16

Could You Buy Life Insurance For Those You Love…With You As The Beneficiary?

Is that even legal? Ethical? Moral? I mean, the person you would be buying the life insurance for would know you were doing it, so what would be wrong with it? I imagine it would take some heavy lifting mathematically to figure out your investment in the policy and your payout should the person die versus just investing the money yourself in the market or some other vessel, but still…I wonder if it would work. I wonder if it is being done by anyone. Whether paying the “client” under the table on a monthly basis or paying the policy outright, the idea fascinates me.

I mean, I could go buy a policy on my life and name anyone I wanted as a beneficiary – so why couldn’t it work in reverse? Let’s say I bought a policy on a parent and named myself as beneficiary – how is that any different than the first scenario? If one did the math and decided that was a good way to “set aside” $X.XX per month, would there be any problems with any regulatory agencies?

Basically you would be gambling on the futures of people you know by purchasing term life insurance on them. I wonder…What do you guys think? Also, How much life insurance should you buy if you can?

5

How To Employ A Balanced Investment Approach.

This guest post is brought to you by The Digerati Life.

When we hear of the terms “Short Term” and “Long Term” in the investing world, these terms refer to an investment period. Traditionally for tax purposes, the Short Term is defined as any investment holding time period less than one year while Long Term is any time period greater than one year. One technical difference between the two is how you record your Capital Gains and Losses on the IRS Schedule D. It has been suggested that small investors should not invest in the short term due to high commission charges. But with the advent of online stock trading, and lowered commissions offered by many discount brokers, that advice has less relevance.

For small investors, investment experts have long advocated the principles of long term investing. “Buy and hold for the long term” is considered one of the main stock market investing strategies around. On the other hand, in recent times, more online trading platforms have been developed which allow for less expensive commissions. This certainly encourages the growth of short term investing. Lower commission rates have become more standard among the best online brokerages around. This may very well encourage a lot more short term investing among investors — with many opting to become more active with their trading. But I believe in more of a balance when it comes to managing one’s investment activities: small investors should mix Short Term investing with their Buy and Hold investments in order to make significant enough gains to keep up with inflation, which has long term effects on your investments.

When To Use A Short Term vs Long Term Investing Approach

Let’s say you bought ten stocks a few months ago, and a couple of them are performing poorly. Should you simply hold on to those bad stocks and wait a year? It could be years until those stocks turn upward. Or consider the opportunity costs of your losses by using the Buy and Hold strategy. If you sold the losing stocks in your portfolio after six months, and used the money to buy the winning stocks you researched in the meantime, wouldn’t that be better than holding onto a loser simply for the sake of following a buy and hold strategy or being overly worried about taxes? You have to cut your losses at some point and you may wait longer than a year, but this is something you don’t have to do anymore. Perhaps buying and holding most of your investments and mixing that with some short term trades (done purely strategically) may help you better optimize your investment strategy. A lot of investors cut their losses in the short term in order to tweak their portfolios. In many instances, this makes sense — say when you harvest tax losses or when you do portfolio rebalancing.

The risk in Short Term trading in the past was taken by those people who had large amounts of money at stake for a few minutes, while they profited from a minuscule up tick in the security’s price. Investing like that is not investing. This tactic uses the investment system as a casino and really only belongs to the world of professional traders. The common wisdom here is to keep your trading to a minimum — involve 5% or less of your portfolio in such endeavors. Most of your portfolio should be in mutual funds and index funds where you employ Long Term Investing strategies such as diversification and some degree of buy and hold. But in certain situations, doing a short term trade shouldn’t be a problem if you keep such trades down to a manageable level.

2

Free Money…If You Can Find It.

Did you know that treasury departments around the country contain about $33 BILLION (Money Mag, Dec ’09) in unclaimed money? Me neither – and some of it may be yours. Of course, I ran a check under my name and nothing came up. But when I get a chance I will run the names of everyone in my family and let them know what I find. The easiest way to search is by using the website for the National Association of Unclaimed Property Adminstrators (NAUPA) at unclaimed.org, where you can search the treasuries of all the states that you have lived in. Happy hunting!

unclaimed

4

How I Saved $150 On My Hotel Stays With A Phone Call.

