Monday, December 31, 2007

Thoughts on Insurance Part 1: Liability Limits

First off, please read the disclaimer at the bottom of this page and know that I am not an insurance agent and that every state has different rules and regulations.

I used to work in the personal (auto and home) industry, and a recent post by Mrs. Micah made me decide to share some things I learned. Please note that I do not benefit in any way by sharing this opinion with you and that it is only an opinion!

Liability Limits
One of the biggest mistakes I saw while working in the insurance industry is that most people do not have high enough liability limits. This seems to be particularly true of younger people. In general, older folks (read: people with a higher net worth) realize a bit more how much they have to lose. Younger people don't realize that their biggest asset is at risk if they get sued. And what is this asset you should be so worried about? Future wages. If you were to get sued, either because you were the cause of an auto accident or because someone fell and got a concussion on your icy front porch, your wages could be garnished for the rest of your life. Not cool. Especially if you're 25 years old. That's up to 40 years of garnished wages. Yikes!

What is Liability Coverage?
Liability coverage typically pays the people you’ve injured for property damage, loss of services, bodily injury, sickness, medical services, disease, loss of income and death.
Let's look at an example to explain. Let's say that you come over to my house to help me put Christmas lights on the outside of my house. I let you climb onto my rickety old ladder, which breaks and you fall. You get injured and end up in the hospital. Your lawyer encourages you to sue me and convinces the courts that I was negligent for letting you on my rickety ladder. The judge decides I owe you $200,000 for medical bills, pain and suffering. Where I am going to come up with $200,000? Luckily, I have homeowners insurance. My insurance company writes you a check and we're friends again. You can bet I won't be calling you next Christmas to help me with my lights, though ;)

Liability Limits and Deductibles
The ridiculous thing is, people often look at decreasing their deductibles before they look at increasing their liability limits, especially on their autos. How short-sighted is that? They decrease their deductible from $500 to $250 (saving them $250 if they file a claim) instead of increasing their liability limits from $25,000 (minimum for auto insurance in my state) to $100,000 (a potential savings of $75,000 in the event of a claim).

Please increase your liability limits as much as you can afford, on both your home/renters insurance and your auto insurance. My husband and I have the highest coverage we can get without getting an umbrella policy ($500,000 on both our auto and our home policies). It is usually surprisingly inexpensive. I think the difference between choosing a $500,000 liability limit versus a $300,000 liability limit on our home was about $7 a year!

Friday, December 28, 2007

Three Weeks to Paradise!

Three weeks from today, my husband and I will be on our honeymoon in sunny, warm Jamaica! Sitting here watching the snow come down at home in Wisconsin, I can hardly believe I'll be enjoying 80+ degrees in just a few short weeks!
We are really looking forward to this trip, especially since neither of us has been to a tropical place before. Any advice???

Friday, December 21, 2007

Favorite Blog Post 12/21/07

My favorite blog post this week was from Get Rich Slowly. The article discusses the importance of social capital and mentions the main character from the Christmas classic It's a Wonderful Life as an example of someone with an abundance of social capital.

It's a Wonderful Life and the Value of Social Capital

I consider myself very blessed to have a lot of social capital in my own life. To top it off, I found out last night that I'm going to be an aunt this summer :)

Thursday, December 20, 2007

Happy Birthday!

It's my husband's 30th birthday today. Happy Birthday, Gimpy!

Wednesday, December 19, 2007

Teaching Kids About Money

I recently read a cute post on Free Money Finance asking readers to comment about allowances and the tooth fairy. I really loved one of the comments left by a reader named Tom regarding what he does for his kids' allowances:

