8 Point or Single Filing: https://www.policygenius.com/blog/marriage-finances/ https://turbotax.intuit.com/tax-tools/tax
© 2016 MoneyCoach LLC
Relationship Video Transcripts With Citations
Dating and Finances (Video 1) Meet Mark and Sophie. Mark is a quiet accountant working at Industry Inc and Sophie is a happy-go-lucky saleswoman working at Corporate Co. While an unlikely couple, the two recently met at the intramural softball game, and quickly hit it off. So much in fact, that they’ve been happily together for the past nine months, and things are starting to get serious. In truth, the two make a great team, and seem destined for a bright future together. There’s just one problem. They’ve left out one key compatibility check: money. Now I know what they’re thinking, “That’s like a marriage topic, plus conservations about money are always so awkward and stressful.” While, that’s indeed true, this “money talk” remains a crucial conservation for any serious couple. Don’t believe us? 75% of divorces are partially due to money1, specifically not communicating about it, plus, the last thing you want to find out once you married is that your spouse has $30,000 in secret credit card debt. So, awkward as it may be, Mark and Sophie need to sit down with a list of their financial goals and numbers, namely assets, debts, credit scores, and salaries, and talk them through2, ideally in a relaxed environment, like a restaurant or bar. 1
Divorce Statistic: http://www1.cbn.com/700club/palmers-first-comes-love-then-comes-money 2 Money Talk Overview: http://www.womenshealthmag.com/sex-and-love/money-talk
While admittedly painful, this talk will accomplish three things3. ● One: It will help you to better understand your partner’s saving and spending habits. ● Two: It will better align you and your partner on shared financial goals. ● And Three: Most importantly, it will help you discover any financial pitfalls or deal breakers now, rather than after marriage. So, assuming Mark and Sophie survive this conversation, for which our video “Funding Your Future”, can be a very helpful framework, their next big talk won’t occur until they move in together. And don’t worry, this conversation is much simpler. It just has three things to establish4: ● One: Who's going to be on the lease. ● Two: Who's going to buy the one-time expense items, like furniture. ● And Three: How are the shared monthly expenses, like rent and utilities, going to be split. Some prefer 50/50, while others prefer splitting according to income. For example, this would mean if Sophie made 60% of their combined income, she would pay 60% of their rent. In the end, no matter what you decide, just be sure you decide together. Finally, although it’s well beyond the scope of this video and definitely too personal, this conversation is also a good time to have a serious talk about your relationship: where do you see it going, what do you want out of it, and so on, but don’t worry, we won’t say anymore. We’re financial educators, not your mother. http://time.com/money/3612739/how-to-talk-money-with-boyfriend-girlfriend/ 3 Money Talk Overview: http://www.womenshealthmag.com/sex-and-love/money-talk http://time.com/money/3612739/how-to-talk-money-with-boyfriend-girlfriend/ 4 The Move-In Talk: http://www.huffingtonpost.com/2014/10/17/moving-in-together_n_5986098.html http://www.womenshealthmag.com/sex-and-love/money-talk http://www.huffingtonpost.com/wendy-atterberry/15-things-couples-should_b_6061834.html
Hopefully you, Mark, and Sophie, now better understand how to navigate dating and finances. Be sure to check out our next video, which covers marriage and finance, and be sure to check out our website, where you can find more educational material and great financial products. Marriage and Finances (Video 2) Meet Mark and Sophie. They’ve been together for two years, and are about to get married! They’re very excited. However, they’re also a little bit nervous. They have no idea what will happen to their finances once they get married. What should they do? Well, we’ve got them covered. Let’s walk through the four most common changes: ● One: The status of your money and property changes, but in a manner dependent on your state. So what does that even mean? Well, the vast majority of states follow Common Law Property, which just states that if an asset, like a house, is in the name of one spouse, either before or after the marriage, then it belongs to them alone. But if it’s in both their names, or it's put into a joint-account, then it is co-owned. The same rule applies for income5 and for debt, such as credit cards or student loans. However, if you live in one of the nine states that follow Community Property Law, while everything earned or acquired before your marriage is still yours,
5
Property During Your Marriage: http://www.forbes.com/sites/janetnovack/2015/01/30/getting-married-got-assetsread-this-first/#f1a2f0e5ce89 https://blog.wealthfront.com/three-financial-issues-for-married-set/ https://en.wikipedia.org/wiki/Prenuptial_agreement http://www.nolo.com/legal-encyclopedia/debt-marriage-owe-spouse-debts29572.html http://family.findlaw.com/marriage/what-s-mine-is-mine-what-s-yours-is-minewho-owns-what-in.html https://www.irs.gov/irm/part25/irm_25-018-001.html
everything after is equally shared property, even if you name is nowhere to be found6. If you’re really worried about this, follow these three rules: ○ Don’t co-mingle separate and marital assets ○ Keep exact records of your pre-marital property ○ And hire a lawyer a create a prenup, which is a document specifying how your property should be divided during your marriage7. ● Two: You now have the option of filing your taxes jointly, as opposed to just separately. This is the better option8 for most couples, as it comes with higher income thresholds, multiple tax deductions, and the ability to contribute to each other’s IRAs9. However, with that being said, filing jointly isn’t always the best case10, especially because it can prevent 6
