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.

Paying Off Debt

Debt is the albatross for young people these days. Often, we're leaving college or grad school with more than 100k in debt. http://www.forbes.com/2009/03/10/college-graduate-school-loans-personal-finance-retirement-grad-school-debt.htmlWhile this is daunting, this debt is an investment in future earnings and options. However, there are a number of excellent options in debt repayment which could help you to greater financial flexibility faster.

First, get rid of all of your private and personal debt. That means credit card debt, car debt, and any private loans. Credit card debt and car debt can be avoided with effective budgeting, restraint in shopping, and avoiding overspending. Private loans are a different story. Often, these loans will carry a higher interest rate, and thus, be more costly than government subsidized loans. There are two ways to manage this money. One, try to avoid it by working while you're in school, and thus avoiding the need for private loans. A second option is the immediate termination of the private loan through no-interest methods. One way which can work is by asking for a salary advance from your job. Your employer will dock your pay to cover it, but you're not paying out over 13%. http://www.thefreemortgagecalculator.com/interest_rates/Personal_Loan.html
If a salary advance is not available, perhaps a no interest loan from family or a close friend may be an alternative. But getting rid of that high interest rate is crucial.

In terms of federally subsidzed loans, look into consolidating your amounts and getting the lowest interest rate possible. http://studentaid.ed.gov/PORTALSWebApp/students/english/consolidation.jsp?tab=repaying The goal is to ensure you get the lowest interest rate possible. Also, at the same time, don't just pay the minimum. Find out how much you can afford to pay off monthly, and do your best to devote a lot of cash to that. The money you are paying in interest is for the privilege of having enhanced earning power, and you should do everything in your power to make that cost as small as possible.

If you have a very low interest rate (some Stafford loans are around 2.4%), don't concern yourself with paying that off on a rushed schedule. You may be able to get a better return for your money in other investments, and so, it would be a prohibitive opportunity cost to pay off the debt rather than get that return.

Also, remember that there are potential loan forgiveness programs and loan repayment options offered from employers. Ask your HR about whether or not your  job can help you out. Further, mortgage interest and interest on education loans may be tax deductible, depending on your income. Research this to see if you qualify, and if so, take advantage of these deductions.

Do your best to remove the bad debt (debt with high interest, no tax benefits) as soon as you can, as long as you are not sacrificing more lucrative opportunities. You can find yourself debt free much sooner, allowing you greater financial freedom.