or if you “can’t stick to a budget,” if you can’t save because “emergencies” keep cropping up, then you might have mixed money messages playing in your head. Reflect a little, identify as many messages as you can, and remind yourself when your spending (or non-spending) goes off-kilter that they are just messages in your head, and you don’t have to obey them. I think it’s important not to assign blame, but simply to admit that you’ve gone against your plans, and work on doing better the next time.

If your spouse attaches different meanings to money than you do (and it seems that “savers” always marry “spenders”), you’ll both have to work on your money messages in a spirit of compromise so that you can achieve your goals. In that way, both of you can spend and save money for the right reasons, and not because of messages playing on a loop inside your heads.

Again, what I may say here might anger some in the insurance industry, but since this is a blog for the StockTwits community, I will say what I have to say and then I would hope to get some feedback and commentary. I would also even invite a contributor who might want to take another side on this issue. I am, as one can read from the previous posts, a big believer in term life insurance over permanent or whole life insurance. The reasons is quite simple. One can save money by providing for the basic family needs with term life insurance, and one can invest the difference. I am absolute living proof of that axiom, because I did invest the difference and learned how to invest the difference. I believe that ANYONE can do it. It is not just the finance majors and "quants" out there who can invest smartly, and one does not necessarily have to be a buy and hold investor to do it either. For most people, the purchase of whole life insurance is simply not an optimal use of their hard earned money.

It looks like I am taking the easy way out by referencing a Smart Money calculator for life insurance requirements. Well, I guess you are right, but I picked it because it deals with one aspect of the topic that many do not cover. That subject is death benefits for minors under Social Security. If one is going to figure out the cost of raising kids and building a college fund, it should at least be figured in to save moneyr perhaps figure out what marginal amount of additional insurance is needed to get a child through college. I will speak to that topic later in this post.

This calculator makes it look so simple to figure out the exact need for life insurance. Well, if you have been married long enough (I know, I'm single, but I have helped a bunch of married folk over the years figure out investment questions), you know that all situations are different and many are downright contentious.  Here are just a few of the topics:

1) Final expenses: I may actually deal with this topic as a separate blog post, but as a person who has buried three people in my family (no, they died of natural causes, I don't want suspicions aroused), people allow panic and emotion to get in the way of sound decisions. Burial, even SIMPLE BURIALS AND CREMATIONS, are NOT CHEAP. Some states now mandate certain charges associated with cremation, and the funeral industry continues to prop prices beyond belief. If one does anything, regardless of how sensitive the issue is, one must discuss and finalize burial plans. Why? Because people die, and they die when one does not expect them to do so. When one does not plan for such things in advance, the whole matter of grief makes people spend like maniacs (I decided to leave any references to drunken sailors to Congress, since they fund war operations). Funeral pre-payment plans are not always the cheapest either, so I think covering these expenses in life insurance costs is a good idea.

2) College education expenses: This can also be a controversial topic, as the cost of college skyrockets from year to year. You can check the Smart Money calculator above, but what you need to do in this case is:

A) Do an estimate of any college savings (529 plans, Coverdell plans, etc) and figure out how much one will need to cover that cost over those years you may not be around until each child reaches 18. If you can find a hourly fee based financial planner that is not selling retail brokerage products, one can get decent advice without an agenda on this issue. One does not need a sales presentation here, one needs a good solid estimate of what is required. There is a note in that calculator regarding what is cost for the 2008-2009 school year. Let me clue you on something. With state budget deficits skyrocketing to the moon, one could see some increases in tuition will into double-digit percentages. Take no thumbnail estimate for granted. The net deficit between these plans and your requirements for college need to be added into one's life insurance need estimate.

B) Estate settlement costs: This will eat up the last of first 1000 words. Needless to say, one must deal with estate issues BEFORE one dies. It may end up being a knockdown-drag-out discussion, but these items have to be covered before the time of death. I have witnessed families losing fortunes in lawsuits and in settling disputed claims when I was in the financial services industry. The costs of dealing with these issues are far cheaper and easier when done before death, and that does not just include a will. There are business agreements, survivorship agreements, partnerships and family corporate entities that must be subdivided or be set for succession planning. Life insurance does have its place in these kinds of estate settlements, but those settlements must be planned for and pretty much set in stone before the death of the individual involved in them. To do otherwise could lead to financial suicide. Trust me, I have seen it happen.

Let's stop here for now and talk about government benefits in the next post. In either the next segment or (if it gets wordy, the one after that), to pull all the columns together. At some point, I will cover the items regarding key person insurance for business people, but I want to keep it simple here. I know many people will be in that position one day, but I want people to be in the position to do that after they cover their family nest egg first.

Life insurance is sold in two basic forms. One form is term insurance, and the other is often called whole life or permanent insurance.

