Make progress on your financial resolutions
BY TERRY SAVAGE SUN-TIMES COLUMNIST Jul 14, 2006
Updated: May 3, 2013 12:14PM
Originally published: July 31, 2003
Remember back in January when you made all those resolutions to get your personal financial house in order? Well, now that it’s summertime and everything is slowing down, here are four of the most important financial projects. Pick one--and get it done now.
Your estate plan. With the decline in stock prices, you may not have much of an estate to plan. But the unexpected can happen, and you don’t want your children and spouse to have messy issues to deal with.
Instead of a simple will, consider a revocable living trust. It helps you handle your affairs appropriately while you’re alive, as well as after you pass on. Estate planning is definitely not a do-it-yourself project. So call an attorney or the local bar association now for references if you don’t already have a specialist in this area.
When you create your estate plan, you’ll need two other valuable documents: (1) a health care power of attorney details who will make medical decisions if you can’t, and (2) your attorney may want you to prepare a living will, which contains your instructions about pulling the plug and organ transplantation if the situation arises.
This should cost under $1,000. Ask in advance for a price, but don’t let cost deter you.
Life insurance checkup. The second promise you made was to do a life insurance checkup. There are still good deals to be had in term insurance, even though insurance-company investment portfolios have shrunk.
Byron Udell, president of Wheeling-based Accuquote.com, says: “Consumers can still save boatloads of money by comparing today’s term prices with their annual costs for policies purchased five or more years ago. And they can extend their level-rate guarantee period for 20 or 30 years.”
How much money could you save? Udell says that a male who was 31 years old in 1994 would have paid $630 for the least expensive 20-year guaranteed level premium policy with a death benefit of $500,000. Today, says Udell: “That guy is 40, and he can buy a new 20-year level term policy from any of eight different insurers for under $400 a year in premiums. In fact, if he only needed 10 more years of level term he would pay about $225 a year.”
One word of warning. If you have cash value insurance, it may have some very valuable guarantees. Many universal life or variable life policies were sold with a minimum “crediting rate” guarantee of 4 percent. In these days of low interest rates, that guarantee is something you don’t want to lose. So check very carefully before you allow an insurance agent to talk you into switching to a new cash value-type policy.
Get organized online. The other thing you promised was to try online bill pay. If you already have a checking account, the rest is easy. Every bank has a Web site. Just go there and click on “online banking.” All you have to do is establish a password, and you’re ready to start paying bills with a click of the mouse. No more writing out checks and tracking your check register. No more paying for stamps. It’s safe, secure and guaranteed. And you can pay anyone, at any time.
Once you’re set up, the next time you receive a bill in the mail, you can go to your computer and enter the payee, address and amount. Do that with all your bills, then click your mouse to send the instructions to your bank. They’ll write out the checks, which you’ll get back in your monthly statement.
Or they may pay some bills by electronic transfer to the phone company, utilities or credit-card issuers. Either way, you’re completely protected against fraud.
Get started with online bill pay now, because the next new thing is e-bills. Soon you won’t have to receive bills in the mail. You’ll be able to have them sent directly to your bank’s Web site, where you can examine the charges and then click to pay the bill in full or just the minimum required amount, on the date you choose. Think of all the trees we’ll save as we eliminate paper bills.
Examine 401(k) choices. The stock market is up, and chances are your bottom line has improved inside the company retirement plan. But it’s still time to do a mid-year checkup to make sure you’ve chosen the most appropriate funds offered by your plan.
Go to www.Morningstar.com for more information on each fund, or click on “portfolio” to enter your investments and get a quick, secure and free analysis of your investment allocation.
In January, that’s what you said you’d do if you had time. So do it now. Remember, the road to financial ruin is paved with good intentions. And that’s the Savage Truth.
Terry Savage is a registered investment adviser and is on the board of the Chicago Mercantile Exchange and McDonald’s Corp.