Is an Emergency Fund Necessary?

This website is for entertainment and educational purposes only. Material shared on this blog does not constitute financial advice nor is it offered as such. Therefore, The Simple Dollar assumes no legal liability for the completeness, accuracy, or suitability of the information provided by its authors.Readers will also note that The Simple Dollar maintains financial relationships with certain third party merchants. If readers access and utilize the services of one of these affiliates through a link on the blog, The Simple Dollar may be compensated for the referral.Please read the blog’s policies on privacy and image-use.And always consult a locally licensed insurance agent, financial adviser or certified attorney before making any financial decisions.

via The Simple Dollar:

I’m a pretty big advocate for emergency funds – cash stowed away in a savings account for a rainy day. Establishing an emergency fund is one of the first things Sarah and I did during our financial turnaround and that emergency fund took care of several difficulties we faced during the first year or so of our financial turnaround.

My belief is in line with that of Dave Ramsey: the first move anyone should make when they’re facing the reality of their debts for the first time is to save up a $1,000 emergency fund. Later on, when you have high-interest debts out of the way, a larger emergency fund is even better.

Even so, there are arguments out there against emergency funds, stating that they’re not a particularly good idea. Those arguments usually rest on three key points.

First, emergency funds stowed away in savings accounts do not earn a good return. Savings accounts earn somewhere between 0.5% and 1.5%, depending on your bank. You can earn a much stronger long-term return in other investments, such as the stock market which historically has returned somewhere around 7%. You would be foolish to make cash savings a significant part of your investment portfolio.

Second, most people have credit available to them, so they should use that in an emergency. If you’re facing a situation that you can’t cover with cash, you could simply use the existing credit on a credit card to cover it. After that, you can pay off the credit card quickly.

Third, emergency funds are a terrible idea if you have high interest debt. A debt sitting at 20% is costing you far more than the savings account is earning for you. You should pay off the debt first.

Here’s my take on each of these points.

First, everything you invest your money in excels in two of three areas and fails in the third one. An investment is either low risk, has a high long term return, or it’s highly liquid (meaning you can get your money out very quickly). You can choose two of those things with almost every investment.

A savings account provides the two things that you’re really looking for in a time of personal crisis – it’s low risk and it’s liquid. The high return is much less important because you shouldn’t be keeping a significant portion of your net worth in an emergency fund. It’s not an investment – it’s a buffer against an emergency.

Right now, our emergency fund makes up only a few percentage points of our net worth. Even when we first started our financial turnaround, we only established a $1,000 emergency fund, which was still only a small fraction of the total value of our assets.

An emergency fund is simply a sacrifice of returns on a small portion of your money so that you have something on hand that’s very liquid and very low risk. It’s not meant as a major part of your retirement savings or your investment strategy. It’s meant as a buffer against things that might happen to you.

Second, trusting in a line of credit means trusting completely in the discretion of a bank. It relies on your credit report remaining clean – untimely identity theft can wreck your credit report for a while and leave you without that credit. It also relies on the business policy of the bank remaining constant, which isn’t a promise – many banks have lowered credit limits over the past several years on large numbers of their customers.

Another problem with this angle is that using a credit card has a strong likelihood of meaning that you’re going to be paying a high interest rate when you pay it back. Yes, there are many emergencies where you’ll be able to pay it all back before the interest kicks in, but what about unemployment, for example? The average duration of unemployment these days is about 36 weeks. It’s pretty likely that you’ll accumulate a nice pile of debt and interest during that kind of timeframe – and, ideally, the bank won’t notice and cancel your line of credit.

A further problem is that many Americans simply don’t have adequate credit to rely on the banks in an emergency. According to this report, 33 million Americans have insufficient information on their credit report to generate a credit score, 24 million more Americans have no credit history whatsoever, and another 61 million Americans have a subprime credit score. That’s 118 million Americans who have insufficient credit with which to obtain a credit card. These are not people who can safely rely on the bank extending sufficient credit to them.

Beyond that, simply having a good credit score isn’t a guarantee that your credit may not fall during a time of crisis. 72% of Americans live paycheck to paycheck – as soon as their paycheck disappears for even a week, bills aren’t getting paid and their credit starts to drop pretty quickly thereafter. This isn’t really a group that should rely on banks extending credit, either.

Finally, repaying debt is more than just a math problem. To start off the explanation here, I’ll quote Dave Ramsey from The Total Money Makeover , page 105:

“Since I hate debt so much, people often ask why we don’t start with the debt. I used to do that when I first started teaching and counseling, but I discovered that people would stop their whole Total Money Makeover because of an emergency – they felt guilty that they had to stop debt-reducing to survive. It’s like stopping your whole fitness program because you get a sore knee from a fall when running; you’ll find any excuse will do. The alternator on the car would go out, and that $300 repair ruined the whole plan because the purchase had to go on a credit card since there was no emergency fund. If you use debt after swearing off it, you lose the momentum to keep going.”