Property During Your Marriage: http://www.forbes.com/sites/janetnovack/2015/01/30/getting-married-got-assetsread-this-first/#f1a2f0e5ce89 https://blog.wealthfront.com/three-financial-issues-for-married-set/ https://en.wikipedia.org/wiki/Prenuptial_agreement http://www.nolo.com/legal-encyclopedia/debt-marriage-owe-spouse-debts29572.html http://family.findlaw.com/marriage/what-s-mine-is-mine-what-s-yours-is-minewho-owns-what-in.html https://www.irs.gov/irm/part25/irm_25-018-001.html 7 Property During Your Marriage: http://www.forbes.com/sites/janetnovack/2015/01/30/getting-married-got-assetsread-this-first/#f1a2f0e5ce89 https://blog.wealthfront.com/three-financial-issues-for-married-set/ https://en.wikipedia.org/wiki/Prenuptial_agreement http://www.nolo.com/legal-encyclopedia/debt-marriage-owe-spouse-debts29572.html http://family.findlaw.com/marriage/what-s-mine-is-mine-what-s-yours-is-minewho-owns-what-in.html https://www.irs.gov/irm/part25/irm_25-018-001.html 8 Point or Single Filing: https://www.policygenius.com/blog/marriage-finances/ https://turbotax.intuit.com/tax-tools/tax-tips/IRS-Tax-Return/Should-You-andYour-Spouse-File-Taxes-Jointly-or-Separately-/INF20137.html https://blog.wealthfront.com/three-financial-issues-for-married-set/ 9 Spousal IRA Rule: http://www.360financialliteracy.org/Topics/Retirement-Planning/IRAs/TheSpousal-IRA-Rule 10 Joint or Single Filing: https://www.policygenius.com/blog/marriage-finances/ https://turbotax.intuit.com/tax-tools/tax-tips/IRS-Tax-Return/Should-You-andYour-Spouse-File-Taxes-Jointly-or-Separately-/INF20137.html
some couples from using income-based repayment plans11 for their student loans. For more details, check out our video “How to Repay Your Student Loans”, and remember, any tax-filing software we recommend will do much of this “filing jointly vs. separately” math for you. ● Three: If you want, you can now join your partner’s health insurance policy. Plus your new marriage may even qualify you for better rates on other types of insurance, like car insurance. To be sure, shop around, or ask your insurer12. ● Four: Although morbid, once you tie knot, you probably should change the beneficiary of your 401K, IRA, and life insurance policy to your spouse13, so in the event of your death, they can get the money. Plus, at this point, you should really create an estate plan, a collection of legal documents covered in our video, “Estate Planning 101” Finally, now that we’ve covered all of the legal details, we just have a few more things to say. ● One: The average cost of a wedding is around $30,000, so although we know it’s a once in a lifetime event, consider scaling back if you can, and definitely avoid going into debt over it14. ● Two: Be sure to keep or open your own credit card, as this is vital for maintaining your own credit history15. https://blog.wealthfront.com/three-financial-issues-for-married-set/ 11 Marriage and Student Loans: http://www.usnews.com/education/best-colleges/paying-forcollege/articles/2015/07/20/how-marriage-affects-your-student-loan-repayment http://www.huffingtonpost.com/aryea-aranoff/how-student-loans-canaff_b_8811724.html 12 Marriage and Insurance: https://www.policygenius.com/blog/marriage-finances/ 13 Changing Beneficiaries: http://www.forbes.com/sites/deborahljacobs/2014/01/03/how-to-leave-your-ira-tothose-you-love/#398b2809511a 14 Wedding Costs: http://www.prnewswire.com/news-releases/the-knot-the-1-wedding-site-releases2014-real-weddings-study-statistics-300049675.html http://www.cnbc.com/2013/05/26/8-Ways-to-Cut-Wedding-Costs-WithoutLooking-Cheap.html?slide=10 15 Keeping Your Credit Separate: http://womans-worth.com/weekly-newsletter/?p=39
● Three: At the risk of sounding mothering, we’re just going to close with this. Marriage requires total financial transparency16, especially around sensitive topics, like spending or pre-marital debt. So, please, bite the bullet, and have the “money talk” with your spouse. For details on this talk, be sure to check out our video “Dating and Finances”. Hopefully you, Mark, and Sophie, now better understand how to navigate marriage and finance. Be sure to check our next video, which covers everything you need to know about estate planning, and be sure to check out our website, where you can find more educational material, personalized financial products, and great legal solutions.
Estate Planning 101 (Video 3) Meet Sophie. Sophie has been working at Corporate Co. for the past six years. Sophie’s happy, and thinks she has everything she needs: a great job, a loving husband, and an adorable puppy named Luke. However, unbeknownst to Sophie, she’s actually missing one thing: an estate plan. Sophie is stunned. What on earth is an estate plan? Well, you should think of it as collection of legal documents that specifies things17 like: ● How your property will be divided once you die. ● Who will take care of your children and pets. 16
Manage Your Money Once You're Married: http://lifehacker.com/how-to-merge-finances-when-you-get-married-without-goi1516718128 17 Estate Planning Guide: http://money.cnn.com/retirement/guide/estateplanning_basics.moneymag/index.h tm?iid=EL http://money.cnn.com/retirement/guide/estateplanning_wills.moneymag/index.ht m?iid=EL https://www.caring.com/articles/estate-planning-101-advice-and-basic
● And perhaps most importantly, who will make medical and financial decisions on your behalf should you become incapacitated. Now, I know what most of you are thinking. I don’t need any of this! And for the most part, you’re right. If you’re a single individual with few assets, you probably don’t need an estate plan18. However, if you’re married, have children, or possess significant property, than the benefits of an estate plan are just too important to pass up. Sophie is clearly convinced, but still has one last question. How does an estate plan work exactly? Well, it generally operates through five components. The first one is the will, which covers things like what property you’re leaving to whom, and who will be your children’s guardian. As for who actually carries out these tasks, since you’re um...dead, you’ll nominate a trustworthy individual to be your executor. Thus, a will has powerful advantages, but it also has serious limitations, most prominently, any financial account with a named beneficiary, like a 401K or IRA, will supersede the claims your will. However, don’t worry, you easily change these beneficiaries to the right person, if you haven’t already19. So that’s the first component.
