Can America ever save money for a rainy day? In this new economy, every day has the potential to be a rainy day, with cutbacks and layoffs and the mortgage crisis we are all sitting on the edge.
Today it is a fact that we as Americans can't live the way we used to, we must now get used to spending less and saving more (easier said then done).
We all have certain bills that have to be paid each month, car payments, house payments, insurance and putting food on the table, these we can't avoid.
At the end of the month we are left with scraps of our paychecks and are expected to fund college, fund retirement, and take the family on vacation.
On top of all that we should be setting aside some money for that rainy day.
Tough to do in today's world.
I think I can help you.
Let's go back to those bills we have to pay each month, starting with the house payment.
Take your payment for your home, what ever it is and multiply it by the number of months you have left on your mortgage.
We will use $1000.
00 and say we have 23 years left on a thirty year loan.
That's $1,000.
00 X 276 payments and that comes to $276,000.
00.
We paid $260,000.
00 for the home and put down $60,000.
00.
We put $60,000.
00 down and will pay another $276,000.
00 to get our home free and clear, that equals $336,000.
00 plus we need to add the first seven years of payments, $84,000.
00 for a grand total of $420,000.
00 on a home that we will own free and clear in the year 2032.
There are many other costs to owning a home like taxes and insurance but lets keep this simple.
At this point you have a home that is worth at little less then you paid for it (do to the current market) and should double over the twenty three year period at least 1 ½ times.
(that's conservative) What you end up with is a built in savings account.
The point I am making is you have to sleep somewhere why not stay where you can acquire some or all of your money back.
What else do we have to pay for each month? Food ..
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I can't help you much there unless you want to buy a John Deer and start tilling dirt.
What else..
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Car payments, no savings there unless you're buying antiques (can't afford those).
What else..
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Health Insurance, yes health insurance can become a great saving account.
(HSAs are becoming very popular in middle America) What else..
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College funding, Yes college funding.
What else..
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Life insurance, absolutely life insurance is the king of built in savings.
Most of us are paying all of these 5 bills each month, lets turn them into a saving accounts and at least get some of our money back.
I can here them now screaming at my little article, the CPAs and the stock brokers and all the non insurance selling so called "financial planners".
"You should get cheaper insurance and invest the rest with me and my broker friends".
The only thing true about that statement is there friends are broker due to the losses of there investments in Wall Street.
Today we as Americans are going to adjust to this new economy (or become extinct) and we will accept less of a return for more of a guarantee.
Well written insurance policies can offer that assurance.
Take out your mutual fund statement and look at the costs of maintaining that fund (about 1 1/2% to 2 1/2%) That is equivalent to a well written UL insurance policy or a term policy with a return of premium rider attached.
Not only does that mutual fund have the chance of loss but it has no extra benefit as does an insurance policy (protection for your family).
You can get both with a good UL policy, savings and protection.
One other fact to mention about a good UL policy and that is that all funds generated in the policy can be accessed TAX FREE and are not claimed on your income taxes each year unlike that mutual fund that you own.
(please consult your tax advisor on any policy you plan to buy) Another Type of insurance policy that is becoming very popular is home mortgage protection with a return of premium rider.
Simple stated this is a contract between the owner (of the policy) and the insurance company that states "make all your premium payments for the term of the policy and we will guarantee the return of all your premiums.
This type of policy is inexpensive and quick to get and is a great way to save money and protect your family at the same time.
These policies are so powerful that I am going to spend more time on them in a future article.
The other insurance we talked about was Health insurance.
Now I know what you're thinking "how can I save money and have health insurance at the same time.
" They are called HSA accounts, HSA stands for Health Savings Accounts.
Simple put, there are two sides to a health insurance policy, side one is catastrophic care and the other side is office visits.
Side one is rarely used (how many times have you or someone you know stayed in the hospital for an extended period of time?) and there for is the inexpensive side as far as the insurance companies are concerned.
Side two is the expensive side and costs the insurance companies millions of dollars in unnecessary doctor visits.
When you go to the doctor for the sniffles and make a return visit a week later those cost are very expensive.
Multiply those by the millions of people that do it and you can see the costs adding up.
Now let's take a family of four (like mine) and separate the costs, I pay $665.
00 per month for health care with dental.
Of those costs $255.
00 is for hospital stays the rest is for doctor visits, that's $410.
00 of my $665.
00 premium.
Wow that's big, in an HSA the burden of doctor visits is on me.
I pay for those visits; that is where the savings account comes in.
Remember that $410.
00 we talked about, that now goes in to my savings account each month and I am issued a special dept card that can only be used for doctor visits or drugs.
If my wife and our two boys don't go to see the doctor other then our regular check up we can save all that money for next year.
Needless to say we eat better and exercise on a more regular basis (I don't want to spend that money) you can do the math, over many years that can be substantial.
One other thing to mention, you can put into that account any amount you want or don't want, so on the month when money is short just pay the $255.
00 and your policy stays intact.
I said free in the title didn't I? Nothing in life is free and that goes for the protection of your life and your family.
The free part was this article, I know how much you paid for it and now you have the information to go out there and start saving for that rainy day.
Good Luck!