When you’re first trying to do something to improve your life, it’s incredibly hard. It’s very easy to be pessimistic about it and be skeptical that things can ever really change. When you hit that first roadblock, it can be incredibly tempting to just simply quit. I’ve seen a lot of people – including myself – abandon goals at this point.

It is well worth sacrificing a relatively small amount of financial gain in the short term to significantly decrease the chance for roadblocks to stand in your way over the longer term.

Once you’re past that point – you’ve paid off your high interest debts and you’re saving and investing for big future goals – good financial decision-making can feel as easy as riding a bicycle. However, a person who is just taking the first steps to a turnaround is much like a child learning to ride for the first time, and the emergency fund is like a bike helmet and training wheels. Sure, they might get going a little faster without them if everything goes perfectly, but life isn’t perfect. We all stumble. It’s a lot easier to get back up and jump in the saddle if you’ve got something in place to cushion your fall.

During that period where you’re saving up a $1,000 emergency fund, you are absolutely causing yourself to build up more interest on your credit card because you’re not paying it off, but you’re doing so to prepare yourself for success in paying it off. What you’re doing is spending a few moments to strap on your bike helmet before you jump on board. Sure, you probably won’t be the first one to the end of the block, but you’re also going to be far less likely to give up when you fall off your bike because the mistake won’t hurt nearly as much.

A final point: most of the arguments here don’t mean anything to you if you don’t really believe emergencies can happen to you. Different people have different levels of safety nets in their life. Some people can rely on their families for financial support no matter the situation. Others have an employment background and connections that are basically infallible. Still others receive a very high income combined with at least a basic understanding that they need to save or invest at least a little of it. For those people, a $1,000 emergency fund is going to seem rather unimportant.

On the other hand, all I have to do is look back at some of the experiences of my own childhood to see how an emergency fund can make a tremendous difference. My father was often laid off from his job and during those times an emergency fund sustained our family. My old man diligently put aside a little bit of money directly from each of his checks into a credit union and we used that credit union when times were tough. The day-to-day reality of my parents’ life didn’t involve investing in the stock market. It involved making sure food was on the table and handling many little emergencies by the skin of their teeth.

Like it or not, half of Americans live in what is considered a low-income situation and, as I stated earlier, 72% of Americans live paycheck to paycheck. These are people that, in many ways, share the experience of the household of my childhood. Turning the ship around isn’t going to be easy for them. Putting on a helmet before they hop on that bike is going to make a big difference.

If you’re figuring out what your first step should be in terms of turning around your debt situation, my recommendation – and Dave Ramsey’s, too – is to have a $1,000 emergency fund. Consider it your helmet for the bicycle you’re about to learn to ride.

The post Is an Emergency Fund Necessary? appeared first on The Simple Dollar.

For more info: Is an Emergency Fund Necessary?

The Simple Dollar

Is an Emergency Fund Necessary?

The post Is an Emergency Fund Necessary? appeared first on FX FOREX.

via WordPress http://ift.tt/1nxY7ne



Personal Finance, accounts, credit, funds, investments, money, ramsey, simple-dollar, the-simple, utilize-the-services

Net Worth and Pleasure

This website is for entertainment and educational purposes only. Material shared on this blog does not constitute financial advice nor is it offered as such. Therefore, The Simple Dollar assumes no legal liability for the completeness, accuracy, or suitability of the information provided by its authors.Readers will also note that The Simple Dollar maintains financial relationships with certain third party merchants. If readers access and utilize the services of one of these affiliates through a link on the blog, The Simple Dollar may be compensated for the referral.Please read the blog’s policies on privacy and image-use.And always consult a locally licensed insurance agent, financial adviser or certified attorney before making any financial decisions.

via The Simple Dollar:

In a post a few days ago, I made an offhand comment about how I didn’t really receive personal pleasure from seeing my net worth increase, though I once did. A few people emailed me on that subject, so I thought I’d clarify what I meant.

When I first began to overcome my personal finance mistakes, I found that calculating my net worth and looking at the change from month to month was incredibly powerful. It was a single number that provided “proof” that I was making better decisions than I was making before.

An increase in net worth meant that I was unquestionably spending less than what I earned, which is the key to personal finance success. An increase in net worth meant that all of the hard day-to-day choices I was making were actually adding up to something big.

It was exhilarating. Each time I calculated that number, I could clearly see the impact that my choices were having even if they weren’t really evident in my day-to-day life.

Over the ensuing years, however, things changed in my life. I changed careers and moved in a self-employment direction. We bought a house and had two more children. All of our debts disappeared and we started building a nice nest egg.