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Do I Need an Estate Plan? http://money.usnews.com/money/retirement/articles/2012/02/27/what-type-ofestate-and-tax-planning-do-i-need-to-do http://www.marketwatch.com/story/why-most-people-need-an-estate-plan1300823957136 19 Estate Planning Guide: http://money.cnn.com/retirement/guide/estateplanning_basics.moneymag/index.h tm?iid=EL http://money.cnn.com/retirement/guide/estateplanning_wills.moneymag/index.ht m?iid=EL https://www.caring.com/articles/estate-planning-101-advice-and-basic
The second component of an estate plan is a living will, which dictates your preferences for end-of-life care, should you be unable to communicate them. This document is then generally paired with the third component, a healthcare proxy, which names a trusted individual to make medical decisions on your behalf20. Both documents are critically important, as without them, your doctors must follow state defined hierarchies, which could leave you and your loved ones with a very unfavorable outcome21. Then, we have the fourth component, assignment of the power of attorney, which names a trusted individual to manage your financial affairs should you be incapacitated22. And no, these powers are not automatically assigned to your spouse. In fact, without this power, your spouse could have significant limitations on selling even jointly-owned property23! Finally, should Sophie have a net-worth of more than $100,000 or substantial real estate assets, she may want to consider the fifth component of an estate plan, a trust24.
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Estate Planning Guide: http://money.cnn.com/retirement/guide/estateplanning_basics.moneymag/index.h tm?iid=EL http://money.cnn.com/retirement/guide/estateplanning_wills.moneymag/index.ht m?iid=EL https://www.caring.com/articles/estate-planning-101-advice-and-basic 21 The Importance of a Healthcare Proxy: http://www.medicareinteractive.org/get-answers/caring-for-yourself-or-a-lovedone-with-medicare/preparing-for-your-future-health-care-needs/health-careproxies 22 Estate Planning Guide: http://money.cnn.com/retirement/guide/estateplanning_basics.moneymag/index.h tm?iid=EL http://money.cnn.com/retirement/guide/estateplanning_wills.moneymag/index.ht m?iid=EL https://www.caring.com/articles/estate-planning-101-advice-and-basic 23 The Importance of Naming Power of Attorney: http://www.nj.gov/ooie/helpful/durable_power_attorney.html https://www.caring.com/articles/what-is-power-of-attorney-for-finances 24 Estate Planning Guide: http://money.cnn.com/retirement/guide/estateplanning_basics.moneymag/index.h tm?iid=EL
Think of a trust as a legal “box” which you can fill with assets, like a house, to be passed down to a specific individual, called a trustee, once you die. This has two major advantages: ● One: It allows you to minimize your estate taxes25. ● And Two: It keeps your larger assets out of probate, which is the pricey, time-consuming way the court that distributes your property and pays off your debts, as outlined in your will26. Finally, as for actually making the estate plan, while you can technically use a cheap, DIY online resource, we don’t recommend it. It’s just too easy to make a costly legal mistake27. That’s why instead we recommend hiring an experienced estate planning lawyer, and don’t worry, our recommend website makes this process a breeze. Hopefully you and Sophie now better understand estate planning. Be sure to check out our next video, which covers children and finances, and be sure to check out our website, where you can find more educational content and great legal solutions. http://money.cnn.com/retirement/guide/estateplanning_wills.moneymag/index.ht m?iid=EL https://www.caring.com/articles/estate-planning-101-advice-and-basic 25 Trust Overview: http://money.cnn.com/retirement/guide/estateplanning_trusts.moneymag/index4. htm?iid=EL https://www.caring.com/articles/estate-planning-101-advice-and-basic 26 Probate Overview: https://en.wikipedia.org/wiki/Probate#United_Stateshttp://wills.about.com/od/howt oavoidprobate/tp/Top-4-Reasons-To-Avoid-Probate.htm 27 Dangers of DIY Legal Sources: https://www.texaswillsandtrustslaw.com/2010/05/24/legalzoom-vs-lawyer-whatyou-dont-know-can-hurt-you/ http://mhs.typepad.com/threepointfive-45/2010/05/legalzoom-and-the-dangersof-diy-estate-planning.html http://thompsonhall.com/legalzoom-wills-are-cheap-but-not-worth-the-risk/ https://legalzoom.knoji.com/pros-and-cons-of-using-legalzoom-vs-hiring-anattorney/ http://hubpages.com/business/Should-I-Use-LegalZoom-To-Setup-My-Company https://www.quora.com/Should-I-use-Legal-Zoom-or-some-other-service-toincorporate-my-startup-vs-paying-a-lawyer
Children and Finances (Video 4) Meet Mark and Sophie. They just found out Sophie’s pregnant. They’re very excited. However, they’re also a little bit worried. Having a child is a life-changing event, and they just don’t know whether they’re financially ready for it. What should they do? Well, we’ve got them covered. The first thing they need to understand is that having and raising child is very expensive, generally around $250,00028. Thus, because this number is so large, it means that if Mark and Sophie have any bad financial habits, like excessive spending or bad credit, now is the time to fix it. Otherwise, their finances just won’t survive a child. For more details on this, be sure to check out our two videos: “Spending Plans 101” and “Funding Your Future”. But let’s say Mark and Sophie are all set financially. What then? Well, unfortunately, there’s still about nine things that need to be done before the baby is born. ● One: Start talking with HR to learn more about the parental leave program29. ● Two: Start looking for a great pediatrician within your insurance network30.
