All this week, I’m going to break format a bit. Rather than give you the same related money advice, I’m going to mix up and share what I consider to be my best tips I’ve mentioned for this year end. My first advice today is about owning bonds. Most major discount brokerage firms offer government, corporate and other bonds. But depending on the size of your portfolio and tax bracket, you may want to use a tax-yield equivalent calculator to see if muni bonds are more advantageous. You’ll want to get good advice on this because insured bonds are no longer as safe as previously believed and the municipal market is no longer a simple place to invest. However, in general Municipal Bonds are a VERY safe investment, so they should be carefully considered.
2Buying life insurance.
Life Insurance is an absolute necessity if you’re in your working years and you need to replace income for your loved ones if you lost your life. What life insurance is NOT is to provide your heirs or future generations a fortune. The bottom line is life insurance is income replacement. My entire career I have spent professing that. Income replacement. You’re insuring yourself against the loss of that income. No income? Well then, there’s your answer about buying life insurance! Remember, people sell life insurance and make big commissions doing it. In its simplest, most basic form, it’s about replacing lost income should you die.
3Make sure you have health insurance now!
I keep mentioning this over and over again. If you’ve lost your job, many insurers are offering short-term health insurance that can be renewed at the end of a term. For example, a 6-month term, where you have coverage. At the end of the sixth month, they make a health assessment of you based on claims you have filed, and decide whether to extend coverage another six months. Sure, that’s less than ideal; but so is the option to carry no insurance on yourself, your wife or on your children. I don’t recommend that because your risk could increase 3-fold, especially with that many people in your home. Do your best to own health insurance, even if you’re unemployed.
4Avoid most annuities.
Okay, this one always gets me calls and complaints from insurance people who are listening. The idea with an annuity, like any retirement account, is to invest your cash and let it compound tax-deferred. Now, let me say, these are a wonderful way to squirrel away a load of cash tax-deferred. But the problem with them is the investment options within the annuity—typically mutual funds—are riddled with exceptionally high expenses. The costs of the fund management, plus the administration fees the annuity company tacks on – all of it can be just way too expensive. And, the fact is: Annuities are not bought: they are sold. And annuities pay very heavy commissions to the insurance people who sell them. Generally speaking, I say steer clear of putting your money into an annuity.
5Research your charities
If you plan to dig a little deeper this year to give to charity, my advice today is do some research. Start by visiting the web sites of charities you’re considering. Look for details about the charity’s goals, the programs they sponsor, and how they spend their money. Next, review the charity’s finances. Ideally, a charity should spend 75% or more of its donations on programs — as opposed to supporting the charity itself. Charity Navigator offers a list of the most and least effective nonprofits in several categories, from animal rights to youth development. Check them out online at www.charitynavigator.org.