Auto Insurance Advice from Kiplinger's

Kiplinger writer Jessica Anderson provides a good summary on 'What You Need to Know About Auto Insurance,' online and in their September 2009 issue.

A few highlights, paraphrased from the article:

• The number of claims filed by other drivers, including how costly those claims are, has an impact on your premiums.
• Cars that are inexpensive to repair are less expensive to insure.
• If your car is worth less than ten times to cost of coverage, consider dropping collision and comprehensive. Note: lender may require collision.
  

You can read the full article at www.Kiplingers.com.

Want more auto insurance advice? Click insurance from my list of topics and you'll find tips to maximize the value of your plan while maintaining a BudgetFree lifestyle.

Your Tax Refund

BudgetFree Approach
by S. Nanavati

This year the Internal Revenue Service reports an average tax refund over $2,700. Use the principles of the BudgetFree for Life System to prioritize how to use your refund.

Survival Needs:

Food, Warmth, Water, Shelter…

Utilities: If you’re having trouble fulfilling critical survival needs (electric, water and heating, for example) your refund should be used to address these matters.

Mortgage: For those without debt and job insecurity consider lowering monthly housing payments. Refinancing isn’t for everyone – you need home equity, a high credit score to qualify for the lowest rates and $2,000 - 3,000 for closing costs. To figure out whether refinancing is right for you, try this online calculator: http://www.bankrate.com/.

Safety Needs

Are you protected against uncertainty or disaster (insurance, home security, etc)? Do you have an emergency fund? Is your job secure? Do you have the skills necessary to compete in the market place? Are meeting your long-term retirement objectives?

Emergency Fund: If your survival needs are met, building a cash fund should be a priority. My September 2008 Newsletter “Your Emergency Fund,” discusses the importance of maintaining a 6-month emergency cash fund.

Tip: Beyond security, a cash fund allows you to save money. Insurance deductibles are one example. According to the Insurance Information Institute raising your deductible from $200 to $500 can cut 15-30% off your premium. Increasing your deductible to $1000 can bring up to 40% in savings. If disaster strike, your emergency fund will cushion the blow of a higher deductable.

Credit Card Debt: Putting money in the bank when you are paying a higher interest on debt doesn't make financial sense. If your job situation is secure and you're carrying credit card debt use your refund to pay down high interest obligations. Start by addressing the cards with the highest interest.
Long Term/Retirement Investing: The correction in the stock market has created an investment opportunity for those with a long-term horizon. If your credit card debt is paid off, you have an emergency fund and don’t have a need for your refund money for the next 3-5 years put it towards your long-term/retirement goals.

Retirement versus College Fund: There are many ways to fund a college education (loans, scholarships, ROTC, work study, etc), but saving is the only way to fund your retirement. Make certain your retirement plan is on track before addressing a college fund.

Social Needs:

If you're on top of your debt, secure in your job and up-to-date with short/long-term financial planning focus some of your refund on personal aspirations – vacation, membership, whatever lifts your sense of belonging and acceptance.

Esteem Needs:

Invest in Yourself:
• Hire a career coach or personal trainer
• Attend classes that enhance knowledge and skills
• Attend a conference to network, increase knowledge and possibly find your next job

Tip: Adjust your withholding so next year’s refund isn’t so large. The IRS provides a withholding calculator so you can fine-tune your taxes to get more in every paycheck. Make sure to automatically transfer this extra money to a savings account so it’s put towards your goals, not your whims.

Your Emergency Fund

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http://www.givinggrinch.com/
BudgeFree for Life!
Volume 1, Issue 5
Editor: Shreyas Nanavati
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Visit the GivingGrinch Website: http://www.givinggrinch.com/
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September 2008: Your Emergency Fund

Six months cash is an essential safety need. Not only does it bring short-term security in times of uncertainty, it’s also a hedge that allows you to lower costs associated with other safety needs.
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GivingGrinch.com interview: I had the pleasure of being interviewed by moneyreallymatters.com. Read the interview and visit the blog: http://www.moneyreallymatters.com//
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Experts tout the need to have a fund to cover living expenses in case of emergency, but how much is enough? In this newsletter we’re going to answer three points:

1. Why six months cash is ideal
2. How to determine the amount you need
3. Some tactics you can use to trim three costly safety needs without negatively impacting your lifestyle