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Average Cost of Raising a Child: http://www.huffingtonpost.com/2014/08/18/cost-of-raising-achild_n_5688179.html 29 Having a Baby Guide: http://www.parents.com/pregnancy/considering-baby/financing-family/a-ninemonth-plan-for-getting-your-familys-finances-in-order/ 30 Find a Pediatrician: http://www.parents.com/baby/care/pediatricians-medicine/selecting-pediatricians/
● Three: Call your insurer to understand what pregnancy costs will be covered31. ● Four: Get life insurance, at least for the breadwinner, as covered in our video “Life Insurance 10132”. ● Five: Have an honest conversation about who, if anyone, is staying at home to raise the child33. ● Six: Depending on that conversation, start looking for a great daycare and/or nanny34. ● Seven: Learn more about saving for your child’s college education35, as detailed in our video “How to Save for College”. ● Eight: Change the beneficiary of your 401K and IRA to your spouse36 or partner. ● And Nine: Make an estate plan, as detailed in our video, “Estate Planning 10137”. Phew... so that’s end right? Well, actually no.
31
Call Your Health Insurer: http://www.smartaboutmoney.org/Your-Money/Life-Transitions/First-Baby-GetFinancially-Prepared 32 Having a Baby Guide: http://www.parents.com/pregnancy/considering-baby/financing-family/a-ninemonth-plan-for-getting-your-familys-finances-in-order/ 33 Having a Baby Guide: http://www.parents.com/pregnancy/considering-baby/financing-family/a-ninemonth-plan-for-getting-your-familys-finances-in-order/ 34 Start Looking for Daycare or Nannies: http://www.raisegreatkids.org/you%E2%80%99re-pregnant-start-looking-childcare-now 35 Having a Baby Guide: http://www.parents.com/pregnancy/considering-baby/financing-family/a-ninemonth-plan-for-getting-your-familys-finances-in-order/ 36 Changing Beneficiaries: http://www.forbes.com/sites/deborahljacobs/2014/01/03/how-to-leave-your-ira-tothose-you-love/#398b2809511a 37 Having a Baby Guide: http://www.parents.com/pregnancy/considering-baby/financing-family/a-ninemonth-plan-for-getting-your-familys-finances-in-order/
Once the baby is born, there are still three more things you need to do. ● One: Ensure the baby has a birth certificate and a social security number. Normally, hospital nurses will give you these necessary forms. However, if they don’t, or your baby was born outside of a hospital, you’ll need to contact the SSA for the social security number38 and your state’s Office of Vital Records for the birth certificate39. ● Two: Once that’s done, add the child to your health insurance policy, and do it quickly, as most insurers will only allow it within 30 days of delivery40. ● Three: Relax, take a deep breath, and enjoy your new baby! Hopefully you, Mark, and Sophie, now better understand how to navigate children and finance. Be sure to check our next video, which covers everything you need to know about life insurance, and be sure to check out our website, where you can find more educational materials, personalized financial products, and helpful legal solutions.
Life Insurance 101 (Video 5) Meet Mark and Sophie. They just found out they’re having a baby girl named Maddie. They’re very excited. However, they’re also a little bit worried, Sophie especially. As the sole breadwinner, she fears for the baby’s feature should she die unexpectedly. Luckily however, there is a ready-made solution for this problem: life insurance.
38
How to Get Your Baby an SSN Number: http://www.360financialliteracy.org/Topics/Retirement-Planning/SocialSecurity/When-do-I-have-to-apply-for-a-Social-Security-number-for-my-newborn 39 How to Get a Birth Certificate: http://www.livestrong.com/article/225179-how-to-get-a-birth-certificate-for-anewborn/ 40 Having a Baby Guide: http://www.parents.com/pregnancy/considering-baby/financing-family/a-ninemonth-plan-for-getting-your-familys-finances-in-order/
Like most types of insurance, life insurance reduces the costs associated with a risk, in this case the risk of dying, in return for a monthly fee called a premium41. While that sounds rather morbid, basic life insurance policies only cost about $400 per year42, plus their benefits are too good to pass up. If Sophie is insured and dies before her time, her insurer will pay her family a huge sum of money, like $500,00043, to secure their future. Sounds pretty good right? But do most people actually need life insurance? Well, it depends, but the rule of thumb here is simple: if you have someone dependent on your income, you need life insurance, otherwise, don’t bother44. But let’s continue. There are two major types of life insurance: term and permanent.