Term life insurance is essentially life insurance for which a death benefit will be paid only within a specific period of time. There is a specific reason for that. The reason for a term is that, if one is saving money routinely for family needs, college education and retirement, as one builds personal and family wealth, one soon will not need life insurance to pay the necessary final expenses for the income provider's death. The family's assets, built up over time, can and indeed should provide for that. As a result, unless there are specific health concerns that would drive insurance premiums up, term life insurance is the cheapest form of insurance one can buy. Terms are specific to policies and variations of the policy, but terms typically cover 10 to 20 year terms. I will provide a link from Pacific Life (mainly because I like the general definitions, not so much because I am providing an advertisement for them (as I definitely am NOT). Study those definitions. Below are my major comments regarding them.

Term life insurance allows one to budget funds for catastrophic occurrences in the life of a bread winner, without committing to many funds to it. Term insurance allows one to invest, save, and plan as term plans are now very inexpensive for amounts at or just under a million dollars. Term life insurance is definitely not an investment either. It is and should be considered a necessary expense to protect the well-being of remaining family members should the bread winner (or bread winners) pass away. As one will see in these definitions, there are various terms that can allow coverage that, if properly sized, will not necessarily break the budget and provide the necessary coverage.

Permanent insurance or whole life insurance is designed to be coverage that lasts an entire lifetime and can build a residual cash value over that lifetime. It is often sold for its investment value, but in truth, and here is the real kicker, it provides little investment value (if it is traditional whole life insurance) because most people with sufficient skill (and one can learn these skills)  can outperform the rate of return provided by the policy. Any of the other types of policies either are tied to a financial index (say the Standard and Poors 500 stock index) or actually invests some of the premium in equity indexes. Those policies are normally called variable life insurance policies.

The other forms of insurance (lump sum single premium permanent or whole life policies) and last survivor life insurance can have some benefit to certain individuals, but in the former case, a term life plan or other survivorship plan is probably cheaper than the whole life version of that policy. I am working on a post regarding the latter case, as with the change in estate tax laws that are coming, if one wants to leave an estate to charity, one must PLAN for the variability in estate tax laws to use the insurance to mitigate it if one wants to leave an estate to a charity or to establish a foundation, if one has such resources. Trusts can be used for that purpose also, but one has to be careful about their legal structure to make that work properly.

I will over time begin to discuss these survivor issues  from the perspective of a business owner. Estate planning will become ever more important in an environment for which tax rates are highly likely to increase as U.S. deficits continue to expand. It is something everyone will be faced with.

The bottom line here is that life insurance should, in my opinion, be viewed as a necessary expense and not as an investment. Typically, whole life or permanent life insurance is sold as an investment, but that investment is typically locked into a cash value, whose return mimics a bond rate, if traditional, and an index rate if variable. As an investor, one requires liquidity and flexibility (that is, the ability to move those assets over time). Handing one's money to an insurer tends to destroy the flexibility aspect, particularly when it is a whole life policy. Term insurance is normally the best option for those who wish to have investment flexibility.

In the next few installments, I am going to discuss how to figure out how much insurance one needs and about estate planning tied to insurance (that is, survivorship insurance for the partner of a deceased person).

More information is coming down the pike on Friday. Thanks again for all who are reading these posts. Your questions and your support are fantastic. If you have questions or would like us to comment on topics, or even if you would like to post on a topic, send a note to buffalotrader100@gmail.com.

As a family begins its life, or as an individual takes on more responsibility and has family interests (business, relational as with parents or dependents, or charitable, as in with foundations or simply protection of assets so that the assets could be donated to charity), the need for insurance is typically greater in the beginning of its life. As the family earns more and builds wealth, that expense is no longer needed, expect for cases when business interests must be protected should a key individual within that business dies.

When one starts out in life, one has few assets (unless one is born into wealth or does something improbable like win a huge lottery) and likely has debt obligations like student loans, a home mortgage, the routine home expenses, the expense of child rearing, and college savings to cover through a savings plan (529 plan, Coverdell plan, or other approved vehicle).

Income must be replaced if that key family income earner (likely mother, father, or both) to cover those expenses. As wealth builds and income increases (assuming a regular habit of savings continues) the primary earners can pay for their expenses, including retirement (with burial or funeral expenses thereafter) and the insurance, outside of estate planning purposes, is no longer needed for the most part.

It is my contention that one should keep these insurance costs to the lowest possible level consistent with the need to cover these assets, and then to save and invest the rest. In the early adult stages of life, one has sufficient time to invest for a long enough period of time to do better than a fixed rate of return offered by other insurance vehicles like whole life or even the variable returns variable life policies.

What I will do (in far more detail in the next few series), is to define those types of insurance and why one should use them. I openly ask anyone who is involved in this industry to comment on these posts if you have an alternative point of view regarding what I will post.

One of the things one must realize, before I close this shorter than average post, is that each state in the United States regulates insurance activities in that particular state.  Though most policies are pretty uniform, there can be minor differences in policy coverage between the individual states. Though I may not (and probably cannot, given the limits of time) each difference, it is always best to check with one's local insurer and state insurance commission if one has questions regarding policy coverage.