In other words, I began to really see the impact that our financial choices are having on our day-to-day life. If we hadn’t turned our finances around, I would not be self-employed right now. I wouldn’t be able to be sitting there waiting when my children come home off the bus. We wouldn’t be living in a nice house with enough space for a home office. I would be feeling stress from things as simple as checking the mail.

I don’t have to look very far to see how our good financial choices changed my life.

So, let’s look at those situations side-by-side. When we first started our financial turnaround, I didn’t see those changes in my day-to-day life. I was still working the same job, living in the same place, driving the same automobile.

I didn’t have the milestones in my life to demonstrate the changes brought about by our financial choices.

Today, things are different. I have lots of things in my life that have only happened because of our financial choices. Being financially stable opened the door to the house we own. Being financially stable opened the door to a career change for me, one that lets me help my children get ready for school in the mornings and be there for them when they get home, which is incredibly important for me.

I don’t need a number to show me those things.

It’s those life milestones that show me the incredible positive impact that good personal finance choices have made in my life. Every single day, my life shows me what I’ve accomplished and why I need to keep my eye on the ball.

At first, I needed that number to see that I was accomplishing something. Now? I don’t need that number. I just need to look around my life.

That’s the reward for sticking with personal finance improvement. You eventually begin to see how it affects your life in a lot of ways and when you recognize that it’s your hard work that made it happen, it inspires you to keep going.

I still figure up my net worth every once in a while, but it’s mostly an exercise to ensure that I’m making smart financial decisions. The day-to-day inspiration that I used to get from that number now comes from the realities of my life – and that’s the result of pushing through those years where I was working hard to improve things but I wasn’t seeing any direct reward.

The post Net Worth and Pleasure appeared first on The Simple Dollar.

For more info: Net Worth and Pleasure

The Simple Dollar

Net Worth and Pleasure

The post Net Worth and Pleasure appeared first on FX FOREX.

via WordPress http://ift.tt/1gxGZM9



Personal Finance, adviser-or-certified, dollar, king, personal finance, policies-on-privacy, referral, services, simple, simple-dollar, that-the-simple, the-simple, utilize-the-services

Finding Your Bliss Station

This website is for entertainment and educational purposes only. Material shared on this blog does not constitute financial advice nor is it offered as such. Therefore, The Simple Dollar assumes no legal liability for the completeness, accuracy, or suitability of the information provided by its authors.Readers will also note that The Simple Dollar maintains financial relationships with certain third party merchants. If readers access and utilize the services of one of these affiliates through a link on the blog, The Simple Dollar may be compensated for the referral.Please read the blog’s policies on privacy and image-use.And always consult a locally licensed insurance agent, financial adviser or certified attorney before making any financial decisions.

via The Simple Dollar:

Our life has become so economic and practical in its orientation that, as you get older, the claims of the moment upon you are so great, you hardly know where [...] you are, or what it is you intended. You are always doing something that is required of you. Where is your bliss station? You have to try to find it. Get a phonograph and put on the music that you really love, even if it’s corny music that nobody else respects. – Joseph Campbell

I love playing tabletop games. There is nothing that makes me happier than sitting around a table with friends new and old, playing a game together. The puzzle of the game makes my brain cells work a little, but the social interaction with the people around the table makes it sublime. For me, that’s one of my “bliss stations.” It really brings me joy.

I also getting lost in a book. I love reading nonfiction, where my mind spins around new ideas, but I also love speculative fiction, where my imagination runs wild. I love getting so deep into a book that the time just disappears. That’s another “bliss station” for me.

Another one? I actually really like getting lost in a work project, getting into the zone where the hours fly by. I absolutely love how I feel when I snap back to attention, realize that time has passed, and notice how much I’ve accomplished. That’s yet another “bliss station” for me.

The time I spend with my children is another one, as is the time spent doing pretty much anything with my wife. Sometimes, I get them when I get lost in a powerful piece of music, or when something makes me laugh deeply.

“Bliss moments” are simply those moments and situations where many of the negative parts of your life just float into the background, leaving you simply feeling great and enjoying the moment.

I believe that “bliss moments,” however you might achieve them, are the true highlights of our life. They make our day-to-day existence worthwhile. I know that they certainly make my own life worthwhile.

There was a time in my life where I felt that I was achieving “bliss moments” when I would walk out of a store with an armload of books or a new gadget or when I was trying out a new restaurant. In those moments, I would feel incredibly good about things, but those moments came with a price.

I felt empty and sad whenever I’d examine the state of my finances and get a glimpse that I was heading in the wrong direction. I’d feel distraught when I’d look at the bills and not know how I was going to pay them.

Here’s the truth: if you have to spend money to achieve a “bliss moment,” then it’s a false moment.