41
Life Insurance Overview: https://en.wikipedia.org/wiki/Life_insurance https://www.policygenius.com/life-insurance/guide http://www.lifehappens.org/wpcontent/uploads/2013/10/Brochure_WhatYouNeedtoKnowAboutLifeInsurance_20 14_Consumer.pdf http://money.usnews.com/money/blogs/the-smarter-mutual-fundinvestor/2014/02/26/which-is-better-for-you-term-or-permanent-life-insurance 42 Cost of Life Insurance: https://www.policygenius.com/life-insurance/guide 43 Life Insurance Overview: https://en.wikipedia.org/wiki/Life_insurance https://www.policygenius.com/life-insurance/guide http://www.lifehappens.org/wpcontent/uploads/2013/10/Brochure_WhatYouNeedtoKnowAboutLifeInsurance_20 14_Consumer.pdf http://money.usnews.com/money/blogs/the-smarter-mutual-fundinvestor/2014/02/26/which-is-better-for-you-term-or-permanent-life-insurance 44 Who Needs Life Insurance Overview: https://www.policygenius.com/life-insurance/guide/who-needs-life-insurance http://www.forbes.com/sites/lawrencelight/2013/06/26/when-dont-you-need-lifeinsurance/#2715e4857a0bec6e5a67d42e
Term life insurance is the simpler, less expensive form45. In return for a series of monthly premiums over a set period of time, generally between 10 and 30 years, Sophie’s family is eligible to receive a large payout upon her death. In contrast, permanent life insurance is way more complicated and has three similar, but distinct forms: whole, universal, and variable46. Under any of these plans, some of premium goes towards establishing a death payout, just like in term life insurance, while the rest of your it, minus expenses, is saved in a taxdeferred account that earns a fixed amount of interest per year47. As the name implies, permanent life insurance plans also last indefinitely, so if you choose to cancel, you’ll get back your saved premiums, plus your interest, after paying some fees and income tax48.
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Life Insurance Overview: https://en.wikipedia.org/wiki/Life_insurance https://www.policygenius.com/life-insurance/guide http://www.lifehappens.org/wpcontent/uploads/2013/10/Brochure_WhatYouNeedtoKnowAboutLifeInsurance_20 14_Consumer.pdf http://money.usnews.com/money/blogs/the-smarter-mutual-fundinvestor/2014/02/26/which-is-better-for-you-term-or-permanent-life-insurance 46 Life Insurance Overview: https://en.wikipedia.org/wiki/Life_insurance https://www.policygenius.com/life-insurance/guide http://www.lifehappens.org/wpcontent/uploads/2013/10/Brochure_WhatYouNeedtoKnowAboutLifeInsurance_20 14_Consumer.pdf http://money.usnews.com/money/blogs/the-smarter-mutual-fundinvestor/2014/02/26/which-is-better-for-you-term-or-permanent-life-insurance 47 Life Insurance Overview: https://en.wikipedia.org/wiki/Life_insurance https://www.policygenius.com/life-insurance/guide http://www.lifehappens.org/wpcontent/uploads/2013/10/Brochure_WhatYouNeedtoKnowAboutLifeInsurance_20 14_Consumer.pdf http://money.usnews.com/money/blogs/the-smarter-mutual-fundinvestor/2014/02/26/which-is-better-for-you-term-or-permanent-life-insurance 48 Cashing Out of a Life Insurance Policy Overview: http://www.foxbusiness.com/features/2012/02/15/cash-emergency-considertapping-life-insurance-policy-instead.html
Sounds pretty good right? Well, actually, permanent life insurance is a pretty bad product. Sophie is stunned. Why is that49? Well, beyond a reputation for being overly complicated and laden with hidden fees, think about it in terms of return on investment. With term life insurance, although your premiums aren’t invested, they’re far cheaper than permanent life insurance. This frees up cash that you could then invest with a robo-advisor for an investment return that will exceed anything you’ll get with permanent life insurance50. And don’t worry, we teach everything you need to know in our two videos “How to Invest” and our “401(k) and IRA 101”. Hopefully you, Sophie, and Mark now have a better understanding of how life insurance works. Be sure to watch our next video, which teaches you how to actually get life insurance, and to check out our website, where you can find more educational material and great life insurance recommendations.
How to Get Life Insurance (Video 6) Meet Sophie. She’s about to become a first-time mother. She’s very excited. 49
Term vs. Permanent Life Insurance Overview: http://www.forbes.com/sites/timmaurer/2013/05/03/term-vs-perm-life-insurancein-90-seconds/ http://www.dailyfinance.com/2014/07/03/whole-life-insurance-bad-investmentmost-people/ https://www.policygenius.com/life-insurance/guide/permanent-life-versus-termlife-insurance 50 Term vs. Permanent Life Insurance Overview: http://www.forbes.com/sites/timmaurer/2013/05/03/term-vs-perm-life-insurancein-90-seconds/ http://www.dailyfinance.com/2014/07/03/whole-life-insurance-bad-investmentmost-people/ https://www.policygenius.com/life-insurance/guide/permanent-life-versus-termlife-insurance Show less
Sophie has watched our first video “Life Insurance 101”, so she understands the importance of getting life insurance. Unfortunately, she has no idea where to start. What should she do? Well, her first step is simple: shop around for the best life insurance plan. To do this, Sophie can either go online and manually get quotes from insurers, contact a local insurance agent, or use our preferred website to easily compare insurance quotes from the best providers. Regardless of method, once Sophie selects a plan, she’ll have to submit an application that provides basic information to the insurer, such as employment status, proof of income, and a release for the insurer to review her health records51. After that, an insurance representative will contact her to schedule two things: a phone interview and paramedical exam52. During the phone interview, the representative will typically ask Sophie questions about her hobbies, lifestyle, and health history. During the paramedical exam, which generally takes place either at home or at work, a trained medical professional will take Sophie’s basic vital signs, as well as a blood and urine sample53. Once those two tasks are completed, assuming that everything else is in order, an insurance underwriter will look at Sophie’s application and approve her.
