Earning Tax Credits for Life Insurance
Earning Tax Credits for Life Insurance
The main purpose of a life insurance policy is to provide financial stability after the death of a loved one. Aside from that fundamental benefit, some tax benefits can come with certain types of life insurance policies. Dependents could reap these tax credits when they receive benefits, or the insured individual can use them before the insurance policy pays out. Such policies typically benefit the very wealthy, helping them to minimize estate taxes. Because these policies carry a much higher premium cost, they rarely make sense for those with smaller incomes. Those individuals typically fare better with term life insurance.
Tax-Free Benefits
Basic tax benefits that go along with every type of policy are the policy proceeds. When the insured individual dies, the beneficiaries receive any life insurance payouts tax-free. The proceeds are tax free regardless of the type of life insurance policy. People who purchase whole life insurance can also benefit from a tax break because the policy’s earnings are not taxable for the duration of the policy. This means that the investments made by the whole life insurance policy will not be taxed until the policyholder’s death and the disbursement of the earnings to beneficiaries.
Cash Value Accumulation
One of the possible tax credits that people may not be aware of is the cash value accumulation. When the single premium value of the life insurance policy matches or exceeds the amount of the potential payout, there are no taxes due on the payout. This tax advantage only applies if the premium value is the same as or more than the overall benefit amount. If the single premium is less than the value of the policy, the earnings collected through premium payments do not qualify as life insurance benefits and will be taxed accordingly.
Guideline Premium
The federal government has placed specific guidelines on the amount of money paid toward a life insurance policy before the policy qualifies as life insurance. If the payments meet the appropriate guidelines, the policy qualifies for tax-free status. The general guideline states that the amount paid into the policy cannot exceed the guideline level premiums or the single guideline premium costs. That means the insured individual cannot pay more in premiums than the policy cash value.
Corridor Test
The corridor test is a process that evaluates the amount of money paid into the policy through premiums compared to the cash value of the policy. To continue to qualify as life insurance so that there will be no taxes assessed upon payment of benefits, the amount of money paid into the policy through premiums must be a specific percentage of the overall value of the benefits. The insurance corridor is the amount of money included in the death benefit that premiums have not yet covered. That balance of benefits would be tax-free.
Jessica Bosari writes about financial planning and life insurance for TermLifeInsuranceNews.com. The site offers news, advice and life insurance information for consumers.
Don't Pay Attention to Your Neighbor
A huge trend of our culture has been to constantly compare your house to your neighbors. Or, your car, lawn mower, kids…education, etc…
What about debt? Bankruptcy? Is it OK to try and achieve the same level of insolvency that your neighbor has? We all know the answer to that question. So, how can you avoid getting stuck in the same trap that your neighbor has? Read on…
1. Don’t Have a Car Payment
Did you know that a majority of American‘s believe that a car payment is just a part of life? Yup, they do. And you know what, I don’t blame them. Generations have embedded this thought process into our current and most likely future generations. BUT, just because everyone else has a car payment DOES NOT mean that you need to. Buy a car WITH CASH and win. Get a beater car that you can AFFORD and drive it until it won’t anymore. You’ll save yourself thousands in the process.
2. Have a Rainy Day Fund
On a normal day, you wouldn’t take a long walk outside while it’s raining, so why should your finances be any different? I don’t know, but the average savings account today sucks. Plan and simple, folks just don’t know how to save. So you can be wiser just by saving a percentage of your income each month. Start with saving $1,000 to be used for EMERGENCIES, then move to saving 2 to 6 months of living expenses. That’s the best umbrella money can buy.
3. Get on a Written Budget
Yup, a budget. I know they aren’t fun to get started, nor are they too much fun to stick to each and every month, but they will save you boat loads of cash if you work at it. As Dave Ramsey says, spend every penny on paper before you even have it in your checking account. This way you don’t even give yourself to spend money on things you shouldn’t.
4. Cut out the Crap
Examples of crap: cable TV, eating out multiple nights every week, vacations you can’t afford, etc…Once you have a budget written out you’ll begin to see areas of it where you can probably cut to help save you some cash each month. This way you can beef up that savings account, or if you have debt to pay off, get crazy about paying off that debt. Look at your expenses each month and create two categories, NEEDS and WANTS. If you’re really good and crazy, get rid of the WANT category and roll that money into savings or debt payments.