A bliss moment, on its own, doesn’t steal from the joy of other parts of your life. It brings joy without ever demanding a payment in return. It doesn’t give you stress at other moments in your life. It takes away that stress for a little bit and makes the stress you do have easier to handle without adding more to the pile. A “bliss moment” shouldn’t require hard choices and sacrifice later on.

Here’s a big secret that I’ve learned about personal finance and life: the more “bliss moments” you can find in your life that don’t require you to spend money, the better off you’ll be.

It’s because of that realization that I constantly seek out free sources of “bliss moments” – or at least sources that incur only the slightest additional expense. I go to community events, particularly those that are free and overlap with my interests, such as community game nights and free concerts. I consciously set aside blocks of time to allow myself to fall into the “flow” of working and, as often as I can, the “flow” of a good book. I also set aside blocks to spend specifically with my children.

These steps cost me very little in terms of my money, but they’re all powerful sources of “bliss moments,” and it’s those little moments that bring so much deep joy into my life. With those moments at hand, the desire to have more stuff falls dramatically. I don’t need “stuff” to have these moments.

Seek out the bliss moments in your life, especially the free ones. Find ways to bring them into your life on a regular basis. I’ve found nothing better in terms of making my life feel whole and making me realize that I don’t really need things or expensive experiences to enjoy a tremendous life.

The post Finding Your Bliss Station appeared first on The Simple Dollar.

For more info: Finding Your Bliss Station

The Simple Dollar

Finding Your Bliss Station

The post Finding Your Bliss Station appeared first on FX FOREX.

via WordPress http://ift.tt/1db4USB



Personal Finance, completeness, insurance, king, material, personal finance, policies-on-privacy, services, simple, simple-dollar, that-the-simple, the-simple, utilize-the-services

Do the Hard Things First

This website is for entertainment and educational purposes only. Material shared on this blog does not constitute financial advice nor is it offered as such. Therefore, The Simple Dollar assumes no legal liability for the completeness, accuracy, or suitability of the information provided by its authors.Readers will also note that The Simple Dollar maintains financial relationships with certain third party merchants. If readers access and utilize the services of one of these affiliates through a link on the blog, The Simple Dollar may be compensated for the referral.Please read the blog’s policies on privacy and image-use.And always consult a locally licensed insurance agent, financial adviser or certified attorney before making any financial decisions.

via The Simple Dollar:

It’s a pretty common principle of time management. When you have a list of tasks to do, choose the one that’s hardest and do that first. That way, you tackle it with the most energy and the freshest mind.

What’s interesting is that many well-organized people use this principle quite well in the short term, but then completely discard it when looking at the long term. When they figure out today’s to-do list, they’ll choose the hard task, but when they look at plans that cover years, they avoid the hard task.

The easiest example I can think of for this phenomenon is retirement savings. Many, many people, when they’re first given the chance to save for retirement, choose not to save anything at all. They choose the easiest part first – not saving anything at all – and save the hardest part for later – socking away 10% or 15% for retirement.

As many as 40% of households near retirement age have no savings at all for retirement – and the numbers get even worse when you look at younger folks.

Your long term goals work almost exactly the same as your to-do list for today. You have more energy and more mental capacity now than you will have in the future, so you should tackle the hardest parts of your goal now, not later.

Retirement savings? Kick that rate up high now while you’re employed and have youth on your side and a strong ability to find a new job if needed.

Debt repayment? The more extra payments you throw at it right now, the less interest you’ll pay over the lifetime of the loan.

Insurance? A plan to get life insurance or health insurance in a few years doesn’t help you if something goes wrong in the next few months.

Yes, it’s hard, especially when you’re younger and your income level is lower.

However, youth has tremendous advantages. You have a much greater capacity to be flexible with your life. You have more energy and more career opportunities. You also have a much longer time horizon, meaning that you’ll have much more time on the other side of that hump.

What can you do to get started? Clean out your closet and sell your unused stuff. Choose the smaller apartment. Make some harder choices today like eating a cheap dinner at home.

Want a specific example? Try out the 52 week money challenge, but knock out all of the highest numbers first – or, better yet, do the entire thing backwards, starting with the $52 week. It’s pretty sweet when you’re finishing up that project and the last few weeks only require you to sock away a few bucks.

You are never younger and fuller of energy and motivation and ability to solve life’s problems than you are right now. Doesn’t it make sense to step up to the plate and knock down some of the more challenging parts of your goals?

The post Do the Hard Things First appeared first on The Simple Dollar.