51
Application Process Overview: http://www.360financialliteracy.org/Topics/Insurance/Life-Insurance/LifeInsurance-The-Application-Process https://www.policygenius.com/life-insurance/guide/application-process 52 Application Process Overview: http://www.360financialliteracy.org/Topics/Insurance/Life-Insurance/LifeInsurance-The-Application-Process https://www.policygenius.com/life-insurance/guide/application-process 53 Application Process Overview: http://www.360financialliteracy.org/Topics/Insurance/Life-Insurance/LifeInsurance-The-Application-Process https://www.policygenius.com/life-insurance/guide/application-process
Now that Sophie understands how life insurance works, and how to get it, as long as she follows these six rules, she should be set for the future. ● Rule 1: Determine if life insurance is really necessarily. Unless you have a dependent, you really don’t54 need it. ● Rule 2: Don’t get permanent life insurance, whether it's whole, universal and variable55. Instead, get “level premium” term life insurance, which is far cheaper and gives you a locked-in premium for the rest of your term56. For more details, be sure to check out first video “Life Insurance 101”. ● Rule 3: As a rule of thumb, target policies worth at least five to ten times your income57, and consider insuring your spouse. For a more exact calculation of your family’s insurance needs, be sure to check out our recommended calculator58. ● Rule 4: Read the fine print of any life insurance plan you are considering, don’t just pick the one with the lowest premium. ● Rule 5: Only get life insurance from reputable providers with excellent credit ratings. If that sounds confusing to you, don’t worry, our recommended website does this screening process for you.
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Who Needs Life Insurance Overview: https://www.policygenius.com/life-insurance/guide/who-needs-life-insurance http://www.forbes.com/sites/lawrencelight/2013/06/26/when-dont-you-need-lifeinsurance/#2715e4857a0bec6e5a67d42e 55 Term vs. Permanent Life Insurance Overview: http://www.forbes.com/sites/timmaurer/2013/05/03/term-vs-perm-life-insurancein-90-seconds/ http://www.dailyfinance.com/2014/07/03/whole-life-insurance-bad-investmentmost-people/ https://www.policygenius.com/life-insurance/guide/permanent-life-versus-termlife-insurance Show less 56 Level Term vs. Annual Renewable Premium: http://www.360financialliteracy.org/Topics/Insurance/Life-Insurance/Comparisonof-level-term-and-annual-term-premiums 57 Life Insurance Rule of Thumb: http://www.cnbc.com/2014/10/03/how-much-life-insurance-do-you-need.html 58 The Calculator: http://www.lifehappens.org/insurance-overview/life-insurance/calculate-yourneeds/
● Rule 6, the final rule: Once covered, be sure to teach beneficiaries of your policy how to file a claim59. That way, in the event of your death, your family knows how to get the death payout. Congratulations! You have finished the life insurance basics curriculum! If you want to see our free recommendations for life insurance plans, or just check out more educational material, be sure to check out our website!
How to Save for College (Video 7) Meet Mark and Sophie. They’re exhausted. They’ve recently had a baby girl named Maddie, and between the midnight feedings and the baby proofing, they’ve barely had to time to sleep, let alone time to talk about a very far-off topic: funding her college education. Unfortunately, that’s also a mistake. College, while undeniably valuable, is mindnumbingly expensive. One year of state college clocks in at around $28,000, and that number will double or triple over the next 17 years60. Scary right? Mark and Sophie are clearly overwhelmed. However, they actually don’t have to be, for two reasons. ● One: They don’t have to save for 100% of the cost ahead of time. In fact, most financial experts think a third is totally adequate61. ● Two: They don’t have to use conventional savings accounts. There actually exist two investment accounts, 529 plans and Coverdell ESAs, 59
Filing a Life Insurance Claim Overview: http://www.360financialliteracy.org/Topics/Insurance/Life-Insurance/ClaimingLife-Insurance-Benefits 60 Cost of College: http://time.com/money/2802161/how-much-save-for-college/ 61 College Saving Rule of Thumb: https://www.washingtonpost.com/lifestyle/magazine/is-saving-for-your-kidscollege-really-a-good-idea/2013/10/20/ef7cc20a-0046-11e3-96a8d3b921c0924a_story.html
