More on this book
Community
Kindle Notes & Highlights
The two primary purposes of creating and maintaining savings are to see you through tough times and to give you the ability to invest.
Ideally, you want to have six months’ worth of savings stashed away,
A bear market happens when the stock market experiences prolonged price declines. Bear markets are usually tied to recessions, and during that time investors typically pull back (or rear up and away, as bears do). A bull market happens when the prices in a (stock) market are rising or are expected to rise. Bull markets typically last for months or even years. During this time investors are, well, bullish, confident, aggressive.
The main purpose of reducing your debt is so you have excess money to go toward growing wealth, which should be the ultimate goal.
Retirement: The goal for this type of investing is for you to save and grow your money to an amount that will allow you to maintain your current lifestyle even after you stop working. You do this because you want to live comfortably without worrying that you have to work forever. Wealth Building: On the other hand, this type of investing is so you can upgrade your life now (and in the future) and also leave a legacy.
If you buy stocks and they gain value and you give those stocks to your child when you’re alive, your child or children will pay taxes on the gain. Alternatively, if you will stocks to your child at death, the child receives the value of the stock as of the date of your death; the gain accumulated during your lifetime will never be taxed.”
The goal of an index fund is not to beat the market, but to mirror it.
Get health insurance. 2. Explore life insurance. 3. Explore disability insurance. 4. Get property and casualty insurance.
HDHPs (High-deductible health plans) are just that; they have a higher deductible, but you can get the benefit of contributing to an HSA (health savings account). High-deductible plans work great for young and healthy people who have minimal medical expenses during the year. Note that preventive services (like shots, screening tests, and checkups) are usually covered under this plan.
A PPO (Preferred Provider Organization) plan allows you to see any provider you choose as long as they are in the network
The deductible on a PPO plan is usually lower than a high-deductible plan, so the premium cost (monthly payment) you pay as an employee is usually higher with a PPO plan than a high-deductible plan. A PPO plan also does not have an HSA (health savings account), but your employer may provide access to an FSA (flexible spending account).
under an HMO plan, you usually have your primary care physician manage and direct your care. This means your doctor will coordinate all your healthcare services, keep track of all your medical records, and provide routine care. If you need to see a specialist, you’ll need a referral from your primary care physician, except in an emergency. And you typically don’t have an option to see any doctor you choose since you’re limited to physicians within the HMO network. An HMO plan won’t offer you access to an HSA, but again it may be worth looking into an FSA.
Flexible Spending Account (FSA) Available to you if offered by your employer, and no requirement to be enrolled in any type of health plan to gain access. Lets you save pretax money for qualified, out-of-pocket medical expenses. Allows tax-free withdrawals (also called distributions), as long as the money is used for qualified out-of-pocket medical expenses like doctor visits, copays, dental and vision, and prescriptions.
Health Savings Account (HSA): Only available to you if you have a high-deductible health plan (described below). Lets you save pretax money for qualified, out-of-pocket medical expenses. Allows tax-free withdrawals (also called distributions), as long as the money is used for qualified out-of-pocket medical expenses like doctor visits, copays, dental and vision, and prescriptions. If offered by your job, an HSA allows automated payroll contributions. Some employers and even some insurers will also make contributions to your HSA if you select this type of plan. If your insurance company makes
One amazing aspect of HSA plans is that they allow you to invest the funds in your account, making this a bonus way to grow your money for retirement
To do this, you have to link your HSA account to a qualified brokerage account, which you can usually do through the HSA custodian (only certain firms manage HSA funds).
HSA is triple tax advantaged—contributions go in pre-tax, they grow tax free, and come out tax free when used for qualified medical expenses.
Unlike an FSA, the HSA never expires and you can take it with you if you leave your job.
Obtaining a private policy will cost more since you don’t have an employer helping with the cost. But, as Anjali wisely points out, the premium you pay is tax deductible on your tax return so you will receive some tax benefit.
check professional organizations that you are a member of to see if they offer a group health insurance plan.
on. That’s why if you need life insurance (more on that soon), it’s best to get it set up when you are younger and healthier.
Term life insurance is issued for a specified number of years (the term), and everything is based on that time frame. For example, if you get a thirty-year policy—you would pay a premium (monthly payment) for thirty years and the payout (death benefit) is guaranteed to your beneficiaries if you die anytime during that thirty years. If you are still alive at the end of the thirty-year period, your policy expires. You stop paying monthly premiums and your beneficiaries are also no longer going to get money from the insurance company after you do die.