For more info: Do the Hard Things First

The Simple Dollar

Do the Hard Things First

The post Do the Hard Things First appeared first on FX FOREX.

via WordPress http://ift.tt/1eWW6fN



Personal Finance, adviser-or-certified, completeness, dollar, king, material, policies-on-privacy, provided-by-its, referral, simple, simple-dollar, that-the-simple, utilize-the-services

Make Failure Into a Stepping Stone, Not an Excuse

This website is for entertainment and educational purposes only. Material shared on this blog does not constitute financial advice nor is it offered as such. Therefore, The Simple Dollar assumes no legal liability for the completeness, accuracy, or suitability of the information provided by its authors.Readers will also note that The Simple Dollar maintains financial relationships with certain third party merchants. If readers access and utilize the services of one of these affiliates through a link on the blog, The Simple Dollar may be compensated for the referral.Please read the blog’s policies on privacy and image-use.And always consult a locally licensed insurance agent, financial adviser or certified attorney before making any financial decisions.

via The Simple Dollar:

Whenever I push myself into a strict diet or a strict exercise regime or a strict set of personal finance rules, I find that I thrive in the short term.

For the first week or so, I’ll hit every benchmark I have within those strict rules. I’ll exercise. I’ll eat incredibly well. I’ll avoid spending an unnecessary dime.

Then, at some point, I fail. Usually, it’s out of thoughtlessness – I just backslide into a bad routine for a moment. I’ll eat something way outside the bounds of what I should be eating. I’ll tell myself I’m going to exercise later today – then I’ll get distracted by playing with the kids. I’ll buy something small on a whim.

Soon after, I’ll realize that failure, and I’ll beat myself up over it. I’ll think really negative thoughts about how I’m hopeless for a little while, then I’ll resolve to get everything back on track. I’ll have a few more days of success, then I’ll fail again.

The cycle repeats itself a few more times, with a smaller and smaller period of success in the middle, until I simply give up.

It’s a common cycle that a lot of people find themselves in when they’re trying to make a major change in their lives. I’ve been through this cycle quite a few times myself, and I’ve come to realize that there’s one big thing at the core of all of it.

I set myself up for failure by adopting changes that offer a very narrow path for success. If you choose life changes that require a significant change from the habits you already have, it’s going to be hard. If you make it so that those changes must be absolute – no backsliding allowed – you’re begging for failure. You need an approach that you can slowly build on.

Instead of saying, “I’m cutting out all food and drinks I don’t eat at home,” simply say that you’re going to cut out those treats three days a week. That way, if something comes up and a friend wants to meet you for coffee on Tuesday, you don’t have to freak out about failing at your goal and you won’t feel like a loser if you do. If you find that this goal becomes trivial, change it to four days a week or five days a week.

Instead of saying, “I’m going to exercise every day for 30 minutes,” simply say that you’re going to work out three times this week for thirty minutes. That way, if you miss an exercise session one day, you haven’t failed at your goal. If you find that this goal becomes trivial, increase the number of days.

In other words, it’s a lot easier to stick with a goal if one mis-step or a simple life interference doesn’t mean failure.

What happens if you fail anyway? If you still find failure, then you should reassess what you’re trying to do.

Failure at a personal goal means that there’s some significant aspect of your life that’s working in opposition to that goal. It’s a sign that maybe you need to work on something else first.

For example, if you find that the reason you’re failing at spending goals is because it’s so easy to buy something incidental with a friend, your challenge shouldn’t be to adopt strict spending limits, at least for now. Your goal should be to separate social encounters from shopping, because it’s that connection that’s causing you problems.

If you find that you mess up on your spending goals because of the ease of online shopping, your goal should focus on your online behaviors.

It’s pretty hard to win a race if there’s a speed bump in the way. Sometimes, you have to stop and smooth out the speed bumps before you can really get going. A failure doesn’t mean you’re incapable of winning the race. It just means that maybe you should stop and smooth out the speed bumps.

The post Make Failure Into a Stepping Stone, Not an Excuse appeared first on The Simple Dollar.

For more info: Make Failure Into a Stepping Stone, Not an Excuse

The Simple Dollar

Make Failure Into a Stepping Stone, Not an Excuse

The post Make Failure Into a Stepping Stone, Not an Excuse appeared first on FX FOREX.

via WordPress http://ift.tt/1bYIUpM



Personal Finance, adviser-or-certified, completeness, dollar, material, policies-on-privacy, provided-by-its, referral, simple, that-the-simple, the-simple, utilize-the-services

The Best Renters Insurance for 2014

This website is for entertainment and educational purposes only. Material shared on this blog does not constitute financial advice nor is it offered as such. Therefore, The Simple Dollar assumes no legal liability for the completeness, accuracy, or suitability of the information provided by its authors.Readers will also note that The Simple Dollar maintains financial relationships with certain third party merchants. If readers access and utilize the services of one of these affiliates through a link on the blog, The Simple Dollar may be compensated for the referral.Please read the blog’s policies on privacy and image-use.And always consult a locally licensed insurance agent, financial adviser or certified attorney before making any financial decisions.

via The Simple Dollar:

In my last post, I shared my take on the best home insurance. With the growing popularity of renting, I conducted some additional research to determine which carriers provide the best renters insurance.