As most of you know, I have been away for the last 3 weeks visiting friends and family around the U.S. – by car. I drove from Colorado to Massachusetts to Florida and back, putting over 5,600 miles on my car and spending my fair share of time in random hotels alongside highways in the middle of nowhere. See, when I travel by car long distances I don’t make reservations in advance; I just drive until I am tired and then find a place to stay. And if I just pulled into a random hotel and got a room, chances are that I would be paying way too much for what I could be getting for much less, especially in the middle of nowhere. So that’s why before I go into any hotel, I call from the parking lot outside…and make sure they offer free breakfast with the room rate.

Normally I only get off the highway at places where there are multiple hotel choices, so I have some options at my disposal. I drive into the parking lot of my first choice, look up their number on my iPhone, and give them a ring. I tell them I am on the road approaching their exit and ask 2 questions – “Do you have any rooms?” and “What is your best price for tonight?”. Usually the answer to the first question is “Yes, plenty” and then they give me a standard rack rate for that night. However, I don’t accept that as the price I want to pay and I then ask if that’s the cheapest they can go, as “I will be pulling off the highway here in a few minutes and checking with all the hotels around you, but would prefer to stay with you”. Every single time I asked for lower rate I was given it. $99 turned into $75. $82 turned into $64. And so on.

motel

And then once inside the hotel, to see if I could save even more money, I asked if they accepted any discount clubs – AAA, NARP, American Express – and sometimes I got a few more bucks off my bill. And finally, I always paid with a rewards card so I got points (sometimes double, depending on the hotel brand) to use later.

By the end of my trip, I estimated that I saved about $150 on hotel stays just by asking for a discount each and every night. Too many people just accept that whatever a hotel tells you they want for a night means that’s what they have to pay. Nothing could be further from the truth! Just because the gigantic sign on the highway says $79.95″ doesn’t mean that’s what you have to pay at all. And that is especially true for when traveling in vastly unpopulated areas that have 90% vacancy rates at their hotels. I am sure I could have pressed for even cheaper rooms, but I figured I was at least getting a fair price for a comfortable bed, a hot shower, and a free breakfast. It never hurts to ask!

Photo from Shutterstock

4

New Year Savings Tips For Your Children.

The turn of a new year is often a time of reflection for many. This year, don’t make resolutions just for yourself, take the time to make resolutions with your children that can have a lifelong effect. Start by discussing and setting some financial goals for your kids. Whether it’s learning the tenants of savings, understanding the ins and outs of responsible credit card use or more, opening the dialogue can happen at any age, any time.

Here are a few tips to get the conversation started, no matter what age your children are:

  • For younger children, start by having them keep track of money they earn by doing chores, are given as allowance, or receive as gifts from relatives. By tracking how much they receive and how they choose to spend or save it, you can begin to help them think strategically about money and plan responsibly.
  • For tweens and early teenagers, don’t let their summer and after school job pay checks go to waste at the mall and local food joints. Rather, encourage them to open a savings or checking account at your bank and with a portion of their money begin discussing the merits of savings and earning interest from a savings account.
  • For older teens take time to explore as many paths as possible, whether it’s college savings, saving for a new car, establishing credit, or discussing various investment techniques. Get them involved and interested in their financial well-being and see where the conversation takes you.

Finally, take it a step further. In order to make this a resolution to keep, sign a Money Management Action Plan (PDF) with your children, keeping you both responsible for starting and continuing the financial literacy learning cycle. Once you’ve set goals, you can then explore the learning tools available at the Manage Your Money section in the JA Student Center to begin setting the financial literacy wheels in motion.

Guest post from Dr. John Box, Senior Vice President of Education, JA WorldwideAbout Junior Achievement├é┬« (JA). Junior Achievement is the world’s largest organization dedicated to inspiring and preparing young people to succeed in a global economy. Through a dedicated volunteer network, Junior Achievement provides in-school and after-school programs for students which focus on three key content areas: work readiness, entrepreneurship, and financial literacy. Today, 137 individual area operations reach more than four million students in the United States, with an additional five million students served by operations in 123 other countries worldwide. For more information, visit www.ja.org.

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