Life Insurance

You are going to die.

That's a fact. Sorry to be the bearer of bad news. Just because you are young does not mean you aren't going to die. But, you can be smart about your death. It's called life insurance.

Many people my age do not have life insurance. It's an extra expense, and they don't think about the costs still present after the die. Here are my top reasons to get life insurance.
1) You have a mortgage
2) Your kids are expensive
3) The average cost of a funeral is about $7500 http://www.ehow.com/about_5196905_cost-average-funeral.html

If you own a house, and you do not have the money in the bank to pay it off, you should have life insurance. It's not as if the bank forgives the debt when you die. If you want to ensure that your family doesn't get foreclosed on because they can't pay the mortgage, you should get enough life insurance to cover the mortgage.

If you have children, and you can't pay the cost of their college education and other expenses out of money you already have, you should get life insurance. A college education costs hundreds of thousands of dollars (see my posts on 529 Plans), and unless you would prefer that your child not go to college, having a life insurance policy large enough to cover their expenses is a good plan.

Finally, get enough to cover the funeral. You don't want to end up like Donny from the Big Lebowski, with your ashes covering John Goodman and Jeff Bridges. http://videosift.com/video/The-Big-Lebowski-Scattering-Donnies-Ashes

Here's the bright side. If you are reading this, chances are you are young, in good health, and have good habits. You can get a large policy, for a long period of time, for not too much money. I have a large term life insurance policy for 30 years, and I pay a very manageable amount per month. For a discussion of the difference between Term Life Insurance and Whole Life Insurance: http://www.smartmoney.com/plan/insurance/term-or-whole-life-8011/ By the end of the term of this life insurance policy, my kids will be out of college, and I'll likely have paid off most of my primary residence. Then, when I need to renew my policy, I can get a much smaller amount because I will not have large financial obligations coming down the road.

Life insurance is smart, in particular if you own a home or have children. Face the facts: You're gonna die, and life is expensive. Now do something about it.

Online Shopping

I like online shopping, for a number of reasons. I'm a little lazy, it's hard to go to stores when you have a kid, and generally, I know what I want and I buy enough in one order to qualify for free shipping. But I am always looking for some sort of incentive when I shop, and I believe I have found it in click through websites. The two which I use most often are http://www.ebates.com/, and http://www.upromise.com/. 

Here's how it works. You know you want to buy something. You go through these websites to find the store you want to buy from, and these websites rebate you 1%-20% of the purchase. Upromise is a method of saving for higher education, and the money goes into high interest savings accounts, destined eventually for a 529 Account. Ebates refunds the money to you quarterly, through a check.

Past incarnations of this concept have provided less than stellar rewards (gift cards at undesirable stores) or sites where people didn't want to shop at. Ebates and Upromise both have a very large selection of stores. I have yet to meet someone who I have spoken with informally about these programs that could not benefit from them. My favorite stores on Ebates are Target.com (3% back), Groupon (3% back), Diapers.com (up to 4% back). Friends of mine have commented on their preference for Drugstore.com (12% back), J.Crew (1.5% back) ,and J.C. Penney (3% back). Take a look for yourself and see how much you could be rebated simply by clicking through a website when doing your online shopping. Plus, you get a ten dollar gift card just for signing up. Further, check out sites like http://www.retailmenot.com/ to make sure you are not missing out on any promotional codes for sales and free shipping. I've gotten about 50 bucks rebated to me in the last six months.

Upromise carries with it a few added benefits. There is a Upromise credit card which increases your deposit into the high interest account, and Upromise also has deals with a number of restaurants which will deposit a percentage of your purchase, provided you pay with a credit card registered on Upromise.com. They also provide rebates on gas and grocery purchases.

All in all, there are a number of benefits to doing your online shopping through these click-through websites. Also, both of these sites also can provide discount codes and coupons. All of these options should be considered to make sure that your money goes farthest when making your purchases.

Saving for College, and Saving on State Taxes

When my son was born in October 2010, one of the first things I did was make sure I had filled out his application for a social security number. Before he had one, I could not open a bank account, or a 529 college savings account in his name. A 529 college savings account is a state-run investment account which allows parents, friends, extended family (anyone can contribute) for someone's qualified education expenses. http://en.wikipedia.org/wiki/529_plan

What does this mean. It means you can invest money, and use the proceeds to pay for college, without paying taxes on the earnings. No capital gains taxes. Sounds good, right. You may think: But I don't want to have to remember it every month. Many plans will do an automatic withdrawal, so you don't need to think about it. http://www.axa-equitable.com/plan/education/529-plans/contributions-and-withdrawals.html

You may think: We just had a baby. Why should I save for college now? College tuition calculators, like the one below, suggest college in 18 years will cost about $440,000 for 4 years. Yeah. Take that in for a second. Now breathe. http://www.fool.com/college/college01.htm

BUT WAIT. There's an even better reason than pure panic to open a 529. Most states will allow for a state tax deduction for the amount you put into that State's 529 (you don't need to use the 529 of the state you live in, but that's the way to get the state tax deduction). My state (which is not a State), DC, allows $4000 in state tax deductions per filer (if filing jointly). http://www.dccollegesavings.com/pdf/dc_disclosure.pdf

Which means, if you are married, filing jointly, you can get an $8000 tax deduction. So, if you put away 666 dollars per month towards your child's education, you will get that much credited back on your taxes. Plus, after 18 years, you will have contributed 144000 of principal towards the account, and you'll likely have much more money in it due to investment growth. The deductions vary by state, and you should determine which plan you approve of based on its performance and tax deduction benefits. A good place to start your research is here. http://www.savingforcollege.com/compare_529_plans/

Also, you can have multiple 529 plans. http://www.savingforcollege.com/intro_to_529s/can-I-have-529-plans-from-multiple-states.php Say you live in DC and want the $8000 tax deduction, but want to contribute more, or want to contribute to multiple funds that may have a better performance. That's ok under the law, just don't contribute more than $13000 per contributor, per year. http://www.irs.gov/newsroom/article/0,,id=213043,00.html

In short, with proper budgeting, you can save a lot of money for college, and have the money you save refunded on your state taxes. College is going to be expensive, and utilizing a 529 plan is probably the smartest thing you can do to ensure your child's future education.