After analyzing several national and local companies, Allstate stands out as the best renters insurance provider. If you want a free online quote, you can get started right away. Continue reading and I’ll explain why you need renters insurance and discuss the major components of a solid policy.

Selecting Allstate as the best ultimately boils down to three important factors:

• Policy Management


• Coverage


• Cost

The other national renters insurance providers that rank just behind Allstate are:

• Nationwide


• Liberty Mutual


• American Family

Who Needs Renters Insurance?

To put it simply, if you’re currently renting an apartment or home, it’s in your best interest to get a renters insurance policy. It’s easy to get a free online quote and learn exactly what your rates will be. Once your policy is purchased, you then have the assurance of knowing your possessions are protected.

Some people mistakenly assume that a landlord’s home insurance policy includes coverage for your personal property. In most cases, this is not true. Chances are, your landlord’s policy does not cover your personal possessions.

College Students

Needing renters insurance as a college student depends primarily on where you live. If you live in a dorm or a rental unit close to your college campus, there’s a good chance you’ll be covered by your parent’s homeowners or renters insurance policy (assuming of course they actually have one of these policies). The same is not true if you rent a house or apartment off campus.

College Student Living in a Dorm

Many home or renters insurance policies limit your coverage as a college student to 10% of your parent’s personal property coverage. To give you an example of how this might work, if your parents have $100,000 of personal property coverage, as an eligible college student you could receive 10% ($10,000) of coverage for your possessions. The exact percentage you’re eligible for varies from policy to policy, so be sure to verify with your parents before you assume you’re covered.

College Student Living Off Campus

If you rent a house or apartment off campus, get your own policy. The best thing to do is start with a free quote and go from there. As a college student, you might not think your belongings have a lot of value, but just the cost of your computer, cell phone, books, and clothes can quickly add up.

Young Professionals

You may’ve been able to get through college using a couch you found on the street, but

chances are you’ve made some improvements to your standard of living. Maybe you bought a new TV, overhauled your furniture, or upgraded your electronic devices. Along with these improvements, you’ve probably moved into a nicer apartment. According to research conducted by the National Multifamily Housing Council, roughly one-third of apartments in the U.S. are rented by someone under 30 years old.

Although it’s not legally required, many property management companies that manage multiple complexes in big cities make renters insurance compulsory. Whether it’s a requirement of your rental agreement, or you’re just taking the initiative, protecting your new investments with a renters insurance policy is a wise move.

Grandparents

If you have a grandparent that rents a home or apartment, you should check in with them to make sure they have some protection. Many seniors are retired and living on a very fixed income. If a major incident were to occur, it could be especially tough for them to get back on their feet.

Older adults also have valuable jewelry or family heirlooms they have collected over the years. Some of these items may have more sentimental value than anything else, but it’s still worth it to protect these items with a basic renters insurance policy.

Finding the Best Renters Insurance

All of the best renters insurance companies provide a similar set of basic coverage options. Knowing that you can get the basics covered, factors like price and the ease of policy management start to take on more importance. The following sections dig deeper into these topics and illustrate why Allstate comes out on top.

Renters Insurance Policy Management

Managing your renters insurance policy really starts with determining how much coverage you need. This is an important part of the purchasing process that you need to get right.

You don’t want to overestimate your coverage level and pay for insurance you don’t need. But you also don’t want to underestimate and end up in a bad place if you have a major loss.

Many of the best renters insurance companies provide access to a simple calculator to help you estimate the cost of your possessions. But the online tools provided by Allstate are a step above what much of the competition has to offer.

To begin with, Allstate’s What’s Your Stuff Worth? tool walks you through several categories like clothing, electronics, hobbies, office and living, kitchen, and more. As you progress through each category, the tool shows you images of common items and enables you to specify how many of each item you own.

For example, in the clothing section, you might specify that you have four pairs of shoes and six pairs of pants. Meanwhile, a calculator in the lower right of the screen keeps track of your running total.

Digital Locker Mobile App

Allstate’s Digital Locker app includes several features that help you manage your renters insurance policy. Perhaps most useful, the app enables you to catalogue your possessions with pictures. You use the app on your smartphone or tablet to take pictures of all your possessions, assign values to each item, and upload the images to your account.

Available on Apple and Android platforms, the app also enables you to:

• Organize your possessions by room, category, or in lists.


• Provide more accurate estimates by using the Google or barcode search (especially helpful if you’re uncertain of the value of an item).


• Take advantage of room and category templates to help make sure you don’t overlook anything important.

Using the Digital Locker app makes it incredibly easy to keep your inventory current and gives you the peace of mind of knowing that if you ever have to file a claim, all the information you need is literally at your fingertips.

