WEBVTT 00:00:01.151 --> 00:00:03.510 If you're committed to reaching your goals, then let your goals 00:00:03.511 --> 00:00:07.308 make your decisions. In any buying situation consider your "must 00:00:07.309 --> 00:00:11.250 "haves". Are they needs or wants? Know how much you can 00:00:11.251 --> 00:00:16.174 afford, whether you can pay cash or will you use credit. What is 00:00:16.175 --> 00:00:19.810 the product worth to you? Do your research. Ask yourself which 00:00:19.811 --> 00:00:24.531 Products fit your needs? Which is the best value? There are 00:00:24.532 --> 00:00:27.570 some "essential goals" that we should ALL share because they're 00:00:27.571 --> 00:00:31.699 critical to safeguarding our financial futures! We’ve already talked 00:00:31.700 --> 00:00:36.349 about savings for retirement and emergencies. Remember an 00:00:36.350 --> 00:00:41.016 emergency fund covers the unexpected such as job loss, 00:00:41.017 --> 00:00:44.548 catastrophic car or home repairs, medical bills and any other 00:00:44.549 --> 00:00:50.496 unexpected expenses or loss of income. At least one of these 00:00:50.497 --> 00:00:55.143 things will hit each and every one of us at some time. Think about 00:00:55.144 --> 00:01:00.145 it: this way, nothing is an emergency if you're prepared for it! 00:01:00.146 --> 00:01:03.784 Keep in mind a 401k or pension is NOT the same as an emergency 00:01:03.785 --> 00:01:08.422 fund. That's because you can't get to that money easily. If you had 00:01:08.423 --> 00:01:12.113 a real emergency, you'd have to go through some red tape and 00:01:12.114 --> 00:01:16.216 face some early withdrawal and tax penalties! Also keep in mind 00:01:16.217 --> 00:01:20.632 that loans and credit are not equal to an emergency fund. When 00:01:20.633 --> 00:01:24.327 you take out a loan or put money on a credit card you will have a 00:01:24.328 --> 00:01:28.686 new monthly payment. That payment includes interest and may 00:01:28.687 --> 00:01:33.045 put you into the red at the end of the month. A tip that helped 00:01:33.046 --> 00:01:36.834 me start to save is "Automate to Accumulate!" Some people call 00:01:36.835 --> 00:01:41.091 this "paying yourself first." You can set up an automatic draft from 00:01:41.092 --> 00:01:44.214 your checking account to a savings account. You can use the 00:01:44.215 --> 00:01:48.162 same bank or set up an account at another institution. This is 00:01:48.163 --> 00:01:52.309 what I do, I set it up an automatic transfer to correspond with my 00:01:52.310 --> 00:01:55.798 pay days, so every other week I am adding to my emergency fund 00:01:55.799 --> 00:02:01.221 and IRA. I use another institution and make it a bit more difficult 00:02:01.222 --> 00:02:06.088 to get my hands on that money. It’s the deterrent I need to leave 00:02:06.089 --> 00:02:10.080 that money alone and let it grow. You can also have a payroll 00:02:10.081 --> 00:02:14.712 deduction go straight to savings or another account. Any method 00:02:14.713 --> 00:02:18.404 of going "automatic" will help you build more savings. If the 00:02:18.405 --> 00:02:22.467 money is not in your checking account or in your hands you can’t 00:02:22.468 --> 00:02:26.094 spend it as easily and chances are you won’t. Forget about the 00:02:26.095 --> 00:02:30.417 money in that account and let it grow. Now let’s discuss another 00:02:30.418 --> 00:02:38.274 essential goal, insurance. Insurance is basic to financial security 00:02:38.275 --> 00:02:41.310 and is more a need than a want. It's one of the foundations upon 00:02:41.311 --> 00:02:46.345 which we built financial victory. Of course, nothing is foolproof. 00:02:46.346 --> 00:02:51.024 Insurance for something truly catastrophic often isn't affordable. 00:02:51.025 --> 00:02:55.488 But having no insurance can be a catastrophe in itself! Before we 00:02:55.489 --> 00:02:59.460 get into the specifics of insurance, let's review the basic terms. 