Why Six Months
This logic is based on the average duration of unemployment. Presently the average length of unemployment is 18 weeks – just over four months. This period can vary based on factors including where you live, your qualifications and willingness to relocate. Having six months cash gives you the flexibility and security necessary to make sound decisions during times of distress without having to tap other sources of credit, savings or assets.
How to Calculate your Six Months
Having enough in your emergency fund to ensuring you continue to live a balanced life is crucial. The checklist below will allow you to calculate your major physiological, safety and social expenditures. If you need a refresher on how the hierarchy works, click here: http://www.givinggrinch.com/.
Physiological Expenses:

• Mortgage/Rent
• Food
• Utilities: Electricity, Gas, Water
• Prescription Medicine

Safety:

• Health Insurance: Medical (COBRA?), Dental (optional), Eye (optional)
• Other Insurance: Auto, Home, Life
• Utilities: Phone, Cell Phone, TV, Internet, Home Alarm, etc.
• Transportation: Gas, Public
• Taxes: Property, School, etc.
• Education/Daycare/Childcare
• Debt Obligations: Auto, Credit

Social:

• Personal/Entertainment Fund
• Personal Care/Grooming

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Need suggestions for how you can fulfill these and other categories for less? You can download our Master List of Budget Advice from either our website (http://www.givinggrinch.com/) or Blog (http://givinggrinch.blogspot.com/).
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Buoy your emergency fund with this simple tactic
Finding the money to build an emergency fund is not easy. The tactic I’m going to discuss will help immensely. Once you have a couple months cash stashed away, you have enough to cover most short-term uncertainties such as family emergencies, auto accidents or other unanticipated events. This will provide enough security to pursue a strategy that will save a lot of money in another safety area – insurance.
Many people choose the minimum deductibles for their home, auto or health insurance. That doesn’t mean you should. An emergency fund provides a cushion to manage minor mishaps. With this buffer you can avoid high premiums by focusing your coverage on major catastrophes.

Home Insurance

• According to the Insurance Information Institute (III), raising your deductible from $500 to $1000 can cut your premiums by 25%
• Combine your auto and homeowner’s policy under the same company can reduce your premiums an additional 5-10%
• Review your policy; make sure the information used to estimate the reconstruction of your home is accurate.
• Call your provider and ask for a list of all the discounts they offer. Some discounts you may not be aware of: home security, new home, auto/home, non smoker and claim free.
• Shop around

Auto Insurance

• According to the III, raising your deductible from $200 to $500 can cut 15-30% off your premium. Increasing your deductible to $1000 can bring up to a 40% savings
• Have an older car? Do the math on the premium you’re paying for collision (damage) and comprehensive (theft) coverage. Insurance companies will only pay the vehicle’s current resale value. To find out what your car is worth visit Kelly Blue Book at www.kbb.com. Compare the value with the amount you are paying annually for collision and comprehensive coverage. Consider cancelling this coverage if it's costing you more than the insurer will pay or if you have enough cash on hand to cover the difference if your car is totaled
• Call your provider and ask for a list of all the discounts they offer. Some discounts you may not be aware: low-mileage, longtime customer, defensive driver, anti-theft device, multiple car, passive restraints, ETF and home-auto discount
• Do you really need tow and rental car coverage?
• Shop around

Health Insurance

While it’s important to be able to visit a doctor when necessary this is not the primary reason for having health insurance. The main purpose of health insurance is to make certain that you're covered against the high cost of hospital visits and specialty care. If you and the individuals on your plan are healthy, make infrequent doctor visits and rarely require prescription drugs consider the following:

• Co-Pay: Raise this amount if doctor visits and prescription medication needs are few and far between
• Deductible: Same as with home and auto, raising your deductible reduces your premium
• Health savings accounts (HSAs) or similar programs allow participants to set pre-tax dollars for medical related expenses.

Where should you put your emergency fund?

Keep this money safe and liquid, but not accessible for daily use. Saving accounts pay very little interest. Money markets offer a better return. You can also put a portion of your emergency fund in a CD where your principal is preserved even if you have to withdraw funds before maturity. Bankrate.com makes it easy to shop around for the best rate: http://www.bankrate.com/.

The Bottom Line

Having a emergency cash fund to cover life’s unexpected – and often untimely – events will not only bring you peace of mind; it will also open other avenues towards building a balanced life.