With all the tools and resources provided by Allstate, managing your policy is a breeze.

Renters Insurance Coverage

In the insurance world, a “peril” is a cause of loss. Most renters insurance policies are listed as “Named Peril” policies, meaning that your policy will identify exactly what you’re insured against.

Some of the most common perils include:

• Theft


• Water Damage


• Vandalism


• Fire


• Smoke


• Lightning

When you get a renters insurance quote, be certain to review the perils you’re protected against. If you live in an area particularly susceptible to fire or lightning, verify that these perils are listed in your policy.

Types of coverage

All of the best renters insurance companies provide access to four types of basic coverage:

Personal Property Coverage: This includes coverage for items you use on a daily basis, like your clothing, appliances, and furniture, as well as specialty items like your jewelry collection or musical equipment. (You’ll want to look into extended coverage for really expensive items, but more on this later).

Liability Coverage: This portion of your renters insurance policy provides protection when you are legally liable for bodily injury or property damage that occurred as a result of an accident or incident involving you or another member of your household.

Medical Payments to Others: Covers the medical costs for any house guests that are injured at your residence, regardless of whether you are liable or not. Medical payments could include things like x-rays, doctor’s fees, or hospital stays. It’s important to note that medical payments protection does not cover you or other members of the household.

Additional Living Expenses/Loss of Use: Covers additional living expenses if damage to your home or apartment is so severe that you are temporarily displaced. This could include hotels, restaurants, or other similar expenses. Your policy will specify how long you have access to the coverage.

Nationwide is one company that stands out for offering superior coverage options. In J.D. Power’s 2013 U.S. Household Insurance and Bundling Study (Renters) , Nationwide was one of only two companies to be rated among the best in Policy Offerings.

Extended Coverage

As alluded to earlier, there are a few circumstances where additional renters insurance is worth looking into. Extended coverage (also called a floater policy) is appropriate if you have a particularly expensive piece of jewelry, a valuable stamp collection, or other similar item that has especially high value.

Extended coverage is offered by Liberty Mutual, American Family, and other top renters insurance companies.

Renters Insurance Cost

Similar to what I mentioned in my post about home insurance, the best renters insurance carriers provide access to an online quote tool. Getting a quote really is the only way you can see how much it will cost given your unique circumstances. Many first-time purchasers are surprised at how affordable renters insurance is. Past studies by the Independent Insurance Agents & Brokers of America and Trusted Choice Independent Insurance Agents indicate the average price for $30,000 of renters insurance ranges from $12-$15 per month, while experts at the National Association of Insurance Commissioners suggest you can expect to pay $15-$30 for a policy depending on your level of coverage.

I was curious to see how these numbers held up and got quotes from three different companies using the same renter profile. The quotes were generated for $30,000 worth of coverage, with replacement cost, for a rental unit just outside a major U.S. city. Here’s what the monthly rates looked like:

• American Family: $11.50


• Allstate: $17


• Nationwide: $22.42

These rates are pretty close to what the studies and experts suggest, but rates always vary based on your location.

The bottom line is that you can cover $30,000 worth of possessions for roughly the cost of a large pizza.

As you can see, the difference in price between the providers will definitely add up over time. If you’re looking for the cheapest renters insurance, the best thing to do is to compare quotes from at least two providers.

Discounts

All of the best renters insurance companies offer discounts. The most common discounts include:

• Multi-Policy: Available if you have an auto insurance or other policy with the same company.


• Claims-Free Discount: Available if you haven’t filed a claim over a certain period of time.


• Protective Devices: Available if you have fire or smoke detectors or a home security system installed. Although there are not as many discount opportunities when compared with home insurance, taking advantage of all available discounts can result in big savings.

Factors That Impact Renters Insurance

Similar to home insurance, there are several factors that influence the cost of your renters insurance premium.

Level of coverage: The level of coverage you choose is one of the major factors that impacts the price on your renters insurance premium. The level of coverage you need is going to vary from person to person. The easiest way to determine what you need is by using the estimation tools provided by Allstate and other top companies.

Location: If you live in an area that has higher crime rates or is more susceptible to wildfire, tornadoes, or other natural disasters, you can expect to pay more for your renters insurance policy.

Deductible: The deductible is the amount of money you pay out of pocket before the insurance kicks in. The formula for deductibles is pretty straightforward: a low deductible means higher premiums; a high deductible means lower premiums. Again, you might be tempted to choose a high deductible, but be sure to choose a level you can realistically meet.

Replacement cost vs. Actual cash value: Most renters insurance providers give you the option to choose between replacement cost and the actual cash value. If you choose replacement cost, you are covered for the actual cost to replace the item that has been lost. If you select an actual cash value policy, the insurance company covers what the item is worth at the time of the loss. In other words, it would be the replacement cost minus depreciation. Replacement cost is the more expensive alternative, but you won’t regret going with this option if you ever have to file a claim.