We give our 6-year-old and 9-year-old kids a $2 per week allowance… but with a catch. They have 5 different banks sitting on their dressers, titled "ANYTIME", "LONGTERM", "COLLEGE", "CHRISTMAS", and "GIVING". Each week they split their $2 into the banks like this:
* ANYTIME: $0.50 cents. This is the money they can use for ANYTHING, any time they want. Candy? Go ahead. Toys? Fine. We do not control their spending on this, though we do advise from time to time. Logan, you want to get a $2 popsicle from the ice cream jingle-jip man as he drives down the street? Go ahead. It’s your money.
* LONGTERM: $0.50 cents. This is money they save up to buy something special for themselves; usually a big toy or something relatively expensive (from a kid’s perspective). They can pick anything they want, and then they put a picture of the thing in the bank along with how much they need to save up. Then they save in this bank for months until they have enough to buy the thing. Once my older son saved for a year and a half to buy this incredible $60 Star Wars toy he HAD to have. Again this is something THEY decide on and the only rule is that they have to save for it.
* COLLEGE: $0.50 cents. When this bank accumulates $20 or so we take the money out and put it into their ING account. When that gets to a couple hundred bucks we roll it into their UGMA or 529b. Lather, rinse, repeat.
* CHRISTMAS: $0.25 cents. The kids thought up this category on their own. They save all year long and use this money to buy personal Christmas presents for their siblings and for us their parents. I think they get a lot of pride using their “own” money in this way, and the gifts they pick out are all the more precious to my wife and I than the ones WE buy for the kids to give us.
* GIVING: $0.25 cents. This money goes into the offering plate at church. Or the Salvation Army kettle outside the grocery store, or maybe a relay-for-life pledge. We think this may be the most important of the five banks, as far a building a child’s character is concerned.
My suggestion to parents is do something like this with your kids from an early age. Make up your own categories. Use whatever percentages you’d like. When your kids are really young, use this to teach them the value of money. Use it help them learn how much coins are worth and how to make change. Start by handing them 8 quarters and have them drop them into the proper banks. Later give them dimes and nickels. After that, dollar bills so they have to learn to make change from one bank to put into the other. Give ‘em a $2 bill and really mess with their heads! Eventually, hand them a $10 or $20 bill and teach them how to break that. When they get monetary gifts as, say, birthday presents, have them split those proportionally as well. If you increase their allowance (my teenager had his allowance doubled to $4 last year) keep the percentages the same.
So do this and as your kids get older watch them learn that, yes, if you spend all your ANYTIME money on candy, you won’t have any left to buy ; a hands-on Finance101 lesson. Watch your older children learn that a neat way to get that special LONGTERM item sooner is to apply some of their ANYTIME money to it as well! Watch your older kids be amazed at how those quarters saved for college at age 4 – through the miracle of compounding interest, regular contributions, and investing - have turned into thousands of dollars for college by the time they are teen-agers.
And if you are really really lucky, some day maybe your child will say to you, like my 9 year old daughter did to me one day: “Dad we are taking donations at school for Susie’s family whose house got burnt in a fire, but I only have $0.25 left in my GIVING bank… is it ok if I take out $5 from my ANYTIME bank and use that also?”
“Yes Lauren, that would be perfectly fine.” ;-)

What I liked about this idea:

- The amount is small. I don't think children need $10 a week unless you're going to put them in charge of some of their own expenses, like lunch tickets.

- The money is budgeted. Particularly with the LONGTERM bank, this seems like a great way for children to learn about delayed gratification, something our society seems to have some major issues with.

- It avoids the "gimmies". I don't have children yet, but if your kids have to buy all of their candy/trinkets out of their ANYTIME bank, you will hopefully avoid some of the whining that often happens at the checkout line!

I printed Tom's comment out and plan on filing it away for that day when my yet-to-be-born children are old enough to start learning about money.

Monday, December 17, 2007

Financial Goals 2008

With 2007 quickly coming to a close, I would like to give you my financial goals for 2008.

1. ROTH IRA's. Having just gotten married in July, my husband and I are playing catch-up for our 2007 ROTH's. In July, we set up automatic contributions for his ROTH and increased the contributions to mine. By April of 2008, we need $2580 more in my husband's ROTH and $2380 more in my ROTH. We're hoping a tax return with mortgage interest and property tax paid on two houses until September will help us out with this. We also plan to put $4000 into each 2008 ROTH by December of 2008.
A stretch goal for us would be to put an extra $1000 into each ROTH for 2008, which is the new maximum. We both started saving for retirement at an early age, so we don't need to do this, but it sure wouldn't hurt!

2. New Car Fund. My husband is very adamant about never having a car loan, and I agree with him. We're planning on a "new" car in about 3 years, one that will actually be about 2-3 years old at the time of purchase. We currently own a 1998 Honda Accord (hubby's) and a 2000 Ford Mustang (mine!), both paid for. I think my car, though newer, will probably be the first one replaced. I don't want to even think about attempting to get a car seat in the backseat of my Mustang or fitting a stroller in my minuscule trunk!
Our goal for 2008 is to add $3900 to the balance of our new car fund. Since we'll want to replace my husband's car soon after mine, our stretch goal would be to add $4500 to the balance of this account.

3. Emergency Fund. While we currently have at least 6 months of living expenses in our savings account, we don't have that much of it designated as "emergency fund" money. Our goal is to increase this fund by $2600 by the end of 2008.

4. New Siding Fund. My husband bought the house we currently live in about two years ago, and the paint on the exterior is beginning to peel pretty badly. The house is big enough to raise a family in, so we decided that we'd like to stay for the long run if possible. Given that, we've decided that instead of repainting, we are going to put vinyl siding on the house. Though more expensive, it should last a lot longer. We haven't gotten a quote yet, so we're not exactly sure of the cost, but we have a general idea. We would like to put new siding on by the spring of 2009, sooner if we can save up the money.
Our 2008 goal is to add $4000 to this fund. Our stretch goal is to save enough to put the siding on sooner, meaning another $2000 saved. We'd also then have to have all of this saved before the snow flies here in Wisconsin. This makes our stretch goal read "to add $6000 to our siding fund by October of 2008."

I will try to give updates on these goals throughout the year. Do you have financial goals for 2008? If so, what are they? If not, below are some other blogger's 2008 Financial Goals. Maybe they'll give you some inspiration!