5. Cut up that Plastic
Another painful one for folks, but a great way to get ahead in your personal finances. Cut up the credit card and if you carry a balance pay those suckers off! Start paying off the lowest balance and work up through the highest. You’ll be surprised how much extra cash you have laying around when you don’t have payments to make anymore! So get cut’n and start pay’n!
Hope these 5 tips help you avoid the ditch your neighbor is in! Any other tips? Share them in the comments!
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Working Together for a common goal
The other week my husband and I went out for dinner with another married couple. We hadn’t gotten together since the holidays so it was really great to see each other and catch up on what was going on in our lives. At some point during our meal we got on the subject of finances. The wife was saying how she had so much fun saving up for a big vacation they went on. She went on to say that she normally doesn’t help out much when it comes to saving for their vacations. But for whatever reason, this year she decided she wanted to save up their spending money for the trip. She got a little jar and would put any extra money she had in this jar. By the time their trip came up, she had saved a significant amount of money; more than enough to cover any special souvenirs they wanted to buy. She also stated that she wished she would have started saving a lot sooner. She never realized just how much money she could save, just by putting a few dollars here and there into the jar. She told us that she was so happy about the money she had saved, that now her and her husband have a “savings meeting” every month and they are helping each other save for different items that they want.
I thought this was a great testimonial about how powerful it is to really take the time and effort to save up for something that you really want. She could have just done what she did every year and not have thought twice about saving up the money. But instead she worked hard and probably enjoyed the trip even more knowing that she took a part in getting them there. Not only did it save them money in the long run (not having to put the extra costs on a credit card) but it encouraged her to look elsewhere on their financial map and see what else she could save for. I think it’s wonderful when a couple can come together with their finances and really work as a team to make their financial dreams a reality.
What financial dreams are you striving for? How can you and your spouse make them a reality?
Ways I save money while attending school
As most of you are well aware, I made the decision back in the summer to go back to school. The choice was made rather last minute and I just squeezed in for admission. Because of that we really had to be on our A-game when it came to our finances and spending wisely. God thankfully provided a great job for me that has worked out beautifully with my class schedule. This job has provided more than enough money for me to pay for school month to month to save me from taking out a large loan. When I am done with school I will have about 80% of my school payed for and the other 20% will hopefully be saved by the time the bill is due. This allows me to be able to skip all the interest payments on the loan both during school and when I’m finished with school.The next way I save is with what I take to drink. Instead of buying bottled water for me to take to class (water is required) I actually take a water bottle from work. I’m a huge fan of vitamin water and it is at work for me to drink. So during the day I will drink a bottle of the Vitamin water like I always do, then I’ll throw that empty bottle in my purse. When I get to school, I’ll fill it up at the water fountain and use that instead. Then before I leave I just toss it in the recyclable bin. It saves me money, ensures the bottle will be recycled, and saves me from having to wash out a reusable bottle every day.
10 Easy Ways to Make Your Financial Future Better than Yesterday
Look to Tomorrow
Everywhere you turn there is nothing but bad news about the economy, bad news about the housing market, interest rates, bail-outs, the stock market, bankruptcy, and gas prices, just to name a few. TV, radio, newspaper, blogs, magazines, books, your family all they do is focus on the past and how we got to where we are today. There does not seem to be anyone who is looking to the future and what can be done to ensure that it is better than the past.
Today is a new day, and you better not be dwelling on your financial status of yesterday!
Look for ways that you can change. There is no change that is too small and I encourage you to think outside of the box and not be satisfied with what everyone else is doing. To get your brain thinking, I’ve included a basic list below that will help you have a better future with your finances.
