Income protection insurance does exactly what it says on the tin- it will protect your income if you are unable to work because of accident, sickness or unemployment. Whilst this type of insurance is invaluable, only a very small part of the population is covered with it. If you have never considered income protection before, here are 5 reasons why you might want to invest in a policy.
1. To keep your savings intact
If you couldn’t work for a long period of time because of an illness or incapacity, how would you maintain your current lifestyle? Well, most of us would rely on government benefits or their savings. But whilst the government does offer financial help to people who are ill, injured or looking for a job, the sum they give out is very small- just over £100 a week. For many people, this would not cover their existing outgoings. Alternatively, you could dip into your savings. But with the average household spending around £1,700 a month according to HSBC, this would not last long. Income protection will prevent you from having to rely on either of these options, giving you a financial safety net.
2. To cover 60% of your income
Whilst an income protection policy will not replace all of your income (there would be no incentive for you to work if this was the case!) you can protect around 50% to 60%. This may not sound much, but don’t forget your outgoings will be greatly reduced if you are ill or injured- you will not be travelling to work for example. You can choose how much of your income you want to be covered- the more money you choose to protect the bigger your premiums will be. And don’t forget, this money is tax free.
3. To get protected until retirement age
If you choose a long-term income protection policy, it will protect you against accident and sickness up until retirement age. This means that if you cannot work because of illness or injury, your policy will pay you a monthly salary either until you are well enough to work or until you reach 65, whichever is sooner. A policy like this gives the highest level of financial security. If you were in a car accident preventing you from carrying out your job, you would have a steady income until you were fully recovered- so you only have to worry about getting better.
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Many financial experts offer advice for getting out of debt and managing with debt. But an even better plan is to learn how to stay out of debt in the first place. To do so you must learn how to manage your finances more efficiently.
We’re taught from a young age, as early as high school and college, that having debt is just a part of life. But having debt is not natural or normal — it is a burden on your life. When you have a healthy financial profile you can afford to pay for everything that you need and want with cash. Even if you do have a credit card the balance should be at or near zero because you can afford to pay it off each month.
Get an Accurate Picture of Your Finances
The first step to managing your finances to stay out of debt is to simply get a clear snapshot of your current situation. Compare your income with your average outflow each month to see if you’re living outside of your means. Highlight expenses that seem like that are too high. For instance, the general rule of thumb is that your total housing expenses should equal no more than 30 percent of your income. Your total food and entertainment expenses should be about 23 percent of income according to the College Board Budget Worksheet for Graduates.
Put Yourself on a Budget
Budgeting doesn’t have to be a dirty word. In fact, it can be very liberating — having a budget gives you more independence and freedom to do what you need to do each day because you know exactly how much money you have available. Write everything down when it comes to your finances — don’t let the figures swim around in your head. Set aside all of your expenditures in neat categories (housing, insurance, food, entertainment, and utilities) then adjust those totals and pull from them as needed. You may find that most of those expenditures just aren’t needed.
If you have debt at this time, use this helpful budget to prepare an aggressive debt payoff plan. Send extra money that you have left over after covering your necessities to pay off more principal than required each month.
Continue reading Managing Your Finances to Stay Out of Debt
Amidst all the negative financial news of the surging credit card debt in the US and the constant debates on the raising of the debt ceiling, here’s something positive that can help you breathe a sigh of relief. According to recent reports, not many Americans are falling back on their monthly credit card bills by more than 90 days. Studies released by TransUnion suggest that the national credit card default rate has dropped to 0.82% in 2010’s last quarter, a drop of almost 33% since 2009. With such rates of credit card delinquency, most people refrained from seeking help of the credit consolidation options as they could well manage their rising debt burden.
More and more consumers are trying their best to reduce their credit card debt and stay current on all their monthly financial obligations. The average total credit card debt per user had dropped by 5.9% or by $287 to $4680 in the very first quarter of 2011 from a staggeringly high amount of $4966 in the last quarter of 2010. TransUnion has also mentioned in a statement that the most recent average was the lowest since the average amounts that was recorded in 2000 and considerably lower than the first quarter of 2009, during the US economic recession.
