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Posts Tagged ‘Life Insurance’

If it was just a matter of evaluating the wisdom of using your life insurance to pay off your charge card debt, I would be inclined to tell you that it would probably be a smart move. However, there is a big wrinkle in the whole equation: namely, you stated that your job is ending soon. Normally, I would have counseled you to seriously consider paying off the debt quickly while you can – especially since taking a loan from your whole life insurance policy should have no tax consequences to you. However, the bigger issue is your looming unemployment status.

Use Insurance as a Cash Cushion in the Future

If you don’t find another job or a replacement contract, you will have to consider how you will pay all your normal monthly obligations – housing, food, utilities, transportation, and so forth. I assume you have little to no savings (or some of that likely would have paid the debt already). Unfortunately, it is taking people longer than ever to find jobs. And with 10% unemployment, 1 out of 3 job-hunters has joined the ranks of the “long-term unemployed.” This means they have been out of work for at least six months. So given the current economic environment, and the fact that your credit card debt is carrying an extremely low interest rate right now, I would suggest continuing to pay on that debt as aggressively as you can, but don’t yet tap the cash value of your whole life insurance policy. Keep it untouched for now, as a standby cash cushion that you can access in the future if things get especially tight and you can’t easily replace your income.

By Lynnette Khalfani-Cox, The Money Coach

Stay-at-Home Moms are very valuable. If the typical American stay-at-home mom got paid, she’d earn more than $116,000 a year for her work, according to a Salary.com survey. A SAHM (or dad) can even use a tool to personalize her own salary. But regardless of how much value a mom actually adds to her family, it is important to take mom’s contributions seriously and be prepared financially. If you’re a stay-at-home mom, here are five financial tips to help protect you and your family:

1. Get a life insurance policy on yourself.

Many people think that only working individuals need life insurance; but that’s a mistake. You want life insurance because if something should happen to you – heaven forbid – the cost of replacing all the services and things you provide for the kids would be enormous. Consider this: You’re essentially the children’s full-time doctor, chauffeur, a teacher to them, their daycare provider and more. If you weren’t around, your husband would have to pay for all these services, or cut back on them, and you don’t want your kids to be short-changed.

2. Plan for a pink slip – even if you’re sure your spouse won’t get one.

While your family may currently be able to get by on just your husband’s income, you must think about how you all would fare if your spouse, by some misfortune, lost his job. Not only would it be financially daunting to make ends meet, but it could also cause marital problems too. PayPal’s 2009 Can’t Buy Me Love survey found nearly half of all couples surveyed in the U.S. said they were arguing more about money amid the recession. Needless to say, it didn’t help that many people have recently been downsized, had their hours cut, or seen their pay slashed. Avoid potential money battles by establishing a budget together, eliminating debt, and building up an emergency cash cushion. You’ll never regret being prepared for a “worse case” scenario.

3. Open at least one credit card – and a separate account – in your own name.

Don’t make the mistake that many stay-at-home moms make by allowing all the family’s credit to be held solely in their husband’s name. Some women are simply added as “authorized users” on credit accounts. It’s better for your personal credit rating to be listed as a co-signer on an account, or to have one or two credit cards in your own name. This also protects you in the event of divorce (you won’t have to apply for new credit, and get “inquiries” on your credit file, which can hurt your credit rating). A credit card account in your name can even prevent hassles in the event of a spouse’s death. Additionally, opening a separate checking account will help you to achieve financial harmony with your mate. You’ll both have a bit of financial autonomy, and you will avoid common money spats over spending because neither one of you will have to account for or “get permission” to make routine purchases. Just be sure to set a limit on how much each of you can spend independently. For example, you might say: “We’ll check in with each other if we want to buy anything over $300.”

4. Stop secret spending.

Plenty of stay at home moms engage in “secret spending,” where they make purchases and hide them from their partners. Working women do it too. But the typical stay at home mom has more opportunity to stash clothes, purses, shoes and other merchandise while her husband isn’t around. Secret spending – whether you’re splurging on yourself on buying stuff for the kids — can easily get out of hand and cause you to rack up big credit card bills. Moreover, if your spouse finds out about your hidden items (and don’t think he won’t ever look in the back of your closet, or notice items with tags still hanging on them), he’ll wonder what other secrets you’ve been keeping from him. Don’t erode your husband’s trust. That could put you on the fast-track to divorce court.

5. Don’t rationalize irrational spending.

Some stay at home moms who go on spending binges or frequently make impulse purchases often justify their constant spending by rationalizing about all the money they’ve allegedly saved. Some women resort to the old “but it was 25% off!” as their rationale for buying something that their spouse later questions. In many cases, it’s an item that they didn’t need or simply couldn’t afford – even with a 25% discount. Other times, stay at home moms think it’s OK to spend excessive amounts of money based on the illogical argument that they’ve already saved money by not going to work, and therefore are not having lunches with colleagues, not commuting, etc.