00:02:59.461 --> 00:03:04.100 Insurance costs money. The payments for insurance policies are 00:03:04.101 --> 00:03:08.607 called "premiums." lf you don't pay your premium, the policy will 00:03:08.608 --> 00:03:13.181 lapse, and you won't be covered. Most insurance policies have 00:03:13.182 --> 00:03:18.219 deductibles. For example, if you have a $200 deductible on your 00:03:18.220 --> 00:03:22.307 health insurance, your insurance company won't pay anything 00:03:22.308 --> 00:03:28.393 until you've paid at least $200 in medical bills. Exclusions are 00:03:28.394 --> 00:03:32.195 conditions or services that aren't covered under a particular 00:03:32.196 --> 00:03:37.528 policy. An example, a homeowner's insurance policy that 00:03:37.529 --> 00:03:44.326 excludes flood damage. There are many types of insurance, but 00:03:44.327 --> 00:03:56.025 the most important are: health, disability, life, vehicle and 00:03:56.026 --> 00:04:00.746 homeowner's or renter's insurance. Let's start with health 00:04:00.747 --> 00:04:06.517 insurance. Medical care is a "need." Because today's medical care 00:04:06.518 --> 00:04:11.057 is so expensive, everyone needs medical insurance. Many people 00:04:11.058 --> 00:04:15.001 have group health insurance through their employer. A group 00:04:15.002 --> 00:04:19.527 policy is based upon a pool of people so the costs for healthy 00:04:19.528 --> 00:04:21.810 employees is averaged with the cost for those with health 00:04:21.811 --> 00:04:25.788 problems. This keeps prices down for the whole group. lf you 00:04:25.789 --> 00:04:29.014 don't have access to group insurance, and you aren't eligible for 00:04:29.015 --> 00:04:33.703 Medicaid or other free insurance, first take a look at the health 00:04:33.704 --> 00:04:39.548 Insurance marketplace www.healthcare.gov to compare plans 00:04:39.549 --> 00:04:43.481 and prices for based on your income. You may also want to 00:04:43.482 --> 00:04:46.818 consider getting less coverage for less money. This way you will 00:04:46.819 --> 00:04:52.102 have insurance if something really bad happens. For example, if 00:04:52.103 --> 00:04:56.392 you have a $1,500 deductible, the insurance company won't pay 00:04:56.393 --> 00:05:00.766 for anything until you've spent $1,500 in a calendar year. But if 00:05:00.767 --> 00:05:04.536 you have to stay in the hospital, you'll be very glad that you only 00:05:04.537 --> 00:05:09.107 have to pay the first $1,500. In other words, some medical 00:05:09.108 --> 00:05:11.550 insurance is better than none at all. Also, most high deductible 00:05:11.551 --> 00:05:13.762 health insurance plans make you eligible for the tremendous 00:05:13.763 --> 00:05:16.147 benefits of an HSA, or Health Savings Account. If you can't afford 00:05:16.148 --> 00:05:19.507 even basic health insurance, consider making changes to your 00:05:19.508 --> 00:05:23.234 budget even drastic ones so you can afford it. You can't afford 00:05:23.235 --> 00:05:28.167 NOT to have health insurance, it's a need, and we must adjust our 00:05:28.168 --> 00:05:32.443 wants to provide for this need! In 2010 the Patient Protection and 00:05:32.444 --> 00:05:35.311 Affordable Care Act, was approved. Many people have strong 00:05:35.312 --> 00:05:39.432 feelings, positive and negative regarding this law. President Trump 00:05:39.433 --> 00:05:43.100 has signed an executive order regarding the health care act and 00:05:43.101 --> 00:05:47.282 stated his administration would like the law repealed and replaced. 00:05:47.283 --> 00:05:50.631 Pending such a repeal, the Patient Protection and Affordable Care 00:05:50.632 --> 00:05:54.685 Act is still in effect. You can shop for coverage, compare rates and 00:05:54.686 --> 00:06:00.604 plans by going to www.healthcare.gov. For Americans making less 00:06:00.605 --> 00:06:04.598 than 400% of the Federal Poverty level, there are discounts in the 00:06:04.599 --> 00:06:09.220 form of subsidies to reduce premiums and lower out of pocket 00:06:09.221 --> 00:06:13.371 costs. If you have lost healthcare do to a change of circumstances, 00:06:13.372 --> 00:06:17.140 such as losing a job, go to the Health Insurance Marketplace, you 00:06:17.141 --> 00:06:20.861 could be eligible for coverage and discounts and may be able to get 00:06:20.862 --> 00:06:24.090 a less expensive plan if losing your job left you with an 00:06:24.091 --> 00:06:28.844 option of an expensive COBRA plan. Now let’s look at vehicle 00:06:28.845 --> 00:06:32.711 Insurance. If you have a car or a truck, you need vehicle 00:06:32.712 --> 00:06:36.017 insurance. Many states won 't let you register a vehicle without 00:06:36.018 --> 00:06:40.240 it. Without insurance, if you cause an accident and someone is 00:06:40.241 --> 00:06:45.005 injured, you could be sued for hundreds of thousands of dollars in 00:06:45.006 --> 00:06:48.540 medical costs and damages. If you