The number of credit-inactive consumers – Are they growing?
Recent reports say that nowadays most Americans are no longer using bank credit cards and in 2010, 70 million consumers did not use a bank-issued general purpose credit card. However, to add to this positive financial news in the US, it has also been noticed that during the course of 1 year, 8 million additional customers joined this rank of credit-inactive consumers.
Continue reading Drop in Credit Card Defaults – A Potential Rise in the Number of Credit-Inactive Consumers
If given the choice, most people would opt to sit by the pool with a cocktail than trudge to work every day, even those people who claim to love their work would welcome the opportunity for a bit of a break. However, it is the incessant bills and ongoing expenses which keep us trudging to work, and it is because of this chasm between our dream of cocktails and the reality of work that the promise of earning a passive income can be so appealing.
When someone offers you the opportunity to earn more than you are earning in your day job, while working just a few hours a day from home, you’d jump at the chance wouldn’t you? Unfortunately these sorts of passive income schemes often turn out to be scams, run primarily over the internet, often requiring a sign up fee and a website full of testimonials from happy clients. However, the reality is that schemes and scams don’t work in reality and there is no magic career which allows you to earn that illusive six figure income without putting in the effort.
At the same time, passive income generating ideas can help you supplement your regular income, and because they are – as the name suggests – passive, they don’t eat into your free time too much either, while giving you a little extra spending money to pay off some debts, save for a holiday or pay off your mortgage sooner.
To help you make a decision about the passive income stream which will best suit you, here are the top five ways, proven by many, to effectively generate a supplementary income.
Continue reading 5 Most Common Activities to Generate Passive Income
Losing your job is always a very stressful and worrying experience whoever you are. It can be even more unsettling if you have a home or family to keep. As long as you remain calm, and think things through slowly and sensibly, it is possible to get through the period of time you are out of work relatively unscathed.
There are several steps you should take in order to make sure you get through the lean times, and those steps are what will be looking at now. So what should you do when you find yourself temporarily jobless?
Order Your Bills
Your main priority when you lose your main source of income is to make sure that the most important bills are covered if possible. This means things like your rent/mortgage, and utilities like water, gas and electric.
If you are in any doubt as to whether you are going to be able to make these payments then the very next thing you should do is contact the companies concerned and talk to them about it.
Most companies are very understanding when customers get into financial difficulties, and will often be able to help by reducing or freezing payments until your situation has been sorted out.
The next most important “bill” that cannot really be put off in any way is your grocery shop. Your family needs to eat, and so any money you do have should definitely be allocated to this area before anything else.
Continue reading Budgeting When In-between Jobs
Job security, financial pressure and medical emergencies keep our mind occupied most of the time. These things lead to many other tensions that we are at times consciously unconscious about the money that is flowing out. In order to prevent such depressions we either get expensive stuffs for ourselves or dine in some posh restaurants. At the beginning of the month when the credit card bill appears our eyes pop out to see the amount. The outstanding balance generally exceeds your income and then we find it difficult to pay it back.
What are the causes for people falling behind debt?
1. Changes in life.
Drastic negative changes in a person’s life can lead to debt. That includes sudden financial loss, unemployment and prolonged disability. When an individual is unable to pay off the outstanding amount due to financial doldrums they often fall into the trap of debt. If a person finds that there is a steady decline in his income then he needs to work on the spending habit. As it is one of the major causes that leads to debt.
2. Lack of attention to your finance.
Lack of attention on a person’s financial situation can be one of the major causes for debt. Budgeting helps in the process of evaluation as well as figures out where the money is flowing. An individual generally ensnare into debt when he is inattentive towards his expenditure and have a reckless spending habit.
Continue reading Top 5 Reasons Why People Get Into Debt