- Cut up all credit cards
- Stop borrowing money from banks/family members
- Begin to live on a budget
- Save money each and every month
- Build up an emergency fund
- Curb impulse spending
- Pay all of your bills on time
- Pay more than the minimum payment on credit card bills/other loans
- Get a second job
- Live well below your means
It is a very basic, common sense, list, but it should be a good starting point for you. The most basic piece of advice I can give you if you are struggling with your finances and are toying with the idea of bankruptcy, or some sort of negative action, is to DO WHAT YOU HAVE TO DO. If you got yourself into this mess, then you can get yourself out of it. The list above is all about looking to the future, thinking of what you can do NOW and TOMORROW so that you are not in the same mess you were in YESTERDAY!
Do not be like everyone else out there who is looking to the past to guide them into the ditch of excuses for their actions. Be a new person, be a different person who is concerned about the future and what they are going to do about it!
What have you done to plan for your future? What have you done to protect yourself from all of the negative news out there, if anything?
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When Does Comfort Debunk Frugal Winter Heating?
Cold House!
So I’m a little frustrated here and I need to tell you why. I have written before about turning the heat down, keeping it down, and adding layers upon layers upon layers of clothing to stay warm, if you live in a cold climate. Ok. So I told you that, which most definitely means that I do that too (I practice what I write).
We had a $180 heating bill for December/January ($50 higher than a usual winter heating bill).
Sure, it was cold outside, but we still kept the heat off in the bedroom all day, low in the kitchen and bathroom, and low in the living room. And to take it an extra step, during the week when Lindsay has night class and I don’t need to spend time in the living room, I don’t even heat it. So then 5 days out of the week just the kitchen heat is on all day, and the bedroom heat on at night. We only heat 2 rooms during the week (on low settings) and are still seeing high electric bills during the winter months!
And we are still cold. And uncomfortable. And growing frustrated.
When does comfort (not being noticeably cold 24/7) debunk frugal heating during the winter?
How I Hosted a Super Bowl Party Without Going Broke
This is a guest post from Craig Kessler who is the face behind the budgeting utility www.budgetpulse.com
(review is in the works). We had a conversation earlier this week about how he saved money while throwing a Super Bowl party. He had some good tips, so I asked if he would be interested in writing a guest post.
The Super Bowl has come and gone, and what a fun one it was. I wrote a post recently that was all about tips on how to host a Super Bowl party without having to go broke. I am doing a follow up post about my hosting experiences and wanted to compare with everyone else, to see if the tactics did indeed work.
I hosted my party to 7 friends and we all had an excellent time. None of us truly were huge fans of either team and basically hoped for a good overall football game and a good party together. We got both. We had plenty of food, beer flowing, wise cracks aimed at everyone, and of course an exciting game that came down to the wire. I managed to host a very successful Super Bowl party and did not spend nearly as much as I could have.
For starters, I went with the approach that everyone should bring a different item or beverage. I have hosted sports parties in the past and covered all costs, this time I wanted things to be even. I had one friend bring a 7 layer dip, another made home made guacamole, and another brought the beer. I covered the chips, bought pizza rolls and chicken chiquitos to cook up in the oven.
I bought a bag of Tostitos chips and a bag of pretzels that combined costs $5. Between the pizza rolls and chiquitos, that was another $8. The only added effort was to actually cook them, which I don’t mind and took barely any time anyways. I didn’t even buy utensils because I used plates and dishes from my apartment and already had plenty of paper towels.
We decided as a group to all get wings and split a large order from a local restaurant that we know has very good quality wings. That was another $8 for my part of the order, and it was well worth it. For my food total, I only spent $21, and I hosted the event. That’s incredible and I was very happy to keep my spending on the minimum especially since we all had plenty of food and had a great time. I even managed to keep my side betting to a minimum and between back and forth bets basically came out even.
How did everyone else’s Super Bowl party go? Share your stories and ways how you were able to keep the price down.
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Ask Ask Ask
Last weekend we were at my in-law’s house for lunch. Afterwards, and after everything was cleaned up, we were drinking coffee and watching one of the NFL games that was on. After a few sips of my coffee I overheard my mother in-law on the phone ordering pizza for a group of people that they were going to have over later that night. Something she said caught my attention:
“Since we are ordering such a large quantity is there any of discount you can give us?”