Certain term life insurance carriers will allow you to add what’s called a rider to your term policy that will convert it to a permanent life insurance policy at the end of the term. Usually the cost to you is pretty significant but it is an option to have if you realize you need to have a permanent death benefit (see below)—and you anticipate that the cost to put it in place at a later point (like after the term policy has expired) will be excessively high (because you’ll be older and less healthy then) or you worry that at that point you will be uninsurable.
Term life insurance policies are what 99% of the population should be looking into (I’m talking to you!). The reason they work for most people is that they’re typically reasonably priced (especially if you get it when you’re younger and you’re healthy), and they protect your beneficiaries during your earning/working years.
Permanent life insurance is structured differently than term in that you pay a monthly premium to get the full policy amount at death, but a portion of the amount you pay into it also accumulates a cash value. So you get a life insurance benefit (for your beneficiaries), but in your own lifetime, you can access the cash you’ve put in, too.
there is a built-in conflict of interest in the sale of these plans. The insurance broker who brings it to you or who tries to convince you to buy it gets a commission. So if they get you to buy a permanent policy, they get paid…a lot.
Insurance is a risk management tool; I don’t believe it should be used as an investment vehicle. Insurance companies are in the business of insurance, not investments;
You will spend a lot less if you get a term policy and focus on saving your excess amount of cash or investing it in other ways.
Life insurance is intended to protect your income-earning years. It’s also there to cover any major debts your passing may leave behind.
This means that if you’re single and/or have no one who is financially dependent on you, or you have no major debt that your loved ones would be responsible for (like a mortgage), there’s currently no need to get life insurance;
Don’t buy life insurance just for a hypothetical future.
Insure yourself for a minimum of 10 times your income, preferably 15 times.
you want to protect your working years with the assumption that you should have enough saved in assets that the need for life insurance goes away in retirement. Think of your life insurance policy like a bridge.
Disability insurance answers the question “What would I do for money if something happened to me and I couldn’t work?”
If you have a private policy and are paying the premium, the benefits will be tax-free.
Short-term disability insurance, aka STDI, can help address an immediate short-term need to cover lost income due to illness, injury, or maternity leave (and/or bonding time with a new baby). It can provide up to 80% of your income and the average length of benefits is three to six months, although it can last up to a year.
It’s less common to get private STDI because it’s more expensive to get as an individual versus through a company policy.
Anjali’s expert advice is that the cost of private STDI is usually not worth it for the benefit amount; it’s better to cover the elimination period of your long-term disability (explained below) with a good emergency savings fund.
Long-term disability insurance, aka LTDI, will provide benefits that cover lost income over a greater length of time, with coverage lasting years (the average LTDI claim lasts just under three years). Typically LTDI has an elimination period, which is t...
This highlight has been truncated due to consecutive passage length restrictions.
LTDI provides 40% to 60% of your income.
If you are self-employed, you should consider getting a policy. Many professional organizations offer group disability policies for their members, or you can also work with an insurance broker to get a policy that is more comprehensive.
You need disability insurance now if you earn income, are accumulating wealth, and have people financially dependent on you.
Usually you will want a benefit that covers you for the full amount, which is 60% of your income.
Any-occupation coverage is limited in that it will not cover you if you can still work in some capacity, even if it’s in a job different from your current job. Own-occupation coverage, on the other hand, will cover you if a disability prevents you from continuing to work the job you had when the injury or illness occurred, even if you can be gainfully employed in a different occupation.
“It’s pretty hard to meet Social Security disability requirements, and some disability policies will reduce your benefit if you’re collecting on Social Security. So you want to make sure you have one policy in place that’s going to give you your full amount without any stipulations.”
Here’s the thing: I do consider financing useful but typically limited to these four scenarios: To buy a house Pay for healthcare Pay for your education Purchase a vehicle (I’m a big proponent of buying used [certified preowned] cars with cash, but that’s not always feasible.)
an accountant, an attorney, a certified financial planner, and a bookkeeper.
Accountability partner 2. Certified financial planner (CFP)/financial advisor 3. Certified public accountant (CPA) 4. Estate planning attorney 5. Insurance broker
A certified financial planner (CFP) is a type of financial advisor who helps you create a program to meet your long-term financial goals. Financial advisors who are CFPs have satisfied the strict training and experience requirements (at least three years of full-time financial planning experience) of the CFP Board.
planner. If you want to work with a CFP, always make sure to check their credentials with the CFP Board at finra.org.