have a loan on your car, or 00:06:48.541 --> 00:06:51.416 you lease, the company that finances or leases your vehicle 00:06:51.417 --> 00:06:54.806 requires that you have insurance listing the company, along with 00:06:54.807 --> 00:07:00.299 you, as the "loss payee." The lender or leasing company will 00:07:00.300 --> 00:07:05.049 consider any lapse in your insurance a breach of contract. Then 00:07:05.050 --> 00:07:07.447 the lender can then force you to pay them for more expensive 00:07:07.448 --> 00:07:14.157 insurance or even take your vehicle by repossession. As with 00:07:14.158 --> 00:07:17.370 anything, learning more can help you save money. And there's no 00:07:17.371 --> 00:07:20.082 substitute for sitting down with an expert. Many insurance 00:07:20.083 --> 00:07:25.436 brokers have little training, so look for someone with credentials. 00:07:25.437 --> 00:07:28.275 And that brings us to the next type of insurance we need, life 00:07:28.276 --> 00:07:32.256 insurance. Laws differ by state, and while there are some 00:07:32.257 --> 00:07:35.171 exceptions, your heirs or family are usually NOT personally 00:07:35.172 --> 00:07:39.036 responsible for debts that are solely in your name. Talk to a 00:07:39.037 --> 00:07:42.747 lawyer licensed in your state to find out for sure, but the point is 00:07:42.748 --> 00:07:46.007 that generally, your life insurance should not focus on your 00:07:46.008 --> 00:07:49.249 debts. Rather, it should provide for the people who depend on 00:07:49.250 --> 00:07:52.499 you for financial support. Life insurance should match your 00:07:52.500 --> 00:07:56.033 financial responsibilities. If you're single and don't provide for 00:07:56.034 --> 00:07:59.110 anyone else financially, you may only need enough insurance to 00:07:59.111 --> 00:08:02.704 cover your funeral. But if you have a family that depends on your 00:08:02.705 --> 00:08:06.685 income, you'll need enough insurance to replace your income 00:08:06.686 --> 00:08:10.159 should you die. There are Internet tools, that let you estimate 00:08:10.160 --> 00:08:14.318 how much life insurance you will need. Before choosing a policy, 00:08:14.319 --> 00:08:18.590 learn more, comparison shop, and talk to an accredited insurance 00:08:18.591 --> 00:08:22.214 professional about how much coverage you need. Consider term 00:08:22.215 --> 00:08:25.344 life insurance if the purpose of the insurance is to protect your 00:08:25.345 --> 00:08:29.661 family’s income for a specific time period, for example, while 00:08:29.662 --> 00:08:35.073 your children are still at home and dependent on you. Whole life 00:08:35.074 --> 00:08:36.844 insurance will also protect your family’s income and protect 00:08:36.845 --> 00:08:39.702 against estate taxes (if you face that issue), but will be much 00:08:39.703 --> 00:08:47.428 more expensive. I'd like to caution you about two mistakes 00:08:47.429 --> 00:08:50.764 People make when it comes to life insurance. First, there is such 00:08:50.765 --> 00:08:54.274 a thing as too much life insurance. The first one is when people 00:08:54.275 --> 00:08:55.445 pay several hundred dollars a month for life insurance, leaving 00:08:55.446 --> 00:09:00.397 them unable to cover their living expenses. This usually happens 00:09:00.398 --> 00:09:03.332 when parents insure not just themselves but their children. 00:09:03.333 --> 00:09:06.398 Remember, life insurance should replace the income of the 00:09:06.399 --> 00:09:09.709 person who dies. Since most people don't depend on income 00:09:09.710 --> 00:09:14.092 from their kids, this is a bad choice if it leaves you unable to 00:09:14.093 --> 00:09:20.342 balance your budget. The second mistake is when you purchase 00:09:20.343 --> 00:09:24.170 insurance that you probably do NOT need. One example of this is 00:09:24.171 --> 00:09:27.165 mortgage insurance or credit life insurance. Mortgage insurance 00:09:27.166 --> 00:09:29.598 pays off your mortgage lender if you die during your loan. So 00:09:29.599 --> 00:09:32.042 Mortgage insurance protects the lender more than it protects 00:09:32.043 --> 00:09:34.011 your family! Do you really want the money to go to your lender 00:09:34.012 --> 00:09:37.127 instead of your family? If you have enough life insurance, your 00:09:37.128 --> 00:09:40.618 family can use it to pay off the mortgage and keep the house, OR 00:09:40.619 --> 00:09:44.199 they can sell the