They were ordering seven or eight large pies, a pretty large amount and what a fantastic question!! She did not know but thought it would be a good question to ask and I have to agree with her 100%. Even if it is not something that the pizza shop advertised, it may be something that they would consider doing based on quantity.
I never found out if they actually gave her the discount, but the thought alone served its purpose. Always ask. And don’t be afraid to ask! What can it hurt? The worst they will say is “no”. Atleast you tried.
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It All Adds Up – Video
No matter how large or small the amount, it all adds up to something that you did not have before. As the video below will explain, very quickly, you should be saving money each day, week, and month because it ALL ADDS UP!
In case you didn’t catch it:
- $.12 every day for one year is $43.80
- $12 every month for one year is $144.00
- $12 every week for one year is $624.00
- $12 every day for one year is $4,380.00
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5 Easy Ways to Recover From Christmas
- Image via Wikipedia
November and December are crazy months and a crazy way to end a year. Lots of food, family, and money being spent. Lots of money being spent is where I want to focus this, obviously.
For me, December was a ridiculously hard month to keep up with. Money in and money out. I had a budget for my Christmas gift shopping, but as the saying goes sometimes, “Budgets are meant to break”. And I am ashamed to say that I broke my Christmas shopping budget.
Let me tell you what happened and how it can ruin you in the new year if you don’t recognize the danger. December is a busy month. Busy busy busy and you need to shop. So you shop shop shop. You are also working full-time and bringing in money. But you are so busy that you don’t sit down and put the money where it needs to go. You don’t do your budget the way you normally do it (organized) and all of the income just stays in your checking account. While you are shopping. Dangerous.
So you are shopping from your checking account and not really keeping track of things because you are too busy to do so. Then, the season is so happy and joyous that you don’t even think twice about going out to eat more than usual or going to the theater one too many times, or just spending money on things you normally would not spend money on. But the time of year is so happy you don’t want to ruin it (the feeling) for you or the people you are with. So you spend spend spend and don’t keep track.
If you are like me, this will drive you crazy and can really only last for one month. Not more and definitely not into the new year.
As you may have guessed, in the above “example” you can replace all of the “you”s with “me” and you have my December and Christmas season. It drove me nuts but I was too busy to do anything about it. I hope this was not what your December looked like, but if it is, here is how you can get back to the real world of making money and budgeting that money.
Paper and Pencil
No. I’m serious. Get back to the basics. Write your budget out on paper and use a pen or pencil. Do not use the computer or whatever method you were using. Get back to the basics. Write out how much you normally budget for a month. Write out all of your bills, categories, and saving goals that you are going to throw money at. Write it all out on paper and track it on paper. Sometimes using the computer just makes it too complicated and things just need to go back to the basics. Don’t think this is a bad thing. Do what you have to do to get your spending under control and your budget back on track.
Use Cash
Most Christmas shopping for me was done online and therefore I used my debit card A LOT. Get back to cash. Don’t use your card except for for paying bills online. Everything else, use cash. It may be inconvenient, but you need to take it back to the basics. Get back to using cash as quickly as you can. The card can become a habit and a REALLY bad one if you don’t get it under control. Make a stop to the ATM or bank today and take out the cash you will need for the month and organize it. No card in January!! Are you with me?
Revisit your Goals
Lindsay and I sat down last week and took a look at our goals. Where were we at? How far have we come, how far did we need to go? What could we do to speed things up? The point is to revisit your goals. Re-energize yourself to meet your goals in the new year. It is easy to forget what you want to accomplish, so a quick visit is a very good thing to do. If you have not done so already, this fund raiser is a great way to reach your goals in the new year.
Don’t Lie to Yourself
This is the worst thing you could do and exactly what most people do. They say it will be okay, things have been going good and easy this way so I’ll just keep on this path. Don’t do it. Do not lie to yourself and talk yourself into thinking that you can continue this way and keep above water for any length of time. You must change. And now is the perfect time to do so.
Restarts Are Good
The second worst thing you could do is think that starting fresh is bad. Rewrite your budget, rework your spending and revisit your goals. These are all good things and do not need to be frowned upon by you or your inner critic. Be afraid of quitting but not of starting over. I encourage you to do so.
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