Click. The Good News
No Credit Needed
Boston Gal's Open Wallet

Friday, December 14, 2007

Favorite Blog Post

My favorite blog post from this past week is from Trent at The Simple Dollar. This is about the most well-written blog post I've ever read:

The Meaning of It All


Thursday, December 13, 2007

Follow-up to "Our Saving and Spending Plan"

Someone left the following comment regarding my post Our Saving and Spending Plan:

How much, then, would you say your financial situation is driving the timing of when you plan to have children? Or, is it the other way around?

I've often heard it said that if you wait for the "perfect" time to have children, you never will. I think the same holds true for starting to save for retirement or starting to pay off debt. You can always say to yourself, "I'll do that after..."

While it will be nice to have 2-3 years of saving before I become a stay-at-home mom and we lose my income, saving is not the driving factor in our timing. There are two main issues that made my husband and me decide to wait to start our family.

1. Our marriage. My husband and I just got married in July, and we only dated for a year before getting married. We would like to have a few years to build a strong marriage before adding children to the mix.

2. My mouth. I have an underbite that was never corrected when I was a kid. My dentist has been encouraging me for years to get this fixed, as it is doing long-term damage to my teeth and gums. I am finally going to do this, starting right after our honeymoon at the end of January (the first appointment is already scheduled). I will have braces for a year and then oral surgery to break my jaw and reset it. Fun, huh? Needless to say, this is not something I want to go through while trying to care for a newborn at the same time!

As you can see, while waiting a couple of years before starting our family will be very beneficial to our savings balance, it really isn't the main reason that I'm still on birth control. ;)

Wednesday, December 12, 2007

How My Husband Has Made Me A Better Person

I was originally going to title this post "How Marriage Has Made Me A Better Person", but after looking at my list (which, by the way, is not complete, just a few things that came to me off the top of my head), I realized that it wasn't marriage but the wonderful man I married that is making me a better person! Anyway, here are three of the ways that my husband has helped me to be a better person:

1. I am learning to do life more slowly. My husband is a very patient man. He's never in a hurry to anything! While this drives me crazy once in a while, most of the time it is a very good thing. I am reminded to slow down and enjoy life. I am reminded that the world will not end if I don't get X, Y, and Z done in the next 10 minutes. I'm very grateful (most of the time!) to my husband for continuing to teach me this virtue.

2. I am spending more time with family. My husband and I are both very close to our parents and enjoy spending time with them. My husband, though, makes a more conscious effort to visit his parents on a regular basis, which in turn makes me want to visit my parents more regularly. The end result is that through the winter months we tend to spend every Sunday with one of the two sets of parents. Luckily, both sets of parents live within 45 minutes of us!

3. I do a better job when brushing my teeth. I know this sounds silly, but it's absolutely true! My husband and I brush our teeth together every morning and night. Before marriage, I was a 30-second tooth brusher. Swipe the brush around a bit, everything feels clean, done. My husband, on the other hand, is a 3-minute tooth brusher. He scrubs and swipes and get every nook and cranny. Twice. At least. When I brush my teeth with my husband, I become a 2-minute tooth brusher. I still get done before him, but I am much more thorough. I'm not sure why I do this, but I know it's good for me!

I'm very thankful to have been blessed with being able to share my life with my husband. If you're married, think of some ways that your spouse has made you a better person and thank them for it. If you're not married, keep looking! There is a man/woman out there who will allow you to become a better you.

Tuesday, December 11, 2007

Our Saving and Spending Plan

My husband and I just got married in July of 2007. To overly simplify our jobs, he is an engineer and I am a secretary. Once we have our first child, I plan on becoming a stay-at-home mom, so we decided to prepare for this right from the start by putting all of my income into savings and living off of his income. We are also trying to put some of his income into savings so that we don't develop a standard of living that has us living paycheck-to-paycheck once we lose my income.

I have to clarify something here. The money going into "savings" isn't going to be sitting in our savings account indefinitely. We do have various plans for it...some gets spent on vacations, some on funding our ROTH's, and we also use it for home improvement projects, etc. So we are using our "savings" money, but not on day-to-day living expenses or the necessities of life. What do you think of our plan?

Monday, December 10, 2007

An Introduction

Hi! I am a newly married 27-year-old woman who recently decided to try to start blogging! I titled my blog "Family and Finances" because those are the topics I am thinking of doing most of my blogging about.

On the "finances" topic, I have recently discovered financial blogs and find that I really love reading them. I decided that at the very least I can link to some of the best things I read so that more people can learn to better their finances.

Regarding the "family" portion, my husband and I are thinking of starting a family of our own in about 2 or 3 years, so I think I will blog about that. It will probably be mostly about the financial aspects for now and get more varied once we get closer to actually trying to start expanding our family.

I'm not sure if I will stick with this or not. I'm not really much of a writer, but I am a big reader. I guess we'll find out!