Financial Planning And Life Insurance

When I was in my 20's, I was married and starting a family. My wife and baby daughter were totally dependent on me and so I decided I needed life insurance. I bought a whole life policy. I was paying $50 dollars a month and my death benefit was $50,000.00. The agent who sold it to me told me my cash value would grow over time and that I could borrow money from it. Being young and dumb I had no idea if what I bought was a good deal or not.

In my 30's my family had grown to 3 children. A friend at work (who also had a growing family) told me he just bought a 250,000 insurance policy. He was paying about the same as I was but getting a lot more coverage. I asked for his agents phone number. I bought a $300,000 10 year term policy for $70 dollars a month. Actually an expensive term policy as I was a smoker. If I hadn't smoked it would have cost less than $30. a month. At the same time the new agent taught me some financial planning ideas that made a lot of sense. He explained how my 401k plan worked and that it was by far the best investment for my future I could make. I maxed out my 401k contributions.

 Thanks to that moment in my life, my 401k has grown to the point where I can retire on the interest and leave a significant sum to my children. I no longer need life insurance. My savings are enough that if I were to pass away, my family would still be able to keep our home and there would be enough money to maintain a good standard of living. Besides savings and investments and my 401k, there is also $30,000 in life insurance given to me by my company and that would more than cover final expenses.

The insurance agent who sold me my whole life policy was not trained in financial planning. He was only trained to sell the products his company offered. My second agent who sold me the term policy and taught me about planning my financial future and it was a major eye opening moment.

I closed my whole life policy. I had built up quite a bit of savings in it but when I closed it they charged me a surrender fee of over 600 dollars. So I received my savings minus the 600 dollars. I thought it was my money? I was a real disappointed in my first agent. Not only did he sell me a policy that would not have been enough, he didn't tell me anything about managing money like the second agent did. First agent was not a bad guy, he was just never trained by his company. Their philosophy of what is the right thing to do for a customer was just much different from the philosophy of the company that promoted term insurance.

First off, regardless of weather or not you need life insurance, you need to begin saving for your future. The best ways available to everyone is either a 401k plan through work or an IRA plan you can set up with just about any financial institution. Both of these are tax deferred plans which are designed to encourage Americans to save money. And the reality of today's world is that we can no longer go to work for a company and expect to work there 30 years and retire with a pension. People have to take responsibility for themselves. My 401k plan at my place of work matches 50%. That means for every dollar I put in I get 50 cents from the company. Do the math. If my taxes are 30% than tax deferring that dollar only meant 70 cents less in my paycheck. So for each 70 cents less in my paycheck, I get 1.50 in my retirement account which grows tax free until I start taking it out at age 59 1/2.

The rules are the same for an IRA except it is a personal plan so there is no matching. But still for every 70 cents less in your paycheck, you get 1.00 in your retirement plan. Its like getting paid to save. Only a fool doesn't take advantage of this.

 If you are raising a family, buy term life insurance. It is cheap and you can afford enough coverage to actually make a difference if something happens to you. In time, if you contribute the maximum amount to your 401k and/or IRA plans they will grow to the point where your retirement will be very comfortable. When your children move out and start their own families, they are no longer dependent on you. Your need for life insurance begins to lessen. If no one is dependent on you for support, why carry a lot of insurance? 

Personal finance is just that. It is personal. Only you will take a serious interest in your own success. Insurance agents, financial advisers, brokers, aany one in the financial services industry will be glad to help you out. The thing to remember is they usually work on commission. So there is always a potential conflict of interest.

Buy some books or go to the library and study up on personal finance. Yes, it is mostly boring and dry reading. But if you learn it, you can easily have over a million dollars in your retirement account when it comes time to retire. And the honest truth is you will need at least that much.

 Teach yourself everything you can about personal finance. Learn the ways of the stock market. Learn the time value of money. I like getting my information from books. The internet is a starting point but so many times what you read turns out to be a sales pitch. A book is rarely a sales pitch. They make their money selling you the book. Not by making a commission selling you a financial product.