house and buy another one. With mortgage 00:09:44.200 --> 00:09:48.236 insurance, they won't have that choice. And it's usually more 00:09:48.237 --> 00:09:53.485 expensive than life insurance. There is one possible exception I 00:09:53.486 --> 00:09:56.582 can think of, mortgage insurance may be beneficial for a person 00:09:56.583 --> 00:09:58.851 who is in poor health and life insurance is unattainable or too 00:09:58.852 --> 00:10:02.779 expensive. If you are considering mortgage insurance in this 00:10:02.780 --> 00:10:06.508 situation check the small print for restrictions and make sure it 00:10:06.509 --> 00:10:10.263 would cover your pre-existing condition. Can you tell us more 00:10:10.264 --> 00:10:14.812 about Credit Life? Credit life is similar but it’s for non-mortgage 00:10:14.813 --> 00:10:18.749 loans. Credit life pays off the car lender or other creditor if you 00:10:18.750 --> 00:10:22.405 die during your loan. But remember, your family is usually not 00:10:22.406 --> 00:10:26.814 responsible for these loans! Credit life is expensive, and lenders 00:10:26.815 --> 00:10:30.291 often push it and act as if it's because they care about your 00:10:30.292 --> 00:10:34.305 protection. But remember it's profitable to them AND the loan is 00:10:34.306 --> 00:10:40.590 paid upon your death even if your family is not responsible for it. 00:10:40.591 --> 00:10:46.280 Credit life protects the lender much more than you! Again here, 00:10:46.281 --> 00:10:49.017 you are much better served with life insurance. One final tip: Try 00:10:49.018 --> 00:10:51.442 to buy enough insurance in a single policy. lf you buy multiple 00:10:51.443 --> 00:10:57.011 policies, you'll duplicate some costs. The next type of insurance 00:10:57.012 --> 00:11:00.606 that most of us need is disability insurance. Did you know that you 00:11:00.607 --> 00:11:03.420 have a MUCH greater chance of being disabled than dying during 00:11:03.421 --> 00:11:07.188 your working years? It's true. That's why disability insurance may 00:11:07.189 --> 00:11:10.712 be even MORE important than life insurance! Try to have 00:11:10.713 --> 00:11:14.582 disability insurance that pays at least 60% of your salary and starts 00:11:14.583 --> 00:11:18.381 3-6 months after you become disabled. Make sure it continues 00:11:18.382 --> 00:11:22.117 until retirement age, and look for a policy that has a broader 00:11:22.118 --> 00:11:26.379 definition of disability than the Social Security Administration's. 00:11:26.380 --> 00:11:29.665 Let's finish our look at essential insurance with homeowner's and 00:11:29.666 --> 00:11:33.467 renter's insurance. If you own a home, you need homeowner's 00:11:33.468 --> 00:11:38.424 insurance. If you rent, renter's insurance is very affordable and 00:11:38.425 --> 00:11:43.038 will protect your belongings. Think of it this way: Insure to Be 00:11:43.039 --> 00:11:46.817 Sure! You can avoid many pitfalls by insuring the important 00:11:46.818 --> 00:11:52.726 financial elements of your life. In summary, to reach our goals, 00:11:52.727 --> 00:11:55.828 we must have a plan. Our goals will differ based on what's most 00:11:55.829 --> 00:11:59.701 important to each of us. Proper insurance and an Emergency Fund 00:11:59.702 --> 00:12:03.421 are "essential goals" because without them, we could lose 00:12:03.422 --> 00:12:07.512 everything else. We all start at different places, but with patience, 00:12:07.513 --> 00:12:10.642 persistence, and desire, we can all reach our realistic goals. Decide 00:12:10.643 --> 00:12:16.708 what's most important to you, follow the steps in this unit and 00:12:16.709 --> 00:12:20.551 you will be more successful in reaching your goals! Use effective 00:12:20.552 --> 00:12:23.854 financial goal setting to create Your own goal map and make sure 00:12:23.855 --> 00:12:29.262 to write it all down. Insurance is an essential goal. So be sure to 00:12:29.263 --> 00:12:31.740 have enough of the right types of insurance for your situation. 00:12:31.741 --> 00:12:36.462 Insurance is what protects you as you work towards your other 00:12:36.463 --> 00:12:41.034 goals. You need to have BOTH an emergency fund and retirement 00:12:41.035 --> 00:12:45.303 savings. The emergency fund is money you can get to quickly 00:12:45.304 --> 00:12:49.031 without penalties. Your retirement savings should be invested for 00:12:49.032 --> 00:12:52.031 long-term growth.