that make it incredibly easy to grow your tuition money tax-free. Even better, these accounts don't even seriously affect financial aid. At most, they’ll only lower it by 5% of their total value62. Sounds pretty great right? So how do 529 plans and Coverdell ESAs work exactly? Well, both allow you to deposit after-tax money into an investment account, and then withdraw it tax-free to pay for the educational expenses of a named beneficiary, like a child or grandchild63. This is true even if the expenses take place outside of your state64, though be warned, all withdrawals not used for education are subject to 10% penalty65, plus tax. So that’s how 529 plans and ESAs are similar. Here is how they're different. ● One: The contribution limit for an ESA is $2,000 a year, whereas for a 529 plan it’s $300,000 over the lifetime of the plan66. ● Two: ESAs have contribution restrictions for high earners, 529 plans do not67. 62
529 Plans and Financial Aid: http://www.reuters.com/article/us-column-feldman-idUSBRE93S0LZ20130429 63 529 Plan vs. ESA: http://www.360financialliteracy.org/Topics/Paying-for-Education/College-SavingsOptions/529-Plans-vs.-Coverdell-Education-Savings-Accounts https://www.sec.gov/investor/pubs/intro529.htm 64 529 Plan vs. ESA: http://www.360financialliteracy.org/Topics/Paying-for-Education/College-SavingsOptions/529-Plans-vs.-Coverdell-Education-Savings-Accounts https://www.sec.gov/investor/pubs/intro529.htm 65 529 Plan vs. ESA: http://www.360financialliteracy.org/Topics/Paying-for-Education/College-SavingsOptions/529-Plans-vs.-Coverdell-Education-Savings-Accounts https://www.sec.gov/investor/pubs/intro529.htm 66 529 Plan vs. ESA: http://www.360financialliteracy.org/Topics/Paying-for-Education/College-SavingsOptions/529-Plans-vs.-Coverdell-Education-Savings-Accounts https://www.sec.gov/investor/pubs/intro529.htm 67 529 Plan vs. ESA: http://www.360financialliteracy.org/Topics/Paying-for-Education/College-SavingsOptions/529-Plans-vs.-Coverdell-Education-Savings-Accounts https://www.sec.gov/investor/pubs/intro529.htm
● Three: ESAs don’t qualify for state deductions, whereas 529 plans can, depending on the state68. ● Four: ESAs make it much harder to change beneficiaries, plus they force you to distribute the funds once the beneficiary turns 30. In addition, under certain ESAs, beneficiaries can actually gain control of the funds once they turn 18. In contrast, 529 plans have none of these traits, plus you can generally change the beneficiary at any time69. ● Five: And here’s the major advantage of an ESA. They’re easy to open at almost any brokerage and can be used for both primary and secondary education expenses. In contrast, 529 plans are restricted to college expenses and are only available through your state, though admittedly several great state plans are available nationwide70. So which account should you choose? Well, despite their greater range of acceptable expenses, Coverdell ESAs are not our preferred option for college savings. They simply have too many flaws, ranging from low annual contributions to worse tax treatment. That’s why instead we recommend opening a 529 plan71, while following these seven rules. ● One: Choose a savings 529, not a prepaid 529, as they’re way less restrictive72. 68
529 Plan vs. ESA: http://www.savingforcollege.com/questions-answers/article.php?article_id=145 69 529 Plan vs. ESA: http://www.360financialliteracy.org/Topics/Paying-for-Education/College-SavingsOptions/529-Plans-vs.-Coverdell-Education-Savings-Accounts https://www.sec.gov/investor/pubs/intro529.htm 70 Nationwide 529 Plans Exist: http://money.usnews.com/money/personal-finance/mutualfunds/articles/2014/11/24/8-common-misconceptions-about-529-plans https://www.irs.gov/uac/529-Plans:-Questions-and-Answers 71 Which Account You Choose: http://www.savingforcollege.com/articles/coverdell-ESA-versus-529-Plan?page=1 http://www.360financialliteracy.org/Topics/Paying-for-Education/College-SavingsOptions/529-Plans-vs.-Coverdell-Education-Savings-Accounts 72 529 Plan Guide: https://www.sec.gov/investor/pubs/intro529.htm
● Two: Pick a 529 with an age-based option, as these require no work, and automatically adjust their holdings based on your child’s age73. ● Three: To save money, avoid 529 brokers, and instead, open your plan directly through the state’s website74. ● Four: Once you’ve picked your plan, use our recommend calculator to understand how much you should save, ideally through automatic deposits, each month75. Also, be sure to keep these contributions below $14,000 each year to the avoid federal gift tax76. ● Five: Encourage helpful relatives, like grandparents, to contribute to your 529 plan, rather than setting up their own. This will help you avoid the financial aid nightmare that comes with grandparent owned accounts77. ● Six: Register for our favorite free education rewards site, as it makes it easy to earn 529 money on everyday spending. ● Seven and Finally: Understand that while saving for college is important, retirement comes first78. Don’t start putting money into a 529 plan until you’ve put to 10-15% of your own paycheck into a retirement account79.
