It’s Time to Take Personal Finance Personally

I spend time visiting and reading other finance-related websites and blogs to see what is up in the world of personal finance. While The Insurance Word blog mainly offers information on how insurance, life, health, disability and long-term care, helps you form a smart and solid financial foundation, we do know that there is a lot more that goes into building a healthy financial life.

Most of the time I see good advice being offered on these sites and blogs, although from time to time I do run across bits of “wisdom” that make me raise an eyebrow. But on the whole, I think they serve an important service: They get people to think about their finances and financial lives in a way they might not have done before.

LearnVest is new to the scene, launched just last November (and is still in beta), but it has made an impression on me. It was started by Alexa von Tobel, who took a leave of absence from Harvard Business School, to address this specific problem:

“There is no formal education for personal finance. Barring the extremely rare exception, personal finance is not taught in high schools, colleges, or even by most parents. How do we typically learn about our finances? Unfortunately, through our own financial mistakes and blunders, which have the potential to set us back before we even had a chance to get started.”

And while most of the information on the site is targeted at women half my age, I do subscribe to their daily email: LearnVest Daily, which I have found engaging and on point, addressing concerns large and small that young people have as they navigate their financial lives. I’ve even benefited occasionally from money-saving (or generating) tips.

I know many of our blog readers are like me, regular people trying to get and keep a handle on what can be an overwhelming topic at times, their personal finances. But I also know we have financial advisors and insurance agents who read this blog.

So, I’d like to do a soft-turn and appeal to you, the professionals out there, to help out with this important task of educating young people about their finances. While websites and blogs are an important avenue to learning, nothing can replace the personal touch, a “teacher” leading the way. And if you are an advisor or agent, you need to start seeing yourself as a personal finance teacher to the upcoming generations.

You can do something about this. LIFE’s NextGen3 is multimedia insurance education program to help educate high-school students about the basics of life, health and disability insurance, as well as financial planning fundamentals. The program has already reached 23 million high schoolers, and this new edition is aimed at raising that number much higher, but we need your help. You can be the conduit to bringing this free program into your local schools, and to your next generation of clients. For more information, you can contact Julie Lattanzi at the LIFE Foudation at jlattanzi@lifehappens.org.

The Need for Life Insurance and the Industry

Tom Korb, VP of public policy affairs at the Association for Advanced Life Underwriting (AALU), recently published an article in the InsuranceNewsNet magazine. While the article was on political involvement, a number of the points he listed are of interest to consumers. (more…)

(Smart) Planning for the Unexpected

A story recently in the Seattle Times tells the story of Cathy Berk and the sudden death of her husband Dave. Dave was 60 years old and expected to work for at least another five years. Cathy also worked, but the death of her husband reduced their combined income by 70%.

Cathy and her husband had tried to invest for their future, but that future did not include his sudden death.

They had accumulated cash and retirement accounts equal to approximately two years of their combined income. Cathy has $21,400 of medical bills which were not covered by Dave’s health insurance and a $133,000 mortgage on her $500,000 home.

Does this sound like there may have been a need for life insurance? Dave did have a small policy which provides Cathy with an annuity of $2,046 per month for 10 years. In today’s market, this equates to a life insurance policy with a death benefit of around $200,000, or one-and-a-half years of Dave’s income.

Using the LIFE’s life insurance needs calculator, and plugging in the data above including Dave’s lost income for five years, showed the amount of life insurance was almost right on target, but this is only because Cathy had advice from a qualified financial professional in reviewing her finances. This professional advisor, upon a close examination of the family finances, revealed some additional investments which Cathy will use to supplement her income.

This points out how important it is for consumers to work with professional advisers to pinpoint their needs and plan for the unexpected. The resources of the LIFE Foundation can be very valuable in educating and creating awareness with your clients to plan properly.

The Ethics of Advising

Ethics. A subject where a few can harm the many, and where the actions of a few may paint an entire industry in a negative light. But the vast majority of our industry professionals follow a code of ethics which keeps the client’s best interest in the forefront. As a member of one or more of the industry’s professional associations, agents agree to follow a strict code of ethics and conduct as outlined below. These are from the NAIFA and MDRT Code of Ethics, but each association has its own code of ethics and conduct. All follow one main point. Do what is best for the client.

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What do I do?

I don’t know how many times I have been asked that question. Am I a financial advisor, a financial consultant, a financial planner or, best yet, an insurance agent?

Good grief! An insurance agent? Why would anyone want to be an insurance agent?

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