I will provide another post in this series on Wednesday.

One of the issues I want to tackle in between the issues of income and estate taxes is the subject of life insurance. This issue can, depending on how it is used, be quite controversial not just from the standpoint of proper use but because of the industry stance on the different forms of it. I think many (and I might dare say MOST) people spend far too much for it. That additional cost could hurt cash allocation for investments in retirement and college education. It DOES however, have a place, in individual and family expenditures. The real question is HOW MUCH OF ONE SHOULD IT BE?

I will also get involved in at least a cursory discussion regarding annuities. I would also like some questions from the StockTwits community about these vehicles. I think annuities are both abused by sales people and are misunderstood as decent investments under certain circumstances as well.  People need to become familiar with annuities in order to make the right decisions regarding the use of them.

Now that I have whetted your appetites, perhaps you will aceept my mea culpa for being late this week. It will be worth the wait I think.

I will make some precautionary statements however:

1) You must have good credit AND pay off your credit cards ON TIME EVERY TIME. I have sufficient cash flow to do that every time. If you do not, then do not go into debt to build up points. That is really stupid because you are ultimately going to ruin your credit score.

2) I realize that credit card laws have changed, and for that reason one must be sure to pick a credit card that does not fee you to death or destroy you with insane interest rates (though that is simply a matter of degree still these days). That means you must research each one carefully before deciding to use one.

3) Study the reward points program in advance to see if it maximizes points for the repetitive payments that YOU usually make. If the card only gives you bonus points for buying a select few special purchases, you will likely grow old and die before ever benefiting from the points you earn. I definitely do not want you to suffer that frustration.

4) Expiration times for points need to be examined for each card. I have cards for which the points will not expire as long as I use the card.

5) Find a bonus program that gives you some flexibility as to how you may use those points.

Let's start with my example. Long ago I had what I seem to recall as Marriott Privilege points, but I had blown them out long ago when I used to travel quite a bit with a former employer. I knew that getting a discount for the Marquis would be next to impossible. I did, however, have a Hilton Rewards Points plan. Sad thing was, I had very few left. How did I turn that sadness into gladness (and a stay at a Hilton Hotel not but about a quarter-mile from that venue?). I had American Express points (and still do by the way) out the wazoo. Not only that, but American Express points are equal to about 1.3 Hilton Rewards points, meaning they would be stretched if I converted some of them. The point of this example is that many credit card companies have promotional or business relationships with other travel service vendors. Because of that, one has a multitude of ways to use the points to do what one really wants to do with them. Guess what, another savvy traveler, @aiki14 DID EXACTLY THE SAME THING to save bucks on his trip from Pennsylvania. There are plans out there that will allow you to use points for cruises, air travel, and countless other services.

Two cards that I have (one personal, one for business) will allow me one complimentary coach ticket for a second traveler upon renewal each year. I intend to use that for a special vacation next year.  A friend of mine may need a bit of help on a coach class ticket, so I will use that for the trip.

Now, the big question is, should one pay the extra amount for say an American Express Platinum Card, which offers special event preferences, entrance to certain airline airport lounges, and special travel services. The real question is will one be able to get the $500 it costs annually to use that card in benefits? If the answer is no, I would definitely NOT get it. A regular American Express card is good enough in most American venues, and in foreign venues where Visa is more acceptable, a regular Visa card is sufficient. If you do, however, wish to take advantage of special travel discounts (and can charge anything from property taxes (a nice point builder) or other larger ticket items through the card, the answer might actually be YES. If one travels enough on business to obtain at least $500 of benefit annually by using them, one would be foolish not to have one.

The key thing is, however, is that you have the cash flow to use them, your credit is virtually spotless, you pay the bills on time, and that you really can take advantage of $500 of travel benefits. For younger folks of more modest means, do NOT attempt to have such a card because of the perceived prestige of having one. The road to Debt Hell is paved with such foolish notions. If one does not need the benefits of it, do not waste the money. Stick that cash in an IRA or some other tax-deferred vehicle.

What if you have a bunch of bonus points or frequent flier miles that are about to expire ? One can give them to charity. There are charity programs by most major cards for which points may be donated to military veterans so that they can afford to travel on leave or need medical treatment. Other charities can take such donations as well. If the new tax legislation passes that eliminates the charitable deduction, as has been proposed, here is a way to donate without cash.

I will do my best in the coming weeks to see if I find some unique bonus point programs that add some real discounting to travel. Again, your credit better be good and your payment history better be spotless before trying this. If you can't handle credit, you can't handle bonus rewards. Let's just face that right up front. But if you can, there are really nice benefits to be had.

Do you have any great ideas on personal finance you'd like to write about? Contact me at buffalotrader100@gmail.com and perhaps send us a sample. We want people in the community to contribute, as the intellectual firepower of 100,000 plus smart people should be shared. That is what StockTwits is indeed all about.