http://money.usnews.com/money/personal-finance/mutualfunds/articles/2014/09/03/the-ultimate-guide-to-understanding-529-collegesavings-plans 73 529 Plan Guide: https://www.sec.gov/investor/pubs/intro529.htm http://money.usnews.com/money/personal-finance/mutualfunds/articles/2014/09/03/the-ultimate-guide-to-understanding-529-collegesavings-plans 74 Avoid 529 Plan Brokers: http://www.forbes.com/sites/josephhurley/2015/06/09/5-mistakes-to-avoid-whenopening-a-529-college-savings-account/#fd3dd4c3081e 75 The Calculator in Question: http://www.savingforcollege.com/college-savings-calculator/ 76 529 Plans and Gift Tax: http://www.360financialliteracy.org/Topics/Paying-for-Education/College-SavingsOptions/529-Plans-vs.-Coverdell-Education-Savings-Accounts https://www.irs.gov/uac/529-Plans:-Questions-and-Answers 77 529 Plan Guide: https://www.sec.gov/investor/pubs/intro529.htm http://money.usnews.com/money/personal-finance/mutualfunds/articles/2014/09/03/the-ultimate-guide-to-understanding-529-collegesavings-plans 78 Retirement vs. College Savings:
Hopefully you, Mark, and Sophie now better understand how to save for your child’s education. Be sure to watch our next video, which details finance and divorce, and be sure to check out our website, where you can find more educational material and great 529 plans. Divorce and Finances (Video 8) Meet Mark and Sophie. They’ve recently decided to get a divorce after ten years of marriage. It wasn’t an easy decision, but they know it’s the right thing to do. However, they don’t really know how to go about it. What should they do? Well, we’ve got them covered. The first thing the two need to understand about divorce is that it's really about three things80: ● Dividing property and debt ● Negotiating spousal and child support ● And determining who will raise the children That’s really it, at least legally speaking. So how do you resolve these issues? Well, it’s generally done in one of two ways: ● One: Both people hire divorce attorneys, and their lawyers work together to settle these issues in court. This is the traditional option, but it’s generally very expensive, plus it will result in the public exposure of your private life81. http://money.usnews.com/money/personal-finance/articles/2014/05/29/whichcomes-first-saving-money-for-your-retirement-or-your-kids-college 79 How Much to Save for Retirement: http://money.cnn.com/retirement/guide/basics_basics.moneymag/index7.htm 80 What Divorce is Really About: http://www.nolotech.com/what-divorce-is-really-about/ 81 Mediation Guide:
● Two: Both people still hire divorce attorneys, but mostly just for legal advice, as they also hire a neutral third party called a mediator. Mediators are generally attorneys or financial advisors, like CDFAs82, that work together with the couples to resolve their issues. Not surprisingly, because spousal communication is encouraged, and the results are private, medication often results in a better outcomes for both spouses. Plus, it’s cheaper, and also voluntary, so if it fails, you can still go to court83. So which option should Mark and Sophie choose? Well, mediation is great for most couples, but it’s not for everyone, especially if your spouse is abusive, intimidating, or non-communicative. In these cases, you’ll really want your own lawyer to fight your battle, not you84. In either case, once you decide the route you’d like to go, it’s time to do three more things: ● One: Open your own checking account and credit card. Both are necessary for life as a single individual, plus it will be way easier to qualify for a credit card while you’re still married85. ● Two: Make sure all your taxes are filed, plus if you suspect your spouse of any financial wrongdoing, considering filing your taxes separately86. http://www.womansdivorce.com/divorce-mediation.html http://www.womansdivorce.com/mediation.html 82 CDFAs as a Mediator: http://www.joe-rosenberg.com/divorce-choices-mediation-and-the-cdfa/ 83 Mediation Guide: http://www.womansdivorce.com/divorce-mediation.html http://www.womansdivorce.com/mediation.html 84 Mediation Guide: http://www.womansdivorce.com/divorce-mediation.html http://www.womansdivorce.com/mediation.html 85 Preparing for Divorce: http://www.womansdivorce.com/preparing-for-a-divorce.html http://money.usnews.com/money/personal-finance/articles/2013/05/17/how-toget-your-finances-in-order-before-a-divorce http://www.forbes.com/sites/jefflanders/2012/12/18/five-best-financial-tips-forwomen-divorcing-in-2013/#264bb6507e6c 86 Preparing for Divorce:
● Three: Start gathering as much financial information as possible, every from tax-returns, to assets and debts, to estate plans87. This information is required by the state, and not only will collecting it beforehand save you money, as most attorneys or financial advisors charge for this service, but it will also give you an in-depth understanding of your financial situation, the importance of which cannot be overstated. After all, how can you negotiate for things like spousal support if you don’t even understand your own income and expenses88? So great. You’ve gathered the information. What next? Well, it’s time to actually find a divorce attorney and mediator. To do so, you can either query your personal network, search online, or use our recommended website, which makes it easy to find great legal professionals. Then, once you’ve found them, sit down, take a breath, and relax. You’ve done most of what you can do. Now, it’s time for the professionals to walk you through the rest of the process. Hopefully you, Mark, and Sophie now better understand how divorce works. If you want to see our recommendations for financial products, legal solutions, or just more educational material, be sure to check out our website. http://www.womansdivorce.com/preparing-for-a-divorce.html http://money.usnews.com/money/personal-finance/articles/2013/05/17/how-toget-your-finances-in-order-before-a-divorce http://www.forbes.com/sites/jefflanders/2012/12/18/five-best-financial-tips-forwomen-divorcing-in-2013/#264bb6507e6c 87 Preparing for Divorce: http://www.womansdivorce.com/preparing-for-a-divorce.html http://money.usnews.com/money/personal-finance/articles/2013/05/17/how-toget-your-finances-in-order-before-a-divorce http://www.forbes.com/sites/jefflanders/2012/12/18/five-best-financial-tips-forwomen-divorcing-in-2013/#264bb6507e6c 88 Preparing for Divorce: http://www.womansdivorce.com/preparing-for-a-divorce.html http://money.usnews.com/money/personal-finance/articles/2013/05/17/how-toget-your-finances-in-order-before-a-divorce http://www.forbes.com/sites/jefflanders/2012/12/18/five-best-financial-tips-forwomen-divorcing-in-2013/#264bb6507e6c