Is Renters Insurance Worth It?

When you live in an apartment building or a house with multiple units, it doesn’t matter how careful you are — you are only as safe as your most irresponsible neighbor.

When you actually sit back and crunch the numbers, the cost of replacing everything you own can add up quick. This is exactly what makes finding the best renters insurance so important.

Renters insurance is affordable, it’s easy to get, and has a huge upside. Choosing to live without a renters insurance policy may end up being a big financial mistake.

Written by Andrew Hansen

Disclosure: Please note that some of the links in this post may be affiliate links. At no additional cost to you, The Simple Dollar will earn a commission if you decide to make a purchase clicking through those links. Earning revenue through affiliate sales is a necessary practice to maintain the website and continue to provide our users with free content. The Simple Dollar and the authors of The Simple Dollar believe in transparency and honesty. For more on this please read our affiliate disclaimer page.

The post The Best Renters Insurance for 2014 appeared first on The Simple Dollar.

For more info: The Best Renters Insurance for 2014

The Simple Dollar

The Best Renters Insurance for 2014

The post The Best Renters Insurance for 2014 appeared first on FX FOREX.

via WordPress http://ift.tt/1npbx7z



Personal Finance, adviser-or-certified, completeness, insurance, material, policies-on-privacy, provided-by-its, referral, services, simple, that-the-simple, the-simple, utilize-the-services

Seeing What You Have Achieved

This website is for entertainment and educational purposes only. Material shared on this blog does not constitute financial advice nor is it offered as such. Therefore, The Simple Dollar assumes no legal liability for the completeness, accuracy, or suitability of the information provided by its authors.Readers will also note that The Simple Dollar maintains financial relationships with certain third party merchants. If readers access and utilize the services of one of these affiliates through a link on the blog, The Simple Dollar may be compensated for the referral.Please read the blog’s policies on privacy and image-use.And always consult a locally licensed insurance agent, financial adviser or certified attorney before making any financial decisions.

via The Simple Dollar:

In many ways, my life today is almost identical to how it was a year ago. I’m still married with three children. We live in the same house. We have virtually the same possessions. Sarah and I have the same careers and our children go to the same schools.

What have we really achieved in the past year? We spent quite a bit less than we earn – in effect, we lived off of Sarah’s income and banked my own.

The problem is that this kind of change really doesn’t show up in your life in any tangible way. Our day-to-day life is basically the same as it was a year ago. Our savings and investment account balances haven’t changed that a bit.

The big changes that financial progress brings about in your life – like a new house or a stable retirement – aren’t seen for a very long time.

Honestly, this can feel really disheartening. It’s nice to believe that when you make good financial choices, you’ll begin to see some positive changes in your life. The problem is that most of the changes are subtle – reduced stress, more career freedom, and so on.

How can you keep your eye on the big picture progress that you’ve made when your daily life feels pretty much the same?

Try focusing on the good things in each day. As I mentioned earlier, financial progress often makes day-to-day living easier and better in subtle ways. It’s usually easier to notice the improvements if you focus on the positive things in your life because those subtle changes often accentuate and bring out the good things.

I’ve found that keeping a gratitude journal, in which I list five good things that happened each day, has helped me to focus on the good things that each day contains.

Calculate your net worth regularly, and note the annual change. I calculate my net worth once every three months. It’s easy to do – just add up your assets and subtract your debts from them. The resulting number is your net worth.

It’s particularly useful to compare that net worth calculation to the previous year’s net worth so that you can see the progress you’ve made in the form of a number. I find that number to be very comforting, particularly when I visualize the difference it made in terms of something tangible. We could buy a new car for what we saved last year, plus fly to France and back!

Imagine your future in detail if you keep on this path. For me, this might be the strongest method of all.

Every so often, I forecast ahead and see what our financial situation will look like in, say, ten years. With that in mind, I’ll talk to Sarah about where our life is headed. What kind of life will we build over those ten years knowing that many things are financially possible?

I color in those broad strokes with lots of little detail to bring it all to life in my head, then I use that picture as a focus point to show myself what will happen with our life if we continue down this path. I also reflect on how that picture will start to fade away if we start making negative changes to our spending.

I want that picture. Hand in hand with the daily reflection on gratitude, it helps me realize my life is pretty good right now and it’s only going to get better.

The post Seeing What You Have Achieved appeared first on The Simple Dollar.

For more info: Seeing What You Have Achieved

The Simple Dollar

Seeing What You Have Achieved

The post Seeing What You Have Achieved appeared first on FX FOREX.

via WordPress http://ift.tt/LevFut



Personal Finance, adviser-or-certified, dollar, insurance, king, material, referral, services, simple, simple-dollar, that-the-simple, utilize-the-services